The Culture of Collaboration

BMW, Toyota and Collaborating with Competitors

They compete in the marketplace, but now they’re also collaborating.

BMW and Toyota have announced they will collaborate in two areas: the companies will share costs and knowledge for electric car battery research, and BMW will supply diesel engines to Toyota. Toyota owns the luxury brand, Lexus, and therefore BMW and Toyota directly compete in the luxury car segment. Both companies have a significant collaboration track record.

In The Culture of Collaboration book, I describe how BMW and Toyota create value by collaborating internally and with business partners. The preface, which you can read here, reveals how my visit to the BMW design center in Munich some years ago sparked the book.

So why would two competitors collaborate? Collaborating makes sense within enterprises and with partners, but the marketplace requires pure competition. Right?  Well, that depends.

Collaborating among competitors makes sense when the collaboration:

1. Creates value for both parties
2. Begins with structure and clarity
3. Involves non-differentiating processes

Clearly, the BMW/Toyota collaboration nails number one. “We think that this collaboration will allow for development of next-generation batteries to be done faster and to a higher level,” Toyota Executive Vice President Takeshi Uchiyamada said at a news conference. Both companies will share the costs of battery development. 

Toyota will reportedly use BMW’s 1.6 and 2-liter diesel engines for cars sold in Europe beginning in 2014. This is reportedly the first time Toyota has procured an engine from a competitor. According to a story by Yoshio Takahashi and Kenneth Maxwell in the December 2, 2011 edition of the Wall Street Journal, the collaboration will reduce BMW’s engine production costs per unit by increasing volume. So, value creation is at the heart of this collaboration.

What about #2, structure and clarity? Based on what I know of BMW and Toyota and their approaches to collaboration, chances are this effort involves much of both. In any collaboration among competitors, both parties must establish boundaries for collaboration at the outset. Most importantly, the competing collaborators must determine use and ownership of existing and jointly-created intellectual property. Far fewer problems arise when business unit people, engineers, marketing folks, lawyers and others from both companies hash out these concerns rather than simply handing off the issues to lawyers to hash out in a vacuum.

Regarding #3, I’ve found that collaboration among competitors works best when the effort involves eliminating redundancy in non-differentiating processes. These are typically under-the-hood processes that are not part of a company’s market or product perception.  Two companies that each make hot sauce might use the same bottling equipment. Two newspapers in the same market might use the same printing presses. Entire industries participate in consortiums for purchasing, saving each competing company substantial money. These shared, non-differentiating processes are invisible to the customer. 

Engines are invisible to all but the most die-hard car enthusiasts, so collaborating on this process arguably fits the bill as non-differentiating. Typically, car batteries have nothing to do with the vehicle perception in the marketplace. In the case of electric cars, though, the jury is still out whether the battery is invisible to the consumer. The technology is in its infancy, and therefore the market consists primarily of early adopters. These consumers are more techno-savvy, realize the lithium-ion battery is intrinsic to the product’s technology and performance, and therefore may place a heavier emphasis on the battery in their purchase decisions.

So, it remains to be seen whether battery research and development is non-differentiating for BMW and Toyota. Nevertheless, if both companies can save substantial money on development and bring vehicles to market sooner and customers perceive and actually get better electric vehicles, this collaboration will prove successful.

Slow Money Collaboration

In a cavernous, nearly empty room above the Readers Café & Bookstore in Building C of San Francisco’s Fort Mason Center, Woody Tasch sits at a corner table by a lone window looking out on the Bay. It’s the eve of the Slow Money National Gathering, and the organization’s chairman is putting the finishing touches on his opening remarks. He must fend off criticism that his model is “fantasy economics” and impress on the three hundred investors and five hundred or so other attendees that our industrialized food system has become as imbalanced as the financial system was during the depths of the 2008 crisis.

Woody, a former New York venture capitalist who now lives off the grid near Taos, New Mexico, wants to change how we finance food businesses as dramatically as he has changed his own life and career. In the 1980’s, Woody worked as a self-proclaimed “small-time VC” making healthcare investments for Prince Ventures, owned by the Prince family of Chicago.  Ultimately, he transformed himself from a mathematics-driven investor to one with a social conscience with stops along the way as treasurer for a foundation and chairman of an angel investor network called Investors Circle.

“It’s no longer about how much we can take off the table for ourselves,” Woody insists. After getting involved with the global Slow Food movement, the antithesis of fast food in its promotion of sustainability, Woody and his collaborators sought to address the difficulty many sustainable food businesses have getting financing. “It hit me that patient capital plus slow food equals slow money,” he explains.

Woody and his colleagues are enabling microfinance for the food industry and, since 2009, have sparked $6 million in micro loans. Slow Money links growers, restaurants, organic farm suppliers and other food entrepreneurs with consumers willing to lend businesses a few thousand—or even a few hundred—dollars.

“This is not a typical fiduciary model,” Woody explains. “What we are going to be proving over the next decade is that collective intelligence and local knowledge of groups of individuals effectively collaborating will produce positive outcomes both in arithmetic and impact on the community.” In other words, investors can do good and simultaneously get a modest return on investment. At the moment, 3 percent a year in interest is typical.

Slow Money is evolving from advocating individual investments to promoting investment clubs. Compared to angel investing, for which investors must have assets of at least a million dollars or a yearly salary of at least $200,000, the investment club barrier to entry is much lower. As a model, Slow Food organizers point to the No Small Potatoes Investment Club, which provides low-interest loans to Maine farmers and food producers. So far, fifteen investors have each put up five thousand dollars.

After talking with Woody, I stop by the rehearsal for the entrepreneur pitches. These five-minute presentations are not unlike those for technology companies at venture capital conferences. But there is something perhaps more wholesome and genuine and, yes, rougher around the edges, about these pitches.  Some of these food businesspeople have never before spoken at an event. George Weld, owner of both Egg restaurant in Brooklyn and a farm in Oak Hill, New York, speaks of the need to curb the “recurring alienation between rural and urban that plagues the food economy.”

One of the better-received pitches comes from Dr. Hubert Karreman, a veterinarian and founder of Bovinity Health. Hubert’s company manufactures natural alternatives to antibiotics for livestock. He clicks through financials including $250,000 in sales in 2011, provides market share projections and leaves the rehearsal audience whispering "he's gonna get funded."

Slow Food’s goal is for a million Americans to be investing one percent of their money in local food systems within a decade. Meantime, Woody Tasch offers his prescription for the economy. “What we need is rebalancing. Right now we’re lurching towards the global race to the bottom. It’s buy low, sell high, GMO [genetically modified organism], CDO [collateralized debt obligation] capitalism. We have to compete for cheap labor around the planet subsidized by cheap oil and ignoring the medium and long-term social and environmental impact.” Collaborating requires a longer-term focus, and Slow Money is helping enable that evolution.

Telepresence Enhancing Travel?

Videoconferencing and telepresence vendors have traditionally marketed their products as a replacement for travel. This is shortsighted in that real value creation comes from integrating real-time video into business processes. Using telepresence so that people can come together spontaneously and design an airplane or develop animation or create a 24-hour healthcare delivery service produces far greater value than travel savings.

 

Considering the obsession with marketing real-time video as a travel replacement, you might think hotels would be lukewarm about videoconferencing and telepresence. But there was nothing tepid about Mary Casey and Bob Hermany’s view of Cisco TelePresence as they announced on Tuesday Starwood’s roll out of public TelePresence rooms. The first two Starwood properties to offer TelePresence are the Sheraton on the Park in Sydney, Australia and the W Chicago. You can view the announcement video here. Incidentally, Mary is Starwood’s vice president of global corporate sales and Bob is Starwood’s senior vice president of operations.

 

Starwood will also install Cisco TelePresence at the Sheraton New York Hotel & Towers, the Westin Los Angeles Airport and the Sheraton Centre Toronto during 2010. Later, the hotel chain will adopt TelePresence at properties in San Francisco, Dallas, Brussels and Frankfurt, among others. In my October 15, 2008 post, I wrote that Cisco and its partner, Tata Communications, were introducing public TelePresence rooms and that the first hotel chain to participate was the Taj Hotels.

 

During a TelePresence call linking several global locations, Sean Hunt, a Starwood executive who manages the Sheraton on the Park in Sydney positioned Australia’s first public TelePresence room as both a travel benefit and alternative. “The problem is we’re isolated from the rest of the world, so this is a great alternative to long-haul travel.” The point is that rather than replace travel, TelePresence lets somebody outside Australia who may never have taken the flight get face-to-face with colleagues and partners.

Aside from marketing and public relations advantages, there are potentially tangible benefits for hotels that adopt TelePresence. Besides renting rooms at rates that can approach $500 a day, hotels can charge $500 an hour for TelePresence. That’s the rate at the Sheraton on the Park in Sydney. Australian dollars, of course.

Venture Capitalists Investing in Semantic Web Deals, Enterprise Social Networking

As social networking permeates our collective culture, enterprises are demanding more business-oriented tools to support social networks.

At the Dow Jones VentureOne Summit in Redwood City, California on February 26 attended by venture capitalists and entrepreneurs, the sessions and cocktail hour hummed with talk about collaboration. One particularly compelling panel addressed “Consumerprise: Just How Will Consumer Technologies be Utilized by the Enterprise.” The panel, moderated by Emily Westhafer of Dow Jones,  included Antony Brydon, founder of Visible Path; J.B. Holston, CEO of Newsgator; Ajay Gandhi of BEA Systems and Peter Rip of Crosslink Capital. Participants discussed why many senior leaders of Fortune 1000 companies are interested in a “Facebook for the enterprise.”

Applications for enterprise-oriented social networking tools range from finding and collaborating with experts to increasing informal social interaction among colleagues. This, in turn, can break down barriers and enhance collaboration.

Despite their interest, many organizations are barring external social networking connections. This will evolve as the control paradigm wanes and organizational culture catches up with the tools.  Companies in many industries have found that collaborating with business partners can create incredible value.

Peter Rip noted that his venture capital firm is looking for investments beyond Web 2.0 and is interested in “semantic web” deals for startups that focus on intelligent structuring of information. The idea here is that machines rather than people should handle more mundane tasks involved in finding, organizing and sharing information and that Web-based applications should understand what individuals want to know.

In his book, Weaving the Web: the Original Design and Ultimate Destiny of the World Wide Web, Tim Berners-Lee describes his 2-part dream for the Web’s future. The first part is that the Web becomes a more powerful way for people to collaborate. This is clearly happening. The second part is that “machines become capable of analyzing all the data on the Web—the content, links, and transactions between people and computers. A ‘Semantic Web’ which should make this possible, has yet to emerge, but when it does, the day-to-day mechanisms of trade, bureaucracy, and our daily lives will be handled by machines talking to machines,” Berners-Lee writes.

However, semantic web start-ups, says venture capitalist Peter Rip, must fit their solutions into the economic problems of the enterprise. This may sound obvious, but too often start-ups push solutions to enterprises without considering how the tools fit work styles, culture and enterprise initiatives.