Competition, Cooperation, Collaboration, and Consolidation


“Interdependence is a fact, it’s not an opinion.”
–Peter Coyote

 

Last week I read a prepublication report issued by the National Research Council on interagency collaboration.  The NRC recently conducted a study of NASA’s interagency cooperation on Earth science missions called for in the NASA Authorization Act of 2008.  The key finding in the report was quite telling: “…engaging in collaboration carries significant cost and schedule risks that need to be actively mitigated. Agencies are especially likely to seek collaborators for complex missions so that expected costs can be shared. However, … inefficiencies arise when collaborating agencies’ goals, authorities, and responsibilities are not aligned.”  Setting aside for a moment the slightly confusing interchange of “cooperation” and “collaboration”, let’s examine the fundamental question here: when should two parties engage in various forms of interchange, and what value is there in it?

You can tell I’m setting the table in a particular way because I said “value” above.  Yes, we will look at this question from the perspective of the value equation I introduced previously.  But first, some background.

A number of years ago I was involved in a NASA-wide special project called “One NASA”.  This O’Keefe-era initiative (discontinued by Griffin in 2006) focused on enhanced coordination, collaboration and communication among all Agency elements to reach common goals.  At the time of the initiative, I was involved in my Center’s formal mentoring program, and my mentor was the person in charge of representing our Center to One NASA.  One of my mentoring tasks was analyzing a set of survey results collected by One NASA from Civil Servants and contractors from across the Agency, touching upon topics of coordination and collaboration.  This experience was formative for me in that I started to picture what it means to coordinate and collaborate, and those thoughts recently resurfaced both as I read the above report as well as prepare for my coming assignment.  It’s this framework that I’ll share next, and I’d love to get your feedback on it.

First of all, what is the most essential ingredient to an interchange?  Well, it’s quite simple: there has to be two or more parties involved.  Seems obvious, yet this is important in that it establishes the foundation for how an interchange occurs.

The important variable in characterizing the interchange between two or more parties is the degree of their interdependency in achieving outcomes.  I’ll have more to say about this in a moment.

Finally, the decision to choose one degree or another of interdependency is a function of the value equation, where value equals benefit minus costs.

Using the above, I’ve formed a spectrum of interchanges between two or more parties as a function of interdependency.  I’ve provided names to particular points on the spectrum that equate roughly to the definitions I formed on the basis of the One NASA survey results, and that align fairly well to the definitions in the NRC report.

Competition.  Two or more firms compete for work.  On the scale of interdependency between firms, we are at one extreme: there is none, nor is there any required.  (In fact, if there is any, we call that “collusion.”) Furthermore, the goals, authority, and responsibility of the firms involved are completely independent.  The idea behind competition is to solicit for ideas and approaches in an almost Darwinistic vein of “survival of the fittest”, using the value equation: seek the combination of benefit and cost that provide the best value.  (Sometimes it is increased benefit, or lower cost; sometimes it is both.)  The concepts behind competition govern most of my daily work life as I lead the development of procurement strategies for mission operations, yet the concept of competition surfaced repeatedly as an idea in the One NASA survey results: why not let different NASA elements compete for work?  Although this concept did not meet with the strategic direction of the Agency, the basic idea stuck with me as one of the anchor points for describing interdependency between elements.

Cooperation.  Moving further along the interdependency spectrum, we next encounter cooperation.  Here, two or more firms engage in some form of exchange or coordination that provides some measure of increased benefit that would not be available should the parties go it alone.  The cost associated with the exchange is negligible and can be ignored.  The parties still keep to their relatively independent goals, authority, and responsibility, although there may be a small amount of congruence.  The classic case in my mind is international cooperation: each party sticks to its own goals and maintains relative autonomy relative to the other; however, each party sees some increased benefit whether it is in terms of a unique contribution from another party, or in terms of secondary benefits (such as international diplomacy).

Collaboration.  Continuing ahead, we next encounter collaboration.  Here, two or more firms engage in a higher degree of exchange characterized by a high degree of interdependency.  The firms work towards a common shared goal and work out a formal arrangement on authority and responsibility.  In a collaborative setting, the interchanges can be quite numerous and complex, leading to the need to examine carefully and distinguish between inherent complexity and imposed complexity, with the desire being to reduce imposed complexity as much as possible.  In terms of the value equation, the benefit of collaboration (primary, secondary, or otherwise) has to outweigh the extra costs associated with a collaborative effort.  It is the benefit-cost trade that is at the heart of the NRC report I mentioned earlier.  Entering into a collaborative effort without an examination of goal alignment and the value equation is irresponsible and can lead to the failure of the collaborative effort.

Consolidation.  At the other end of the spectrum is consolidation.  In this case, the goals, authority, and responsibility are highly aligned (or are forced to be so, which is a whole different story).  The degree of interdependency is total and complete.  An examination of the value equation says that tremendous value can be achieved if the separate parties are combined into one, usually around the parameter of cost.

In the end, I formed the following picture:

Competition Cooperation Collaboration Consolidation
(No interdependency) (Little interdependency) (High interdependency) (Total interdependency)

What would you add to this picture?

 

Competition, Cooperation, Collaboration, and Consolidation

The Value Equation


“Price is what you pay. Value is what you get.”
–Warren Buffett

 

Last week I did an interview on Pars3c.com as part of the ongoing High5 series.  In one question I touched upon business models and offered the idea of “the value equation” as being a possible means to evaluate different business models.

What is the value equation, and it is really possible to compare and contrast equivalent approaches using this relationship?

In my current line of work of developing and implementing strategies for acquiring the goods and services needed by mission operations in Houston, the value equation plays a central role.  In soliciting for goods and services, we weigh the proposed benefit in terms of technical, management, and business approaches, along with demonstrated reliability based upon past performance, and contrast that against the cost for the proposed approaches.  The Federal Acquisition Regulations (FAR) defines “best value” as “a combination of competitive pricing and improved performance” (i.e., benefit).

With the above we have some clues.  In a very simplistic way, the relationship between benefit and cost and the resulting value can be expressed in terms of the following equation:

value = benefit – cost

Let’s look at some results for value in terms of benefit and cost.

One way to increase value is to provide the same benefit at a reduced cost; that is, if the benefit is the same, reducing cost provides more value.  Focusing for a minute on the commercial-versus-Government debate on access to low Earth orbit, one can surmise a logical explanation behind the philosophy for handing over routine cargo and crew transportation services to the commercial sector.  It is rooted in the belief that standard commercial business practices and the free market will lead to lower costs in the longer run for the same services (i.e., benefits) provided by systems in existence today.  This is the relationship that many have in mind as to why it is desirable to reduce cost; as long as one can reduce cost yet continue to provide the same goods or services, it is perceived of greater value.  I certainly do.  Wal-Mart is the master of this approach with its volume buying and pressure on it suppliers to reduce costs.

That’s the easy part.  Let’s get a bit more complicated and look at another way to use the equation.

Another way to increase value is to find new benefits at an additional cost that makes it worth the benefit-cost trade.  One way to find new benefits would be to create additional business lines or identify additional customers beyond NASA that can use cargo and crew transportation services to low Earth orbit.  Space tourism is the hot item right now, yet I believe other avenues will be needed to make the business case sustainable in the long run. Could space-based solar power be one of those business lines?  Or harvesting and recycling dead satellites for valuable materials?  I’m sure the leaders in the commercial sector are mulling over these, and a host of others, as potential business lines; I suspect they need additional business lines like these to help close the business case for entry into commercial transportation services.  The examples I cite are areas in which NASA is not really active as far as I know, so these represent new benefits around which additional value can be created, as long as the costs are worth the trade.

Oh yes, I’ve been avoiding intentionally the one question you had as soon as I wrote the value equation (especially if you’re my high school physics teacher, Mrs. Matney).  Time to deal with it.  How can one “subtract” cost from benefit to arrive at value?  Aren’t they measured in different units?

That takes us to the extremely hard part.

One of the key differences between mission-driven Government organizations and the commercial sector is this very element; the fact that for many mission-driven Government organizations such as NASA, benefit is not expressible readily in terms of the unit used for cost: money.  Profit has no meaning.  Attempts to monetize benefit in terms of some kind of return on investment use complicated and obfuscated secondary effects such as spinoffs or economic multipliers.  (The latter says that for every dollar invested in NASA, NASA returns X in economic benefit.  I’ve seen no definitive number for X, with values ranging anywhere from 2 to 9 depending on the source.)  Reasonable people can disagree on how benefit is monetized, and thus we can end up with differing results for value.

(Oh, I probably angered a bunch of CBA analysts with that last paragraph.  So be it.)

In the commercial sector, as much as one may want to see altruistic reasons for getting into a business, often the key measure of benefit comes down to money: what is the profit, and what is the return on investment?  I know, I know – a company built to last does not use the profit motive as its purpose for being in business, yet the bottom line does have a significant role in whether a business stays in business, or not.  Even Disney with its “Make People Happy” purpose has to turn a profit; if it doesn’t, no more Disney shows on TV and no more amusement parks, and I know of at least two young girls who would be up in arms over that.

I don’t have a ready-made solution to this challenge.  Yet perhaps that in itself is a clue: the solution for what is best in the long run for the future of human spaceflight is not to be found through a detailed best value comparison of commercial-versus-Government approaches to low Earth orbit.  Might it be found elsewhere, in terms of the larger picture perhaps?

This goes back to another idea I raised later in the same interview, and touched upon in a recent blog post by Wayne Hale: the need for strong leadership.

That is a topic for another time.

 

The Value Equation

Part of the Solution, not of the Problem


“To solve any problem, here are three questions to ask: First, what could I do? Second, what can I read? Third, who can I ask?”
–Jim Rohn

 

Last week’s election results are in, and as predicted the House will change political leadership when the next Congress convenes in January.  Speculation is rampant in the news (see this, this, this, and this) that the new leadership will push for cuts in non-defense discretionary spending to 2008 levels.  As I wrote last time, for NASA that might mean a reduction in its budget for the current fiscal year from the $19 billion in the President’s budget and NASA Authorization Act of 2010, to something around $17.3 to $17.5 billion once it is passed (the difference is whether one takes inflation into account, or not).

Really, this question about funding levels for NASA is nothing new.

NASA is often lumped by critics into the largesse that typifies their view of all federal spending.  Despite the fact that NASA’s fraction of both the total budget and of non-Defense discretionary spending is going down (currently about 0.5% of the total federal budget, and less than 3% of just the non-Defense discretionary spending piece), it is viewed as part of the larger problem of Government spending out of control, period.

This critical view has influenced me throughout my career here, and whether directly or indirectly I’ve made it a part of my approach to always seek ways to optimize how tax dollars are spent.  In my current role, I’m getting the opportunity to practice what I preach on a larger scale, by leading the development of strategies within mission operations that reduce cost while improving performance.  This is an extremely difficult task due to two interrelated factors: (1) much of our budget is devoted to maintaining a highly-skilled world-class workforce; and (2) at what point does reducing cost begin to “throw the baby out with the bathwater,” and jeopardize the half-century of excellence that we’ve been known for?

For me, the road to success is to be a part of the solution and not of the problem.  The way to do that is to think of the solution, not of the problem.  As I see it, such a solution will start with creative and innovative approaches to how human spaceflight operations are conducted in partnership with the commercial sector in sustainable ways.  Holly G. Green, author of More than a Minute, recently wrote in her blog about the importance of building clarity around the following for any strategic planning effort:

  • The mission statement (why you exist)
  • Guiding principles (how you will behave)
  • Value propositions (what you offer to key stakeholders)
  • Destination points (where you’re going)
  • Strategic priorities (areas of focus for the organization)
  • Key initiatives (what you will do to get there)

I’m using her excellent ideas along with others I’ve accrued over the years to define a framework for seeking a creative, innovative approach to further reduce the recurring costs of human spaceflight while identifying the right kinds of lasting partnerships to build with the commercial sector that will improve the overall performance of human spaceflight.  This framework states why mission operations exists, what our guiding principles are (which I’ve written about before), what we have to offer value-wise to stakeholders, where the organization is headed, and what the strategic priorities are for the organization.  Furthermore, success has to be predicated around casting this framework in a larger perspective that goes beyond the self-interests of the organization and addresses what is best in the interests of human spaceflight.

In other words, I’m striving to be a part of the solution, not the problem.

Defining a strategic planning framework is a good start towards thinking of the solution, not the problem. What other ideas do you have that I can do, or that I can read, or whom I can ask?

 

Part of the Solution, not of the Problem