Building the Extended Enterprise: Key Collaboration Factors
By Dr. Christos Braziotis and Dr. James Tannock, Nottingham University.
The simple qualities of trust and commitment are the cornerstones of a successful and enduring business relationship, a new study has found.
Research into the nature of extended enterprises—networks of firms that combine skills to improve their product offerings—revealed the attributes as crucial to an alliance’s ability to survive.
A survey of major companies in the aerospace industry found trust takes time to form but the process can be accelerated by make-or-break challenges.
The findings helped experts from Nottingham University Business School develop a taxonomy to assist in understanding the transition towards extended enterprise (EE) and the distinctive sets of factors that influence effectiveness.
They firstly divided these into contractual and engaging factors.
Contractual factors are associated with explicit aspects of a relationship – e.g. issues related to operational responsibilities, strategic and business decision-making and basic concerns such as defining the length, costs, risks and rewards associated with a partnership.
Engaging factors, meanwhile, are associated with the implicit aspects of a relationship, and these can be further broken down into two sub-groups: enabling and enhancing.
Enabling factors concern the practical aspects of a relationship e.g. levels and methods of information-sharing, communication channels and knowledge exchange.
Enhancing factors relate to the actual level of intensity of collaboration in terms of, for example, trust, power and commitment.
The study concluded the interaction between enabling and enhancing factors primarily determines the effectiveness of collaboration within an EE.
Research basis
The research drew on in-depth case studies of three manufacturing companies within the aerospace industry.
Company 1 is a leading manufacturer and an acknowledged EE pioneer. Company 2 is a significant supplier to 1, as well as some of 1’s competitors. Company 3 develops and manufactures a product in partnership with 1 but has formed further EEs with 1’s competitors. Companies 2 and 3 have also worked together.
Interviews and focus groups organised over the course of two years were used to provide information and opportunities for evaluating the key collaborative factors in EEs and how they interrelate. Annual reports, internal memos, organisational charts and process maps were also made available!
Key findings
• The simple qualities of trust and commitment are the cornerstones of a successful and enduring business relationship.
• Research into the nature of extended enterprises – networks of firms that combine skills to improve their product offerings – revealed the attributes as crucial to an alliance’s ability to survive.
• The factors that affect the effectiveness of an extended enterprise (EE) can be divided into two main groups: “contractual” and “engaging”.
• The latter of these can be further divided into two subgroups: “enabling” and “enhancing”.
• Enabling factors concern the practical aspects of a relationship – e.g. levels and methods of information sharing, communication channels and knowledge exchange.
• Enhancing factors relate to the actual level of intensity of collaboration in terms of the likes of trust, power and commitment.
• The interaction between enabling and enhancing factors primarily determines the effectiveness of collaboration within an EE.
Comments and implications
Study co-author Dr Christos Braziotis said, “Our aim was to better understand how various factors help bring about effective collaboration. Trust between partners is clearly a vital ingredient of that, and all the companies and employees we surveyed described it as important. But they also said it doesn’t come about quickly – it develops over time and especially when partners have to face difficult situations.
He went on to note, “There are many outside influences that test an extended enterprise’s level of collaboration and its effectiveness. These influences might change many times during the life of an enterprise, constantly setting new challenges for it to overcome. In the face of a serious market demand downturn, for example, partners might tend to revert to ‘individual survival mode’.”
He then summarised, “When such problems are identified—and there will always be some—good partners discuss them and come up with recovery plans. There’s a realisation along the lines of ‘We’re partners—we do the work together, we share the risks, we share the rewards’. That’s the proper attitude towards a win-win partnership.”
The study also identified potential difficulties in the exercising of power among an alliance’s partners.
Co-author Dr James Tannock said, “Managers in the smaller firms suggested there are occasionally some power issues to address. One particular company, for instance, was initially felt to be exercising its power unduly due to its size and dominant position. This situation later improved considerably as taking common decisions allowed the relationship to develop positively over time.”
The authors concede the single-industry context of the research—made necessary by the in-depth nature of the project implies certain limitations.
But Dr Braziotis added: “We found evidence that our findings will apply to other EEs in the aerospace industry and, indeed, to other manufacturing industries featuring a degree of EE formation. Our conclusions should also apply to other industry contexts where there are supply chains of a highly collaborative nature – although such claims, of course, must be subject to future research.”
Paul Arkwright
Publisher
