Build Confidence in Collaboration

Thomas Fisher is getting ready to peel back the covers on his company’s confidential information so that suppliers can better serve his needs. But before he takes that big step toward collaboration, he’s got to take a deep breath.

“There’s some leeriness on our side. Suppliers will need to have a lot of our proprietary information to fulfill our raw materials needs in real-time. That could be used against us if we’re not careful,” says Fisher, vice president of global information technology for Applica, an $850 million maker of small appliances (including the Black & Decker line) headquartered in Miami Lakes, Fla.

In June, Fisher is planning to launch a Web-based front end to his manufacturing system, based on QAD’s MFG/PRO, that will give suppliers unprecedented access to Applica’s production data. Sharing the information will allow Applica to do real-time procurement of raw materials it uses, which Fisher expects to lower costs and increase production flexibility. But with that big win comes the risk that the

information will be misused?for example, specifics on Applica’s manufacturing processes or product design might somehow make their way to competitors. “We’re working on rules and procedures on how that information should and should not be used,” Fisher says.

His sense of unease is pretty universal. Seventy-five percent of senior IT managers cited lack of trust as the number-one barrier to electronic collaboration in a recent survey conducted by NerveWire, a consultancy in Newton, Mass. “It is a tradition that we don’t trust our business partners,” says Hau Lee, professor of operations, information and technology in the Graduate School of Business at Stanford University and an authority on supply chain management. “People don’t have a clear understanding of how sharing information would result in better performance. The lack of understanding induces fear and skepticism: ’I’m not sure, so it’s better not to do it.’”

Yet the potential benefits of collaboration are huge, be it integrating supply chains, product development or even business processes. Companies?and their supply chains?can cut out waste, speed time to market and be more responsive to customers’ needs by sharing information. During an otherwise grim year in 2001, for example, Applica cut $60 million out of its average inventory and trimmed the number of days product remained in inventory from 136 to 94, thanks to collaboration projects already in place, Fisher says.

Sooner or later, companies in all industries must face the fact that competition is increasingly between supply chains rather than between companies. Hardly any big-name manufacturers actually make anything themselves anymore?they leave it to contract manufacturers so that they can compete on the basis of superior information and efficiency. “All companies will have to do collaboration as a core competency, or they will not survive,” asserts Denis Mathias, a partner in San Jose, Calif.-based IBM Consulting Services. Supply chain partners “need to have a different value proposition not based on exploitation but win-win.”

Spalding Holding, a maker of sporting equipment in Chicopee, Mass., finds its collaboration with Wal-Mart Stores to be a win-win, says Spalding CIO Christine Rousseau. “Getting their forecast and [point-of-sale] data is beneficial to us because it allows us to keep our inventory levels down. It lets us serve [Wal-Mart’s] needs better,” she says. Wal-Mart, in turn, runs short of Spalding goods less frequently than it did before the companies exchanged data and has a better understanding of Spalding’s capacity and costs.

In contrast, companies that screw their trading partners to the proverbial wall will find they cannot work as effectively, says Mathias, as those that collaborate seamlessly in an electronic environment designed to help all parties thrive. The age of specialization demands that companies lay down their age-old adversarial relationships with trading partners.

Of course, company practices won’t change overnight. And neither will human nature. Fear, uncertainty and doubt (FUD) has always driven people to hold information close to the vest, even among coworkers. At this early stage of collaboration, companies are struggling to find ways to safely open up. Unless and until partners can see that it is in their own best interest to collaborate, getting them to trust each other will be an uphill battle. Just ask Jack Lowry.

FUD Factor

Back when he was vice president of information technology at now-defunct Goldman Industrial Group of Vermont, an automotive capital equipment provider in Springfield, Lowry had a vision nearly a decade ago of how electronic collaboration would help his company and his customers work better together, cutting cost, improving quality, increasing responsiveness and improving time to market. (Read more about Lowry’s prototype effort in “Nobody to Play With” at www.cio.com/printlinks.) Back then, the technology piece was missing from the collaboration puzzle. But Lowry was convinced collaboration was so sensible that anyone could see the payoffs.

And perhaps Goldman’s customers and suppliers could see potential benefits, but long-standing mistrust?both inside and outside the walls of the enterprise?proved insurmountable. Before bringing his message of collaboration to outside partners, Lowry had to start within the organization. There he found enough skepticism to sink the whole endeavor.

“The reaction was, What’s in it for me? Why should I do this? It’s more work for us,” says Lowry, who last fall cofounded Global Location Services, a provider of global positioning systems in Williamstown, N.J. With an extensive background in both manufacturing and IT, plus a boatload of charisma, he managed at last to convince people internally on the Vermont sales team that collaborating externally was the right thing to do. Then he had to wait for his salespeople to provide him the right contacts at their customer companies. Then he had to get the sales guys up to speed on collaboration?at least enough to sound marginally knowledgeable on the subject when meeting with outside parties alongside Lowry.

When Goldman reps finally met with their partners and customers, it was more of the same. “You’d need someone from the other side’s IT department, the head person in charge of the plant, your sales guy and your plant guy,” says Lowry. When at last all the right people were around the table, good feelings did not exactly flow. “The arms are folded. They’re shaking their heads. They’re looking tired. They want to know, Do you really want to collaborate, or do you just want us to do something for you?” he says.

Sometimes the other side would flat out refuse to get involved. More often?and worse, by Lowry’s lights?the partner would agree to collaborate but then not do anything. “They’d drag their feet. They would wait it out because they knew there would be a change in management, and it would someday go away,” he says. Just months before Goldman filed for bankruptcy in February 2002, Lowry finally found a partner willing to go beyond the pilot stage on a far-reaching collaboration project in which the companies agreed to directly link their manufacturing systems. But before the venture could get going, the recession caught up with Goldman. You can’t help but wonder if Lowry had had more success earlier whether the company would be around today.

Lowry was a visionary. He had much more than minimal collaboration in mind and only early stage technology to pull it off. In fact, he was attempting the deepest degree of collaboration, in which the majority of interactions between partners involve shared applications. The promise of such integration is that partners redesign their business processes so that activities naturally shift to the appropriate party, eliminating much waste. Today, there are many technology solutions on the market or on the way (such as Web services) that can help companies achieve this. It’s the people issues that still loom large.

Scott Griffin, vice president and CIO at Boeing, is running up against the trust barrier. Boeing engineers have long shared product design data electronically with their supply chain partners. At that basic level of collaboration, trust has not been a big issue because the arrangement is covered by standard nondisclosure agreements. But a higher level of collaboration, in which the company will integrate its business processes with its partners, holds both the promise of fatter profits and the peril of greater risks, Griffin says.

In the near future, Boeing engineers and their partners won’t just pass design documents back and forth but will actually share the same product data management system with their partners, as if there were no corporate boundaries. “In this high-level collaboration we will have designers [from all sides] working concurrently. Someone is building the components; someone is designing the assembly; someone is figuring out how to make the assembly; someone is figuring out how the assemblies will go together into subassemblies and then finally into an airplane. That is nirvana as far as collaboration,” says Griffin, speaking from Boeing’s new headquarters in Chicago.

Even at such an advanced level of collaboration, technology is no longer a barrier. “The technology is getting to the point where you can literally work together as if you were in the same company. The only rules are nontechnical rules about who gets to work together, how do they work together, what information can they share, what information can’t they share, who owns the intellectual property,” Griffin says.

But “this is a big deal in terms of trust because the [supplier] could build the same part for your competitor,” he says. “Once you say, Build me the world’s best overhead arch beam, they could turn around and sell that to Airbus.” No one has come up with a satisfactory solution to that conundrum yet, despite vendor claims to the contrary, says Griffin, adding, “We need to work some stuff out.”

Six Ways of Getting to Yes

So successful collaboration boils down to trust among partners. And trust has to be built up over time. “You have to earn it,” says Applica’s Fisher. “You can’t walk in the door with bright eyes and bright ideals. It takes time.” Acknowledging that there are no quick fixes, here are six ways CIOs can lay the foundation for trust.

1 Start small. Begin by collaborating on a small scale?such as synchronizing one type of sales data?and with a partner you already trust (hopefully, the feeling is mutual). Pick a project that is likely to provide a quick return on investment for both sides. Once you show real benefits and create a climate of trust, then it’s time to go for bolder stuff. Spalding, the sporting goods manufacturer, launched its collaboration with Wal-Mart by initially exchanging data via EDI. Today, the companies share forecasts and real-time sales data over the Internet. The key to the successful venture, says Spalding CIO Rousseau, was establishing a track record of collaboration, however modest.

2 Look inward. As Lowry found at Goldman Industrial Group, the necessary precondition for establishing trust with outside partners is establishing trust with one’s internal peers. That means the CIO and his staff must make peace with the supply chain folks, the e-commerce team, the marketing and sales force, and whomever else might be involved (which is to say, everyone). Give the same pitch you would to external partners, singing the commonsense benefits of working together and grinding along toward consensus. Your internal political situation might be a mess, but that’s no excuse. If you can’t break down barriers with the people you play alongside on the company softball team, you don’t have a hope in hell of doing it with outsiders.

3 Gather ’round. This is no time to use e-mail or videoconferencing. There’s no more sophisticated method to build up trust than to meet with people the old-fashioned way, around a table. Listen to the objections, find out what the agendas are, buy them lunch (better yet, cocktails), and then do it all over again as people leave and management changes. Boston-based Partners HealthCare System recently began sharing some data with Blue Cross Blue Shield of Massachusetts, a health insurer. The undertaking makes sense for both sides, but first the parties had to overcome antagonism caused by fractious negotiations on reimbursement rates that happen every few years. John Glaser, vice president of IT and CIO for Partners, and his counterpart, Blue Cross CIO Carl Ascenzo, discovered that a small humanizing touch is sometimes all that’s necessary to get collaboration working. The person who does claims processing at Partners got together with her counterpart at Blue Cross for the first time. “The social glue didn’t exist because they had never met. One part of collaborating is getting to the point where you realize you like the other person,” says Glaser.

4 Go for the win-win. It’s a clichŽ, but be prepared to hear?and say?”win-win” (or even “win-win-win”) over and over again. That’s because collaboration really is a new way of doing business, a system in which the biggest parties do not bully and abuse their partners because they can, but rather help create an environment that optimizes business for all supply chain members. If you can’t demonstrate that the collaboration initiative will benefit everyone, no one is going to get behind it?in their hearts, minds or wallets.

5 Don’t give away the store. Declare that no one has to, or should, share all information. Even in this day of the extended enterprise, some information should remain proprietary. Acknowledge that point right away so that people can relax. You don’t have to share everything to improve your supply chain’s performance. Simple exchange of demand, consumption and capacity forecasts can go a long way.

6 Just do it. One of the best ways to build trust is simply to start sharing information. If all goes well, success breeds trust, emboldening the partners to go on to bigger things. Rousseau doesn’t worry that sharing data will lead Wal-Mart and other customers such as Kmart to try to drum down Spalding’s costs. “That will happen anyway. We’re not afraid of that. We just have the kind of relationship where it’s beneficial to both sides to share as much information as we can,” she says.

Having a history of successes together goes a long way to maintaining trust, Rousseau says. “Nothing bad has ever happened with the information they send to us. And vice versa. Trust evolves through reliability and being able to have accurate, timely data.”