Business Case: To Collaborate, Or Not To Collaborate--That Is The Question

We've been reading a lot about the need for business collaboration. In fact, the theme of the InformationWeek Spring Conference (March 17 to 20) is Collaborative Business: The Big Picture. As with many good ideas, though, when it comes to successful business collaboration, the devil is in the details. So, to prepare for the conference, I put together an exercise for both conference attendees and those of you staying at home. This will give us each a chance to examine how we might handle a plausible situation that could occur when implementing a collaborative business opportunity.

As you read the case, think about two questions:

Business Exercise Case
Acme Manufacturing (our hypothetical company)is an American success story. Started on a shoestring in the 1980s, Acme has grown into a profitable business with a solid record of delivering quality seasonal merchandise. It sells about $100 million a year in goods, primarily for the Christmas season. Acme can afford little in the way of downtime and depends heavily on its motivated staff, shipping partners, and computer systems, because more than 60% of its sales occur in the June to September time period.

Dave Fleming, VP of sales, is excited by a real opportunity brought to him by Mart-Ware, a second-tier discounter that wants to lower its inventory costs and better meet consumer needs. Mart-Ware approached Acme with a proposition to electronically link its internal stocking system and customer Web site with Acme's manufacturing and distribution systems. Dave estimates that Mart-Ware's offer of almost exclusive positioning of Acme's products will triple the business from Mart-Ware, increasing its orders to $6 million. Even more important, the incremental margin on that additional $4 million in sales will be 25%. Given that the total pretax profit of Acme last year was $7 million, it's easy to understand Dave's enthusiasm.

However, there's a problem in consummating the deal. Jody Longworth, Acme's CIO, has two major concerns about the potential success of the collaboration. The first is the system-integration time frame. After meeting with the Mart-Ware people, Jody says that for things to be in place in time for the selling season, it will take her six weeks (including working weekends) to build and test the required software. That means she has to get started in less than 10 days. She will have to hire contract help but thinks there's about a 75% probability that she'll be ready.

Her greater concern is the security and integrity of the Mart-Ware systems. When visiting with the CIO, she was alarmed to learn that several groups in their stores share passwords. Mart-Ware has had security problems. Its Web site has been defaced in the last year by a hacker. Plus, it's common knowledge in the industry, she says, that the CIO (who came up through the sales organization rather than information technology) is less than knowledgeable about IT.

Mart-Ware admits to past problems but says things are under control. It's annoyed and says your CIO is an alarmist.

Your legal counsel tells you that it's unclear whether your business-interruption insurance covers any damage to you if your systems are disrupted by a security breach because of a marketing alliance.

And Now What?
It's Monday morning. The Acme executive committee is meeting to discuss the opportunity and the risks. Given the times, you take the security of your assets seriously. On the other hand, this is an excellent opportunity to increase profitability significantly. None of you is a computer expert. You view both Dave and Jody as solid, if not necessarily outstanding, employees. They've been with the company six years and four, respectively.

Dave starts off the meeting by announcing that Mart-Ware has just called, saying it needs to move quickly and that if you aren't ready to commit by Friday, it will find another partner--one who, in its words, is more ready for E-business than you are.

What do you do?

If you see me at the conference, I'd love to hear your thoughts. Otherwise, please share your ideas in my Listening Post forum or by E-mailing me at [email protected]. In a future column, I'll summarize (and comment upon) some of responses I've received.

(Acme Manufacturing is not to be confused with the Acme company brought to prominence by the lawsuit filed against it by one Wile E. Coyote.)

Robert M. Rubin is CEO of Valley Management Consultants, a firm specializing in E-business and information technology strategy, organizational design, and evaluation. Before joining VMC, he was senior VP and CIO for Elf Atochem North America, a $2 billion diversified chemical company. The recipient of multiple industry awards, he is a contributing editor to InformationWeek and a member of its advisory board.