Is collaboration useful?

[Yasunori]

Recently in Japan it is popular that a big company is in the collaboration with other companies in different sectors.
For entrepreneurs is collaboration useful?
Is collaboration common in North America?

[BrandonMullins]

Collaboration in the sense of Joint Ventures? Maybe Strategic Alliances?

If so, this is a very common practice, and a very effective means of business.

A joint venture is an entity formed between two or more parties to undertake economic activity together. The parties agree to create a new entity by both contributing equity, and they then share in the revenues, expenses, and control of the enterprise. The venture can be for one specific project only, or a continuing business relationship.

Another useful tool is a strategic alliance, which differs slightly from a joint venture. A strategic alliance involves no equity stake by the participants, and is a much less rigid arrangement. It's a mutually beneficial long-term formal relationship formed between two or more parties to pursue a set of agreed upon goals or to meet a critical business need while remaining independent organizations. Each company brings different strenthgs and capabilities to the agreement. This is a more viable system for entrepreneurs and start-up corporations.

A few examples of why a strategic alliance could be used between two companies are:

- Expanding market presence
- Fastly achieve economies-of-scale, and critical mass
- Increase in capital and/or resources
- Access to expertise and knowledge beyond your means
- Bring together complimentary skills and assets that neither company could posess alone.

Here are a few real-world examples that I can think of, of strategic alliances:

SOHO Gets A Big Boost From Anheuser-Busch:

Soho Natural Soda, a startup producer of natural carbonated beverages, was operating out of a Brooklyn kitchen. With no money to build, rent or operate any bottling facilities, it persuaded a regional beer company to use its excess capacity to bottle the beverages. Soho then got brewer Anheuser-Busch to distribute the product. In 11 years it grew from a kitchen table to $11 million in sales, with little overhead or cost.

Motorola And In-Focus Join:

Motorola and In-Focus Systems saw an opportunity to gain a share in the burgeoning worldwide market for high-performance video display panels. In-Focus developed a new technology that lets it make passive matrix displays that are almost as good as active matrix displays but cost much less.

Motorola purchased a 20% interest in In-Focus for $20 million. They then formed an equally owned joint venture to build display panels incorporating In-Focus's technology Motorola's integrated circuits.

In-Focus got the capital it needed, a key customer, and access to Motorola's international distribution manufacturing capabilities. Motorola locked in a strategic technology that it was unable to develop internally. The technology permits Motorola to leapfrog past rival Japanese competitors. It also created a captive customer for its integrated chips while getting an equity that could rocket in value.

Electronic Muffler Developer Gains A New Product, Credibility & Distribution:

Noise Cancellation Technologies, Inc. developed an electronic noise cancellation technology that could be used as a replacement for conventional automobile mufflers. The company teamed with muffler maker Walker Manufacturing to develop a revolutionary electronic muffler.

Noise Cancellation had the technology. Walker had automotive expertise, marketplace credibility and the manufacturing capability to deliver orders once they are placed. Together they used Walker's credibility to approach major customers and were able to get test installations on city buses in New York and Montreal.

Noise Cancellation got technical, marketing, and manufacturing resources. Walker got a leading edge technology to increase its profit margins in a price competitive industry.

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So as you can see, yes, these practices are very common in North America, and very smart for any company in the world to utilize.

These are just some intitial thoughts. I am sure others have more knowledge on this than I.

-Brandon

[Yasunori]

Thank you, Brandon!
Collaboration is a common practice also in North America.
These are interesting examples of success.
Do you have interesting examples of failures?

[BrandonMullins]

Yasunori,

I am sure that I could come up with some examples of failed joint venture attempts, and I will post those soon. It's funny how you always hear just about the successful ones, huh?

-Brandon

[mphcoach]

Truth is that there is Collaboration - on a formal basis and collaboration which is informal.

Let's say that you have a great new product. Before it launches you get loads of buddies in the same business as you to tear it apart and let you refine it.

Creative people will get others in as well. people from outside the business - or those who are in the business who might not have anything to do with it and seek their input - listening hard.

These aren't focus groups, they are way beyond this - they are real outsiders and thus have very open minds, asking the dumb, the stupid questions, which are often the most valuable. Questions like these help me be a good coach too!

I once worked in a business where the backshop (the store room) was always untidy. They held a team meeting and had the cook in as well (you know the one who ran the employee facility).

She knew nothing about the storeroom and its processes, but boy did she ask some tricky questions of them.

Sometimes, little 'c' collaboration is real good at the mocro level, without which the big 'C' collaboration would be worthless.