No doubt at the heart of every business operation there is a need for effective risk management. In many cases partnering and collaboration can provide mitigation and greater certainty of outcomes on all sides of the relationship, through more proactive collaborative approaches and the sharing of knowledge.
Collaborative ‘vested outsourcing’ contracting brings risk and value management into the heart of the contract, in a way that is not possible in traditional contracts. Instead of apportioning risk, it is collectively assessed and valued.
Network Rail operates a number of different collaborative contracting strategies, encompassing different risk or reward regimes, fee arrangements, target cost definitions and payment procedures.
Umit Bititci, Professor of Business Performance and Head of Department in Business Management at Heriot Watt University has focused his research on improving business performance and he is passionate about enabling businesses with the tools for success. Over the last 25 years he has collaborated with a range of sectors, researching what makes some businesses more successful than others and identifying the role played by collaboration in this success.
His paper ‘Managing Synergy in Collaborative Enterprises’ investigated why collaborations often fail and offered a Synergy Model to support success.
Acording to a team from Warwick Business School led by Dr. Mehmet Chakkol, more than 50% of outsourcing contracts are terminated before the end of the contract. To prevent this, the parties involved must recognise early on the positives and negatives, and specify how the end goal could be reached.
Professor Umit Bititci identifies the key reasons for failure as:
- Lack of commitment, leading to problems with trust and eventual failure of the relationship.
- Failure to identify a common ground. The partners cannot answer the question “What additional competitive advantage is the collaboration going to create?” and for which markets/customers and/or shareholders?”
- Unrealistic objectives of partners, with the expectations of each partner not being made explicit and shared.
- Failure to fulfil objectives and needs of partners.
- Failure to focus on customers’ needs.
- Focusing on individual short-term benefits rather than focusing on long-term benefits collectively.
- Unfair distribution of benefits.
- Absence of an operational system to manage the collaborative enterprise. It is critical that management systems are in place to provide the partners sufficient visibility to allow them to manage the collaborative enterprise.
What is needed is a collaborative process management framework for aligning the shared purpose within and across the projects, and people to continually adapt to others’ needs. To embrace creativity and innovation, and develop an environment of openness, trust and inclusivity.