The Role Of Trust In Business Collaboration

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The role of trust inbusiness collaborationAn Economist Intelligence Unit briefing papersponsored by Cisco Systems

The role of trust in business collaborationPrefaceIn 2007, the Economist Intelligence Unit publisheda paper entitled, Collaboration: Transforming the waybusiness works, one of a family of papers producedsince 2006 as a result of ongoing research sponsoredby Cisco Systems.The paper reported that there is a widespreadimperative to adopt collaborative business modelsand noted that trust is a critical building block incollaboration. However, those seemingly simpleconclusions can quickly become complicatedin today’s business world, where the forces ofglobalisation and the knowledge economy areconverging with technology and demographics tochange the face of business interactions.The Economist Intelligence Unit and Ciscotherefore decided to join forces again to explorethe concept of trust in 21st Century businesscollaboration.The Economist Intelligence Unit’s editorial teamexecuted the survey, conducted executive interviews,and wrote the report. The findings and viewsexpressed here do not necessarily reflect the views ofthe sponsor; the Economist Intelligence Unit bearssole responsibility for this report.Our thanks are due to all survey respondents andinterviewees for their time and insights. The Economist Intelligence Unit 20081

The role of trust in business collaborationExecutive summaryMany businesses today extol the concept ofcollaboration, though few seem to definecollaboration in exactly the same way. It isnot without irony that the term “collaborators” has, attimes, been used to describe both traitors and teammates. In current business vernacular, though, thefocus is on partners.Today, businesses have come to see thewhole world as their domain, and technologiesare converging to facilitate communication, socollaboration is seen as a way to glean new insights,reach new markets, outwit competitors, reduce costsand raise revenues.Research shows the term “collaboration” is usedto cover the gamut—from projects designed to cutcosts, increase efficiency and improve complianceto those involving working with outsiders to developnew products. Most often, collaboration is achievedthrough the use of early-21st Century technologyto enable 20th Century processes. Collaboration isusually focused internally on producing derivativesof, or improvements in, existing activities. It is rarelyseen as a total success.While value can be derived from many differenttypes of co-operative activities, the research suggestscompanies may be doing themselves a disservice bycategorising every such initiative as collaboration.In fact, the research indicates that companiesmight benefit from a more disciplined approach todefining and executing a collaboration strategy.Increased rigour could enable organisationsto attain greater success and value fromcollaborative ventures—and better prepare themfor the increased challenge of collaborating as thebusiness environment becomes more globalised,communication becomes more virtualised, andthe workforce absorbs an increasingly tech-savvydemographic.Figure 1“Collaboration” is often a misnomerCollaboration involves shared and common goals: “I wonder if we could ?”L Driven by mutual self-interest, opportunity appetiteL Requires high level of commitment on each sideL Creates new (not derivative) valueL Value accrues to each partyL Often requires specialisation on each sideL Requires high level of trust, eg, environment in whichproprietary information can be safely sharedL Examples: Product innovation; pharma R&DCollaborationCo-operation involves broad but mandated goals: “We need to ”L Meets business need; often driven by directiveL Can succeed even if commitment is unevenL Value often derivative (eg, process improvement,efficiency initiatives)L Value may directly accrue only to one party (or neither)L Requires only medium level of trust - eg, enough toshare information on “need to know” basisL Examples: Outsourcing arrangementsCo-operationCo-ordination involves narrow goals: “Get this done ”L Driven by directive; little self-interestL Team-work helps, not pivotal to successL Value unlikely to accrue directly to involved partiesL Often focused on one-time, short-term goalsSource: Economist Intelligence Unit2 The Economist Intelligence Unit 2008L Focus more on stemming loss of value than on creatingnew valueL Trust not key to successful completionL Example: Cost-cutting initiativesCo-ordination

The role of trust in business collaborationThe research shows that few businesses adequatelyarticulate the value and need for trust, or share andformalise the critical components of trust; rather, theyhave focused more generically on codes of corporategovernance and ethics. Moreover, few companies givetrust a paramount role in internal efforts, though theresearch suggests that trust is far from complete evenamong people in the same function or organisation.Admittedly—and importantly—the need for trustvaries among projects and depends on the make-up ofthe constituents and the goals of the project.For example, people who co-ordinate on aninternal cost-cutting initiative are unlikely to need totrust each other in the same way as collaborators intwo separate companies, working together to developa new product (see Figure 1).The cost-cutting project will be helped byteamwork, but is essentially a “get-it-done” directivethat is likely to be achieved regardless of who trustswhom. Product R&D with outsiders, however, requireseach party to contribute (upfront and on an ongoingbasis) time, money, and proprietary information tofulfil the question, “I wonder if we could ?” Thesepartners must trust each other.Somewhere in between these extremes lies muchof what is currently deemed collaboration—the “weneed to ” space in which the goals are mandatedand driven by a clear business need and where trustbetween counterparts clearly helps get the job done.Trust in this domain needs to be higher than amongco-ordinators working on one-time, short-term, finitegoals, but not as high as in the R&D example.The term “collaboration” is often used whenindividuals are merely involved in co-ordination orco-operation.Why does it matter how these initiatives arecategorised? The labels themselves are not important,but labelling every initiative as “collaboration” createsa misnomer that robs companies of the ability todeploy resources efficiently and effectively to createthe most value. Understanding the difference betweencollaboration and co-operation or co-ordination canhelp companies fashion effective collaborativepartnerships and invest in building the requisite levelof trust.Businesses need to approach collaborationstrategically, and—as with any business strategy—seek to align people (culture), processes andtechnology with the project goals. In the case ofcollaboration, that alignment must take adequateaccount of the level of trust required to improve thechances of success in each form of collaboration (seeFigure 2).The research shows that those who describethemselves as being very good at collaborationare more likely to report completely successfulcollaborations, tend to do more due diligence to verifywhether potential partners are trustworthy, and havehigher standards of trust than those who perceivethemselves to be less capable at collaborating.However, the dispersion of results suggests thatfew companies are focused on collaboration itself as acapability, or on instituting the kind of trust standardsthat can speed and ease collaboration, or on properlyaligning corporate culture, processes and technologyaround the collaborative strategy.About the surveyOf the 453 business executives surveyed, more thanthree-quarters were located in North America, Europeor the Asia-Pacific region. Just over one-half workedfor companies that had annual global revenues ofmore than US 1bn and about one quarter worked forcompanies with revenues of US 10bn or more. Theexecutives had a variety of formal titles and functional roles, but all had participated in a collaboration effort in the prior year, and nearly 80% describedthemselves as participants in formal or informalvirtual collaboration efforts. The Economist Intelligence Unit 20083

The role of trust in business collaborationFigure 2Excellence in collaboration requires trustworthy people, processes and technologyPeopleProcessesTechnologyL High level of trust in theorganisationL Trusting relationships betweenindividualsL Belief in shared goalsL Eagerness to share informationL High trust tempers potentiallyhigh riskL Process buy-in is highL Processes reinforce trust (eg, bydefining objectives,accountability)L Processes enable collaborativeeducation/communicationL Adoption of collaborative tools ishigh and diverse, driven byspecific utilitiesL Tools reinforce trust, eg,telepresence emulates more“personal” interactionL Tools provide transparencyCollaborationL Institutional trust uneven; trust incertain groups/teams/individualsis highL Tangible commitment to projectgoalsL Willingness to share informationas neededL Trust may not be enough tooutweigh riskL Some collaborative/trustprocesses in placeL Buy-in varies so mixed effect ontrustL Processes still not focuseddiscretely on furthering trustL Provision of/adoption ofcollaborative tools is unevenL Tools enable communication, butmay not reinforce trustL Tools offer little transparencyCo-operationL Trust is not a part of the cultureL Little trust is sought or evenneededL Mindset is to achieve statedobjectivesL Information is parsed out asdirectedL Perceived level of risk is highL Few/no collaborative/trustprocessesL Processes probably “borrowed” /modified from other activitiesL Focus on protecting participantsL Few/No tools designed specificallyto improve collaboration/trustL Uneducated users can underminetrust with ineffective useL Tools focus on limiting accessCo-ordinationSource: Economist Intelligence UnitFurthermore, few companies have built high trustlevels even within their own organisations, or investedin creating trusted individuals—who can, as theresearch shows, be powerful agents of collaboration.In short, despite the widespread desire to be“collaborative”, and the concomitant use of suchbuzzwords as “collaboration”, many companies areprobably recreating the wheel on every collaborative4 The Economist Intelligence Unit 2008project they undertake.This ad hoc approach not only wastes resources: Itmakes it difficult for organisations to sell themselvesas collaborative partners, thereby limiting theirability to exploit the potential of collaboration togenerate unique and discrete innovations, especiallyas the forces of globalisation, virtualisation, anddemographics grow.

The role of trust in business collaborationKey findingsThe survey yielded responses from 453 businessexecutives who had recently participated incollaborative projects. Those respondents,in a variety of positions, companies and industriesaround the world, were asked about those projectsand the people and organisations with which theycollaborated. Below are the key findings on the stateof collaboration and the role of trust.In regards to collaboration:Figure 3Collaboration is most often focused on internalimprovements and efficiency—especially at the largestcompanies(%)Annual revenues of 10bn or moreAnnual revenues of 500m or lessImprove internal processes4422Increase efficiency4225Lower costs28 Collaboration has become an everyday activity.The only executives permitted to take the survey werethose who had participated in a project during thepast year to achieve a common objective working withindividuals from outside their immediate group. Thesecollaborators could be customers, suppliers, businesspartners, or colleagues serving other functions intheir organisation. Of the 471 executives to whomwe submitted the survey, 453 met the collaborationcriterion (96%).15Improve customer service2525Improve product quality2018Develop a new product1930Increase sales1928Reduce delays/increase speed1813Improve compliance Collaboration is still used most often to improveinternal processes and increase efficiency (seeFigure 3), especially at large companies. Collaborationis less often used to create value by developing newproducts or improving product quality. However, verygood collaborators also worked more often than lesscapable collaborators on initiatives such as increasingmargins and developing outsourcing relationships. Collaboration is more often focused on workingwith other internal stakeholders (within the functionor organisation), but the smallest companies are moreinclined to work with external customers and peers(see Figure 4), as are people at companies that seethemselves as very good collaborators.1712Increase margins1314Develop outsourcing relationships1211Recruit/develop employees811Research information*521* Research or exchange information about a market, products or customersSource: Economist Intelligence Unit The Economist Intelligence Unit 20085

The role of trust in business collaborationFigure 4Figure 5Larger companies are far more likely to be“collaborating” with other internal stakeholdersVery good collaborators are more likely to report totalsuccess in their collaborations. “How successful was yourrecent collaboration in meeting its goals?”(%)Annual revenues of 10bn or more(%)Very good collaboratorsAnnual revenues of 500m or lessPoor/Moderate collaboratorsPeople in other functions (in same or other location)67Collaboration complete and completely successful3625People within my organisation, but outside my location or function1161Collaboration complete and fairly successful275451People within my function (in another location)48Collaboration not yet complete but going well241324External suppliers/other partners4333Collaboration complete but not very successful116External customersCollaboration not yet completed, and going poorly283739External peers (eg, in knowledge exchange)Collaboration abandoned; may be revived18230%In-house R&D team1314In-house product designers107External product designers78External R&D team614120%Source: Economist Intelligence Unitsuch as shared information. Those who are very goodat collaborating are significantly more likely to sayhonesty, ethical behaviour, and a willingness toexchange information are critical (as opposed to justimportant) when deciding whom to trust.Source: Economist Intelligence Unit Few people say their recent collaborations werecompletely successful, though about half deemedtheir projects “fairly” successful”. Organisations thatsay they are very good at collaborating are more likelyto report complete success (see Figure 5). Successis most often achieved in collaborations focused onincreasing efficiency, improving customer service, andenhancing internal processes.The key findings in regards to trust are as followsand are explored in more detail, with figures, in theensuing text: Most collaborators want first and foremost fortheir partners (individuals and organisations)to have integrity (ie, be honest and ethical). Theyalso want tangible demonstrations of good faith,6 The Economist Intelligence Unit 2008 Many executives are disappointed with theircollaborators. Qualities that survey respondents seeas key to trustworthiness are rarely displayed– byorganisations or individuals—to the degree thatthey had hoped. However, very good collaboratorsare more likely to report honesty and integrity incollaborative partners. Complete trust is very rare—but it oftendoesn’t matter. Very few collaborators totally trusttheir counterparties (people or organisations),and those who are poor at collaborating trusttheir counterparties even less. However, issues oftrust rarely torpedo today’s collaborations. Mostcollaborators expect and forgive lapses in judgment,though they are less tolerant of malicious intent.

The role of trust in business collaboration Companies have yet to find or embrace aconsistent way to measure trust, and “wordof-mouth” is still the most trusted currency forassessing trust in another person or organisation.However, those who are very good at collaboratingare significantly more likely to conduct greater duediligence on trust. Trust, as well as project success, appears todecline as collaboration becomes more virtual. Few trends emerged in the survey results regardingcollaboration or the role of trust in any one industry,company-size, or regional segment. Rather, thedispersion of the results suggests that approachesto collaboration and perceptions regarding therole of trust are fashioned on a case-by-case basis.In short, collaboration is far from becoming aninstitutionalised strategy with widely acceptedstandards of best practice.Confirming the role of trustin collaborationAnyone involved in business interactions wouldsay it is axiomatic that trust is a building block ofcollaboration, but trust is not easily defined.John Dean is General Manager of EnterpriseConnect, part of the Australian government’sDepartment of Innovation, Industry, Science andResearch. Enterprise Connect collaborates with othergovernments to access their intellectual property orknow-how and with other organisations in Australiain pursuing policy objectives. He says, “Collaborationhas become more important now that it’s a globalworld, and we have to take ever more account of whatis happening in other places”.“The benefits of collaboration have become moreobvious to people,” he says, but he concedes thatthe trust element is complex—even for governmentemployees, who may be collaborating within theconfines of mandated codes of conduct and who maycollaborate, at the highest level, under the provisionsof memoranda of understanding and other protocols.He adds that trust stems, in part, “fromunderstanding the other party’s position, andconceiving of whether there is a genuine opportunityfor give-and-take”. He says it is also importantto remember that collaboration may not alwaysneed a specific commercial imperative. In citing acollaborative venture with Norway that began in 1994,he says, “That initial collaboration has come andgone, but we’ve had lots of really good engagementsin different ways since that time—and not all of themhave been formal. Since Australia is geographicallyremote from North America and Europe, it is vital totap into such relationships to keep abreast of newand developing business trends. And these ongoinginteractions help to maintain trust and confidence inthe relationship.”The survey itself demonstrates the link betweentrust and collaboration—though not necessarily in away one might expect.Much of the collaboration pursued today endureseven when the level of trust between collaboratingparties is highly questionable. However, when trust isweak, failure is more common.Figure 6Success of collaboration vs trust in partnering organisation(%)Complete and completely successfulComplete and fairly successfulNot yet complete but going wellComplete but not very successfulNot yet completed, and going poorlyAbandoned, but may be revivedAbandoned; could not meet objectivesComplete trust2622309940Little trust6501711116Source: Economist Intelligence Unit The Economist Intelligence Unit 20087

The role of trust in business collaborationRespondents who said they had “little” trustin an organisation with which they had recentlycollaborated were more likely to say theircollaborations had failed to meet their goals, or hadbeen abandoned (see Figure 6). Those who describedtheir level of trust as complete were more likely todescribe their collaborations as totally successful.However, many collaborative ventures aresuccessful to some degree without much trust betweenthe parties involved. For example, 50% of people whosaid they had “little” trust in an organisation withwhich they had recently collaborated still describedtheir collaboration as fairly successful in meeting itsobjectives. And 6% of those with little trust

The Economist Intelligence Unit and Cisco therefore decided to join forces again to explore the concept of trust in 21st Century business collaboration. The Economist Intelligence Unit’s editorial team executed the survey, conducted executive interviews, and wrote the report. The findings and views

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