January 30, 1996

Prepared by: Silber & Associates
Dr. Bohne Silber
13067 Twelve Hills Road
Clarksville, MD 21029-1144

STIMULATED COLLABORATION AND FORMATION OF STRATEGIC ALLIANCES

One of the noteworthy effects of the program is the joining together of competitors to work toward a common goal. Without the ATP award, the real stumbling block for many companies would be the lack of a collaborative effort.

A participant summed it up this way: "The award fit in with our strategy of...not having to manage the entire effort ourselves. We gain the leverage of working together with the companies. The money is not the actual benefit, but the leverage."

"We couldn't have had the same goals without the ATP because we wouldn't have had the same collaboration and resources. The major impact of ATP is the joint effort," said one scientist. Without the mechanism for consolidating resources, said another participant, "We'd only be looking at the tip of the iceberg. It's too involved a topic. We couldn't achieve progress."

Another added, "The award has brought us together with [partner company] to encourage sharing of technology in a mutually beneficial way. With the government's money, we've doubled our effort, hired four scientists, and put other employees on the job. We've been able to be more aggressive. Within our company it has really changed how we do research. Everyone's really gotten behind it. It's given us critical mass, directed our emphasis."

"Collaboration, cooperation, and learning to operate in a consortium with competitors were key outcomes of the ATP," said a participant in a large joint venture project which paired competitors together as research partners. "We saw and experienced the value of working together with competitors. The ability to leverage knowledge has been so tremendous. It has broken invisible barriers...This was a win-win situation for all companies. The opportunity for competitors to work together, to come together to solve a common set of problems, has been rare." Another participant concurred: "In the past we looked at each other as competition, but in reality we're all competing against the Japanese. ATP brought us together, and that has been unbelievably valuable...forming the consortium has been the greatest benefit of ATP."

Another successful marriage through ATP has been between manufacturers and end-users. The arrangement creates a powerful research alliance. "ATP gives the supplier companies and user companies a very unusual joint venture format to become partners and understand each other's world view," a participant explained. Another company offered, "The key benefit of ATP has been improving relations with our major users. We've had beneficial collaborations, which lead to better products moving to market faster. The end users jointly participate with suppliers and decrease the market risk of the product. Leveraging reduces the cost and decreases risk."

Other participants expressed the same notion. "It's uncommon for OEMs [original equipment manufacturers] to work jointly with materials suppliers. The OEMs are not usually involved because it's not part of their culture--they're usually focused on their own customers. But for a materials supplier to go into this

without the OEM is very high risk. Unlike the ATP, many programs focus on the end product and neglect the large underbelly of suppliers. Without ATP we wouldn't have gotten into this technology. We got a subcontractor involved and they normally wouldn't have been part of it. ATP made it possible to demonstrate the technology."

EXTENT OF COLLABORATION

On average, each joint venture project included six formal participants. During the course of the ATP project, 35 of the 82 JV participants forged subcontracting relationships with an average of five additional companies. Even for Single Applicant projects, collaboration played an important role. Twenty-two out of 42 Single Applicants reported bringing into their projects an average of four outside companies as subcontractors.

The ATP projects fostered new relationships among U.S. companies. Only one joint venture involved a consortium of companies which previously worked together. According to the participating companies, the others were formed expressly for the ATP. On average, because of the ATP, participants reported striking up alliances with five companies with whom they had never before done business.

GENERAL BENEFITS OF COLLABORATION

Figure 2 below documents participants' widespread enthusiasm about the benefits of collaborating on the ATP projects. Many considered the team experience the most significant outcome of their ATP

award. "The ATP award," said one JV partner, "has opened the eyes of management that technological projects like this one are valuable. Our company used to turn away from outside collaborations. We had a history of zero; we were an inward-looking company. We were skeptical at first of collaboration, but not now."

According to a JV participant, the different members of the joint venture "act like a company now. We confer with each other, advise each other. We recognize that pre-competitive technology can be worked on together. There is a leveraging of resources, looking at different markets, having different ideas."

"Leveraging" crops up frequently when the participants speak of the important consequences of collaboration. Referring to the pure practicality of working as a team, one participant offered this anecdote: "Prior to ATP, two large and competing companies were going to pursue two major technical materials. ATP enabled them to split the effort--one company is trying one, and the other company is trying the other. The two competing technologies will then be evaluated by [a university], and a choice can be made."

The leader of a large joint venture described how the JV partners have pooled their money to pay for research they cannot afford individually. "We've used a large portion of the money to contract for university research which otherwise we couldn't afford. Our companies need work that's best done in a university, but company budgets don't allow for this. We can now use university experts. The university is a good neutral ground for our companies, where there aren't proprietary concerns. The money is catalytic because it provides the means for the companies to work together. I'm not sure the companies would have started this project without the money."

Under the ATP, competitors working together on a joint venture view each other not as competitors, but as resources. For the sake of common research goals, they've abandoned their traditional ways of interacting--or, perhaps more accurately, not interacting----and instead are sharing ideas and resources. Many have found that working hand-in-hand with their competition means greater efficiency, expedited progress, and a better quality result. "Prior to ATP," said a researcher from a large corporation, "we met with [corporate competitor] once a year to share information. We accomplished nothing; we had no synergy. Now we work together daily on all tasks of the program and there's amazing synergy between two of the biggest companies.

We absolutely would not be doing anything together without ATP--no doubt about it." The ATP also gives small companies a platform to demonstrate their merit to large corporations, paving the way for future business together. A small company participating in a joint venture aptly said, "One of the premiere things ATP did was provide a framework for little guys and big guys to get together under circumstances they never would have."

Collaboration seems to be a fresh concept to some U.S. high-tech companies. As one JV partner commented, "There has been a new awareness of the value of consortiums. Management and the president of our company use it as an example of how cooperative research can be done. Individuals companies can't do broad research. ATP has allowed a broad-based consortium to work together, which is very cost-effective. We're sharing in high-risk research rather than doing it ourselves, which is a cost benefit. Getting competitors to work together wouldn't have happened without ATP. Companies are sending their technological gurus to the project meetings, and this is a very strong impact on how we do research."

Many participants spoke with admiration about the collective talent involved in their projects. "This is the first time a number of companies have come together to work on [specific technology]. There's never been a case before when such a concentrated effort of scientists came together."

SPECIFIC BENEFITS OF COLLABORATION

The interview contained questions which probed some of the specific advantages of collaborating on the ATP project, such as avoiding duplication of effort and stimulating creative thinking. The respondent was prompted

with an item and asked to describe whether, as a direct result of collaboration, his or her company benefited to a great, moderate, or small extent, or not at all.

First and foremost, research collaborators value the opportunity to share ideas--the stimulation of creative thinking (named as a great or moderate benefit by 95% of the group). According to one JV participant, "We are not receiving funding, but to be part of a consortium like this is very positive from a scientific perspective. The scientists from different disciplines meet and spawn new ideas and solve problems. We saw this as a long-term commitment, enabling us to expand our know-how..."

The second most compelling benefit of collaboration, the participants maintain, is that products are commercialized sooner (92.9% described this as a great or moderate benefit). Other significant benefits include time savings (92.5%), increased customer acceptance (89.2%), and obtaining R & D expertise not available in-house (89.0%). The least important--or least relevant--outcomes of partnering for the respondents are attracting more investment capital, engineering for volume manufacturing, and ensuring a reliable, quality source of supply (22.6%, 31.6%, and 35.0%, respectively).

In addition to the potential benefits listed in the interview guide, several participants named other benefits they experienced because of their partnerships on the ATP project, including these:

• "reality check about the direction of R & D"
• "better definition of the problem"
• "better access to graduate students"
• "credibility with potential investors."

PROBLEMS FROM COLLABORATING

Participants freely discussed the problems they've encountered on the road to fruitful collaboration. For a few companies, the collaborative relationships never jelled and posed on-going problems throughout the study. "We had fundamental differences," said one JV partner of another. "We felt more capable to make decisions but they tried to drive the decisions."

A common problem relates to cultural differences--between large companies and small ones, and between industry and academia. "Our project," reported a JV participant, "did not go as hoped. We would be very cautious about working with universities. It was very difficult for them to judge the benefit of technological issues that might be vital to commerce. They lacked a sensitivity to issues which might have commercialization implications, such as robustness, cost and reliability. We needed to give the university small, specific research tasks which were not oriented to applied technology. In all, the university didn't follow through on tasks, and they had different values."

Another participant spoke about the hazards of merging organizations with different agendas. "In general, the relationships are not terribly healthy. Everyone has a different agenda and needs. There is no general, only ten colonels. It does not operate smoothly. No one is in charge...It's impossible to throw together different agendas."

For the majority of participants, however, the problems have been only minor stumbling blocks, resolved without serious consequence. Most companies have worked through their cultural differences without incident. "There was culture shock at first," said one, "but none now." Initially many companies, particularly competitors, are wary of each other, cautiously studying one another from opposite sides of the conference table. "The first few years were spent trying to gain trust and confidence. We are now teaming, and the partnerships are going well. There's a bonding. At first we didn't want to share information, but now the sharing is beautiful."

Learning to collaborate takes time. According to a JV participant, "It took us two years to learn to work together. Collaboration is not easy. You must establish credibility with one another. I can't believe short ATP projects are successful since it takes this much time to establish the necessary relationships."

Situations involving intellectual property are fertile for disagreement. "The main problem we've had," offered a JV partner, "is that this is a horizontal alliance, and we're all competitors. We have to deal with intellectual property." Some company executives, far removed from the day to day give-and-take among research partners, harbor concerns about collaborating with competitors. "Management has been worried we're sharing too much," said one participant. "Some of us have been told to back off."

Several companies mentioned the lengthy start-up period as a problem. "In the beginning, it took us six months to finalize the agreement. This was very intense and very grueling, but we got over it." Often the slow start has less to do with paperwork than with reconciling organizational cultures. "You have to get to know people. It took a year to get around organizational cultural differences. And we had technological identification issues--looking for who had what to share and what we should spend time on, our priorities."

A few participants were put off by the administrative effort which was required to manage the award. As one reported, "I'm not sure we'd pursue another joint venture because of the incredible amount of paperwork and the bureaucracy. The amount of administrative overhead is unbelievable. Has progress been made? Yes, and it will probably lead to a product, but it hasn't all been blue sky."

RELATIONSHIPS WITH COLLABORATIVE PARTNERS

Fifty-nine percent of the projects were carried out without changes in the initially participating organizations. On 23% of the projects, at least one participating company was changed to a different company, and on 18%, at least one participant, along with that company's piece of the project, was dropped altogether.

Adjustments to the roster occurred for a variety of reasons. Sometimes the research requirements changed, making Company B a more appropriate participant than Company A. On several other occasions, by the time the ATP project actually began, a participating company had gone out of business. Overall, decisions to replace one company with another or to eliminate certain tasks seldom stemmed from dissatisfaction with a company's performance. According to the organizations themselves, most of the collaborations with research partners, suppliers, federal labs, and universities have been successful. As one company representative quipped, "The relationships have been very good. We resolve problems better than we do within our own companies." Table 3 indicates that more than 90% of all participants said their collaborative relationships have worked out "extremely well" or "fairly well."

Ninety-two percent of participants, in fact, said their ATP experience has peaked their interest in working collaboratively with other companies, and 96% of joint venture participants reported that this experience would influence them to engage in another joint venture down the road (see Figure 3). Companies are more likely to jump on board a collaborative effort once they've experienced first-hand the benefits. "ATP was our first collaborative effort," said a researcher, "and it took some convincing. Now we have five to six collaborations going. ATP was our pilot program." Another JV partner offered, "We'd absolutely pursue another joint venture. This is the way to do technology--working together with your customer. We should do more of it involving the customer and supplier. It's a win-win-win."

Some Single Applicant participants reportedly contemplated applying for the ATP award as a joint venture. Most decided against it, however, because they had the necessary capabilities internally to carry out a solo program of research, enabling them to avoid extra paperwork and potential disputes over intellectual property. One Single Applicant, speaking against formal collaborations, said, "The joint venture approach is inherently flawed for most technology. Organizations are hard to manage, and joint ventures are almost completely unmanageable. We need a single, clean decision-making chain. There is better focus, better control, and increased flexibility with Single Applicant programs."

Often the decision boiled down to issues of control. "We wanted to control the technology and control our own destiny instead of negotiating with a partner," said a Single Applicant. "Universities sometimes demand excessive rights." Another participant responded in a similar vein: "It was our core technology, and we would not share with anyone."