Tracing back to the advent of collaboration
From the year 2000, a massive shift occurred quietly to most, but daringly to a few. A few large organizations saw the change that was occurring. In 2007, when I was consulting with a large $Bn technology bellwether from my alma mater, I remember how this disruption, so new and so unique, was being viewed as the single largest transformation in the industry way before most of the world heard of this disruption. This arrived with the perfect storm co-created by cloud system deployment capabilities and the penetration of high speed internet. With these forces aligned, it created the SaaS disruption. It took 10 years though for its proliferation to be the product of choice for all industries. It uniquely positioned itself to productise systems and frameworks and create workflow environments which were hitherto accessible only to the big companies at a fraction of the expense. It did something else which was more succinct though. Now companies were suddenly getting familiar with having open systems and integrations and allowing outsiders in – a fundamental shift in thinking which has changed everything.
How has this affected collaboration though?
A precondition to any collaboration is an open mind. Where one can freely discuss synergies than be worried about theft of intellectual property by sheer discussion itself. With an open system environment, companies began to see how great technology could be accessed by everyone for a fraction of the cost, establishing that letting someone in can save money. Now organizations needed a nudge to say that collaborations can add business value. In 2009, I remember how an acquisition by another big bellwether of a small technology outfit in Europe was of strategic importance to them. Making less than 1% of their own top-line, this large technology company was ready to take the plunge of letting in a small team of engineers join them rather than do what might come to them easier – build their own team. A surprising move, but it gave them access to a downward integration possibility which could get them into market 3 years sooner and maybe worth billions in years to come.
Why would a tech company have this internal conversation though?
There can be 3 different time phases which show the transition of this conversation:
- Improve performance: Banking on economies of scale to be able to provide better profitability by operational synergies and far lesser redundancies.
- Consolidate and remove excess capacity: Use the combined workforce and bring down bench strength and increase utilization by looking at leaner teams of support.
- Provide market access: Use relationships and delivery capabilities to enter a segment or market where the other may have significant leverage or reduce time to market.
- Provide a new product/ service: Utilisation of the other organization’s technology so that they would be able to use the same relationships.
- Solve a current challenge: Use something that has been perfected/ done better by another organization to be able to apply the shared learnings in its own company.
- Complete a cycle: Use the other organization’s offerings to be able to solve problems at a vertical level above or below and become a ‘one-stop’ solution.
- Create new offerings: Leverage the potential of both organization’s offerings to be able to create a new product that will solve a problem in another industry altogether. In early 2017, we advised a logistics company and facilitated introductions to another block-chain implementation client of ours. Together, they developed a POC (which we advised on) in the supply-chain logistics space which on deployment would make the company one of the first in the country with capabilities to provide a future-ready block-chain solution positioning it at the cutting edge of similar solution providers in the country. For the block-chain company, they now had a product to resell and a test case in one of the largest industries for block-chain disruption.
- Expand horizontally: Leverage a product’s offerings to be able to expand into new geographies. When we advised a mid-size tech company on a potential collaboration, we felt the possibility of being on the delivery side of the solution and having their share of the pie. While the move was inorganic, it also meant that the company was on the winning side of a massively expanding foodtech industry. This collaboration resulted in a large transition of the rewards of the technology they were building.
- Transform organization completely: Work together to completely transform the offerings to a new paradigm. We advised a company in mid-2016 to be able to fill up their idle capacity. While one of the collaborators had approached us for a sale of his business, the collaboration was able to lift up both their margins while reducing the costs of them operating individually. After the addition of few new key management personnel, the business had reached a stability which allowed it to fetch a 2x improvement in valuation in under a year.
Is this the next big thing then?
It is evident. Maturity of a tech collaboration has significantly risen. Now, organizations look beyond just current year cash flows. They are looking 3-5 years from now. And the belief in a union of equals has emerged. Earlier, ‘big fish eat small fish’ was the thinking making organizations work as silos of expertise. In my personal opinion, there is a massive consolidation of strengths underway. More and more organizations are becoming cognizant of their strengths and accepting of their weaknesses. ‘Collaboration’ (which is being used as a buzzword for achieving impact internally) will be the buzz word of the next 7 years as organizations become more open, learn to work better and grow together faster than they individually could have.
If you think your organization is facing a similar set of dilemmas, situations commanding an understanding of Strategic Finance or you know you need to go forward while you’re still ahead, I can be reached on nag[at]prequate.in.