03 Apr Intentional and accidental adversaries: Why collaborative innovation initiatives often fail
Have you ever wondered why most collaborative innovation efforts in the oil and gas industry fail? Organisational and behavioural issues are to blame.
This post was contributed by Tony Wood, Managing Director of Catalyst61.
A Typical Scenario
Imagine the following scenario….
You are an executive of an international Oil & Gas company. Continued low oil and gas prices have decimated your cash flow and profits. You have made all the cost savings you can, you have cut out the ‘fat’; your organization is now ‘lean and mean’, and yet performance, productivity and return on assets are still lagging.
Your company and indeed the industry as a whole is still beset with both company and industry level problems and issues.
At every conference and industry event the rallying cry goes out ….
- “We must be more innovative”
- “We must collaborate more effectively”
And yet you believe that the Oil and Gas is an innovative industry,
- “we develop new technologies to explore and extract hydrocarbons from the depths of the oceans, we collaborate with our suppliers and partners to deliver and operate multi-billion dollar assets? Is this not collaborative innovation?”
However, you concede that the industry could do better and with your fellow executives from other international Oil and Gas companies you set up a collaborative innovation initiative, to share best practices and to jointly seek solutions to challenging problems.
Everyone agrees that this is the right thing to do,
- “we have the best engineers and the smartest people, we should be able to jointly solve these problems.”
The Collaborative Innovation initiative is set up as a JIP (Joint Industry Project). Senior Management endorse the initiative.
- “This is the industry collaborating to deliver real benefit to our shareholders and stakeholders”
Everyone agrees terms of reference and nominates representatives to the steering committee and project office to identify, execute and deliver cost savings and productivity improvements that will deliver value to the JIP participants. Everyone agrees to share information, data, costs etc. (subject of course to observation of anti-trust issues).
The start of the work programme goes well. The JIP appears to have clarity of goals, and initiatives are jointly identified and prioritized based on a cost-benefit analysis. However, progress is slow.
A number of participants are slow in sharing their data; a number of participants are not providing the agreed resources (people with appropriate experience) to the project; individual companies start to question the motives of the other participants,
- “They are just taking our data and not sharing theirs”
- “They are not committed to this initiative”
- “Their priorities are not aligned with the JIP goals”
The JIP limps on. Statements are made that the project is delivering ‘great stuff’ but in reality few real tangible benefits are delivered. Senior executives turn their attention to other issues and problems, the JIP team becomes disenfranchised and the initiative eventually stalls.
What has happened?
The Collaborative Innovation initiative had clear and obvious benefits to all participants so why did it ‘fail’?
Mindset And Mental Models
Let’s take a moment to use this framework to think about how competition between participants is intentionally and perhaps more interestingly accidentally set up to the detriment of the initiative.
Oil and Gas companies explore for and sell what is basically an undifferentiated product, namely oil and gas (yes there are different qualities of oil etc.) over which they have no control of the market price. Consequently, competition between companies is around access to reserves and access to markets. Given that the majority of oil and gas reserves are held by governments, International Oil Companies (IOC’s) compete with each other to demonstrate to governments and National Oil Companies (NOC’s) that they are the best company to partner with. This competition tends to be around having:
- Best technology
- Best experience
- Leading processes
- Access to key resources (pipelines, processing facilities, supply chains etc.)
Oil and Gas companies see these and other capabilities conferring competitive advantage.
So in our scenario we have set up the JIP and the participants start to identify and negotiate which technologies, processes etc. the initiative should focus on.
Company A may lead the industry on a number of drilling technologies which it believes are competitive so will not be interested in sharing these with the participants.
Similarly, Company B may have best-in-class supply chain models and capabilities and will not be interested in sharing these with the other participants.
So immediately an intentional adversarial situation is set up as the participants try to agree and prioritise initiatives without compromising what they individually see as competitive advantage.
This mental model of competitive advantage drives behaviours, in this case unwillingness to share, which reinforces the mindset of company competitive advantage.
It is likely that this mindset is well known and understood by the participants and the JIP will agree a set of initiatives, such as industry environmental issues to execute, which however may or may not be optimal in respect of overall business benefit.
The author, having been involved in many of these types of initiatives cannot help but conclude that much of what companies believe confers competitive advantage is driven by this mindset and in many instances the competitive position is fallacious and companies would do better to maximise business value by sharing and engaging in collaboration.
Perhaps more insidious and certainly more interesting is how accidental adversaries are set up, and how together with intentional behaviours generally lead to poor performance of the JIP and general collaborative innovation initiatives.
Back to our scenario, as mentioned earlier the JIP starts well, participants begin with a clear objective and with the intention of pursuing win-win initiatives. In the spirit of collaboration individual companies seek to take advantage of their strengths and minimising their weaknesses to facilitate collaborative innovation and accomplish together what cannot be achieved by the individual companies.
So at the start of the JIP the participants have set up this virtuous circle of collaboration leading to success:
[The above diagram is a causal loop diagram (CLD) which explains the behavior of a system by showing a collection of connected nodes and the feedback loops created by the connections. One or more of the nodes represent the symptoms of the problem. The rest of the nodes are the causal chains causing the problem.]
Overall goals and specific initiatives have been agreed (recognising the intentional adversaries’ situation described earlier).
The JIP and individual companies set to work on the detail; sharing data, engaging resources, jointly problem solving.
At the same time the individual companies participating in the JIP will seek to improve their own success, such as taking the group data and analyzing and looking for insights that will deliver more benefit to their company:
So individual participants start to seek to maximise the benefits to their own company.
However, unwittingly and unintentionally, participants start to take actions that the other participants see as being outside the spirit and even the letter of the JIP.
Company A may for instance analyze and interpret the JIP data, implement changes to processes and procedures and quickly derive business benefit. Company A does not share the information and the results with the participants as it believes the analysis is only relevant to its own business. The other participants believe that Company A should be sharing their analysis and learnings. They believe Company A is acting unfairly and decide to ‘retaliate’ by not sharing data or insights with Company A. Company A is then surprised by the actions of the other participants as surely the improvements were only relevant to their processes?
The initial spirit of collaborative innovation turns adversarial.
Here’s where the entrenched mindsets ‘kick-in’ ….
- “We know what is happening, like their position on sharing drilling technology, Company A is just using the JIP to take all our data and insights for its own benefit. Company A is not interesting in collaborating……”
Rather than communicate and get to the root causes of the behaviour and actions of Company A, and indeed the other participants, the participants believe they know all there is to know about Company A’s actions. That they were intentional and ‘hostile’; that there is no point in discussing it (due to Company A’s behaviour over drilling technology); and that the only recourse is to ‘retaliate’.
Once this mindset takes hold, the relationships sour and the initiatives start to stall….
The overall behaviour of the participants can be summarised in the following causal loop diagram (CLD):
This CLD is archetypical(1) and the behaviours it describes are generic and occur in every industry, indeed wherever organisations, companies and even individuals try to collaborate and jointly innovate.
How Do You Improve Collaborative Innovation?
It is clear that the mindsets and mental models drive behaviours, and that as postulated in the above scenario, intentional and accidental adversarial behaviour will very likely stall collaborative innovation.
Everyone would agree that collaborative innovation is a good thing, indeed with commodity price volatility, technology disrupting business models, competition for scarce resources etc., it has probably become a pre-requisite for success.
The author contends that one of the critical requirements to successfully engage in collaborative innovation and ensure sustainable success, is to understand and change mindsets and mental models that drive this outdated, harmful and value destroying behaviour.
Changing Mindsets and Mental Models
The lesson of the scenario is that our mental models lead us to all to readily supply explanations to situations. We need to somehow ‘suspend’ judgement. This requires open communication and objectivity.
Specific actions that can help facilitate effective collaboration and joint innovation:
- Understand, and with clarity articulate the opportunity that brought the participants together in a collaborative relationship. What was the catalyst for collaborative innovation? The degree to which participants have a common vision and agree on the execution of that common vision (participant and group needs and expectations) can be a significant influencer on mindsets and shared mental models.
- Set up processes and procedures that develop goals that align the efforts of the participants. This needs to be supported by relevant metrics that monitor and reinforce collaborative behaviour. The participants should also commit to team learning and developing shared mental models.
- Identify conflicting incentives that may be driving both intentional and unintentional adversarial behaviour. Perceptions of company competitive advantage for instance.
- Establish routine communication. The monthly ‘scorecard’ meeting should not be the only forum for discussions.
- When adversarial behaviour is identified, objectively articulate the original misunderstandings and expected mutual benefits. Try and ‘map’ the unintended effects of each participant’s actions.
- Given that intentional adversarial behaviours are common in many industries, the author suggests that an objective third party is engaged to manage and facilitate the collaborative innovation process.
This post was written by Tony Wood, Managing Director of Catalyst61.
“The System Archetypes”, William Braun, 2002
As is always the case with organisational (and indeed personal) actions and activities, our mindset and mental models, i.e. how we perceive the world both as an individual and as an organisation, explicitly and implicitly drive our behaviours.