Industry collaboration, cross-industry collaboration, collaborative commerce, collaborative procurement and collaborative consumption are just a handful of the seemingly endless types of collaboration it is possible to engage in. Collaboration opportunities exist across the private and public sectors and a vast array of industries have taken collaboration seriously for years, implementing wide-scale programs in, for example, the supply chain and procurement areas.
Governments worldwide continue to focus on cutting government spending and reducing system inefficiencies, in no small part because the taxpayer demands it. One mechanism they use is collaborative procurement. Local governments and other organisations come together to pool or share purchasing volumes, information, resources and even technology.
In the UK, there is evidence of authorities collaborating to reduce duplication and improve service delivery from as far back as the 1970s. In 2007 the Collaborative Procurement Programme was established under the governance of The National Audit Office and although they have not seen as much success as initially hoped they continue to promote and adapt the program. In May of this year Nesta re-launched a platform called Civic Exchange providing an online platform to showcase successfully used civic software and promote its reuse. Scape is a Local Authority controlled company formed in 2005 with the objective of bringing efficiency to the building process through the development of standard designs and strategic procurement arrangements and has reported savings of £22M on £230M spent on a selection of publicly funded construction projects in the East Midlands. There are many, many more examples.
The automotive industry provides perhaps more prominent examples of collaboration, standardisation and even knowledge sharing aimed at reducing costs and increasing the opportunities to innovate. The Automotive Industry Action Group (AIAG), formed in 1982, is a member-based non-profit industry group working collaboratively to streamline industry processes. Founded by three North American automotive manufacturers, membership has grown to include many hundreds of companies across the globe and the group is responsible for such achievements as introducing a single bar code symbology, achieving standards in the engineering change management systems and establishing electronic data interchange rules and formats along with many other initiatives resulting in billions of dollars of savings.
Chris Hallett, editor of Autocar Magazine sums up collaboration in the car industry nicely: “Car companies are trying to collaborate on as much as possible, particularly things that the customer doesn’t care about. Meanwhile, they are keeping things that the customer does care about, like design and brand characteristics, separate.” Here are just a few examples of what he is talking about:
- Renault and Nissan have been strategic partners since 1999 controlling eight major brands together
- Renault-Nissan and Daimler announced a partnership to jointly develop small cars estimating savings of €2bn a year by sharing production costs as well as procurement
- BMW and Toyota who have a longstanding collaboration on fuel cell technology are now working on a programme to jointly develop a sports car powered by hybrid engines
- Toyota and Ford announced a partnership in August 2011 to develop a hybrid system for light trucks and SUVs
- General Motors and Honda announced, in 2013, a long-term, definitive agreement to co-develop fuel cell system and hydrogen storage technologies
Elon Musk of Tesla Motors took collaboration a step further when he announced in a blog last month, “Tesla will not initiate patent lawsuits against anyone who, in good faith, wants to use our technology.” He went on to write “We believe that Tesla, other companies making electric cars, and the world would all benefit from a common, rapidly evolving technology platform.” The Financial Times reported shortly after Musk’s announcement that “Nissan, BMW and Tesla are keen to collaborate on creating possible global vehicle-charging standards.”
Why go on and on about collaboration? Well, because it’s important and because in the finance industry we need to explore new methods of collaboration. Cloud computing, utilities and open source will all help the industry as will the vast amounts of money now being directed towards innovation in fintech. We might even hope for real progress in developing standards and possibly even utilities around reference data, KYC and AML but we should be more seriously exploring different types of collaboration between financial institutions.
Let’s find a finance equivalent to Toyota’s fuel cell or Tesla’s lithium-ion battery pack and partner on that component, bringing down dollar and resource costs on this fundamental and yet not differentiating (or at least not differentiating for long) part of the overall system. Then let’s find another one and another one until we’ve really started to tackle the thousands of duplicative applications banks all build. Let’s create a marketplace promoting software successfully used in similar organisations in order to share it and then let’s use a standard agreement to reduce the expense and time it takes to procure this software. Let’s turn components, processes and software widely used by the marketplace into industry standards. And let’s do it again and again and again.