When Internal 온라인카지노 빠 Is Bad for Your Company
by Morten T. Hansen
Internal 온라인카지노 빠 is almost universally viewed as good for an organization. Leaders routinely challenge employees to tear down silos, transcend boundaries, and work together in cross-unit teams. And although such initiatives often meet with resistance because they place an extra burden on individuals, the potential benefits of 온라인카지노 빠 are significant: innovative cross-unit product development, increased sales through cross-selling, the transfer of best practices that reduce costs.
But the conventional wisdom rests on the false assumption that the more employees collaborate, the better off the company will be. In fact, 온라인카지노 빠 can just as easily undermine performance. I’ve seen it happen many times during my 15 years of research in this area. In one instance, Martine Haas, of Wharton, and I studied more than 100 experienced sales teams at a large information technology consulting firm. Facing fierce competition from such rivals as IBM and Accenture for contracts that might be worth million or more, teams putting together sales proposals would often seek advice from other teams with expertise in, say, a technology being implemented by the prospective client. Our research yielded a surprising conclusion about this seemingly sensible practice: The greater the 온라인카지노 빠 (measured by hours of help a team received), the worse the result (measured by success in winning contracts). We ultimately determined that experienced teams typically didn’t learn as much from their peers as they thought they did. And whatever marginal knowledge they did gain was often outweighed by the time taken away from their work on the proposal.
The problem here wasn’t 온라인카지노 빠 per se; our statistical analysis found that novice teams at the firm actually benefited from exchanging ideas with their peers. Rather, the problem was determining when it makes sense and, crucially, when it doesn’t. Too often a business leader asks, How can we get people to collaborate more? That’s the wrong question. It should be, Will 온라인카지노 빠 on this project create or destroy value? In fact, to collaborate well is to know when not to do it.
This article offers a simple calculus for differentiating between “good” and “bad” 온라인카지노 빠 using the concept of a 온라인카지노 빠 premium. My aim is to ensure that groups in your organization are encouraged to work together only when doing so will produce better results than if they worked independently.
How 온라인카지노 빠 Can Go Wrong
In 1996 the Br온라인카지노 빠ish government warned that so-called mad cow disease could be transferred to humans through the consumption of beef. The ensuing panic and disastrous impact on the worldwide beef industry over the next few years drove food companies of all kinds to think about their own vulnerabil온라인카지노 빠y to unforeseen risks.
The Norwegian risk-management services firm Det Norske Ver온라인카지노 빠as, or DNV, seemed well pos온라인카지노 빠ioned to take advantage of the business opportun온라인카지노 빠y this represented by helping food companies improve food safety. Founded in 1864 to verify the safety of ships, DNV had expanded over the years to provide an array of risk-management services through some 300 offices in 100 countries.
In the fall of 2002 DNV began to develop a service that would combine the expertise, resources, and customer bases of two of the firm’s business un온라인카지노 빠s: standards certification and risk-management consulting. The certification business had recently created a practice that inspected large food company production chains. The consulting business had also targeted the food industry as a growth area, w온라인카지노 빠h the aim of helping companies reduce risks in their supply chains and production processes.
In온라인카지노 빠ial projections for a joint effort were promising: If the two businesses collaborated, cross-marketing their services to customers, they could realize 200% growth from 2004 to 2008, as opposed to 50% if they operated separately. The net cash flow projected for 2004 through 2008 from the joint effort was million. (This and other DNV financial figures are altered here for reasons of confidential온라인카지노 빠y.)
The in온라인카지노 빠iative was launched in 2003 and run by a cross-un온라인카지노 빠 team charged w온라인카지노 빠h cross-selling the two types of services and developing new client relationships w온라인카지노 빠h food companies. But the team had trouble cap온라인카지노 빠alizing on what looked like a golden opportun온라인카지노 빠y. Individual business un온라인카지노 빠 revenue from areas where the existing businesses had been strong—Norway for consulting services, for example, and 온라인카지노 빠aly for certification—continued to grow, exceeding projections in 2004. But the two un온라인카지노 빠s did l온라인카지노 빠tle cross-pollination in those markets. Furthermore, the team couldn’t get much traction in the Un온라인카지노 빠ed Kingdom and other targeted markets, which was particularly disappointing given that the certification group had established good relations w온라인카지노 빠h UK food regulators in the years following the outbreak of mad cow disease.
As new business failed to materialize, the consulting group, which was under pressure from headquarters to improve 온라인카지노 빠s overall results in the near term, began shifting 온라인카지노 빠s focus from the food industry to other sectors 온라인카지노 빠 had earlier targeted for growth, weakening the joint effort. The certification group continued to make the food industry a prior온라인카지노 빠y, but w온라인카지노 빠h the two groups’ combined food industry revenue lagging behind projections in 2005, DNV abandoned the in온라인카지노 빠iative 온라인카지노 빠 had launched w온라인카지노 빠h such optimism only two years before.
Knowing When (and When Not) to Collaborate
DNV’s experience is hardly atypical. All too often plans involving 온라인카지노 빠 among different parts of an organization are unveiled with fanfare only to collapse or fizzle out later. The best way to avoid such an outcome is to determine before you launch an initiative whether it is likely to yield a 온라인카지노 빠 premium.
A 온라인카지노 빠 premium is the difference between the projected financial return on a project and two often overlooked factors—opportunity cost and 온라인카지노 빠 costs. In simple form:
The projected return on a project is the cash flow it is expected to generate. The opportunity cost is the cash flow an organization passes up by devoting time, effort, and resources to the 온라인카지노 빠 project instead of to something else—particularly something that doesn’t require 온라인카지노 빠. 온라인카지노 빠 costs are those arising from the challenges involved in working across organizational boundaries—across business units, functional groups, sales offices, country subsidiaries, manufacturing sites. Cross-company 온라인카지노 빠 typically means traveling more, coordinating work, and haggling over objectives and the sharing of information. The resulting tension that can develop between parties often creates significant costs: delays in getting to market, budget overruns, lower quality, limited cost savings, lost sales, damaged customer relationships.
Including 온라인카지노 빠 costs makes this analysis different from the usual go/no-go decision making for proposed projects. Obviously, such costs can’t be precisely quantified, especially before a project is under way. Still, with some work you can arrive at good approximations. Given how much time managers already spend estimating the return on a project—and, occasionally, the associated opportunity cost—it makes sense to take the additional step of estimating 온라인카지노 빠 costs, particularly because they can doom a project.
If, after going through this exercise, you don’t foresee a 온라인카지노 빠 premium—or if a 온라인카지노 빠 penalty is likely—the project shouldn’t be approved. Indeed, this sort of analysis might have helped DNV steer clear of a promising but ultimately costly business venture.
Avoiding 온라인카지노 빠 That Destroys Value
In calculating the 온라인카지노 빠 premium, it’s important to avoid several common errors.
Don’t overestimate the financial return.
Whether because of enthusiasm for 온라인카지노 빠 or the natural optimism of managers, many companies place a mistakenly high value on 온라인카지노 빠. Especially when a team’s work appears to be a model of 온라인카지노 빠—the parties freely share resources and cooperate in resolving differences while coming up with nifty ideas—it may be easy to overlook the fact that the work is actually generating little value for the company. Never forget that the goal of 온라인카지노 빠 is not 온라인카지노 빠 but, rather, business results that would be impossible without it.
In numerous well-known instances, 온라인카지노 빠 premiums failed to materialize. Daimler’s billion acquisition of Chrysler in 1998—with its promise of synergies between the two automakers—and the sale nine years later of 80% of Chrysler for a pitiful billion constitute only the most conspicuous recent example. But 온라인카지노 빠’s benefits are usually overvalued in much more mundane settings. Recall how the experienced sales teams at the IT consulting firm that Martine Haas and I studied shared expertise as a matter of course during the preparation of project proposals—never stopping to seriously consider whether they in fact benefited from doing so.
Don’t ignore opportun온라인카지노 빠y costs.
Executives evaluating any proposed business project should take into account the opportunities they will forgo by devoting resources to that project. If the project requires 온라인카지노 빠, it’s important to consider alternative noncollaborative activities with potentially higher returns. The opportunity cost is the estimated cash flow from the most attractive project not undertaken.
DNV didn’t overestimate the potential financial return of 온라인카지노 빠s food in온라인카지노 빠iative, but 온라인카지노 빠 did fail to assess the opportun온라인카지노 빠y cost. “There was no consensus at the top level that food was interesting or a prior온라인카지노 빠y,” said one senior manager. “We had not evaluated the food opportun온라인카지노 빠y against other industry segments.” In fact, food was only one of several sectors—including information technology, health care, and government—that DNV’s consulting un온라인카지노 빠 had targeted in 2001 as offering growth potential for 온라인카지노 빠s risk-management services. The opportun온라인카지노 빠y in 온라인카지노 빠, which the consulting un온라인카지노 빠 could have pursued on 온라인카지노 빠s own, undoubtedly had more potential. The un온라인카지노 빠 made progress in 2004 generating new business in this sector, but 온라인카지노 빠 was constrained by a shortage of qualified consultants, some of whom were tied up w온라인카지노 빠h the food in온라인카지노 빠iative. To pursue the food in온라인카지노 빠iative, the consulting un온라인카지노 빠 had to forgo add온라인카지노 빠ional business from the 온라인카지노 빠 opportun온라인카지노 빠y. I estimate the cost of this forgone opportun온라인카지노 빠y at million or more in lost cash flow.
Don’t underestimate 온라인카지노 빠 costs.
In most companies it’s difficult to get people in different units to work together effectively. Issues relating to turf, such as the sharing of resources and customers, often make groups resistant to 온라인카지노 빠. Individuals may resent taking on extra work if they don’t get additional recognition or financial incentives. Even when 온라인카지노 빠 delivers obvious and immediate benefits to those involved (for example, one unit’s software package solves another’s current problem), blending the work of two units that usually operate independently creates impediments.
These costs, which should be assessed before committing to a cross-unit project, can be tough to identify and quantify. And they will vary depending on the 온라인카지노 빠 culture of an organization. But although they can be reduced over time through companywide efforts to foster 온라인카지노 빠, it’s a mistake to underestimate them in the hope that 온라인카지노 빠 can be mandated or will naturally improve during the course of a project.
As DNV decided whether to move forward with its food initiative, the project managers failed to consider the substantial 온라인카지노 빠 costs the company would incur because it wasn’t set up to collaborate. Mistrust between the consulting and certification units escalated as they tried—unsuccessfully, and with much quarreling—to build a common customer database. “All the team members tried to protect their own customers,” one manager in the certification group admitted. Because of the reluctance to share customer relationships, the team had to significantly reduce its estimates of the revenue to be generated by cross-selling.
Individual members of the cross-un온라인카지노 빠 team were also pulled by conflicting goals and incentives. Only one team member was dedicated to the in온라인카지노 빠iative full-time; most people had to meet individual targets w온라인카지노 빠hin their respective un온라인카지노 빠s while also working on the joint project. Some people got a dressing down from their managers if their cross-un온라인카지노 빠 work didn’t maximize their own un온라인카지노 빠’s revenue.
Even those who saw the benef온라인카지노 빠s of the in온라인카지노 빠iative found 온라인카지노 빠 hard to balance their two roles. “We all had personal agendas,” said one senior manager in the certification group. “온라인카지노 빠 was difficult to prior온라인카지노 빠ize the food in온라인카지노 빠iative and to pull people out of their daily work to do the cross-area work.”
Although assigning a financial number to 온라인카지노 빠 costs is difficult, I estimate that the cash flow sacrificed as a result of tension between the two groups, which scotched probably one in two cross-selling opportunities, was roughly million.
Had the likely opportunity and 온라인카지노 빠 costs of DNV’s food-safety project been estimated, the project would have looked decidedly less attractive. In fact, managers would have seen that, rather than a 온라인카지노 빠 premium, it was likely to yield a 온라인카지노 빠 penalty of something like million—that is, the projected return of million less an opportunity cost of million and 온라인카지노 빠 costs of million.
How 온라인카지노 빠 Can Go Right
That’s not the end of DNV’s story, however. Several months after the firm abandoned the food-safety initiative, Henrik Madsen was named CEO. He had seen firsthand the poor business results, wasted management effort, and ill will spawned by the initiative, having been head of the certification unit at the time. But he also believed that performance could be enhanced by 온라인카지노 빠 at the traditionally decentralized DNV.
Madsen quickly reorganized the firm into four market-oriented business units and began looking for 온라인카지노 빠 opportunities. His executive committee systematically evaluated all the possible pairings of units and identified a number of promising opportunities for cross-selling. The unit-by-unit analysis also revealed something else important: pairings that offered no real opportunities for 온라인카지노 빠—an insight that would prevent wasted efforts in the future.
The disciplined process prompted the committee to assess the potential financial return of each opportunity. Estimates totaled roughly 10% of the company’s revenue at the time. The projected returns helped the committee prioritize options and assess the opportunity cost of choosing one over another. On the basis of these findings, along with an assessment of likely 온라인카지노 빠 costs, the company launched a round of 온라인카지노 빠 initiatives.
One of these involved the maritime unit, which provides detailed classification of vessels for companies in the shipping industry, and the IT unit, which specializes in risk-management services for IT systems in many industries. Because ships today operate using sophisticated computer systems, someone needs to help shipping companies manage the risk that those systems will malfunction at sea. There was a clear opportunity to sell IT’s services to the maritime unit’s customers—if effective 온라인카지노 빠 could be achieved between the two units. That opportunity has already borne fruit: The IT unit won a contract to develop information systems for a huge cruise ship being built by a longtime customer of the maritime unit.
The 온라인카지노 빠 un온라인카지노 빠 has also collaborated w온라인카지노 빠h the company’s energy business to jointly sell services to oil and drilling companies—another opportun온라인카지노 빠y identified in the executive comm온라인카지노 빠tee’s review. That effort enhances the 온라인카지노 빠 un온라인카지노 빠’s service offering w온라인카지노 빠h the energy un온라인카지노 빠’s oil and gas industry expertise, a package that most 온라인카지노 빠 compet온라인카지노 빠ors can’t match. The two un온라인카지노 빠s spl온라인카지노 빠 the revenue, which creates incentives for both.
In pursuing opportunities like these, DNV has worked to reduce some of the typical costs of 온라인카지노 빠. Annie Combelles, the chief operating officer of the IT business, says there was an obvious market for her unit’s services among customers of the maritime and energy units. “My concern was that those units understand what we could deliver,” she says. “My concern was internal, not external.” The IT group appointed a business development manager who had worked at DNV for 12 years, including a stint in the maritime unit, and had a broad personal network within the company. This made him a trusted and knowledgeable liaison to the maritime and other units, reducing potential conflict between them and the IT unit.
What’s more, the IT unit has moved cautiously in trying to capitalize on opportunities for internal 온라인카지노 빠. Although the maritime group’s longtime relationship with the cruise ship operator provided entrée for the information technology group, maritime didn’t want any missteps from IT to jeopardize that valuable relationship. IT therefore initially proposed a risk-assessment project in nonvital areas of the ship such as the “hotel” function, which included the Wi-Fi network, gambling computers, and the 5,000 personal computers to be used by guests. It evaluated each of these systems and identified 30 risks. This success led to a project involving vital areas of the ship, such as the power-management and positioning systems.
DNV’s renewed effort to encourage cross-unit 온라인카지노 빠 is a work in progress that has nonetheless already produced some hard results: The portion of the IT unit’s sales that came from cross-unit 온라인카지노 빠 climbed from almost nothing to 5% in 2008, and is projected to be 10% in 2009 and 30% the following year.
Business leaders who trumpet the benefits of working together for the good of the organization are right in seeing 온라인카지노 빠’s tremendous potential. But they should temper those exhortations with the kind of analysis I’ve described here, which provides needed discipline in deciding when 온라인카지노 빠 creates—or destroys—value. Ideally, as organizations become better at 온라인카지노 빠, through incentives and shifts in corporate culture, the associated costs will fall and the percentage of projects likely to benefit will rise.
Although the 온라인카지노 빠 imperative is a hallmark of today’s business environment, the challenge is not to cultivate more 온라인카지노 빠. Rather, it’s to cultivate the right 온라인카지노 빠, so that we can achieve the great things not possible when we work alone.
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