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  1. 1. PEEKING INSIDE THE BLACK BOX: TOWARD AN UNDERSTANDING OF SUPPLY CHAIN COLLABORATION DYNAMICS STANLEY E. FAWCETT Georgia Southern University AMYDEE M. FAWCETT University of Arkansas BRADLEE J. WATSON Arlington Hills Care and Rehabilitation GREGORY M. MAGNAN Albers School of Business and Economics, Seattle University Supply chain collaboration is a vital dynamic capability — one that can deliver differential performance. Yet, few managers comprehend the nuanced complexities involved in assessing heterogeneously dispersed resources and bringing complementary competencies together up and down the supply chain. As a result, gains from collaborative initiatives are often disappointing. Several literature streams including systems design, competency development (e.g., the resource‐based view and relational view), and change management predict these outcomes. Building on insights from the literature, we sought to enrich the theory of collabora- tion via inductive, interview‐driven research. Specifically, we conducted approximately 50 structured interviews at each of two points in time. Rig- orous analysis of the interview firms’ experience with collaborative initia- tives provided insight into the motivations, resistors, enablers, and outcomes of collaboration. These insights form the foundation for a theo- retical model to explain collaboration successes and failures as well as to provide prescriptions for using collaboration to achieve differential firm and supply chain performance. Keywords: behavioral supply management; human judgment and decision making; strategy development; supply chain management; case studies; qualitative data anal- ysis; structured interviewing the resources and routines that reside among diverse INTRODUCTION members of the supply chain (Mahoney and Pandain Despite intense interest in the collaborative supply 1992; Dyer and Singh 1998). Research has shown that chain, researchers know relatively little regarding the the ability to identify and link complementary capa- collaborative process through which companies com- bilities via collaboration does lead to superior perfor- bine and configure resources across organizational mance (Harrison, Hitt, Hoskisson and Ireland 2001; boundaries to create distinctive customer value (Ellin- Fawcett, Magnan and McCarter 2008; Mentzer, Stank ger, Keller and Hansen 2006; Fawcett, Magnan and and Esper 2008). Specifically, collaboration enables Ogden 2007). In theory, collaboration enables firms faster new product development, enhanced quality, to achieve differential performance as they tap into lower product and supply chain costs, shorter fulfill-44 Volume 48, Number 1
  2. 2. Peeking Inside the Black Boxment times, and improved customer service (Cachon tial performance. By looking inside the “collaborationand Fisher 2000; Frohlich 2002; Ketchen, Tomas, Hult box,’’ we gained a better understanding of theand Slater 2007; Rinehart, Lee and Page 2008). More dynamic system that is collaboration and are thusimportantly, Holcomb, Holmes and Hitt (2006) argue able to partially explain the motives, enablers, andthat such collaborative advantages are especially diffi- resistors to a successful collaborative strategy.cult to replicate since competitors must both acquirethe complementary resources and duplicate theirdeployment. CONSTRUCTING A COLLABORATION Unfortunately, relatively few companies have CAPABILITY: A BRIEF BACKGROUNDachieved the high‐level collaboration required to Several theories implicitly inform the developmentobtain breakthrough performance (Ellinger et al. and contribution of collaboration. We identified three2006; Min, Mentzer and Ladd 2007; Nicovich, Dibrell streams of literature as central to understanding theand Davis 2007). Beth, Burt, Copacino, Gopal, Lee, process through which a collaborative dynamic capa-Lynch, Morri and Kirby (2003) note that despite years bility is built: (1) systems design, (2) competencyof intense pursuit supported by substantial investment development, and (3) change management. Eachin advanced technology, truly agile and collaborative stream’s relevance derives from insight provided intosupply chains remain an elusive goal. Among the the process of organizing or structuring networkissues that impede collaboration are interfunctional resources to create distinctive value and achieve differ-and inter‐firm conflict (Moberg, Speh and Freese ential performance in a challenging and uncertain2003; Barratt 2004), nonaligned goals that lead to environment (Porter 1991). Of particular importance,opportunistic behavior and diminish trust (William- each perspective helps us understand the transforma-son 1979; Fawcett, Magnan and Williams 2004; McC- tional tension inherent in cultivating collaborativearter and Northcraft 2007), and an inability or advantage. Although each perspective yields insightunwillingness to share sensitive information (Kamp- into the capability‐development process, individually,stra, Ashayeri and Gattorna 2006; Fawcett, Wallin, All- none paints a holistic picture of the nuanced dynam-red and Magnan 2009a). Such behavioral constraints ics that promote or hinder a firm’s attempt to exploitmake it difficult to integrate customer and supplier collaboration as a source of competitive advantage.resources for unique competitive advantage (Eisen-hardt and Martin 2000). Systems Design The tension between a strong desire to combine Supply chains are innately complex, adaptive sys-complementary competencies for distinctive advantage tems (Cooper, Lambert and Pagh 1997; Mentzer, De-and a persistent inability to build relational advantage witt, Keebler, Min, Nix, Smit and Zacharia 2001).suggests a need to take a closer look inside the “black They consist of dynamic and nuanced behavioral,box’’ of collaboration. Sufficient theoretical reasoning organizational, and technology subsystems, whichand anecdotal evidence (e.g., Honda’s supplier devel- must effectively work together to maximize value crea-opment and Procter & Gamble’s connect‐and‐develop tion (Fawcett, Ellram and Ogden 2007a). Aligningprograms) exist to endorse collaboration as a valuable and structuring these subsystems to achieve firm‐leveldynamic capability (Teece, Pisano and Shuen 1997; goals — e.g., adaptation, survival, and superior perfor-Nelson, Mayo and Moody 1998; Helfat and Peteraf mance — is the fundamental objective of systems2003). Yet, research findings concurrently reveal that design (Churchman 1968; Hofer 1975; Luthans andmanagers and researchers alike fail to grasp the dyna- Stewart 1977; Senge 2006).mism and intricacies that delimit the processes within Scott and Davis (2006) discuss three evolutionarythe “collaboration box’’ (Krause, Scannell and Calan- views of systems design theory that merit consider-tone 2000; Barratt 2004; Petersen, Handfield and Ra- ation for application to collaboration:gatz 2005; Ellinger et al. 2006; Thomas, Esper and 1. Rational Systems. Rational systems theorists perceiveStank 2010). organizations as multifaceted collectivities that are The purpose of this article is to build and enrich designed and maintained to pursue specific goals.theory regarding how decision makers construct a Organizations therefore devote the majority ofdynamic collaborative capability. To do this, we their energies and resources to the attainment ofemployed the tenets of grounded theory and per- these goals.formed a largely qualitative, inductive study of collab- 2. Natural Systems. Natural systems theorists argueorative initiatives among leading supply chain that organizations are more than tools designed forenterprises (Glaser and Strauss 1967; Corbin and goal achievement. Organizations become socialStrauss 1990). We investigated the process of employ- entities. Over time, structure and governance begining collaboration to combine and configure resources to focus on “organizational’’ survival. The abilityacross organizational boundaries to achieve differen- to motivate and leverage the commitment, intelli- January 2012 45
  3. 3. Journal of Supply Chain Management gence, and initiative of the collective’s participants 1979). As firms are designed around functions to determines the probability of surviving in a hostile obtain deep skills, efforts to protect turf can be environment. expected to be strong and entrenched (Anderson 3. Open Systems. Open systems theorists perceive 1982; Ellinger et al. 2006). Open systems theory organizations as reciprocally related to the surround- notes, however, that if the external environment dic- ing environment and stress the complexity of an orga- tates collaborative change and offers valuable nization’s discrete component parts. Organizations resources beyond the firm’s organizational bound- depend on the environment for resources and for aries, then active structuring can enhance collabora- markets. They must also respond to it as it evolves. tion (Lawrence and Lorsch 1967). But, successful Therefore, attention shifts from structure to process — transformation depends on inculcating the appropri- the process of organizing, adapting, and changing to ate organizing process; otherwise, collaborative adap- both survive and to improve performance. tation is immensely difficult. These views each emphasize three core, enduring Competency Development features of organization design that influence the cul- Collaborative supply chains develop the processes tivation of collaboration: the relationship between the needed to organize (i.e., identify, integrate, and organization and its environment, the nature of the exploit) resources that reside across organizational design process, and the rationale for the organiza- boundaries to create unique customer value. This pro- tion’s existence (see Table 1). cess‐building imperative is consistent with and builds From a rational systems view, once management on the resource‐based view (RBV) of the firm, which determines that collaboration is a desired organiza- argues that a firm consists of “a collection of produc- tional capability and therefore a vital goal, a con- tive resources’’ that can be exploited to create value scious, calculated design process will develop such a and competitive advantage (Penrose 1959; Rubin capability. Many organizations operate under rational 1973; Wernerfelt 1984). The more valuable and rare systems principles and are frustrated when collabora- the resources, the greater the advantage the firm may tion does not readily materialize from their design obtain (Dierickx and Cool 1989; Barney 1991). More efforts (Fawcett et al. 2007). Natural systems theory recent RBV research has emphasized that how a firm helps us understand that because interfunctional and configures its resources is a better indicator of distinc- inter‐firm collaboration increases the possibility of tive performance (Teece et al. 1997; Eisenhardt and opportunistic behavior and thus vulnerability, tension Martin 2000; Barney 2001). The RBV has thus “evolved should be expected in the design process. Managers into a dynamic recipe explaining the process by which will resist any collaborative behavior (e.g., sharing these ingredients [a firm’s resources] must be utilized’’ information or resource commitment) that threatens to achieve competitive advantage (Newbert 2007, their specific “organizational’’ survival (Williamson TABLE 1 Essential Components of Systems Theory Role of Environment Nature of System Goals; i.e., System Design Desired Outcome Rational Largely overlooked; i.e., Conscious, Obtain specified goals systems the system is closed calculated design Natural Human systems view: Adaptive, Mix between specific systems Ignored; i.e., system is spontaneous goals and organizational closed Institutional View: evolution survival Perceived as enemy; i.e., a source of pressures and problems Open The source of Proactive Improve performance in systems (1) resources and process midst of environmental constraints and of organizing or dynamism (2) change, diversity, structuring to and variety adapt46 Volume 48, Number 1
  4. 4. Peeking Inside the Black Boxp. 124). Of note, the current view holds that the orga- tend to persist in a steady state until an external forcenizing process must extend beyond the firm’s own dictates change (see Figure 1). Influenced by this driv-boundaries because vital resources are often found out- ing force, the firm enters a transition phase duringside the firm — ’’embedded in inter‐firm resources and which adaptation is pursued. However, resisting forcesroutines’’ (Dyer and Singh 1998, p. 650). act as counterweights to the environmental forces that The dynamic‐capabilities branch of the RBV litera- dictate change. If the resisting forces are more preva-ture informs a firm’s quest to cultivate a collaborative lent or stronger than the driving forces, the changeorganizing process in two ways. First, by definition, a initiative stalls and the organization reverts to and iscapability is “the firm’s ability to integrate, build, and frozen in its entrenched behavior. Resisting forcesreconfigure internal and external competencies’’ (Teece may thus debilitate the strategy‐implementation andet al. 1997, p. 517). Terms such as “coordinate,’’ organizational‐transformation processes required to“combine,’’ and “integrate’’ describe the process of build a dynamic collaborative capability (Kotter 1995;capability development (Eisenhardt and Martin 2000; Dent and Goldberg 1999). Collaborative transforma-Ettlie and Pavlou 2006; Barreto 2010). For example, tion occurs only when management strengthens driv-Prahalad and Hamel (1990, p. 4) described Honda’s ing forces and/or mitigates resisting forces.engine development as the model core competency, Forces resisting collaboration vary in strength andsaying, “core competencies are the collective learning influence, might exist anywhere within an organiza-in the organization, especially how to coordinate tion or supply chain, and may include people, poli-diverse production skills and integrate multiple cies, or processes (Kotter 1995; Dent and Goldbergstreams of technologies.’’ The nature of a distinctive 1999). For example, threat‐rigidity theory suggests thatcapability suggests that practices that bridge organiza- an individual’s tendency to react to threatening eventstional boundaries — such as goal alignment, frequent with psychological stress and anxiety produces a rigidand open communication, high levels of managerial and maladaptive response (Staw, Sandelands and Dut-interaction, the exchange of expertise and resources, ton 1981; Moon and Conlon 2002). By contrast,and a willingness to share risks and rewards — are structural‐inertia theory maintains that firms are slowthe essential elements from which a collaboration to change because established norms, routines, proce-capability is built (Morgan 1997; Rai and Bajawa dures, and other structural features restrict adaptation1997; Gulanic and Rodan 1998; Stonebraker and Afifi (Hannan and Freeman 1984; Barnett and Carroll2004; Eng 2006; Green, McGaughey and Casey 2006; 1995). Long‐established behaviors and structures areDe Luca and Atuaghene‐Gima 2007). particularly resistant to change (Barron, West and Second, the word “dynamic’’ implies the ability to Hannan 1994). Unfortunately, when firms are unablerapidly change or reconfigure a firm’s resource base in to change faster than the external environment or col-response to a changing environment (Zahra, Sapienza laborate more effectively than agile rivals, they riskand Davidsson 2006; Teece 2007; Barreto 2010). To irrelevance (Grove 1996; Lee 2004).the extent that managers pursue local goals (see natu- Because our understanding regarding the dynamicral systems theory) to the exclusion of other concerns, interplay among organizational design, capabilityconflict or tension arises across inter‐functional and development, and adaptation is incomplete, we strug-inter‐firm boundaries (Walton, Dutton and Cafferty gle to explain collaborative successes and failures. We1969; Ruekert and Walker 1987; Barclay 1991; Xie, are thus limited in our ability to provide prescriptionsSong and Stringfellow 1998). Perceived goal incongru- for cultivating a dynamic collaboration capability toence increases safeguarding behavior and the tendency achieve differential performance. We sought to redressto resist change, impeding both collaboration and a this shortcoming by building theory on how compa-firm’s ability to rapidly reconfigure resources (Kumar, nies inculcate a collaborative business model.Schee and Steenkamp 1995; Duarte and Davies 2003;Gulati and Nickerson 2008; Rossetti and Choi 2008;Groznik and Heese 2010). The prevalence of these RESEARCH METHODSstructure‐driven counterproductive behaviors makes As we began the project, supply chain collaborationdynamic capabilities rare and suggests a need to better had emerged as a topic of interest in the literature;understand the nature of change management (Fawc- however, it was evident that collaboration strategiesett, Andraski, Fawcet and Magnan 2009). and processes were not well understood. Three preli- minary steps were therefore taken to firmly groundChange Management the research: To understand why the adaptive, proactive process 1. An extensive literature search going back to the earlyof reorganization predicted by open systems theory 1980s was conducted. Key word searches using theseldom emerges we turn to force field analysis (Lewin words “supply chain’’ in combination with “integra-1951). Force field analysis argues that organizations tion,’’ “coordination,’’ and “collaboration’’ were January 2012 47
  5. 5. Journal of Supply Chain Management FIGURE 1 The Change Management Process performed via ABI Inform and ProQuest data- 5. Given the high transformation costs/risks, can col- bases. This review identified 159 articles that were laboration lead to sustained competitive success? used to inform the design a meaningful interview Simply stated, is it worth it to invest in a collabora- guide. tive inventory capability? 2. A series of half a dozen preliminary, informal man- The prefield work also instilled context to interpret agerial interviews were conducted to refine the our findings about the construction of a dynamic col- interview guide and ensure managerial relevance. laborative capability. Because our interest was in the 3. An advisory board consisting of managers and aca- process of constructing a collaborative capability, we demics was assembled to provide feedback on the replicated the study after 6 years — an interval of time research content and process. long enough to yield insight into collaborative strat- This stepwise approach led to an open‐ended, semi‐ egy and capability emergence. structured interview guide that asked questions regard- ing five themes that permeate the design of collabora- Sample and Context tive systems. Table 2 links these research themes to the To build theory related to the process of developing core elements of systems design. The five themes are: a collaboration capability to achieve relational advan- 1. Why should managers be motivated to adopt col- tage and differential performance, we sought a context laborative practices that are difficult, demand new that could serve as an “extreme case’’ (Eisenhardt skills, require technology investment, and expose 1989a; Pettigrew 1990). Extreme cases are useful in the organization to new risks? theory building since the dynamics under investiga- 2. What are the enablers of a collaborative capability? tion are often better defined and more easily docu- 3. What process factors make it so difficult to develop mented than in other scenarios (Pratt, Rockmann and collaborative capabilities? Kaufmann 2006). We therefore selected companies 4. Given the rarity of successful collaborative pro- largely on the basis of their reputation for supply grams, what is the nature of the resistors that make chain collaborative excellence. Potential participants the transformation to collaborative management so were often mentioned in the trade press or included difficult? as presenters on the programs of professional48 Volume 48, Number 1
  6. 6. Peeking Inside the Black Box TABLE 2 The Linkage between Systems Theory, the Literature, and Facets of the Design Process Elements of Literature‐Driven Research Themes Facets of Systems Systems Theory Design Process Relation between Why should managers be motivated to adopt Motives organization collaborative practices? and its environment Nature of systems design Why have so few companies developed Resistors process effective collaborative practices? What is the nature of the resistors that impede the collaborative transformation? What are the enablers of a collaborative Enablers capability? Organizational goals Can collaboration lead to sustained Outcomes competitive success?associations’ annual meetings. As the research pro- suppliers, or both at the time of the interviews. A totalgressed, we asked managers at interview companies of 49 interviews were conducted in Period 1. For Per-and other discipline key informants to identify addi- iod 2, 57 interviews were performed. Fifteen compa-tional companies of interest based on the their reputa- nies participated in both rounds of interviews. Table 3tion for excellence or unique collaboration experience. shows the overall demographic statistics for the inter- Given our focus on the collaboration process, we view companies. By design, the interview companiesconducted interviews across four core channel posi- in the two panels possess similar characteristics. Thetions — retailers, finished‐goods assemblers, direct findings from the Period 1 interviews led us tomaterials suppliers, and service providers. This seg- include several smaller suppliers and service providersmentation maximized our ability to evaluate differ- in the Period 2 panel.ences in strategy and behavior across severaldimensions thought to influence collaboration: cus- Case Study Processtomer contact, resource access, source of power, and We employed a multicase, interview‐driven method-perceived know how. Each company was involved in ology to explore the intricate what, why, and how ques-one or more collaborative initiatives with customers, tions associated with collaboration (Yin 1981; TABLE 3 Qualitative Sample: Channel, Ownership, Sales, Profits, and Employee Levels Period 1 Period 2 Channel Position Number Number Retailer 14 15 Finished‐goods assembler 13 19 Direct‐materials supplier 13 12 Service provider 9 11 Descriptive Sales Profits Employees Sales Profits Employees Statistics (US$M) (US$M) (US$M) (US$M) Mean 28,751 1,704 124,706 24,077 2,168 94,408 Median 9,045 589 44.750 4,954 679 16,300 Minimum 103 705 2,701 3 4,183 35 Maximum 285,222 10,267 1,700,000 378,799 12,731 2,100,000 All monetary amounts are in US dollars. January 2012 49
  7. 7. Journal of Supply Chain Management Meredith, Raturi, Amoako‐gyampa and Kaplan 1989; 1996). First, each case was viewed as a “stand‐alone McCutcheon and Meredith 1993). Interviews provide a entity’’ to help describe the process and identify the robust opportunity to explore collaboration since they issues encountered by each firm as it pursued a col- enable managers to elaborate on the challenges they laboration capability. Importantly, following the encounter — as well as the solutions they employ — as inductive process, we allowed ideas and themes to they seek to create deep functional skills while simulta- emerge from the data. Although we noticed similari- neously fostering collaboration capabilities (Dyer and ties and differences among the cases, we refrained Wilkins 1991; Eisenhardt 1991). Multiple cases enable from further analysis until we had completed the a replication logic, allowing researchers to confirm or interview process so that we could maintain the inde- disconfirm inferences drawn from each case and yield pendence of the replication logic. more generalizable results (Yin 1981). Second, only after we completed all of the write‐ups Once a company agreed to participate, a brief over- did we begin the cross‐case analysis. Our goal was to view of the research objectives and a copy of the inter- identify and match patterns in order to develop a view protocol were provided (Spradley 1979). A more robust and complete theoretical picture (Eisen- semistructured interview guide populated with open‐ hardt 1991). Because of the varied and nuanced ended questions was used to (1) allow managers to answers as well as the diversity of language and terms describe events and processes, (2) assure comparabil- used by the interview managers, we determined that a ity of findings, and (3) provide flexibility in pursuing careful manual evaluation process would provide the insight into unique practices and programs that best interpretation of the interviews. This analysis con- became evident during the interview. The typical inter- sisted of three major steps. view lasted two to four hours (the longest interview 1. Using the literature as background, we pursued an lasted 16 hours) and involved senior managers who iterative, open‐coding process — i.e., we traveled had responsibility for their company’s collaborative back and forth among the case write‐ups and supply chain initiatives. Because of the crossfunctional emerging constructs. As we began to identify com- nature of the research, the contact manager often mon statements, we formed provisional categories invited other managers to participate in the interview and first‐order codes. We developed a spreadsheet process. For example, IT managers, logisticians, new to help us to track and compare results across the product managers, purchasers, and project leaders case studies. were often involved in the interviews. Multiple infor- 2. The three‐person analysis team used a process of mants mitigate subject biases and provide nuanced individual coding, collaborative discussion, and insight into complex processes such as the building of concurring to derive theoretical meaning from the a collaborative capability (Schwenk 1985; Golden cases. The team consisted of one of the original 1992; Miller, Cardinal and Glick 1997). interviewers as well as two new researchers. The During each interview, extensive notes were made for new researchers were brought in to avoid data pro- later reflection. In addition, secondary sources such as cessing bias (Pagell and Wu 2009). We repeated company presentations, new releases, process docu- this process for every ten cases until all of the cases mentation, program descriptions, and performance were coded. As new concepts were discovered, the scorecards were used to supplement interview findings. researchers returned to the previously coded cases Together, the interview notes and background materials to look for evidence of the newly identified phe- were used to (1) create rich and reliable structured case nomena. This process forced 100 percent inter‐rater write‐ups (Graebner and Eisenhardt 2004) and (2) reliability among the researchers. avoid “data asphyxiation’’ from the large amounts of 3. Because the provisional categories were tightly data (Pettigrew 1990). The typical write‐up was over defined, their number expanded greatly. For each five pages and 2,000 words long. The notes from the facet of system design, over 20 categories emerged. Period 2 interviews alone consisted of almost 340 sin- To focus our findings on the most critical issues, we gle‐spaced pages and 145,000 words. As the interview employed two decision rules as part of the axial cod- process continued, the researchers spoke often to com- ing process. First, phenomena that were infrequently pare notes regarding both the process and the content. encountered (in under ten percent of the compa- This iterative discussion‐based process was used to nies) were deleted. Second, we consolidated specific, improve research reliability and validity as well as but related codes into broader, more theoretical cat- derive a consensus regarding their meaning (Eisenhardt egories (Strauss and Corbin 1990). For example, 1989a, 1989b; Corbin and Strauss 1990; Seidel 1998). financial performance, revenue growth, profitability, and pressure from Wall Street became need to Data Analysis improve financial performance. Similarly, teaming, Each case write‐up was used for two analyses: cross‐functional meetings, co‐locating managers, within‐case and cross‐case (Eisenhardt 1989a; Ellram and use of advisory councils became intra/interorga-50 Volume 48, Number 1
  8. 8. Peeking Inside the Black Box nizational teaming structures. The resulting meta several areas. Not surprisingly, globalization is per- matrices that reveal the data structure for both time ceived as a preeminent source of cost pressure. One periods are shown in Appendix A. manager summarized a common perception, saying, “There is a huge, giant sucking sound coming out of The analysis process lasted four months. From this China.’’ Increasing customer demands were also iden-process, we gained greater insight into key facets of tified as a pervasive force raising cost consciousness.system design identified in Table 2. Ultimately, a sys- One manager pointed out that customers find them-tems model emerged describing the dynamic tension selves in a similar cost squeeze, noting, “More of theinvolved in building a collaboration capability. As the customers we are dealing with are making decisionsframework emerged, we reevaluated the data’s fit/mis- based strictly on costs and short‐term profitability.’’fit with our new theoretical understanding (Glaser Macro‐economic changes such as exchange rates wereand Strauss 1967; Pratt et al. 2006). We found that also viewed as raising cost consciousness. The need tothe balance between the desire to establish a collabo- lower costs has been and will continue to be a pri-rative capability and the forces resisting organizational mary reason to pursue more effective collaboration.change is influenced by management’s ability to iden- Second, managers concurred that customers aretify and employ the correct enabling mechanisms. We increasingly powerful and their demands are elevating.continue with a brief overview of our findings, which One manager complained, “Customers have changedare organized using the four facets of systems design and are spoiled rotten and too demanding. It’s crazyidentified in Table 2. We follow this discussion by out there.’’ Another described the power differentialproposing a more general theoretical model of collab- that often exists in buyer/supplier relationships, say-oration capability construction. ing, “As a supplier, we realize that our customers have the big cannons and we only have BB guns.’’ Manag- FINDINGS AND DISCUSSION ers consistently noted that rising customer expecta- tions require a collaborative response. One succinctlyMotivation to Build a Collaboration Capability summarized the competitive necessity: “We have to be Open systems theory postulates that a changing envi- connected to customers to survive.’’ Viewed over time,ronment provokes a conscious, contingent response to the trend is for customers to exert more power — cus-maintain or improve performance (Lawrence and Lors- tomer pressure almost matches price pressure as a dri-ch 1967). Force field analysis similarly argues that envi- ver of collaboration. The reality that the downstreamronmental forces drive companies to build new shift in customer power has been enabled bycapabilities (Lewin 1951). The interviews confirmed enhanced information availability and expanded sup-this environment‐response relationship, highlighting ply options suggests that the collaborative imperativethe fact that they perceive today’s environment as tur- will increase.bulent and threatening as well as the reality that collab- As managers discussed these two driving forces, theyoration is critical to both change and competitiveness. often expressed frustration that lower costs and betterFor example, one manager noted, “Collaboration is the service stand in opposition to one another. From aenabler of strategic transformation, . . . Our goal is to traditional systems design perspective, higher servicegenerate 50% of ideas outside the organization (we are levels require higher costs via increased investments innow at 15‐20%).’’ Another manager reiterated the com- inventory, premium transportation, better technology,petitive benefit, saying, “Our customers are getting big- and greater operating responsiveness. Managers high-ger. Key suppliers are getting more powerful. lighted this cost/service tradeoff as one of their mostCompanies in the middle like us are getting squeezed. daunting challenges, arguing that collaboration isCollaboration is the key to reducing the squeeze.’’ needed to reconcile these drivers. One manager sum- Among the forces driving managers to reevaluate marized the role of collaboration in helping compa-their organizations’ value propositions and value‐crea- nies simultaneously reduce costs and increase service,tion capabilities are globalization, compressed tech- “The low‐hanging fruit is long gone; more sophisti-nology cycles, and constant bottom‐line pressure. cated, collaborative solutions will be required.’’Managers noted these forces combine to create two Managers in Period 2 frequently identified fourprevalent competitive imperatives — (1) the need to other forces driving collaboration. Three of thesereduce costs and (2) the need to raise service levels — forces focus on the supply chain network design: thethat increase the need to build a collaboration capa- need to establish global reach, the need to secure thebility (see Table 4). company’s strategic position in the supply chain, and First, almost all of the managers identified greater the desire to build a winning team. These forces havecompetitive pressure and a resulting need to reduce strengthened over time, indicating that managers feelcosts as a critical driving force in today’s economy. a greater need to collaborate effectively to bringManagers perceive that cost pressure is emerging from worldwide resources together to meet global custom- January 2012 51
  9. 9. Journal of Supply Chain Management TABLE 4 Forces Driving SC Collaboration—Period 1 vs. Period 2 Driving Force P1 (%) P2 (%) Representative Quotes Competitive pressure 80 79 “Strong focus on cost‐cutting and efficiency to reduce costs maximization’’; “The belief that ‘you can find it cheaper in China’’’; “Managers are constantly being asked to reduce costs’’ Customer demands for 67 75 “Relationships are driving SCM initiatives’’; higher service levels “Stock‐outs are unacceptable’’; “Price point, discontinued items, and replenishment’’; “What can we do to make customers happier’’ Secure the company’s 24 37 “The goal is to experiment with alternative strategic position in channels’’; “Companies come to us because of our the supply chain global reach’’; “Globalization has changed the rules of the game’’; “Global competition has changed the rules’’ Desire to build a 24 25 “Logistics and sourcing of SCM are viewed as winning SC team critical components’’; “If the internal chain isn’t robust, we become the weakest link in the chain’’; “Our focus has swung inward and outward based on where the weak link in the supply chain was’’ Need to improve 18 28 “There is a constant push/pull pressure to hit financial performance financial numbers’’; “Materials are the second largest expense after payroll’’; “Every effort must be supported by proven financial results’’ Need to establish 16 47 “The spirit of collaboration is part of our daily global reach culture’’; “Desire to work together rather than squeeze the small player for everything they have’’; “We are starting to build a culture of SCM’’ ers’ needs. As companies build strong SC teams, they managers perceive collaboration as a required are better positioned to respond to the fourth impera- capability. tive — the need to improve financial performance. To summarize, managers perceive that the competi- Resistors to a Collaboration Capability tive environment is changing in ways that require Though managers identified collaboration as an more effective collaboration. They realize that becom- appropriate contingent response, the RBV literature ing a contributing member of a strong, collaborative notes that combining and configuring skills and tech- supply chain enables their companies to create greater nologies across boundaries is hard work and rarely customer value at lower costs and thus mitigate inten- occurs (Stalk, Evan and Schulman 1992; Barney sifying competitive forces. Based on the preceding dis- 2001). Because the behavior of individuals must cussion, we postulate the following. change in collaborative relationships — often substan- Proposition 1a: Intense price pressure initiates and tially — the change management literature argues that influences the development of a collaborative capabil- resistance will be strong (Staw et al. 1981). Manager ity. Although the initial response to price pressure is a responses during the two sets of interviews confirm reduction in the desire to collaborate, when price these expectations and identified a variety of resistors pressure reaches the point that firms can no longer including interfunctional and interorganizational con- resort to traditional cost‐cutting measures, managers flict, misaligned metrics, lack of leadership, an inabil- perceive collaboration as a required capability. ity to embrace change, misused power, and limited Proposition 1b: Intense customer pressure initiates information sharing. Table 5 shows that these and influences the development of a collaborative entrenched resistors have prevailed across Periods 1 capability. When customers demand service levels that and 2. Moreover, inadequate alliance practices, com- cannot be met via traditional behaviors and practices, plexity, poorly defined roles and responsibilities, and52 Volume 48, Number 1
  10. 10. Peeking Inside the Black Box TABLE 5 Resistors to Collaboration: Period 1 versus Period 2 Resistors P1 (%) P2 (%) Representative QuotesOrganizational structure & 73 75 “Major challenge is turf battles’’; “Functionalfunctional conflict silos’’; “Internal credibility with internal functions’’; “Each of the cooperatives focuses on it own little ‘garden’’’; “Our technicians want to be purchasers’’Poor strategic alignment: 53 68 “Our structure is not prepared to share orgoals & measures change’’; “Conflicts over delivery frequency and service levels’’; “We don’t have the same goals, structures or systems’’; “No one knows what the whole thing looks like’’Lack supply chain 39 63 “Lack of decision making at upper levels’’; “Lackleadership & know‐how of leadership’’; “Primarily a back‐office operation’’; Short‐term thinking and tactical decision making’’; “Leadership is not modeling correct behaviors’’Resistance to change 59 61 “That’s the way we’ve always done it’’; “Convincing doctors that lean SCM would not compromise healing’’; “Resistance to changed roles and responsibilities’’; “You can’t change 90 years of history in only 8 years’’Insufficient trust/abuse 47 53 “Culture has reduced trust and collaboration’’;of power “We are the two‐ton gorilla and we wield tremendous leverage’’; “Over committing beyond capabilities’’Inadequate information: 73 53 “Communication!’’; “Suppliers are frustratedConnectivity & sharing that we do not share strategic information’’; “Information and technology systems are not as refined as they need to be’’; “We have plenty of data, but we can’t get it to decision makers so they can use it’’Inadequate alliance 12 35 “Dealing with main supplier’’; “Lack of buyingmanagement practices power’’; “Most of our vendors lack the capabilities to collaborate effectively’’; “Structuring contracts in a ‘one‐size‐fits‐all’ approach’’; “Defining ‘partnering’ is a challenge’’Inaccurate forecasting & 29 33 “Forecasts are ‘garbage’’’; “Poor forecastingexcess complexity makes it difficult to pass accurate information upstream’’; “Complexity will be tomorrow’s constraint’’; “. . . difficult to manage multiple systems’’Poorly defined roles and 10 32 “Resistance to the loss of power and to changedresponsibilities roles and responsibilities’’; “Who really owns the responsibility?’’ “We are struggling to define our role’’Gap in education skills and 18 30 “Teaching internal users the sourcing process’’;human resources “Lack of education of buyers’’; “We don’t have the talent we need for today’’; “Employee development is a real challenge’’; “Worker turnover and loss of talent’’ January 2012 53
  11. 11. Journal of Supply Chain Management a lack of employees with key skills are emerging as decision that creates vulnerability to others’ misuse of serious collaboration resistors. Together, these resistors asymmetrical power. For example, managers are reluc- have essentially frozen companies in noncollaborative tant to share vital decision‐making information. This business models. unwillingness to share information was observed at A careful evaluation of manager comments reveals both the interfunctional and interfirm levels. In fact, that structure and culture underlie much of the one manager shared a common sentiment, saying, “It is observed resistance. Focusing on structural resistors, easier to get information from suppliers than from interview managers explained that the desire to build other groups within our firm.’’ Simply stated, managers deep functional skills creates conflict and impedes col- equate the sharing of proprietary information with giv- laboration. One manager shared a prevailing thought ing away power. Collaboration is perceived as too risky. that, “too many managers are functionally obsessed.’’ Overall, the interviews reveal that no single resistor Another described the outcome of this mindset, say- impedes progress toward high‐level collaboration. The ing, “We have good people who do not accept that collaborative challenge is one of accrual. As the others do great work.’’ A third manager summarized diverse resistors reinforce each other, managers the dilemma, noting, “People are more concerned become overwhelmed. One manager highlighted this about who will get the glory or the blame rather than reality, saying, “You have to understand what you are evaluate whether or not a decision will benefit the up against. You need to understand all the different entire company.’’ These functional mindsets are rein- things that can kill you!’’ Because the entrenched forced by poorly aligned goals and metrics — the sec- resisting forces permeate organizational structure and ond most frequently observed resistor. Another culture, they are intrinsically difficult to mitigate. manager connected these two resistors, explaining, Moreover, the existence of the entrenched resistors “You’ve got to measure what you want to happen. tends to mask the need for new managerial skills and You can’t change without measurement.’’ organizational routines Turning to culture, interview managers identified two Proposition 2a: Traditional, functional organiza- core collaboration resistors: (1) an unwillingness to tional structures are likely to impede the creation of a adopt collaborative behavior and (2) a lack of trust. collaboration capability. Managers at interview companies reiterated repeatedly Proposition 2b: Traditional, functional organiza- that their colleagues firmly resist collaboration initia- tional cultures are likely to impede the creation of a tives — largely because they perceive collaboration as collaboration capability. threatening. Interview managers stressed that they and Proposition 2c: The interplay among structural and their colleagues lack collaborative experience and spe- cultural resistors is re‐enforcing. When both types of cific skills such as those related to alliance building. resistors are simultaneously found within a firm, Consistent with structural‐inertia theory, they also the degree of collaborative resistance increases pointed out that resistance to change is often rational- monotonically. ized by past success. Managers shared statements like, “It’s worked! Why should we change now?’’ and “That’s Enablers of a Collaboration Capability the way we’ve always done it’’ to explain this phenome- The critical juncture in the change management pro- non. Interview managers expressed frustration with cess occurs when the desire to transform collides with senior leadership’s lack of comprehension that change resistance to change. Lewin (1951) proposed that and collaboration are needed as well as with colleagues’ management should proactively intervene to (1) resistance to change. In some cases, frustration has strengthen driving forces or (2) mitigate resisting transformed to despair. Managers lament that resistance forces. His notion of intervention is consistent with to change is so ingrained in organizational culture, it contingency theory’s view that managers must threatens to permanently freeze a company in noncol- respond to a changing environment by adopting an laborative behavior. One manager pointed out that appropriate contingent response. Lawrence and Lorsch existing organizational culture is contagious, stating, 1967 emphasized the need to fit the response to the “The old mindsets convert the new people to their way exigencies of the new situation. We would thus expect of thinking.’’ the managerial response to target specific resistors. A lack of trust contributes to managers’ unwillingness Further, given the nature of a dynamic capability, we to risk changed behavior and collaborative practice. At would expect managers to employ enablers to over half of the interview companies, managers noted strengthen interfunctional and interorganizational that trust is missing within their organization as well as interaction and relational quality (Teece et al. 1997; among important SC relationships. Managers described Eisenhardt and Martin 2000; Barney 2001). Analysis a need to believe that others will not take advantage of of the interviews confirmed these dynamics. However, them before they will engage in the behavior required the interview findings reveal a need to pay particular to achieve relational rents. Absent trust, they avoid any54 Volume 48, Number 1
  12. 12. Peeking Inside the Black Boxattention to the role and importance of managerial only a small group of companies have reallycommitment as an antecedent to investments in spe- overcome.cific enabling mechanisms. As managers in the Period 2 interviews described Commitment as a Superordinate Enabler. In each their satisfaction with their companies’ collaborationinterview, we asked managers to specifically assess initiatives, the pattern associated with commitmenttheir company’s commitment to collaboration. maturity reemerged. Among companies with low lev-Although the companies were known to be partici- els of commitment maturity, managers expressed apants in various collaborative initiatives, managers desire to collaborate, but elaborated on the challengedescribed different levels of commitment maturity of getting there. One manager noted, “We are making(see Figure 2). Their responses can be categorized as progress but you can’t change the direction of a superfollows. tanker in a short distance. We have years of hard work1. On a scale of 1–10, our commitment to collabora- ahead of us.’’ Among emerging and growing commit- tion is a 5. We do not know how to collaborate ment companies, the overwhelming sentiment was, well. Collaboration requires a different skill set we “We are happy, but not satisfied.’’ At collaboration do not have time to build. leaders, managers were delighted, but cautious. This2. We know that collaboration is important. It repre- feeling was shared as follows, “In today’s environment sents a new way of doing business and we are you can never be satisfied with where you are! We are beginning to learn how do to it effectively. getting better, but our business strategy will demand3. Our commitment to collaboration is growing. We more.’’ Ultimately, managers recognize that commit- have documented its benefits and are building ment among senior executives is needed to open momentum for deeper, more strategic collaboration. mindsets and mobilize resources, but acknowledge4. We are absolutely committed. Collaboration is crit- that enduring commitment in today’s volatile environ- ical to our competitive strategy. ment is difficult to obtain. Proposition 3: Managerial commitment enables (a) The descriptions of commitment maturity emphasize resources to be dedicated to collaborative mecha-two realities. First, many companies remain function- nisms, (b) the mitigation of resistors, and (c) theally frozen — they are committed to functional excel- development of a collaborative capability. The greaterlence and lack both the collaborative “know why’’ the managerial commitment — as measured by locus,and “know how.’’ Without the vision or right skills, breadth, intensity, and duration — the greater themanagers neither understand nor embrace high‐level emergent collaborative capability.collaboration. Second, progress is being made amongfirms that have made the decision to pursue develop- Cultural and Structural Enablers. Commitmentment of a collaborative capability. Pilot projects are maturity influences a manager’s perspective regardingyielding results and performance improvements are their firm’s ability to cultivate specific enablers. Man-being documented. Even so, the sustained effort and agers at low‐commitment firms expressed concern thatinvestment required to transform organization culture the strength of the resisting forces was amplified by aand structure remains a substantial impediment that lack of willingness on the part of leadership to invest in needed enablers. They noted that intensive collabo- ration strategies were out of their reach. These manag- FIGURE 2 ers did, however, agree with their peers at more Commitment to Collaboration: Period 1 versus committed companies regarding the type of enablers Period 2 that needed to be established. By contrast, managers at high‐commitment firms were optimistic that they had a plan to establish needed enablers and felt that given time they would achieve collaborative goals. These managers’ sense of direction was evidenced by a strong emphasis throughout the interviews on core enablers. Table 6 reveals that companies are engaged in the process of enabler development and indicates that managers identified each core enabler more frequently in Period 2 than in Period 1, indicating a convergence of aware- ness regarding the importance of core enablers. That managers are targeting investments to mitigate the influence of specific resistors is evidenced by Table 7, which pairs the most frequently identified enablers January 2012 55
  13. 13. Journal of Supply Chain Management TABLE 6 Enablers of Collaboration: Period 1 versus Period 2 Enablers P1 (%) P2 (%) Representative Quotes Trust‐dominant 41 86 “Open books to get to true costs’’; “Transparency collaborative culture is the key success factor’’; “You help me here and I’ll help you there’’; “Philosophy of open communication. We have been very honest with suppliers’’ Accurate, timely 49 79 “Frequent meetings to go over jointly defined information sharing metrics’’; “Manage the information flow’’; “I’d like to see our partners share more information’’; “Technology continues to improve real‐time decision‐making’’ Aligned SC measures & 51 70 “Benchmark best practices’’; “Monthly meeting to more accurate costing establish production plans, performance expectations, and measures’’; “Overriding philosophy is to use measures that communicate’’ Intra/inter‐organizational 31 68 “Multi‐disciplinary, center‐led organization’’; teaming structures “Cross‐functional meetings are more effective’’ “Co‐locating personnel at O&M facilities’’; “Management teams to manage internal accounts in other divisions’’ Supplier development & 49 67 “Vendor compliance’’; “Willingness of supplier to integration change their paradigm’’; “Meet on a regular basis with suppliers to communicate expectations’’; “Suppliers participate in classes designed to help them’’ Employee buy‐in and 43 63 “Small victories enable further collaboration’’; empowerment “Need a plan that others can buy into’’; “Let the lean culture do its work on the docs’’; “Show the concrete results to capture buy‐in’’ Learning & 41 63 “Change the culture to make experimentation experimentation safe’’; “Active use of pilot projects’’; “Constant mechanisms learning through listening, scanning and pilot projects’’; “It is critical to find a partner willing to experiment’’; “Theory guides, but experiments decide’’ Senior‐level managerial 37 61 “CEO present at all meetings’’; “Monthly meetings commitment with all senior managers present’’; “Senior leadership — they have to have the vision’’; “Senior level manager has taken the role of project leader’’ Process transparency & 39 56 “Identifying the metrics needed to create visibility’’; supply chain mapping “Mapped out the in‐stock process’’; “Established standard process and a ‘unified code’’’; “Joint rapid process improvement workshops’’; “Choreography is the key’’ Disciplined NA 25 “Built a centralized decision‐making group’’; decision making & “Execution to plan’’; “Better analysis is being done follow through to justify and support decision making’’; “Discipline needed to change culture’’; “The only way to rationalize the network is through visibility supported by disciplined actions’’56 Volume 48, Number 1
  14. 14. Peeking Inside the Black Box TABLE 7 The Relationship Between Enablers and Resistors Enabler Resistor Rank % Rank % 1 Trust‐based collaborative culture 85 5 Lack of trust 53 2 Better information availability 79 6 Inadequate information sharing 53 3 Aligned goals & measures 70 2 Poorly aligned goals & metrics 68 4 Team‐based mechanisms 68 1 Functional structure & turf conflict 75 5 Supplier development & integration 67 7 Inadequate alliance management 34 6 Employee buy‐in 63 4 Resistance to change 61 7 Experimentation mechanisms 63 4 Resistance to change 61 8 Top management commitment 61 3 Lack of leadership 63with the most prevalent resistors. That managers con- Outcomes from a Collaboration Capabilitysistently identify enablers more frequently than the As in all strategic initiatives, the desired outcome ofrelated resistors reiterates a convergence of awareness a dynamic collaboration capability is differential firmand suggests that documentable successes are being performance (Porter 1991). Interview managers areobtained. cognizant of this goal; yet, throughout both waves of Despite the increase in enabler implementation, interviews, they expressed frustration regarding themanagers noted that resistors remain entrenched and constant pressure to quantify the “P&L’’ impact of col-that change‐management processes need greater com- laboration initiatives. The source of the angst ismitment, more experimentation, and sustained persis- expressed in two related thoughts, which managerstence to generate credibility. They expressed the communicated frequently: “So much of what we aresentiment that building momentum to garner broad‐ trying to do cannot be easily traced to the bottombased buy‐in is a prerequisite to resistor mitigation. line. How do you quantify the value of a better rela-Two thoughts that were frequently reiterated are cap- tionship?’’ and “If you don’t have the numbers, it’stured by the following quotes, “You have to have just your opinion.’’ Managers often find they must jus-some quick wins.’’ and “We need to document ‘what’s tify their collaboration efforts with numbers that arein it for me!’’’ not currently captured by their firms’ measurement Ultimately, the interview findings indicate that when systems.it comes to establishing a collaborative culture and Although many companies have yet to documentstructure, managers are learning both what to do and collaborative benefits, a few managers were excited tohow to do it. However, managers warned that despite share specific statistics that defined their collaborativethe slow progress, “lip service’’ and hyperbole under- success. They reported 30–35 percent reductions inmine progress. This sentiment was aptly captured by inventory and up to a 100 percent improvement inone manager’s exclamation, “Doing is more important inventory turns. Cost benefits ranged from 5 percentthan talking. Talking always results in cynics.’’ per year decrease in acquisition costs to 20 percent Proposition 4a: Investments is collaboration ena- productivity improvement. One company reported ablers (e.g., aligned objectives, shared customer‐ori- 10–20 percent reduction in prices to consumers. Like-ented vision, technological connectivity, relationship wise, time benefits included 25–50 percent decreasestrust) allow companies to mitigate existing collabora- in reorder lead times, 50 percent improvement intion resistors. on‐time delivery, a 50–60 percent decrease in order Proposition 4b: Resistor mitigation is influenced by fulfillment lead times, and achieving a 99 percentthe fit or alignment between a company’s specific col- on‐time delivery. Managers also reported sales andlaboration enablers and existing collaboration resis- profit growth as high as 50–58 percent.tors. The greater the alignment is, the greater the Most managers, however, described obtained bene-mitigation effect. fits without sharing the “hard’’ numbers (see Table 8). Proposition 4c: Resistor mitigation is influenced by The two most frequently identified benefits of collabo-the ability to generate early or initial buy‐in and ration across the two time periods were (1) improvedmomentum. The greater the use of practices that productivity and (2) enhanced customer satisfaction.document collaborative benefits, the greater the miti- First, increasing globalization, the emergence of low‐gation effect. cost rivals, and intense competition characterized the January 2012 57
  15. 15. Journal of Supply Chain Management TABLE 8 Benefits of Collaboration: Period 1 versus Period 2 Benefits P1 (%) P2 (%) Representative Quotes Improved productivity & 88 67 “Lean focus is beginning to take root’’; “Operating lower costs costs have dropped’’; “50% more profitable over the past four years’’; “System enhancements have enabled more work with less labor’’ Continuous process 10 47 “Reduced value stream steps from 45 to 20’’; “SC improvement collaboration has increased learning in the chain’’; “Provide lead time for problem solving’’; “Everything seems to move faster’’; “The momentum needed to make changes and drive new initiatives’’ Improved customer 45 46 “Better customer satisfaction’’; “Improved service to service & satisfaction members’’; “Higher in‐stock percentages at the store level’’; “All of this leads to better customer satisfaction’’ Enhanced growth & 29 39 “Enabled 13 new stores in 4 months’’; “An ever competitiveness growing earning stream’’; “Sustained profitable growth’’; “It helps us to be more competitive and keeps us in business’’ More effective 20 37 “Fewer conflicts along the supply chain’’; communication & “Collaboration allows us to solve issues more coordination rapidly’’; “We are better able to develop and deliver solutions’’; “Collaboration is being driven by both customers and service providers’’ Better supply 37 32 “Becoming a ‘preferred customer’’’; “Ability to chain relationships leverage supplier resources to run a leaner supply chain’’; “Increase the learning chain’’; “Supplier loyalty’’; “Suppliers have helped to successfully take cost out’’; “We have won back the trust of the suppliers’’ Improved quality 10 19 “Early quality/reliability of new products’’; “Bar none, service and quality’’; “Everything we do is to drive product quality’’; “Price premium for many products due to quality levels’’ Faster, more responsive 43 14 “Better service levels’’; “Results: cost, quality and order fulfillment faster delivery/service responsiveness’’; “Benefits are threefold: lower costs, better service, and greater responsiveness’’ Better on‐time delivery 27 14 “Better on‐time delivery, higher quality, lower prices, and happy customers’’; “Achieved 99.6% second day on‐time delivery’’; “In‐stock % way up — critical to delivery speed’’; “We finally have our strategic product delivery process defined’’ Faster inventory turns 43 12 “Inventory and lead time reductions’’; “SCM has led to higher inventory turns and in‐stock percentages’’; “Supplier visibility into orders has improved inventory turns’’; “Inventory turns are up’’; “Our inventory turns have gone up steadily’’58 Volume 48, Number 1
  16. 16. Peeking Inside the Black Boxdecade in which both studies were carried out. Thus, throughout the organization as well as up and downit is not surprising that managers noted the ability to the supply chain influences future commitment to col-take costs out of the system as the primary benefit of laboration and thus the firm’s willingness to continueSC collaboration. Second, managers persistently dis- to invest in an enhanced collaborative capability.cussed their enhanced customer‐service capabilities.However, it is difficult to aggressively cut costs andsimultaneously increase customer satisfaction. The fact TOWARD A DYNAMIC SYSTEMS MODEL OFthat fewer managers reported customer satisfactionimprovements in Period 2 indicates that there may be COLLABORATION The concepts and relational dynamics that emergedlimits to balancing this tradeoff. from our study are portrayed in Figure 3, which sum- Continuous improvement, a benefit that was seldom marizes and generalizes our principal findings. This sys-mentioned in Period 1, became a focal benefit in Per- tems diagram illustrates the reinforcing and balancingiod 2 — perhaps as a strategic response to this cost‐ cycles that firms face as they seek to develop a collabo-service dilemma. Managers talked openly and enthusi- rative capability (Senge 2006). The momentum cycle,astically about the intangibles that they are experienc- indicated by white arrows, involves learning how toing from better relationships and improved processes. leverage early successes to increase commitment andIntangibles included better communication, more rig- build capabilities. The balancing cycle, indicated byorous analysis, greater visibility, higher levels of trust, gray arrows, depicts the interaction that exists amongenhanced learning, the emergence of a problem‐solv- collaboration resistors and enablers. The two cycles areing environment, and momentum for change. For inextricably linked. As firms initiate collaborative inter-many companies, documented “baby steps’’ justify action — either interfunctional or interorganizationalcollaboration as a viable strategy despite the difficulty — they enter the balancing cycle. Organizations thatof tracing “hard’’ benefits to the bottom line. How- successfully mitigate resistors are able to loop back intoever, the interviews evince that benefits are not being the momentum cycle. Those that do not alleviate resis-obtained equally. tors fail to build a collaboration capability. Proposition 5a: A collaboration capability delivers The capability‐development process typically starts aspositive supply chain operational and financial perfor- a strategic response to changes in the competitive envi-mance benefits. ronment. The perceived magnitude and permanence of Proposition 5b: A firm’s ability to document perfor- the threats drive the strength of the collaborative intentmance improvements and disseminate success stories FIGURE 3 Interplay of Momentum and Balancing Cycles in the Construction of a Collaborative Capability January 2012 59