Who's Collaborating?

Although some vendors might have you think otherwise, collaboration is not a synonym for communication. (E-mail and even the telephone can support collaboration, but communication alone does not constitute collaboration.) In its purest form, collaboration consists of two or more individuals or companies working together to achieve a common goal or create mutual value. By combining resources - whether that means sharing customer information, supply chain data, intellectual property or R&D expertise - collaborators jointly create what they cannot produce efficiently on their own. Forms of collaboration can be classified by the relationship between the collaborating parties, which often sets the tone for the partnership.

BETWEEN COMPETITORS: As the insurance CIO found out, collaboration among competitors is the most difficult and delicate form of partnership. But archrivals Procter & Gamble and Clorox have managed to make it work. The two packaged goods companies compete fiercely in the cleaning products and water purification categories, yet both profited when Press'n Seal, a new plastic wrap based on breakthrough P&G technology, went to market under Clorox's well-established Glad brand. P&G invented a new plastic wrap that seals tightly only where pressed (and won't stick elsewhere). But the company didn't have any products in the plastic wrap category and executives realized that a joint venture with Clorox would be more profitable than investing the resources to establish a meaningful P&G presence in a new category. So it shared the science behind Press'n Seal with Clorox in a deal that got P&G a 10 percent stake in the Glad business (with an option to buy another 10 percent stake) and a cost-effective entry into the plastic wrap business. Clorox got to introduce a new product in a dormant category and gained access to P&G's substantial R&D pipeline for products in the plastic wrap, bags and containers business, on an ongoing basis. Today, Glad commands 49 percent of the plastic wrap category, up 23 points from before the introduction of Press'n Seal in 2003. And the collaboration continues with the recent introduction of Glad ForceFlex trash bags, which are made of strong but stretchable plastic developed by P&G.

A G Lafley, P&G's CEO, is so bullish on the concept of collaboration that he's made it a corporate priority, setting a goal of sourcing 50 percent of the company's innovation externally. For a company that long prided itself on developing all of its products internally, working with outsiders to bring new products to market is a major cultural shift. "In our R&D organization we have 7500 people in 150 science areas, but there are 1.5 million high-quality people outside P&G," says Larry Huston, vice president of R&D Innovation and Knowledge. "You can't possess all the science and brilliant minds. If you try to invest in all the different science areas relevant to you and be world class, the costs will be prohibitive."

BETWEEN FRIENDS: Although outsiders consider the Chicago Mercantile Exchange (CME) and the Chicago Board of Trade (CBOT) to be fierce cross-town rivals, the two trading organizations have not viewed things that way. And in fact, they have a lot in common: They share a large number of customers, and both must process all the trade transactions that they broker. In the past, CME maintained its own clearing function and CBOT outsourced to a third-party clearing organization; both required their customers - financial institutions conducting trades - to put up funds to guarantee their trades. The organizations saw an opportunity to build a joint, Web-enabled clearing system that would be more streamlined than the pair's previous systems yet provide more sophisticated trading details. Now traders can put up money once to guarantee trades on both exchanges. The system also can save money for traders - money that can be reinvested in the market, increasing volume for both trading exchanges. "If someone's trading our Dow against [CME's] S&P, they're looking at up to a 90 percent savings in terms of margin offsets," says Brian Durkin, executive vice president and chief operating officer at CBOT.

IN THE FAMILY: Although collaboration between companies may garner more attention, internal collaboration between far-flung or diverse business units can often generate remarkable efficiencies or create value in product lines. Before P&G opened the doors to external collaboration, the company was already working hard to transfer knowledge internally. For example, collaborating P&G researchers applied paper engineering know-how from the company's paper towel business to its home-care group's Swiffer mops. Research on calcium done for the laundry and toothpaste categories led to insights for Actonal, P&G's osteoporosis drug. And combining expertise in cleaning technologies led researchers to develop Olay Age-Defying Cleansing Cloths.