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Does Collaboration Impact Business Performance?


Posted by on April 7, 2010

Recently I highlighted and reviewed a report by Frost & Sullivan which talked about the impact of collaboration on overall business performance.  The report was created a few years ago and was thus slightly dated.  Fortunately someone from Verizon sent me a more updated version of the report, this one was conducted in 2009 and provides more insight and information into how businesses are collaborating and how effective that collaboration actually is.  The new report talks much more about UC&C or Unified Communications and Collaboration and also introduces ROC or return on collaboration.  As with the previous report, there is no mention of Enterprise 2.0 anywhere, just collaboration.  Let’s dive right into it.

What I find fascinating about this diagram is that over 43% of UC&C tool deployments happened in the past 12 months.

In my opinion this helps crystallize the Enterprise 2.0 market and shows that companies are indeed taking this seriously and that collectively companies are moving towards more enhanced collaboration.  Now keep in mind that this only speaks to tool deployment and says nothing about strategy, results, adoption, or effectiveness.  This is simply the percentage of companies that have deployed these tools within the organization.  Frost & Sullivan also point out that this shift towards UC&C tools was probably facilitated by current economic conditions which have been putting pressure on companies to produce, innovate, and cut costs.  Furthermore over 80% of companies surveyed that currently have not deployed UC&C tools plan on doing so in the next 2-3 years.  This roughly falls in line with market predictions from large analyst firms which are predicting strong growth in the enterprise 2.0 space by 2013 (even though the predictions vary quite a bit).

For those companies that deployed collaboration tools, 72%  stated that they experienced better business performance compared to only 46% of companies that did not deploy them.

Companies that deployed collaboration tools saw improved performance in innovation (68% vs 39% that didn’t deploy), sales growth (76% vs 50% that didn’t deploy), and profit growth (71% vs 45% that didn’t deploy).  These are pretty solid numbers across the board.  To help break down collaboration even further Frost & Sullivan separated companies into 3 categories: basic, intermediate, and advanced collaborators.  You can see what constituted each of the categories in the image below:

What’s interesting is that none of the choices above really address innovation tools such as Spigit, collaboration platforms such as Blue  Kiwi, or anything even close to Wikis.  Still, the fact remains that collaboration has proven to be an important factor on overall business performance.  What I really want to see is a similar report that brings into play some of the actual E2.0 tools that many companies are using.  All of the collaboration tools mentioned above are of course offered by Cisco and/or Verizon.  While I think these collaboration tools are important are they are greatly missing painting a bigger collaborative picture.  I conducted an in depth case study on Enterprise 2.0 at Vistaprint (and there are plenty of other companies deploying E2.0 tools) which probably doesn’t fall into the above collaboration categories yet has seem tremendous results as a result of their efforts.  Don’t get me wrong I’m sure Vistaprint is using things such as web conferencing, perhaps some form of softphones, and a few other things up on that list.  However, nothing on that list addresses the fact that Vistaprint was able to cut training time by almost 50% for new engineers by deploying a wiki; there’s no area or category for that in this report and that is  HUGE miss.

I’m sure a good amount of the companies surveyed have some sort of E2.0 collaboration tool deployed yet their effectiveness and presence is lost in this report perhaps leaving the overall impact of collaboration on business performance understated.

Let’s keep going.

As I mentioned above Frost & Sullivan introduced ROC (return on collaboration) into the mix and defined it as such:

ROC = ((functional area spend) * (functional area charge)) / overall UC&C spend

For definitions of what these variables mean you can refer to the full report.

Based on the 3 categories of collaborative companies here is the ROC that they received.

You can see from the diagram above that the more advanced collaborative companies see a higher ROC.

Next Frost & Sullivan broke down ROC for various departments within an organization.  While many people may lurk or pay attention to what happens on various web 2.0/collaboration sites; only a small portion of users actually contribute and create content.  This means that you need a certain scalability affect to achieve success and this is precisely why many Facebook fan pages with only a few hundred or even thousand fans are still like ghost towns.  Frost & Sullivan found something similar when they looked at collaboration across various departments.  The departments with the largest staff had the greatest ROC, this again is because more people means more contributions and perhaps greater results.  Yes, the focus should be on quality and not quantity but when you only have a small percentage of contributors you need a greater overall pool of users (which means more contributors).

Here we can see that sales and R&D saw the highest ROC while HR saw the lowest.

Again I feel that the size does matter when it comes to collaboration as is further evidenced by the breakdown of collaboration by company size below:

Here we see that large companies see a MUCH higher ROC when compared with smaller companies.  Could there be other variables that affect this?  Sure, but so far we seem to have a pretty good case that collaboration is more effective in large companies and large departments, and I think that makes complete sense. Finally, we get to what I think is the most important image in the report and that is how the type of collaboration impacts business performance across various departments.  As we saw with the first report I commented on a few weeks ago, collaboration is still currently a massive driver for overall business performance.

So let’s take a look at this chart to see exactly what it means.  In a nutshell this chart says,

“The better your company collaborates, the greater the impact is across departments and the organization as a whole.”

Simple enough to understand right?  Again something to keep in mind and something the Frost & Sullivan mention in the report.  The R&D and sales departments are usually the largest ones and also see the highest ROC for those in the advanced collaborator category.

There are a few other interesting findings in the report which you can check out for yourself.

The report was sponsored by Verizon and Cisco which both offer their own suite of collaboration tools.  This report does a great job of building the case for their respective uses but I think overall we need something that looks at E2.0 platforms and how effective they can be for collaboration as well.  I’m actually working on a report for SNCR which will hopefully answer some of these questions towards the end of the year.  For now, consider that collaboration does have an overall large impact on business performance, that should be the key takeaway from this report.

I’m also open to creating/conducting research into SCRM, E2.0, and social media.  If you want to sponsor a report please let me know.

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  • philsimonsystems

    Great post, Jacob.

    A few points:

    Now keep in mind that this only speaks to tool deployment and says nothing about strategy, results, adoption, or effectiveness.

    So true. Go back 15 years and think about the number of companies doing ERP, BI, or CRM. That didn't mean that they were doing it well.

    Also, it's interesting how the recession has spurred adoption of newer technologies. Sometimes, people only do things when forced.

  • http://www.lapininternational.com/ David Lapin

    Collaboration, both internally and externally, has proven to be successful in increasing business production and expanding relationships with clients. This post comes as no surprise, but it's good to see collaboration being promoted with such impressive data.

  • hyounpark

    I found this report (not the blog post!) to be disappointing. It spoke more to unified communications than to enterprise collaboration and I have no idea what a 3.6 really means because it's a stat that they made up, rather than a statistic that actual companies use.

    It just shows how little research has really been done in this space that we're willing to look at a report like this in enterprise collaboration and call it progress. It's partially in response to this report that I decided to do research in this space this year to talk about the Spigits, Jives, and NewsGators of the world, as well as Sharepoint integration, ECM, social media integration, and task improvements that companies actually care about, like supply chain visibility, onboarding, employee engagement, product development. But it's such an empty space that there's room for multiple analysts to do work in these fields and for all of us to add value to the market.

  • http://www.intranetfocus.com Martin White

    There was a very good monograph on statistical methods published by Imperial Chemical Industries over 60 years ago on statistical methods which the author dedicated to his wife, on the basis that she was a better cook than any statistician. The report you cite is well meaning but statistically flawed. The only way in which percentage improvements in (say) sales growth as a result of collaboration can be measured is to carry out the same process with and without collaboration being part of the workflow. Sadly most surveys are based on qualitative guesstimates from people who have no real metrics and an interest in justifying the investment they have made on collaboration platforms.

    For a more rigorous study have a look at the paper by Haas and Hansen in Strategic Management Journal, 26(1), pp1-24, which shows that in the case of Sterling Software sales performance fell as collaboration increased! This paper is cited in Hansen's excellent book Collaboration (Harvard Business School Press, 2009) along with many other studies that show that it is not possible to state that the better your company collaborates the greater the impact.

    Think back to 1970 and the wonderful collaborative effort that resulted in the crew of Apollo 13 surviving when the Command Module oxygen tank exploded on the way to the Moon. On that basis certainly collaboration is the way to get great results. Then think back to 1986 and the launch of the Challenger Space Shuttle. A decision made with a great deal of collaboration resulted in the deaths of seven astronauts.

    I rest my case

    • Yasmin

      Just read your comment, Martin, and purchased Collaboration. HBP books are usually great. Thanks for the tip!

  • http://www.intranetfocus.com Martin White

    There was a very good monograph on statistical methods published by Imperial Chemical Industries over 60 years ago on statistical methods which the author dedicated to his wife, on the basis that she was a better cook than any statistician. The report you cite is well meaning but statistically flawed. The only way in which percentage improvements in (say) sales growth as a result of collaboration can be measured is to carry out the same process with and without collaboration being part of the workflow. Sadly most surveys are based on qualitative guesstimates from people who have no real metrics and an interest in justifying the investment they have made on collaboration platforms.

    For a more rigorous study have a look at the paper by Haas and Hansen in Strategic Management Journal, 26(1), pp1-24, which shows that in the case of Sterling Software sales performance fell as collaboration increased! This paper is cited in Hansen's excellent book Collaboration (Harvard Business School Press, 2009) along with many other studies that show that it is not possible to state that the better your company collaborates the greater the impact.

    Think back to 1970 and the wonderful collaborative effort that resulted in the crew of Apollo 13 surviving when the Command Module oxygen tank exploded on the way to the Moon. On that basis certainly collaboration is the way to get great results. Then think back to 1986 and the launch of the Challenger Space Shuttle. A decision made with a great deal of collaboration resulted in the deaths of seven astronauts.

    I rest my case

  • Yasmin

    I'm working on an enterprise 2.0 strategy at a large government agency, and just read the article mentioned in this blog post. While I think it provides useful ways about thinking about return on collaboration, I am concerned about the methodology used. It doesn't seem like there were any statistical methods used to look at how powerful the effects of collaboration were on business performance, or if the changes experienced were at all statistically significant. Do you know if the data sets are available for further analysis? I definitely want to use information that points to the effectiveness of this stuff on biz outcomes, but want to make sure the data is analyzed in a rigorous way. I'm actually surprised that Verizon and Cisco would authorize such a report!
    Thanks!
    Yasmin
    http://bonnieandyasmin.com

  • Kevin peterson

    Very good article. Collaboration does impact business performance as having Online Collaboration increases business efficiency, work efficiency, productivity, reduces costs, better client interaction etc. There are various online collaboration tools such as WebEx, gomeetnow, gotomeeting, on premise RHUB appliances etc. to select from.

    • http://www.thefutureorganization.com/ jacobmorgan

      Thanks for the kind words Kevin, very much appreciated.