Which Kind of Collaboration Is Right for You?

Magazine

The Idea in Brief

As potential innovation partners and ways to collaborate with them proliferate, it’s tough deciding how best to leverage outsiders’ power.

To select the right type of collaboration options for your business, Pisano and Verganti recommend understanding the four basic collaboration modes. These modes differ along two dimensions: openness (can anyone participate, or just select players?) and hierarchy (who makes key decisions—one “kingpin” participant or all players?).

• In the open, hierarchical mode, anyone can offer ideas but your company defines the problem and chooses the solution.

• In the open, flat mode, anyone can solicit and offer ideas, and no single participant has the authority to decide what is or isn’t a valid innovation.

• In the closed, hierarchical mode, your company selects certain participants and decides which ideas get developed.

• In the closed, flat mode, a select group is invited to offer ideas. But participants share information and intellectual property and make critical decisions together.

Each mode has trade-offs. For example, open networks (whether hierarchical or flat) produce many ideas, but screening them is costly. What to do? Choose modes best suited to your capabilities. For instance, if you can evaluate ideas cheaply but no single participant has all the necessary expertise to shape the innovation, use an open, flat collaboration.

The Idea in Practice

Select the collaboration mode that best suits your capabilities and strategy.

In developing the iPhone and its applications, Apple initially used closed, hierarchical networks, where it could better control components influencing users’ experiences. But once the iPhone was established, Apple defined a growth strategy hinging on adding software functionality and applications. Because it knew it couldn’t anticipate all the applications iPhone users might value, it switched to an open, flat network: It introduced a kit allowing third-party developers to create applications based on the iPhone OS platform and to provide them to users directly through the device.

In an era when great ideas can sprout from any corner of the world and IT has dramatically reduced the cost of accessing them, it’s now conventional wisdom that virtually no company should innovate on its own. The good news is that potential partners and ways to collaborate with them have both expanded enormously in number. The bad news is that greater choice has made the perennial management challenge of selecting the best options much more difficult. Should you open up and share your intellectual property with the community? Should you nurture collaborative relationships with a few carefully selected partners? Should you harness the “wisdom of crowds”? The fervor around open models of collaboration such as crowdsourcing notwithstanding, there is no best approach to leveraging the power of outsiders. Different modes of collaboration involve different strategic trade-offs. Companies that choose the wrong mode risk falling behind in the relentless race to develop new technologies, designs, products, and services.

All too often firms jump into relationships without considering their structure and organizing principles—what we call the collaborative architecture. To help senior managers make better decisions about the kinds of collaboration their companies adopt, we have developed a relatively simple framework. The product of our 20 years of research and consulting in this area, it focuses on two basic questions: Given your strategy, how open or closed should your firm’s network of collaborators be? And who should decide which problems the network will tackle and which solutions will be adopted?

Collaboration networks differ significantly in the degree to which membership is open to anyone who wants to join. In totally open collaboration, or crowdsourcing, everyone (suppliers, customers, designers, research institutions, inventors, students, hobbyists, and even competitors) can participate. A sponsor makes a problem public and then essentially seeks support from an unlimited number of problem solvers, who may contribute if they believe they have capabilities and assets to offer. Open-source software projects such as Linux, Apache, and Mozilla are examples of these networks. Closed networks, in contrast, are like private clubs. Here, you tackle the problem with one or more parties that you select because you deem them to have capabilities and assets crucial to the sought-after innovation.

Collaboration networks also differ fundamentally in their form of governance. In some the power to decide which problems are most important, how they’ll be solved, what constitutes an acceptable solution, and which solutions should be implemented is completely vested in one firm in the network: the “kingpin.” Such networks are hierarchical. Other networks are flat: The players are equal partners in the process and share the power to decide key issues.

Discussions of collaborative innovation in both academic journals and the popular media often wrongly link “openness” only with “flatness”—and even suggest that open, flat approaches are always superior. The notion is deeply flawed, however.

As the exhibit “The Four Ways to Collaborate” shows, there are four basic modes of collaboration: a closed and hierarchical network (an elite circle), an open and hierarchical network (an innovation mall), an open and flat network (an innovation community), and a closed and flat network (a consortium).

When figuring out which mode is most appropriate for a given innovation initiative, a firm should consider the trade-offs of each, weighing the modes’ advantages against the associated challenges and assessing the organizational capabilities, structure, and assets required to manage those challenges. (See the exhibit “How to Choose the Best Mode of Collaboration.”) Its executives should then choose the mode that best suits the firm’s strategy.

The costs of searching for, screening, and selecting contributors grow as the network becomes larger and can become prohibitive. So understanding when you need a small or a large number of problem solvers is crucial. Closed modes, obviously, tend to be much smaller than open ones.

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