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Henning Piezuka: I recently presented
this to a very senior
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consultant, and the senior
consultant said something like,
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"You know what? This confirms
exactly what I've seen in, like,
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20 years of practice. Firms are
not sufficiently strategic about
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collaborations." Now think about,
what does it mean to be
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strategic? Strategic does not
simply mean to say like, "Oh,
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this is what I want,"
but also to develop
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a very good understanding
of what the other side wants.
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Welcome to <i>The Ripple
Effect</i>, the podcast that takes
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you on a journey through the
minds of Wharton faculty. I'm
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your host, Dan Loney, and in
each episode, we'll be diving
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deep into the inspiration behind
the groundbreaking research that
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Wharton professors have
conducted, and exploring how
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their findings resonate with the
world today.
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When two firms look to
collaborate on a project,
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there can be a higher level of
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innovation. But if the
expectations go askew, there
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tends to be a misperception of
what was expected to occur and a
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failure sometimes to renew the
partnership. But why is that?
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Henning Piezuka is an Associate
Professor of Management here at
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the Wharton School and co-author
of some recent research about
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this problem of misperception in
collaboration. Henning, great to
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talk to you. How are you today?
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Great. Great to be here. Dan,
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thanks for having me.
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Thank you. I guess my first
question is the idea of
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misperception. How frequent
maybe do we think it is?
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So there's a very easy
empirical answer to this. In our
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data, we see this about 20% of
the time. So in about 20% of the
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collaborations that we study, it
happens that one partner does
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see the other, not as a
competitor, but the other
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partner sees the other as a
competitor. That happens 20% of
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the time, which, if you think
about it, is quite a lot, that
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there's a fundamental
misunderstanding
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in such a close
relationship.
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Well, and I think it's interesting,
you mentioned that there is this
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element of being a competitor.
You know, normally when you have
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two companies coming together
for a partnership and trying to
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innovate, you would think that
they are, obviously are working
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to a common goal, but there is a
perception that there still is
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this level of competition
between the two.
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So you see, here's something
very interesting about this. We
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tend to think of competition and
collaborations as like two
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opposites. But if you actually
think about it, it's one of the
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most common things ever that the
person you're competing with you
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might also collaborate with. And
this is true on an inter-
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organizational level, but it's
also true on an interpersonal
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level. I give you a simple
example I often do with
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executives when I teach this
material. Okay. I would say,
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take out a piece of paper and
write down people you are
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currently collaborating with or
see yourself collaborating with
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in the future. And people write
down like five to 10 names,
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okay? And then a few minutes
later, ask them, now write down
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five to 10 people with whom
you're currently competing or
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can see yourself competing with
in the future, right? And what
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often pops up, or like all the
time, is people write down the
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same set of names. So it's
absolutely common that the
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people you collaborate with may
also be the people you compete
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with. And, you know, it's very
easy to reflect a little bit.
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It's basically, you have, like, a
joint interest, but you're also,
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like, in the same area. So it
makes total sense that there's
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some overlap. Yeah, that's the
idea.
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What was it, then, in terms of
researching this idea that
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piqued your interest in wanting
to look at
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this connection of
misperception?
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multiple things, Dan. The first
thing is— you see, like, it's
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very well known that competitor—
that people who collaborate also
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compete. And so in general, this
is something we know how to
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manage. We can write contracts
and stuff like this. So this is,
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like, well established. But a
lot of collaborations which
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fail, people would nevertheless
say like, "Well, it was the
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competition within the
collaboration." And that is
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puzzling, right? We know about
it, we know how to manage it,
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but still a lot of people do not
manage it. And so we wondered,
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like, why don't you manage it?
And so the key thing about it is
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you see, like, you can manage
your partner as a competitor, if
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you see your partner as a
competitor. But if you miss out
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on the fact that your partner is
a competitor, or if you miss out
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on the fact that they see you as
a competitor, then it becomes
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like a perception problem,
right? You first have to be
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aware of it before you can
manage it in the first place.
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And so it was really like this
frequent failure. The other
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thing about it is, then, is
there also are just a lot of juicy
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stories which kind of popped up
when I talked with executives.
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So I give you an example
of what often came up
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like. Right? The story we would
often hear is that they say,
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like, "Look, we are trying to set
up this collaboration. We think
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we are meeting basically with a
bunch of friends, and we are
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coming in there and they are
already sitting at the table
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with two lawyers." And in that
moment, it was kind of clear
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that this would go nowhere,
right? Because the one is
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basically, "Oh, my God, we need
to protect ourselves," and the
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other is like, "Hey, let's just
have a good collaboration going."
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And so it was these kind of
stories which we said, like,
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look, why is it? Why are these
kind of misunderstandings in
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collaborations happening?
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And in many cases, this could
have an impact on the potential
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of renewing or continuing on
with the relationship between
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the two companies.
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You're spot on. That's the
outcome we measure. We look at
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whether you want to renew the
collaboration, right? You've
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worked together. Were you're
happy with it or not? And if
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you're happy, you tend to renew
collaborations, if you're not.
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You see, given all the benefits
that are associated with
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renewing a collaboration, that's
an important outcome by itself.
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I would say beyond that, it's
also an indicator of all kinds
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of other things, right? You see,
like, why don't you renew
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something? Because you're
unhappy with it. And we actually
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show this in the paper. These
collaborations also perform way
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below expectations. So people
actually, when they announce a
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collaboration, they say, like,
"Oh, we want to launch this many
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products together," and so on and
so on. But then if there's
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misalignment in the perception,
so one party sees the other as a
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competitor and the other party
doesn't see the other a
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competitor, then you typically
do not hit those expectations.
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How frequently do you see these
types of partnerships come in,
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where the results end up being
below what the expectation was?
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So in cases where there's
misalignment, it's almost all
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the time the case. But you see,
if you think about it, that's
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not all that surprising, because
if you approach a collaboration
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and you don't think of the other
side as a competitor, you share
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information widely, right? You
go in there with, like, a very
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open-minded like, "Hey, look,
this is what we're working on.
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This is what we're doing. You
should check out this," and so on
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and so on, right? But then the
other side plays everything,
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like, very close to the chest,
they guard the information. And
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not only do they not share much,
they're probably also kind of
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abusing the knowledge you have
shared. And say, like, "Hey, now
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we can actually kind of rip this
off, and kind of can benefit
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from it," right? So that these
things don't last is not all
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that surprising. So basically,
once you have a misperception,
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the chance of this not being
renewed pops up tremendously.
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What happens then, if both
companies believe that they are
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in alignment? And I mean, is it
as simple as saying that that is
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the dream scenario, or do
problems still pop up even when
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the perception is that both are
in alignment?
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Dan, whenever two people or two
companies meet, there'll be
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problems.
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It's not a question whether
there are no problems, but
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there'll be much, much less
problems.
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You see, I'm really glad you
raised the issue of alignment,
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because there are two types of
alignment you want to
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differentiate. You can be
aligned, if both sides don't see
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each other as a competitor, right?
Like I don't see you as a
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competitor, you do not see me as
a competitor. Okay, that's one
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type of alignment. The other
type of alignment is I see you
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as a competitor and you see me
as a competitor. Now, the
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interesting thing about it is
both types of alignment work way
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better than misalignment. So if
you see me as a competitor, I
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see you as a competitor, it's
going to work out just fine.
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You're going to bring your
lawyers. I'm going to bring my
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lawyers. We're going to meet up.
I'm going to play stuff close to
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the chest. You're going to play
stuff close to the chest. Okay,
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we have a good understanding.
Like, Look, this is like an
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arm's length. We're not going to
be friends. Here we are
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competing." Okay, so all good,
right? We get exactly the kind
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of collaboration we expected. We
get a collaboration among
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competitors. If you and I don't
see each other's competitors,
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it's a much more kind of
friendly kind of thing. Okay,
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it's a little bit less well-
defined, but we also not going
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to be ripping each other off, right?
Like, I'm going to come in
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without lawyers. You're going to
come in without lawyers. It's
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going to be like, "Hey, look,
let's just work together. We're
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going to figure things out.
Here's what we are doing." So
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it's going to be an open
collaboration. The critical
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thing is really the
misalignment. I'm coming in
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there a little bit naive and
say, like, "Hey, Dan, here's all
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my stuff. Check it out," right?
While you are like, "Hey, I think
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of Henning as a competitor.
Well, this is kind of stupid
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that he shares all this stuff,
but why not? I'm gonna rip him
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off." Right? And then you
shouldn't be surprised if
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afterward, we are not willing—
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I'm not willing to renew the
collaboration.
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You mentioned in the paper the
Sony PlayStation. Give us the
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example of how that fits into
this research example.
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So this is the juicy story
around the Sony PlayStation.
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Sony— you see, like, obviously
the Sony PlayStation ended up
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being, like, one of the prime
competitors of Nintendo, right?
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And so you might think like, "Oh,
the two were always competitors,"
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but not at all. So Sony was
actually a supplier to Nintendo.
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The two had actually partnered
in developing a console
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together. And so Sony had no
intention whatsoever to enter
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the console market on its own.
So they developed this thing for
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Nintendo, and they have this
expectation. They go to this big
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game fair and say, like, "Look,
we are going to announce this
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collaboration with Nintendo, and
it's going to be great, okay?"
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And they do exactly that. They
go to the game fair and say,
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like, "Great news, we are Sony.
We got this collaboration going
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with Nintendo." All great. The
next day, Nintendo announces
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another collaboration with
Philips, that they also develop a
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game console with them. And so
Sony says, like, "What on earth
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is going on? We thought we are
collaborating and conquering
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this market. Now you are telling
us you're collaborating with us,
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but you also see, at the same
time, seem to be competing with
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us." And so they were horrified.
They felt insulted. And they
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said, like, "You know what? This
is insane. We are now feeling no
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loyalty whatsoever towards
Nintendo. We are going to enter
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this market ourselves. We have
built up all this knowledge,
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okay. We don't have to hold
back. They didn't treat us well,
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and so we entered this market." So
in many ways—and you see
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what's interesting about this
example is both parties can kind—
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get kind— can get screwed,
right? In this example, Sony
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gets screwed because they get
ripped off by Nintendo, but
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Nintendo eventually gets screwed
because of the way that Sony
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then responded to it and said,
like, "Look, we are going to
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fight back. We are not going to
take this."
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What do you think are the most
important things to highlight
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for companies to understand
from you
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and your colleagues doing
this research?
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So I recently presented this to
a very senior consultant, and
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the senior consultant said
something like, "You know what?
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This confirms exactly what I've
seen in like 20 years of
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practice, firms are not
sufficiently strategic about
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collaborations." Now think about,
what does it mean to be
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strategic? Strategic does not
simply mean to say like, "Oh,
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this is what I want." But also to
develop a very good
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understanding of what the other
side wants. Here, then, is the
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most kind of funny thing about
this. We are doing all of this
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based upon publicly available
data. We leverage companies' 10k
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reports. So all these companies
would have had to do is to open
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up the 10k report of their
competitor and say, like, "Hey,
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is this actually, like, do they—
how do they see us?" Right? But
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you see, firms are not always—
firms are not always clear about
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this. I give you a little bit of
a juicy example. Okay, when I
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presented this at— I presented
this in there— at Wharton, to
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all the professors, okay?
And there was a little bit of a
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pushback that people said, like,
"It should be clear, if somebody's
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a competitor or no." Okay. And then
I raised the question, "Okay,
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please raise your hand if you
think that NYU Stern is a
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competitor." And about, like, I
don't know, I forgot the
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exact number— 30, 40% of the
hands went up. And I said, like,
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"You see, that's exactly the
issue. Obviously, NYU Stern is a
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collaborator of us, right? We
hire great PhD students from
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them. They hire great PhD
students from us. We co-write
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papers with them. So there's a
lot of collaboration, but
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obviously we are also competing
against them, right? We are
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competing in the market for MBA
students, for faculty, for PhD
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students, right? And even so,
while Wharton is clearly
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winning, they are still a
competitor of us, right? Or you
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can think of them as a
competitor of us." And so— but
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it's really not always clear,
right? And so— if you're a
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competitor, if you're a
collaborator. And so you want to
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be— you want to be very
thoughtful. You want to be
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strategic about it. How do
others see you?
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Henning, great to have you with us today.
Thanks very much for your time.
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This was great fun. Thank you
so much for having me.
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Thank you. Henning Piezuka, who is
Associate Professor of
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Management here at the Wharton
School.
00:14:43
Thank you for listening
00:14:44
to <i>The Ripple Effect</i>. We hope
you found this episode
00:14:47
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