The Competitive Advantage Between Enterprises
An Inquiry into Enterprise Transformation
Every enterprise eventually encounters possibilities it cannot pursue alone.
Sometimes the missing capacity is obvious. Another enterprise possesses technology we do not have, access to a market we do not know, specialized expertise we have not developed, or resources that would take years to build ourselves. The strategic response is familiar. We form a partnership, establish an alliance, create a joint venture, acquire a company, or develop some other arrangement that brings complementary capabilities together.
No single enterprise governs the whole of what they are attempting together.
Those distinctions matter. But I have become increasingly interested in what happens after the choice has been made. The agreement may bring two enterprises together. It does not necessarily make them capable of working together.
We assume that if the strategic logic is sound, the economics are attractive, and responsibilities have been clearly defined, collaboration should naturally follow. Yet anyone who has worked inside a consequential partnership knows otherwise. Enterprises can possess highly complementary capabilities and still struggle to coordinate their work. They can agree on the objective and disagree about how decisions should be made. Information moves differently. Commitments carry different meanings. Authority remains rooted in separate organizations even when the work itself has become shared. No single enterprise governs the whole of what they are attempting together. The deal has been made. The capacity to carry the work together has not.
Beyond the Deal
In the previous essay, I described capacity as the sustained ability to produce outcomes that could not otherwise be reliably achieved. Collaboration presents an interesting extension of that idea. Capacity may not reside entirely within an enterprise. It may also develop between enterprises.
Consider what happens when two organizations begin doing consequential work together. At first, each brings what it already knows how to do. One may contribute technical expertise. Another may bring customer relationships. One may provide manufacturing capability, another distribution, capital, technology, or market knowledge.
These capabilities matter. They are often why the relationship was formed. But bringing capabilities together is not the same thing as developing the capability to work together.
Each enterprise must learn how to coordinate across boundaries that did not previously exist. They must learn how commitments will be made, interpreted, and sustained across different organizations. They must determine how information will travel, where decisions will be made, how disagreements will be addressed, and what happens when circumstances change faster than the agreement anticipated. Some of these questions can be settled in advance. Others can only be answered as the parties encounter the work together.
The decision to collaborate and the capacity to collaborate are not the same thing.
Through repeated practice, something begins to develop that did not reside wholly within either enterprise before the relationship began. A capacity for acting together. This is more than cooperation. More than complementary resources. More than a well-written agreement. A new capability begins to emerge, one that depends upon both enterprises but belongs wholly to neither. That possibility changes the question.
The question is no longer simply: What does each enterprise bring to the relationship? A different question begins to emerge: What are these enterprises becoming capable of doing together?
The Capacity to Collaborate
This may be one reason so many promising collaborations disappoint. Considerable attention is given to what each party brings to the relationship. Financial resources are evaluated. Technical capabilities are compared. Responsibilities are negotiated. Governance structures are established. Yet much less attention is given to what the parties must become capable of doing together.
That capacity develops in practice.
The enterprises learn how to coordinate work across organizational boundaries. They learn how to make commitments that can be relied upon by people who do not report to the same leadership. They develop ways of sharing information before it becomes comfortable or complete, while still respecting what each enterprise must protect. They learn where authority should reside when decisions affect both organizations. They develop the ability to surface disagreements without placing the relationship itself at risk. None of this requires their interests to become identical. It requires them to develop practices capable of carrying the differences that remain.
Trust develops here as well. Not simply as confidence in the intentions of the other party, but through the repeated experience of commitments made and kept, problems surfaced rather than concealed, and difficult moments carried together. Each experience makes the next act of reliance more possible.
The decision to collaborate and the capacity to collaborate are not the same thing. One establishes an intention. The other determines what the relationship can actually carry.
As that capacity develops, decisions that once required escalation can increasingly be made within the work. Information begins to move across organizational boundaries with less friction. Problems can be addressed before the parties retreat into determining which enterprise is responsible for them, without removing the accountability each must still carry. People begin coordinating around the requirements of the shared work rather than protecting the routines of their separate organizations.
The relationship develops its own way of operating. The enterprises remain distinct. Their interests do not become identical. They continue to have different histories, responsibilities, economics, and objectives. Yet between them a new field of practice begins to form recurring ways of making commitments, sharing information, exercising authority, addressing disagreement, and responding when circumstances change.
And within that field, new capabilities can develop.
Collaborative Advantage
We usually think about advantage as something an enterprise possesses.
A distinctive technology. A cost position. Intellectual property. Customer relationships. Scale. Expertise. Brand. The ability to execute something particularly well.
These remain important sources of advantage. But if capability can develop between enterprises, then advantage may develop there as well. Collaborative capacity is the developed ability to act together reliably. Collaborative advantage begins when that capacity opens possibilities and produces outcomes that neither enterprise could reliably produce alone.
Perhaps the most consequential collaborations are not those that merely provide access to one another's strengths.
They are those through which new capability is developed together. If the capacities required by the future must increasingly be developed across enterprises, then preparing for that future will require more than strengthening the enterprise itself. It will require leaders capable of cultivating what can only emerge between them.
Further Reading:
This essay offers two companion readings because collaborative capacity can be considered from two related perspectives. Richard Sennett’s Together: The Rituals, Pleasures and Politics of Cooperation explores cooperation as a craft developed through practice among people who remain different.
Wayne Baker's Achieving Success Through Social Capital examines how relationships between people and organizations become resources capable of producing value that neither party could produce alone. One deepens the human practice of cooperation; the other extends its practical significance across enterprises.
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With gratitude and anticipation,
John Henderson
Founder, The Pivot Mind
