Collaborative Innovation: Five Steps to Successful Technology Partnerships
More companies are turning to outsiders for help with innovation. Three CIO 100 winners learned how to get the most from a partnership with an industry peer.
By C.G. Lynch
Erin Griffin, vice president of IT at Loyola Marymount University (LMU) and Mitch Davis, CIO of Bowdoin College, met three summers ago at Snowmass, near Aspen, Colorado, during a conference on academic computing. They shared experiences about their respective IT challenges and traded some ideas. But it didn’t occur to either Griffin or Davis that they could join forces until they met up again in 2005 at the same conference.
The two walked together out of a session about disaster recovery, reflecting, Griffin remembers, that they were both were both in a jam. Disaster recovery solutions from vendors were expensive—especially for small colleges with limited budgets. She and Davis joked about how easy it would be for people to replicate each other’s data centers, if only they were willing to work together. Then came the epiphany. “We said, What if we actually did it?” Davis recalls. Half a year later, Griffin, who is based in Los Angeles, and Davis, in Brunswick, Maine, began development of a solution that allows them to host each other’s disaster recovery sites. It has cost a mere fraction of what it would have to hire a vendor.
Samuel Gaer, executive VP and CIO of the New York Mercantile Exchange (Nymex), faced a different conundrum. A major competitor was encroaching on Nymex’s market share by offering competing energy futures contracts on a “side by side” system for trading both securities and their options, while Nymex was still executing them manually from its trading floor during
the day. Gaer needed to get Nymex’s contracts online in a hurry. Nymex had a system ready, called ClearPort that it had upgraded, but Gaer knew that the Chicago Mercantile Exchange (CME), which specializes in financial futures, had a well-established electronic trading platform called Globex. “From a technical standpoint, our system was robust, but CME [and Globex] still had some distinct advantages,” he says. For instance, Globex, which had been around since 1992, had been more heavily tested, and as a result it was more scalable. So Gaer called CME COO Phupinder Gill and proposed a partnership.
“I essentially said, why should Nymex reinvent the wheel when we can collaborate?” Gaer recounts. Working together over the next year, Nymex and CME came to an agreement that enabled Nymex to list its futures contracts on Globex. As one result, the trading volume in crude oil futures offered by Nymex grew from 220,000 to more than 500,000 per day in 6 to 8 months.
The collaborative efforts by Loyola Marymount and Nymex, which each received a 2007 CIO 100 award for partnering successfully with an industry peer, represent a growing trend among companies (CME is also a 2007 CIO 100 honoree, for a business intelligence project involving dashboards for managers). A global study by IBM of 765 CEOs last year revealed that more than 75 percent of them place a high priority on partnering outside of their organizations to create innovation. But there remains a “collaboration gap,” with only 50 percent of companies actually reaching beyond the enterprise to partner with another organization. That gap, the study concluded, represents an opportunity for CIOs to lead the way as facilitators of intercompany collaboration.
But assuming this role is a challenge for IT departments, which typically take pride from invention. “The role of the inventor is disappearing,” says Navi Radjou, VP at Forrester Research. “They need to stop inventing and take on the role of a transformer: transforming raw technologies into a meaningful application for [the] business.”
Find the Best Solution (Maybe Not Yours)
“I can code in seven different languages, but I’m a business guy,” says Samuel Gaer, executive VP and CIO of the New York Mercantile Exchange. When Gaer proposed listing Nymex’s energy futures contracts on the well-established Globex platform run by the Chicago Mercantile Exchange, he told his boss: “This has nothing to do with a lack of faith in our abilities; this has everything to do with a forward-looking business relationship.”
From their experiences, LMU and Nymex are helping to define best practices for successful partnerships in business innovation. Griffin and Gaer reveal how they made it work, from selling their ideas to business leaders to executing their winning projects.
1. Convince Your Boss
Even though most CEOs might tell IBM’s survey team that they welcome external partnerships, they still have to be convinced that such things are good for business. Three factors that count: good timing, a solid ROI and an immediate business need.
Griffin and Davis conceived the disaster recovery plan for LMU and Bowdoin in 2005. They were still brainstorming when Hurricane Katrina devastated the Gulf Coast in August and forced colleges in its path, such as Tulane in New Orleans, to shut down. Disaster recovery became a hot topic. “All of a sudden people were interested in it,” Griffin says. “So we took it to our senior administrations.” However, cost became the overriding factor, Bowdoin’s Davis says. “I’d been thinking about what it would cost to do disaster recovery with a vendor—you just couldn’t do it.”
In the case of Nymex, CEO James Newsome was keenly aware that the company had put significant time and money into ClearPort. But at the time, in 2005, Nymex developers were still putting the system through its paces. So when Gaer made the case to collaborate with CME, he emphasized the benefits of speed and economics. “I said that CME spent $7 billion in seven years building a worldwide distribution market for Globex. If we put our products on Globex, then we’d have the immediate
distribution we needed.” That confirmed for Newsome that collaboration was the right decision.
There were some sticking points during negotiations. For example, Nymex worried about ceding some control over its technology to CME. In exchange, Nymex wanted CME to sign a noncompetitive agreement promising not to list futures contracts that resembled Nymex’s. CME eventually agreed, and the deal went forward. (In June, the companies quashed rumors that they were discussing a merger after the Bloomberg news agency reported Nymex was exploring a sale with three potential partners, including CME. Executives from both companies said that they plan to continue their partnership as independent entities.)
2. Convince Your Staff
Once Gaer worked out the deal with CME, he had an ugly job ahead of him: telling his team of developers who had built ClearPort that it was being shelved in favor of Globex. “It was one of the hardest things I had to do,” he says. “We had our own system that we believed was bleeding edge. There was a lot of pride of ownership.”
Seek a Partner with Complimentary Skills
A successful collaboration pairs partners with complementary skills. “Mitch [Davis, CIO at Bowdoin College] is the king of the creative idea,” says Erin Griffin, VP of IT and CIO of Loyola Marymount University. “I’m [a] process and planning person.” The two organizations built a joint disaster recovery system. “Not only did our staffs have complementary skills,” says Griffin. “We did as well.”
Gaer faced a common problem with collaboration, says Forrester’s Radjou, as IT staff let go of their role as inventors. “You don’t want them to think they’re not good at what they’re doing,” he says. Providing them with ways to make valuable contributions to the project is critical.
The Nymex developers weren’t blindsided by the news of the partnership—there had been rumors of the deal in the marketplace—but there were, Gaer believes, bruised egos. So in town hall meetings, he went out of his way to make it clear to the developers that their technological work was sound. Then he could explain the business imperatives.
Of course, not everyone was sold right away, so Gaer encouraged them to vent and to challenge him. “[I would] walk to the bottom of the floor and say, Ask me what you want. Say the emperor has no clothes.” He also established an open-door policy for his staff to speak with him privately if they didn’t feel comfortable doing so in the open town hall forum. Gaer believe that his openness and willingness to hear criticism helped the staff trust the decision.
Gaer and Jim Krause, CME managing director and CIO, also gave the Nymex IT department an active role in the integration with Globex. While CME, which deals primarily in financial futures, wasn’t new to energy futures (it had once listed a few Nymex products) it still relied on Nymex IT’s expertise to help with the migration.
3. Divide the Work to Conquer the Project
After LMU and Bowdoin got their staff and leadership teams on board, the next step was to assess the strengths and weaknesses of each organization. The approach was simple: Whichever organization was better-versed in a particular technology would help its partner implement it. Griffin and Davis’s ultimate goal was to replicate each other’s IT departments as much as possible—from their Web infrastructure to e-mail, to servers. By mirroring each other, they could easily take on each
other’s operations if a disaster occurred.
According to Griffin, Bowdoin had a good handle on VMware, but LMU had a better grip on Microsoft Exchange. So they helped each other deploy the technologies they knew best, mixing and matching until their IT departments were like twins. “Now you can go right down the list of places where we match,” Davis says.
4. Establish Metrics for Success—As You Go
Collaborating with partners in one’s industry often breaks new ground, and measuring the outcome can be difficult. “We were looking for measures of success and we found that we sort of redefined them as we went along,” says Griffin.
One way to ensure that the partnership succeeds is to mind your partner’s goals. For example, while both LMU and Bowdoin wanted a new disaster recovery solution, they needed it for different reasons. Bowdoin would need LMU’s services frequently for short periods due to storms that cause power outages several times a winter. LMU, on the other hand, will most likely need Bowdoin only in case of a large earthquake or terrorist attack. (The LMU campus is near Los Angeles International Airport, which has been targeted by terrorists in the past, including an attempt, thwarted by U.S. authorities, to bomb the airport on New Year’s Eve 1999.)
The partners designed each other’s emergency sites to reflect the frequency and magnitude of their needs. For instance, LMU would need the ability to conduct all classes remotely for several months in the event of a major disaster. As such, it would need to retain access to one semester of a fully populated course management system. Bowdoin, however, had no such need. Each scaled its storage plans accordingly.
5. Foster Good Communication from the Top Down
If the CIOs in the partnership have a good relationship, their goodwill will trickle down to their teams. “We had mutual respect for each other, and I think that transferred quickly,” says Bowdoin’s Davis.
Gaer and CME’s Krause are friends (“It’s a small industry,” Gaer notes). And they had worked together in the past. “That really helped—having the familiarity with each other from a cultural as well as a technology level,” Gaer adds. Eventually, as their IT teams got to know each other over weeks of conference calls, they also developed close relationships.
Griffin and Davis helped transfer their energy to their teams by bringing their managers to the birthplace of the project at Snowmass. “We did some bonding over frisbee, golf, rafting and hiking,” says Griffin. “As much as electronic collaboration is great, sometimes it helps to meet people face-to-face and get a sense of what kind of sushi they eat, or if they prefer Fenway Park or Dodger stadium.”
Griffin says that because collaboration with a peer organization is still a new concept, IT staffs are bound to view it cautiously. It takes enthusiastic leadership from the CIO—and a few gung-ho staff members—to get things moving. “There was some trepidation at first,” Griffin says. “But I have a couple of people who saw this as exciting. Sometimes it takes a few people who look at the world differently to make a collaboration effort like this contagious.”