Going Beyond Collaboration

An Interview with Raymond Miles, author of Collaborative Entrepreneurship Innovation as the primary driver of economic development and business success is not a new idea—over seventy years ago economist Joseph Schumpeter first posited this idea.

Creating an environment that enables, indeed, encourages creativity and innovation on a continuous basis is the only business strategy for success. Even the most innovative firms are not able to fully use their innovation capacity. So why not collaborate across industries and with other businesses for mutual benefits and long-term survival?

Raymond Miles has spent his whole career studying business models and has, along with the co-authors of his publications, developed what they believe will be the major business model of the future. The model is one in which inter-firm collaboration exists to produce a joint strategy of continuous innovation on a large scale. It involves a community of firms operating in complementary markets and collaborating in a network that shares knowledge, innovations and the resulting financial benefits.

In Collaborative Entrepreneurship: How Communities of Networked Firms Use Continuous Innovation to Create Economic Wealth Raymond Miles and co-authors Grant Miles and Charles Snow describe this new business model using a fictional collaborative multi-firm network they call OpWin Global Network.

Some of the OpWin Global Network’s key attributes are:

• It is a dynamic network of independent firms.


• To join the network companies must demonstrate competence and trustworthiness.


• All firms are expected to contribute ideas and resources that will generate income for network partners.


• Member firms create products and services for their own markets and work with other firms in the network on innovation projects.


• At least half of their revenue is expected to be from continuous innovation.


• Expectations include the highest standards of customer satisfaction, human resource management, natural environment sustainability and service to the community.


• All firms in the network openly share their ideas and innovations with all other network firms.


• Rewards (revenues and profit sharing) are determined after the fact, not by contract, but by fairness based on contributions.

VB: In Collaborative Entrepreneurship you observe that CEOs estimate that only 15 to 25 percent of the knowledge in their firms is used. Why do you think most businesses in advanced economies use such a small fraction of their innovation potential?

Raymond Miles: Your first question is, in some ways, exactly the right first question. Failure to use knowledge—which I suspect you are already discovering in your IdeaConnection interviews—is not because of a lack of innovative ideas in organizations. A lot of people have ideas but they either don’t fit into the marketing plan of their company or no one will listen to them. Or the leaders of the company do not encourage a culture of innovation and do not recognize that innovation is a key business model. It is fundamental to long-term, and indeed, short-term success.

VB: How did you and your co-authors come up OpWin Global Network as a way of describing the concepts underlying your future business model for success? You capture our attention by starting off with a press release dated January 10, 2010 highlighting OpWin's record earnings and collaborative strategy.

Raymond Miles: It was partly due to my journalism training. We had written and published a number of academic articles containing a lot of material that is in the book—some of these articles date back to the early 90s. The ideas received a lot of attention mostly in Europe, not in the USA. We came to the conclusion that our problem in communicating our ideas in the USA was that we couldn’t point to any specific businesses which clearly illustrated the concepts we were writing about.

VB: People want examples.

Raymond Miles: That’s what usually grabs people. When Peter Drucker was writing about effective management he pointed to Sears and General Motors which had learned how to operate decentralized, divisional firms. We couldn’t point to existing networks of businesses that would clearly illustrate all the pieces we thought were part of this new organizational form. We hit on the notion of creating a company and gave it all the features that would make it prosper. As we imagined and wrote about the features it would require and the problems it would have to overcome the business model became more visible and clear to us. Thus we were able to provide a better description of what we had in mind for the future.

It was not only a device to communicate with the reader; it was also an approach that forced us to think through, and deal with, all aspects of operating an associated network of independent companies that collaborate to enhance creativity and take economic advantage of the resulting creativity, knowledge and innovation.

VB: You created the structure, visualized how people would relate to each other, and thought about the agreements that would be required among companies within the network.

Raymond Miles: The approach worked. But if we'd had a real life example it would have been easier to analyse and write about.

The complete model didn’t exist empirically but some of the building pieces did in various parts of the world. We had studied them, but they were, for example, a little firm in Australia and a computer firm in Taiwan—these were not going to grab sophisticated USA and European audiences. The Acer Group based in Taiwan comes closest to practicing continuous innovation through collaboration and is in the process of transforming itself into a global information technology company. It is among the world's top manufacturers of personal computers with operations in over forty countries and dealer relationships in more than one hundred countries. But it is not an American or European example.

The OpWin Network case study—even though fictional—becomes very real and people can relate to it. It forced us to put all the pieces together and provide a pretty complete description of what would be required to ensure successful collaborative entrepreneurship on a global scale.

VB: It does. It clarifies what would be the effective style of leadership, which is relevant even if not part of a collaborative network.

Raymond Miles: Yes, and people like you who have read it in-depth have the same reaction. The typical reader skips over or rushes through the book and only picks up a couple of things that are interesting.

Sometime after the book was published an entrepreneur called me to discuss the concepts in the book—he was a partner in a relatively small venture capital firm. During our telephone conversation he said, "Every entrepreneur needs an OpWin. I’m talking to all my partners." I later followed up to inquire how far he and his partners had progressed. He advised they had not gotten very far as the partners did not have a common mental model of the vision. So I conclude the ideas are unevenly received and implemented.

VB: Are you aware of any companies in the USA that are following the OpWin principles?

Raymond Miles: Syndicom SpineConnect is a collaborative knowledge network for spine surgeons. It was built over the past few years under the leadership of Scott Capdevielle and a team of surgeons. Scott and Syndicom know a great deal about the collaborative process. I believe over 1,000 spine surgeons world-wide participate in this network. It has reached out to related firms, such as medical device manufacturers and distributors, to encourage them to play a role in future innovations in spinal medicine. Scott Capdevielle will tell you collaboration is not something that happens automatically, but that it will happen faster than you expect even among people who don’t have business training or prior skill at collaborating

VB: The structure you discuss for OpWin is interesting in that most activities, such as production tasks, drafting of new ideas and scanning the Innovation Catalog to identify projects, are carried out by self-managed innovation teams composed of members from some or all firms in the network as well as from suppliers and customers. Middle-level managers facilitate operations at the request of the innovation teams. This is very different than the traditional hierarchical structure.

Raymond Miles: And it was the case in the most progressive companies of the 60s. I was part of the early organizational development movement—team-building and organizational development—and this was very much part of the training for managers. They had to re-define their role if they were going to encourage creativity and innovation among their employees—we didn’t use those terms at the time. The term used was collaborative behavior. They were facilitators. They weren’t directing. Ideas were going to emerge from their employees and collaborative behaviour was going to produce new solutions. The managers needed to develop the skills necessary to help and support those who had the ideas put them into practice.

VB: Peter Blau’s Theory of Bureaucracy with hierarchical structures tended to mitigate this Kind of thinking. In that it focused on structure and hierarchies, with clear lines of authority and power.

Raymond Miles: Oh yes, it clearly did. It didn’t provide room for a more open organization—at least in theory. Blau’s young associate, Richard Scott, was on my dissertation committee in Stanford in the early 60s. He and Blau simply took Max Weber’s original concepts of bureaucracy and gave them a more sophisticated expression. But I don’t think they ever meant to preclude innovation within their stable organizational structures.

VB: No. They were looking at structure rather than human behaviour within the structure, weren’t they?

Raymond Miles: Yes, that’s right. But if you have an idea it has to have some link to the rest of the system in the organization, and it has to find the resources for development. A challenge for middle-level managers is to determine how to implement creative new ideas—that’s a creative path in itself. Just as important as having the good idea is helping the idea become reality.

VB: What makes a good facilitator in an OpWin-type organization?

Raymond Miles: There are two facilitation roles. One is facilitating the process by making sure they’ve got a place to meet, time to meet and by making it clear that their meeting is important to you and for the firm.

The other facilitation role is helping teams maintain behaviors which support the highest levels of innovation. This includes responding positively to all ideas. If it’s a bad idea raise enough questions so the group will discover the problems and hopefully solve them or identify alternative ideas. If it’s a good idea, help get it operationalised. It’s a very creative process and anyone who can do it well can be a CEO. That’s what you do at the top.

VB: The idea that the CEO, the person who is highest in the hierarchy, is the one with all the bright ideas, is unfortunately all too pervasive in many organizations.

Raymond Miles: That’s right. Most often the good ideas are with the organizations' employees and the CEO needs to create a climate that encourages employees to share them

VB: You say that each time you have presented Collaborative Entrepreneurship’s core ideas to student, managerial and academic audiences in the USA, Australia and Switzerland you have expanded on the concepts and issues explored in the book. Which of your new ideas are of particular interest and why?

Raymond Miles: I think we’ve talked about nearly all the key points. Since the book was published we've mostly thought about how one would implement the concepts in various industries, and whether collaboration will become a prerequisite for economic development and success.

It is becoming increasingly clear that the old business models will not work in this global economy. Increasingly feasible is an organizational process that will enable innovation to be continuous and occur outside a firm's traditional industry boundaries. The next few years are going to be really interesting as companies develop new structures to compete globally and take advantage of innovation through collaboration across their industries and even across industries. The old models of the secret R&D internal shops will become a thing of the past. And thinking about knowledge as an asset and whether intellectual property needs to be protected as is done presently will change.

You’ve obviously read and thought about these matters in-depth. It is very rewarding for authors to have someone to discuss their ideas with. And you’ve got your own talent and experience which makes this come alive for you.

VB: It certainly does.

Raymond Miles: I would be delighted to receive feedback from you or any of your readers about ideas that look like they’re not right or need improving. You will take a further look at Syndicom as an example of a collaborative enterprise?

VB: I will. Creative new ideas may only surface if someone within the organization is sufficiently entrepreneurial to see the opportunity and figure out a way to act on it. Or the persons with the ideas might leave and set up their own companies.

Raymond Miles: Entrepreneurs are interesting people because by and large they aren't inventors. They look at something and imagine a new application by modifying, adding to or taking another slant on the original idea. Many of the most successful innovations occur that way rather than through basic science. I don’t want to overstate it because basic science and applied engineering, for example, do result in a lot knowledge that is useful to entrepreneurs. But the fact remains that many if not most entrepreneurs are not scientists nor do they have scientists working for them.

VB: The unused knowledge in companies represents a wealth of lost opportunities which could be addressed by using your model of a collaborative multi-firm network.

Raymond Miles: OpWin Global Network was intended to show how a community of companies operating in complementary markets could collectively increase the use of their knowledge assets. An idea that is floundering in one company or is not considered core to their business could find a home with a different company, thereby enhancing the chances that the good idea would be pursued.

In a typical company the reward system and the way they are organized squeezes out knowledge use and transfer between different work groups, departments or divisions. The result is one unit doesn’t want to collaborate with another because they’re not sure what benefit will come to them. A lot of ideas are lost that way—a huge amount—but companies could address this internal problem if they set their minds to it.

Even if that internal problem was addressed there would still be a lot of knowledge that would not be used because a company can only deal with a finite quantity of ideas in their product and process development chain. And the marketing staff can only promote a finite number of innovations to the marketplace.

VB: Somebody looking at an idea or invention from a different perspective might do what you consider to be a key characteristic of entrepreneurs—take the idea, elaborate on it and come up with a completely different application that has commercial value.

Raymond Miles: They could, and they could do it without being formally obligated to pay you a penny. That’s what everybody is always worried about.

The current thinking generally is if we share an idea, someone will do something with it that is outside our patented protection, make a fortune with it and we won’t get anything. As one manager said to me—I think I quoted it in the book—"I would rather let an idea go to waste than have somebody take it and make some money without paying anything to us".

VB: I guess that comment is typical of many people’s views?

Raymond Miles: Oh yes. It is a commonly held view; in the case of the CEO I quoted his position was based on having been previously cheated in this manner. He had never had an experience of doing it right, doing it in a collaborative way across firms.

VB: Our culture and its legal structure around patents, industrial designs, and trademarks lead us to focus on protection of intellectual property rather than sharing it for mutual benefit.

Raymond Miles: You can’t blame the creators of current patent laws and regulations. The problem is they are not just protecting; they are also constraining. That’s one of the things we’ve tried to point out in our articles and publications over the last decade or more.

VB: It’s an important lesson.

Raymond Miles: That’s why we comment about patent laws in the book. It illustrates the impact of the current patent laws.

VB: A manager has to back off, as you say, get out of the way and let people innovate and implement their innovations.

Raymond Miles: You can't just get out of the way; you have to help them be creative. You have to help spread trustworthy behaviour across the firm. That’s a challenge. How do we demonstrate to one another that we can trust each other? All involved in developing new ideas need to know they will receive the right credit at the end of the process. Creating that climate requires good management.

We show how collaboration might occur across companies using our OpWin Global Network model. In this model the founders of the network realize that collaboration is a crucial learning and business process. They put in writing their understanding about how it will work and then share this understanding with each new firm that joins the network.

VB: The issue is how to sustain it.

Raymond Miles: How to sustain it is very important. Trust is a fragile condition. You have to really work to maintain trust and you have to work to maintain a commitment to equitable treatment. So OpWin spent a lot of time on the issue of trust.

VB: Both collaboration and cooperation are processes in which two or more parties work with each other to achieve mutually beneficial outcomes, such as revenue growth or new patents. You say the motivation in a collaborative relationship differs from that of cooperation in that it is not based primarily on self-interest, on the benefits each party expects to receive. Rather it is based on intrinsic motivation and caring trust, with each party committed to the other’s interests as well as their own, and it is assumed that in the long-term rewards will be shared equitably. Is this the essential difference between cooperation and collaboration and why you feel collaboration will be so powerful as an economic model in the future?

Raymond Miles: Those are factors. It is difficult to be truly collaborative unless you are pushed by a commitment to trustworthy behaviour and are as concerned with the well-being of your partner company as you are with your own. That sounds euphemistic but, in fact, in our best relationships that’s where we are. In relationships with our closest friends, our spouse, or with our kids. If you take that approach of trust with the people at work, not only will you never treat them badly but you will want them to succeed and will help them in the process. That is a natural, human feeling.

VB: We want to see our business associates succeed just like we want to see our children succeed.

Raymond Miles: Absolutely. You know, it is remarkable how pervasive this feeling is but we deny it as a legitimate human motivation. What you simply have to do is recognize that this is the way people often behave and it is very productive. In fact, if you think back the most fun you ever had at work was in one of those circumstances where trust and collaboration were involved. Most people describe the best days of their lives in business as being times when they were behaving collaboratively.

VB: Interesting.

Raymond Miles: Of course the debate about human nature is centuries old.

Aristotle had a very rich view of human nature and, not surprisingly, being as brilliant as he was, he knew people had self-serving inclinations. They respond to and value duty, but they also rise above duty and behave in ways that serve others. This isn’t a new debate.

Currently there’s a lot of conversation about cooperation. What we were saying in the book is cooperation is better than not cooperating but it is very restrictive because it generally occurs where the desired outcomes are relatively clear and the distribution of future returns can be anticipated and negotiated.

If you really want to do something and really share ideas, then go beyond cooperation towards collaboration. Collaboration to create and apply knowledge for commercial enterprise entails sophisticated behavior. It is based on competence and experience, intrinsic motivation, trust between individuals and organizations, and full sharing of ideas, knowledge and information. Because collaboration is a process in which two or more parties work together to achieve mutually beneficial outcomes it is much more complex and demanding than cooperation. And most often much more rewarding.

VB: I find the term "partnership" is also somewhat self-serving.

Raymond Miles: Oh it is. Yet that’s about as far as most current business writers get.
They think it’s progressive. I guess on one level it is.

I would also argue that if I could get into a true collaborative relationship it would be self-serving—but in a different way. It's rewarding. It’s achieving at a grand level.

VB: And it is not just a "feel-good" thing because it gets results.

Raymond Miles: Oh absolutely. I’ve talked to people who have been part of a scientific research team and they remember it as being one of the most exciting periods of their lives. No one was sweating about who got credit for every idea. There was a team effort.

VB: And they were also having fun.

Raymond Miles: Having fun—a rich spot. We need to push the fact that collaboration in an organization or among organizations is not only more productive and makes more money, it is also a lot more fun.

VB: As we compete for increasingly scarce skilled resources, collaboration provides a definite advantage.

Raymond Miles: Exactly.

VB: You identify four shortcomings in the present theory of the firm and indicate that the most fundamental is its flawed concept of human motivation, which would have it that people in organizations act only with self-interest and often with guile. Are you optimistic positive human motives such as sharing, working together and being generous will increasingly find their way into teachings in business schools, economics departments and executive training programs? What do you see as being some of the implications if this becomes more the norm than the exception?

Raymond Miles: I don’t believe that human motives are genetically determined. I think they are culturally and environmentally determined. So I think we can create the kind of society we want to create. You can educate people inappropriately or you can educate them appropriately.

I am optimistic that collaborative behaviors will increasingly be taught at business schools and in training programs for managers. The impact on changing behaviors in the business world will be welcomed and productive.

Conclusion:
This is an optimistic and encouraging message. "Individuals have good ideas, but groups have great ideas." Under the Collaborative Entrepreneurship model businesses pledge to set the highest standards for customer satisfaction, human resource development and retention, and environmental sustainability. When these standards are met everyone wins, including our planet. Let this be a rallying call to change the tide from dumbing down to smartening up.

Raymond Miles has a journalism degree from the University of North Texas, MBA in industrial relations from the University of North Texas and Ph.D. in organizational behavior and industrial relations from Stanford University. He has been a professor at the Haas School of Business, University of California Berkeley since 1963 including Dean during 1983 to 1991. He is presently Professor Emeritus at Haas School of Business and continues to study, write and publish and act as a Faculty Advisor. He has also served as a business consultant and member of boards of directors of a number of large companies.