Networking for Business Collaboration

The drivers for collaboration in the economy affect SMEs as well as larger companies, but most SMEs do not have the luxury of being able to set up a special, dedicated group to develop a strategy for partnering. Rather they are reactive to opportunities and address them in ways that they believe will work i.e. they try to mirror what the customer is expecting.

So it is interesting, and a pointer for what will no doubt become more commonplace, that some SMEs have formed consortia for working together, usually in order to be in a position to bid for major contracts. They are learning from each other and taking cues from the business environment – something that SMEs are good at – and are setting up what are sometimes referred to as: "Communities of Practice".

Steve Harding of the University of Central England (UCE) in the UK has been studying how SMEs collaborate. His work has led him to the conclusion that collaboration for business reasons has a path and a timeline:

• The process starts with enterprises sharing information: cautiously at first, "testing the water", seeing if there is scope for "win-win" collaboration. Unless driven by an external influence (e.g. in order to get access to EU funding), this initial stage usually involves just two enterprises – SME#1 and SME#2 discussing how they might co-operate to jointly address a perceived customer requirement. Steve calls this a "Simple Dyad", where SME#1 owns the customer, and works with SME#2 to meet that customer's needs. Note that any one SME may simultaneously be involved in several dyads, as it tries to judge which partnership will bring the best rewards.
  
  
• For some (but not all) dyads, the process then leads to a sharing of "know how", as a culture of trust and reciprocity develops between the two SMEs. It is at this stage that the concept of mutual dependence becomes important i.e. the relationship should be structured so that neither organisation is capable of operating independently of the other in the target market segment. The SMEs in the dyad are now "collaboration ready": they know how they will work together.
  
  
• The process that arose in reaction to perceived business opportunities finally leads to a culture of networking amongst SMEs that have experienced successful "Simple Dyads". This manifests itself most prominently in the area of new product or service development, where a lead SME sets up a collaboration involving a number of specialist SMEs with the objective of jointly creating a new offering for the target market. It has been termed the "Italian District Model", because this approach is practised quite widely in Italy. This stage requires high levels of resilient trust amongst the participants. It is to be noted that the lead SME requires competences in the development, organisation and sustenance of the collaborative network: such SMEs are acting as "orchestrators" within their target market segments.

If left to develop at its own pace, this process takes at least two years and usually much longer to reach fruition. But various organisations in the UK with government funding are looking for ways to stimulate and accelerate the process. Their belief is that by encouraging and helping SMEs to collaborate, the result will be more business for the SME member organisations, but also more choice for the customer and ultimately an improved (local) economy.

One way of encouraging networking for business collaboration is through the provision of online collaborative marketplaces. One example is the West Midlands Collaborative Commerce Marketplace, set up and administered by the Warwick Manufacturing Group. It is a free-to-use online hub for SMEs in the UK West Midlands, designed to enable and assist them to:

1. Access new business opportunities – based on what the SME is capable of doing, not what it does now
2. Form new partnerships – to address those opportunities
3. Sustain that new business – collaborate on-line to support communication and delivery

The evidence is that SMEs that actively use such networking tools are beginning to win business. Related objectives of the scheme are to up-skill enterprises from being component suppliers to system suppliers, and to increase the utilisation of e-Business techniques and methods.

But it is not only through government-funded initiatives that collaborative networking is being encouraged. Larger companies in the telecoms sector, for example, are using online collaboration tools to communicate effectively with their smaller-sized partners. Public bodies such as councils are experimenting with the technology to manage their large and diverse supplier base. And organisations involved in EU-funded R&D are looking to use online collaborative working to ease the task of managing complex projects with anything up to 25 or more companies involved.

The lesson for larger companies is to understand that this process is happening today, and to consider how best to take advantage of the growing willingness of SMEs to collaborate within a network. Elsewhere we have observed how some larger organisations are developing skills and core competences in the area of organising such networks, and we have called such companies "orchestrators". For smaller companies it is critical that they work out what role or roles they wish to play in such networks, and make themselves ready and easy to collaborate with.

The evidence is pointing to the fact that networking for business collaboration will become more prevalent as the economy continues to grow more complex. Those SMEs and larger organisations that learn how to operate effectively within such networks and take full advantage of the new business opportunities that arise will be in the best position to prosper in such an environment.

Partnering Points on Networking for Business Collaboration

• If your organisation is not currently taking part in any collaborative activities, make it your business to find out what is going on in your industry and target market and consider getting involved.
• Ask your key customers what they expect from their suppliers: don't assume that the answers will be the same as when you first won their business.
• If your company is unable to meet the changing requirements of your customer base, determine whether working with other companies could be the best approach.
• Seek out partners who have complementary and supportive skills and capabilities: don't decide to collaborate solely on the basis of current product or service offerings.
• Develop mutually beneficial and interdependent relationships, and encourage a climate of trust and co-operation amongst your own and your partners' staff.
• Make your organisation "collaboration ready", and deliver on your commitments to your collaborative partners in the same way as you do for your customers.

You are free to use material from istarisArticles in whole or in part, as long as you include complete attribution, including website link. Please also send an email to enquiries@istaris.co.uk, notifying us where the material will appear.

Next article
Previous article