COLLABORATION – CREATING COMPETITIVE ADVANTAGE

April 24, 2015 by
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COLLABORATION – CREATING COMPETITIVE ADVANTAGE

The year 2008 would now appear be part of history for many and just one of the many years that have gone by.  For countries, global economies, regulators and corporate world, however, it definitely was one of the turning points that would continue to redefine the way commercial activities are viewed.

Entrepreneurs and CEOs are beginning to have a hard new look or relook at all business from multiple perspectives.  The last couple of years has seen changes not only in regulatory and corporate actions but rapid disruptions in technology that arenow redefining business & revenue models.

Welcome to VUCA World – A New Normal

Volatility, Uncertainty, Complexity and Ambiguity are new buzzwords in the corporate boardrooms that are redefining strategies, governance and risk management.  Corporates and business models that once appeared to benchmarks and invincible are today under the scanner for their vulnerability.  A couple of corporate actions and expression of opinion in the recent past are a clear indicators of the thought process.

Take the case of the recent decision of General Electric on its business exposure to real estate and financial business.  The plan to exit them and focus on pure play industrial company with an intent to make it a simpler and more valuable company. An extremely profound move that has its moorings on the thought process in the corporate world – being driven by needs for greater regulatory compliances.

If that was not enough we had Jamie DimonCEO of J P Morgan being concerned about start-ups from the Silicon Valley eating into their banking business! Innovations, primarily driven by technology, are disrupting the banking world.

There is strong underlying message that is defining corporate concerns.  It is evident that the need of hour is about being lean, mean and really fast!  Try visualizing driving a formula one car on the crowded streets of India where it just not traffic but you are not sure when and who is going to follow the traffic rules or lane discipline.

Collaborative Approach – The Way Forward

In an environment driven by huge potential, with similar if not more uncertainty and risks, it is critical for entrepreneurs and managers to realize that the “Collaborative Approach” is perhaps the best strategy to be pursued.  The collaborative approach is distinctly different from that of an outsourcing model where the relationship is that of a principal and vendor.  It has to be lot more holistic where the risks and rewards of entrepreneurship is shared amongst entrepreneurs while still retaining a fair degree of operational flexibility within a well-defined framework.

A De-Risking Tool

A collaborative approach would be a great tool to de-risk organizations.  Technology disruptions are the order of the day and customer loyalties are getting increasing getting shorter if not uncertain. Not just the customer, the new millennial workforce is under enormous peer pressure too.  Driving entrepreneurial culture inside organizations, Intrapreneurs as they are increasing being referred to, is fast becoming the need of hour. This would possibly also address the some of the other problems associated with attrition and employability. Should not come up as surprise if the allocation of large start-up funds being established corporates in information technology sector was a strategy to overcome this problem.

Derive Pricing Advantages

Products are getting increasingly commoditised or competition is coming faster than ever before.  In a situation like this product prices are always under pressure.  A collaborative approach can not only mitigate that risk but collaborative approach across geographies/verticals may potentially help organizations to derive better pricing by moving up the value chain.  It is no wonder that that even large companies Google has recently teamed up with large consulting organizations to exploit emerging opportunities in the sphere of Digital India.  Smarter operators are creating more customised solutions for customers who are not averse to the idea of sharing resources! Inter-state car-pooling is definitely one such initiative.

Asset Light Models

Collaborative approach could also address the problems associated with capital intensive asset heavy models.   This is more relevant is capital constrained economy like India where either capital is either scarce or debt very costly.  Even financial investors like VC/PE firms are increasing backing asset light models that use resources more efficiently and deliver better bang for the buck. An asset light model will inevitably lead better asset utilisation leading to better Returns on Capital Employed (ROCE).

The list of advantages could go on.  It is not to suggest there are little or no risks associated with a collaborative approach.  Every strategy has its inherent accompanying risks but then entrepreneurship is all about managing risks to obtain better and sustainable results.  In a world where the gurus have prescribed co-creation of value with the customers and co-opetition is not sacrilege,collaboration is not something that is really new, it was probably one the earliest forms of commercial enterprise –  barters!

 

Article contributed by :

R Venkatakrishnan

Director

Value Added Corporate Services P Ltd

rvk@valueadded.in

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