By Dr. Heidi K. Gardner
Collaboration is getting a bad rap. Inasmuch as most business leaders understand that they and their colleagues must get better at cross-silo working, too many of them get execution wrong. For example, some leaders think more collaboration is better and simply form more and more teams, with more and more members. Others consider collaboration an initiative that only needs to be implemented—not managed over time. Some organizations focus on collaboration as a goal in and of itself.
It’s hard to argue against collaboration. But when it is poorly carried out, or disconnected from the company’s strategic goals, it can backfire. Based on our decades-long empirical research at Harvard University, this article will explore how effective collaboration—what we call smarter collaboration—generates better financial outcomes.
Smarter Collaboration Boosts Revenues
One of the top outcomes of smarter collaboration across departments, business units, and geographies is higher revenue. Our work with thousands of senior executives has revealed this outcome time and time again across a wide range of organizations, ranging from manufacturing companies to financial institutions to professional services firms like law and accounting. It doesn’t matter the size or structure of the organization: the underlying principles apply to companies that range from very small to giant, and entirely domestic to international.
One global retail bank we worked with provides a clear example of this phenomenon. Our research revealed patterns of collaboration that set apart the highest-performing branches, where different kinds of bankers played discrete roles in collectively producing higher-quality, integrated offerings for customers. In these branches, the frontline bankers combined data, personal interfaces, and targeted outreach to spot customers’ needs and spark interest in the bank’s products. Product specialists then used this knowledge along with their expertise to develop customized offerings that generated higher value for the customer.
With controls in place for the relative affluence of the neighborhoods and other variables, our analyses showed that more collaborative branches generated significantly higher revenue with those particular products and greater customer loyalty.
Why is this? Smarter collaboration is not about simple cross-selling. Rather, having a wider range of contributors—such as senior leaders, product managers, client care experts, engineers, and financial experts—engaged with a client in a thoughtful way gives you more insight into that client’s needs, priorities, and preferences. If these different players communicate effectively among themselves, you can use this information to identify new opportunities to help the client (and generate more revenue).
Some of the new work may be one-off projects or products. But the biggest opportunities arise when the various individuals bring together their perspectives—that is, what they picked up during the project—and collectively brainstorm about the customer’s more complex challenges. That’s the perfect starting point for recognizing big questions and answering them in innovative, multi-pronged ways.
When you tackle the bigger, more complicated challenges, you gain access to higher-level executives who have larger responsibilities, bigger budgets, and more sophisticated needs. And delivering this top-notch work to very senior executives only grows your reputation and perceived legitimacy within the client organization.
Smarter Collaboration Means Higher Profits, Too
The kinds of joined-up, comprehensive solutions developed through collaboration not only create the ability to spark more sales and revenue with your existing accounts: they are also tied to higher profit. As you start working with higher-level individuals within your client, and the C-suite in particular, your work becomes more valuable and higher margin. Further, growing your relationship with existing customers costs less than capturing business with new customers. It’s a true win-win: higher margin work with a lower cost of sale.
Generally speaking, “moving the client to the right” takes you out of the commodity game and into the domain of differentiated offerings.
Let’s look at this phenomenon in action. One tech and data provider we worked with—let’s call them Data-Mark— had one core product: data that tracked the effectiveness of marketing campaigns. Most customers used another company’s data-visualization software to help them see patterns in the data. But combining these two tools was an unwieldy process: so, when Data-Mark began offering a data-visualization tool optimized to analyze its data, adoption was impressive. The new tool was user-friendly, and it came with reports and graphs directly linked to the marketing data. All of this meant the company could charge more than competitor products in the market. And because Data-Mark was only selling to existing data customers, the cost of sales was low.