Come Together, Right Now—It Worked for Sony and Microsoft
Companies that collaborate on certain projects with other firms can reap greater rewards than going it alone.(originally published by Booz & Company)
When Sony and Microsoft announce they’re both releasing a new generation of video game consoles for the holiday season, they often coordinate the launches with big-name game manufacturers. And that’s no coincidence. There aren’t too many people who would wait in line to buy a Playstation or Xbox if they couldn’t play highly anticipated games that show off the consoles’ best new features.
Coordinated product releases are one type of synchrony that companies can use to increase customer satisfaction and drive up joint sales. Although previous research has focused on the infrastructure that enables coordinated innovation (such as longstanding relationships between partners or contracts to form alliances), the strategic approaches and processes that help companies collaborate in inter-organizational projects are not as well understood.
According to a new study in Advances in Strategic Management from Jason Davis at MIT’s Sloan School of Management, companies can synchronize their product development work in three ways:
1. By deliberately collaborating with partners;
2. By reacting to signals from other companies; and
3. By combining these two strategies into a hybrid approach.
The author’s research is based on a study of eight technological collaborations between 10 leading semi-conductor and Internet service firms, and he conducted more than 100 interviews with engineers, executives, and managers.
The planned collaboration strategy requires a group of companies to formally agree to work together. For example, Apple works with a small and select set of suppliers to coordinate the compatibility and development schedules for cutting-edge products such as the iPhone. This approach requires managers to meet regularly, work together to determine budgets and schedules, and adjust project needs as uncertainties occur.
But in many industries, synchrony comes as a reaction to an event, rather than being prearranged. For example, a manufacturer might work closely with businesses that make complementary products to broaden the market, or companies could accelerate their schedules in response to rivals.
There’s also the hybrid approach. One company in the study, a large computing systems firm, coordinated intensively over a three-year period with a large software company. The two firms synchronized their product releases in an attempt to persuade other related businesses to adopt new iterations of their technologies. “We not only want to align with [the software company], but also want to influence other developers to use our new technologies,” said a vice president of the computer firm, “… however, we are doing nothing more here than publicizing our collaboration.”
Of course, many companies are reluctant to join forces with other firms, uneasy about ceding leadership on a project or unwilling to bend to other firms’ schedule changes, funding fluctuations, or personnel turnover. And partnerships don’t always work out. Some analysts have suggested that the widely publicized problems with the construction of Boeing’s 787 Dreamliner airplanes underscore the challenge of coordinating safety and testing procedures between a manufacturing firm and its outside suppliers.
To avoid such hazards, the author stresses that effective communication is crucial between senior and mid-level managers charged with ensuring that projects and partners stay on track. “In industries where high interdependence is the norm, it is essential for managers to gain a better understanding of how synchronization works and the potential pitfalls across their collaboration networks,” he writes.