Why Your Company Needs More Collaboration

What distinguishes companies that have built advanced digital capabilities? The ability to collaborate. MIT Sloan Management Review’s research finds that a focus on collaboration — both within organizations and with external partners and stakeholders — is central to how digitally advanced companies create business value and establish competitive advantage. These companies recognize that digital transformation blurs — and sometimes obliterates — traditional organizational boundaries and demands a focus on cooperation and collaboration that is unprecedented for most enterprises.

The broad implications of this finding are evident in three separate research projects MIT SMR conducted over the past three years: a recent survey-based research report on digital business trends, “Achieving Digital Maturity,” produced in partnership with Deloitte Digital; a separate survey-based research project focused on the internet of things (IoT); and a case study project exploring data-driven organizations.

While the benefits of collaboration are clear, so too is the reality that many organizations still have a long way to go in making collaboration the priority it needs to be. Less than half of the respondents to our 2016 digital business survey agreed or strongly agreed that “our organization is increasingly organized around cross-functional project teams, not necessarily functions and divisions, to implement digital business priorities.”

More Cross-Functional Collaboration

Based on a global survey of more than 3,500 managers and executives, MIT Sloan Management Review and Deloitte’s third annual report on digital business found that the most digitally advanced companies — those successfully deploying digital technologies and capabilities to improve processes, engage talent across the organization, and drive new value-generating business models — are far more likely to perform cross-functional collaboration. More than 70% of these businesses use cross-functional teams to organize work and charge them with implementing digital business priorities. This compares to less than 30% for organizations in an early stage of digitization.

Digitally advanced organizations recognize and reward collaboration and cross-functional teams — nearly 77% of digitally advanced businesses do, versus 34% of the least digitally sophisticated group of companies. “It’s just more difficult to think about any function in isolation because the processes are becoming so integrated,” said David Cotteleer, vice president and CIO at Milwaukee, Wisconsin-based Harley-Davidson Inc.

As an example, Cotteleer pointed out that connected vehicles demand a stringent cross-functional approach to design and manufacture. “It’s no longer just about product engineering,” he said. “It is about software design, system integration, and other elements that fall outside traditional product engineering. Multiple functions in the company are now realizing that what used to be their domain is now also a domain of technology.”

At the hospitality company Marriott International Inc., based in Bethesda, Maryland, the team behind the company’s push into digital recognized that upgrading mobile apps and the online experience is only half the battle for winning customer loyalty. “We can create the best website on the planet, and we can build the best search campaigns to reach customers,” said George Corbin, Marriott’s former senior vice president of digital. “But if we can’t deliver an exceptional stay, guests won’t come back.”

At Marriott, coordinating digital innovation with operational excellence required significant collaboration between two groups that were not familiar with each other. Corbin worked closely with his counterparts in operations — spending more time with them than with his own team for a period of time — to ensure that the company could deliver on the promise made by any new app (for example, that a guest who uses a room-service app actually receives the right food at the right time).

General Electric Co.’s transition to digital is similarly forcing the organization to adjust working relationships across functions. In the company’s oil and gas business, for instance, traditional sales are big ticket, product-centric, and transactional: Customers purchase machines, as well as parts, maintenance, and repair-service contracts, at fixed prices. Adding machine sensor analytics to the sales mix — a “tiny little sprinkling on top of the deal,” said one GE executive — has led to a dramatic shift in the way the sales team collaborates with internal stakeholders.

Selling software solutions “was definitely a change in how our sales personnel approach customer conversations,” said Lorenzo Simonelli, former president and CEO of GE Oil & Gas and now president and CEO of Baker Hughes Inc., a GE company based in Houston, Texas. When GE sells an electronic submersible pump, for instance, the equipment sales manager brings along a software application engineer who understands the technical details about how the pump is going to operate in a given environment and how it will interact with the company’s IoT platform. With its new focus on digital, GE is changing what it is selling, how it sells, and to whom it sells.

Collaboration With Customers

Pursuing strategies that depend on IoT often requires creating value through collaboration, especially with customers. In a 2016 MIT SMR IoT survey of more than 1,400 managers, two-thirds of the respondents who are actively working on IoT projects said they collect data from and/or send data to their customers, suppliers, or competitors. This exchange of device data across organizational borders deepens existing relationships between organizations and encourages new collaborations with customers.

WASH Multifamily Laundry Systems LLC, based in El Segundo, California, is a case in point. Providing service to more than 75,000 locations, the company’s extensive network of hundreds of thousands of interconnected washers, dryers, vending machines, and payment systems serves roughly 7 million residents a week.

In the past, WASH would deliver machines to apartment buildings, repair equipment when it broke down, collect quarters, or provide alternative payment systems. Today, WASH also draws on a continuous flow of machine data from suppliers (such as the makers of washers, dryers, and vending equipment), service providers (such as telecommunication providers), and consumers to create and test new services.

For instance, the company is working with its college customers to adjust pricing at peak periods to spread demand, reduce congestion, and improve student experience in dormitories. Individual locations can struggle to run pricing experiments, since all machines must be priced the same at a given location. Random price changes, a valuable component of experiments, run the risk of alienating customers. To help, WASH built an experimentation platform that matches characteristics of a location with similar locations in its network and varies attributes of interest, such as price.

Nedbank Group Ltd., a banking and financial services company based in the Sandton section of Johannesburg, South Africa, used its digital capabilities to collaborate more with customers as it addressed a strategic issue in its card and payments business. In order to grow, the business unit had to identify and commercialize new services for its merchant customers. The bank turned to its massive trove of demographic, geolocation, and transactional data, hoping to give its merchant clients valuable insights about their own businesses.

Developers of the tool, called Market Edge, quickly demonstrated its value to some of Nedbank’s largest merchant customers. With the new tool, the South African hardware retailer BUCO discerned patterns in what kinds of customers were visiting which stores and when. Judy Gounden, a group marketing executive at BUCO’s parent company, Iliad Africa Ltd., based in Midrand, South Africa, recalled that “when I told a store manager who believed that most of his business was derived from local residents that, in fact, half of his business was coming from residents that lived in a town 10 kilometers away, his eyes went wide and he said, ‘How do you know that?’ So we shared the data with him.”

Talent was a limiting factor in the rollout of Market Edge. Retailers don’t always know what to do with raw information. “We can’t just expect a retailer who is very good at knowing what shampoo should be on the shelf to see data and interpret it in a way that makes them change their business,” said Chris Wood, Nedbank’s head of emerging payments, strategy, and regulation. Collaborating with customers to identify the most relevant and valuable data was essential, but Nedbank had to develop its own team from scratch to support the sales team that typically worked with clients.

Technology innovation is another factor driving — and benefiting from — collaborations with customers and other stakeholders. Increasingly, health care organizations are seeking innovations to improve patient outcomes and reduce costs. Cardinal Health Inc., based in Dublin, Ohio, established an innovation lab to bring together physicians, patients, pharmacists, and providers to understand issues, craft solutions, and try them out. Software developers, for instance, don scrubs and shadow clinicians to get a feel for process flow. Customers and employees regularly propose ideas that are screened and tested using one-week agile sprints. “It’s not just about bringing people in,” noted Brent Stutz, Cardinal Health’s senior vice president of commercial technologies. “It is about getting them out and observing.”

Adapting to Increased Collaboration

Digitally advanced companies are more collaborative because they pursue corporate objectives that depend on the effective use of technology, which, in turn, depends on effective collaborations. But increasing collaboration can be fraught: Different functions may exhibit a history of animosity toward one another; individuals with strong egos may not work effectively together; sharing relationships with clients may be anathema for others; and misaligned goals or mistrust can stymie efforts to create shared value with external partners. Overcoming these challenges can mean changing work practices, behavior norms, and metrics of success — in short, adapting essential elements of a company’s culture.

At the New York-based financial services company MetLife Inc., Marty Lippert, executive vice president of global technology and operations, said that his company’s emphasis on digital has meant a new approach to developing leaders. “One of the top criteria for us today is looking at — and looking for — people who have the skill sets to work cross-functionally across the organization,” Lippert said. Working cross-functionally has become so important that the company is training its hiring managers in behavioral-based interviewing skills to ensure that new hires have cross-functional abilities.

Cardinal Health’s Stutz stresses that maintaining (rather than just building) a digital culture that supports collaboration can be one of the more demanding challenges. Collaboration needs the right talent. When it comes to hiring for and building a digitally supportive culture, Stutz looks for characteristics such as empathy, problem-solving ability, curiosity, and adaptability. As he put it, “It’s not always the smartest person we hire, but the person who is going to be the team player and bring a genuine passion and energy for solving big problems.”