Collaborate or compete? That's a core strategic question for organizations seeking margins and market share. When are they better off energetically competing against their rivals? When are they wisest to collaborate and cooperate? That strategic question is even more important for the internal IT marketplace. CIOs have to determine what will better drive desirable results: more collaboration within their IT shops or encouraging smarter competition. The "correct" answer, of course, is "both." Good luck.\n\nUnfortunately, most CIOs focus far less on the productive role of competition versus collaboration than on the design and deployment of productive process. Our legitimate concerns about process undermine rigorous thought and action around when getting people to compete and getting them to collaborate makes the most sense. Too much of either can kill. As Paracelsus, the 16th century Swiss alchemist, keenly observed: "The dose makes the poison." What's the right dosage? What's the right mix?\n\nThese issues snapped to mind at US CIO's CIO 100 Symposium in San Diego, during a session on innovation that I participated in with Capital One CIO Gregor Bailar and others. Bailar, inspired by an internal competition run by CBS Marketwatch to encourage creative mash-ups, imported the idea to his IT shop. The first time he ran the competition, he got far fewer entries than expected.\n\nNow it's not that Bailar doesn't encourage or support Web 2.0-oriented innovation. Capital One is as innovative a shop as you'll find. The organizational reality is that sometimes internal competitions productively tap an existing well of frustration and perceived opportunity. But if the target audience hasn't yet perceived the potential opportunity, they may treat such competitions as just gimmicky distractions.\n\nThis is a powerful and (relatively) innovative diagnostic. Run an internal competition around mash-ups, interfaces, tech support or some other IT-empowered business issue and see what kind of response you get. The size of the prize and quality of recognition have to make sense, but you'll be amazed at what does\u2014and doesn't\u2014pop up. I was.\n\nIndeed, you'll find the conversation surrounding prize size, recognition and rewards speaks volumes about your shop's competition culture. Will a token dinner for two and an enterprise attaboy from the CIO motivate people? Or do you need cold, hard cash? Are you looking for breakthrough ideas from a brilliant programmer? Or would you rather have entries from programming pairs or trios? Do you want lots of entries? Or do you want the "right" ones?\n\nThese aren't rhetorical questions. The way you design a competition\u2014particularly its rewards\u2014reveals your own values as a leader. To the extent you recognize, reward and celebrate individual achievement, you may tacitly discourage collaboration. To the extent you pit teams against one another to come up with solutions, you discourage sharing and cooperation. And if competition in any form is seen as irrelevant to innovation, creativity and productivity, you're running an IT shop that's ignoring one of the greatest spurs to ingenuity known to history.\n\nCIOs worldwide are impaled on the schizophrenic horns of a leadership dilemma. IT organizations desperately need the efficiencies and innovations that internal competition can surface. Yet they have to promote greater knowledge sharing and collaboration to encourage greater efficiencies in innovation communication and alignment. So which is the better investment: rivalry or cooperation? \n\nEven though I've written books about collaboration, my money's on rivalry as the medium and method that deserves greater investment and ingenuity from CIOs. While competition shouldn't be a dominant driver of your internal IT culture, it needs to be more than a spice: It has to be an essential ingredient. Yes, competition for the sake of competition is dumb\u2014but so is collaboration for the sake of collaboration. You need to begin by learning how your existing IT culture defines the contours of its collaboration versus cooperation landscape.\n\nWhile the answers aren't easy, the path to finding them is. Look at the three most common "success stories" your organization tells when it's reviewing past accomplishments. Then review the three most common "abysmal failure" tales your people tell. Here's the trick: Don't look for the heroes, villains, best practices or dumbest decisions. Instead, examine the competitive versus collaborative dynamics of each project. What role did competition and rivalry play in the successes and the failures? How did cooperation and sharing add value or induce paralysis?\n\nYou're guaranteed to discover your IT shop's comfort zones around rivalry and cooperation. Sometimes, feeling uncomfortable about competition is wonderful; other times, it signals the wrong kind of fear. Sometimes, collaborative, cooperative relationships indicate a well-run organization; then again, they can signal self-indulgent complacency. You need to know this.\n\nAt one global professional services firm, the CIO realized that office rivalry between regions had passed the point of diminishing returns. There was literally no incentive for offices to share best practices\u2014or any meaningful information\u2014at all. Not a single success story had anything to do with cross-office collaboration. In fact, because the offices were actually ranked against one another, collaboration was effectively discouraged. Effecting a change in incentives and culture proved easy. An outside consultancy recommended the straightforward remedy of making 20 percent of the regional CIO's bonus contingent upon demonstrable knowledge sharing and cost-savings between the units. The units were also ranked on how collaborative they were.\n\nBy contrast, another professional services firm IT shop was so collegial and collaborative that it passive-aggressively killed efforts to introduce IT innovations that would upset the existing comity. The IT people did a better job of collaborating with each other than with their internal clients. The clients came second. The result? The consultants bypassed IT and bootlegged budgeted IT innovations on their own. The CIO was ultimately asked to leave, and a non-IT partner was put in charge. A few of the surviving IT employees are unhappier, but the bulk of their internal clients are not. Internal competition energized both IT and its users.\n\nLeadership means defining and designing the kind of marketplace that's best for your IT shop and enterprise. And it means having the courage to compete and collaborate and inspiring your people to do the same.\n\nMichael Schrage is co-director of the MIT Media Lab's eMarkets Initiative. He can be reached at email@example.com.