Perception Gaps: When Teams Misconnect | Henning Piezunka

How Competition and Collaboration Overlap

Dan Loney: When two firms collaborate on a project, there can be a higher level of innovation. But if the expectations go askew, there tends to be a misperception of what was expected to occur and a failure to renew the partnership. Why? Henning Piezunka is an associate professor of management here at the Wharton School, and co-author of some recent research about this problem of misperception in collaboration. Henning, my first question is about the idea of misperception. How frequent do we think it is?

Henning Piezunka: There’s a very easy empirical answer to this. In our data, we see this around 20% of the time. In about 20% of the collaborations that we study, it happens that one partner does not see the other as a competitor, but the other partner sees the other as a competitor. That happens 20% of the time. Which, if you think about it, is quite a lot, that there’s a fundamental misunderstanding in such a close relationship.

Loney: When you have two companies coming together for a partnership and trying to innovate, you would think they are working to a common goal. But there is a perception that there still is this level of competition between the two?

Piezunka: Here’s something very interesting about this. We tend to think of competition and collaborations as two opposites. But if you actually think about it, it’s one of the most common things ever that the person you’re competing with, you might also collaborate with. This is true on an interorganizational level. But it’s also true on an interpersonal level.

I’ll give you a simple example I often do with executives when I teach this material. I say, “Take out a piece of paper and write down people you are currently collaborating with or see yourself collaborating with in the future.” And people write down five to 10 names. Then a few minutes later, I ask them, “Now write down five to 10 people with whom you’re currently competing, or can see yourself competing with in the future.” And what often pops up is people write down the same set of names.

It’s absolutely common that the people you collaborate with may also be the people you compete with. Basically, you have a joint interest. But you’re also in the same area, so it makes total sense that there’s some overlap. That’s the idea.

Loney: In terms of researching this idea, what piqued your interest in wanting to look at this connection of misperception?

Piezunka: Multiple things, Dan. The first thing is, you see it’s very well known that people who collaborate also compete. In general, this is something we know how to manage. We write contracts and stuff like that. But a lot of collaborations which fail, people would nevertheless say, “Well, it was the competition within the collaboration.” And that is puzzling, right? We know about it. We know how to manage it. But still, a lot of people do not manage it. So we wondered, why don’t you manage it?

The key thing about it is, you can manage your partner as a competitor if you see your partner as a competitor. But if you miss out on the fact that your partner is a competitor, or if you miss out on the fact that they see you as a competitor, then it becomes like a perception problem. You first have to be aware of it before you can manage it in the first place. It was really like this frequent failure.

There are also just a lot of juicy stories that popped up when I talked with executives. I’ll give you an example of what often came up. The story we would often hear is that they say, “We’re trying to set up this collaboration. We think we’re meeting with a bunch of friends. And we’re coming in there, and they’re already sitting at the table with two lawyers.” And in that moment, it was kind of clear that this would go nowhere. Because one is basically, “Oh my God, we need to protect ourselves.” And the other’s like, “Hey, let’s just have a good collaboration going.” It was these kinds of stories that made us say, “Why are these kinds of misunderstandings in collaborations happening?”

Loney: In many cases, this could have an impact on the potential of renewing or continuing with the relationship between the two companies.

Piezunka: You are spot on. That’s the outcome we measure. We look at whether you want to renew the collaboration. You have worked together. Were you happy with it or not? And if you’re happy, you tend to renew collaborations. Given all the benefits that are associated with renewing a collaboration, that’s an important outcome by itself.

It’s also an indicator of all kinds of other things. You say, “Why don’t you renew something?” Because you are unhappy with it. And we actually show this in the paper. These collaborations also perform way below expectations. When people announce a collaboration, they say, “Oh, we want to launch this many products together,” and so on and so on. But then if there’s misalignment in the perception — one party sees the other as a competitor, and the other party doesn’t see the other competitor — then you typically do not hit those expectations.

How Misaligned Expectations Can Ruin Partnerships

Loney: How frequently do you see these types of partnerships come in where the results end up being below expectation?

Piezunka: In cases where there’s misalignment, it’s almost all the time. If you think about it, that’s not all that surprising. Because if you approach a collaboration and you don’t think of the other side as a competitor, you share information widely. You go in there with a very open mind, like, “Hey, this is what we are working on. This is what we are doing. You should check out this,” and so on and so on. But then the other side plays everything very close to the chest. They guard their information. Not only do they not share much, they are probably also kind of abusing the knowledge you’ve shared. “Now we can actually rip this off and can benefit from it.” That these things don’t last is not all that surprising. Basically, once you have a misperception, the chance of this not being renewed pops up tremendously.

Loney: What happens if both companies believe that they are in alignment? Is it as simple as saying that is the dream scenario? Or do problems still pop up, even when the perception is that both are in alignment?

Piezunka: Whenever two people or two companies meet, there’ll be problems. It’s not a question of whether there are no problems, but there’ll be much, much less problems. I’m really glad you raised the issue of alignment, because there are two types of alignment you want to differentiate. You can be aligned if both sides don’t see each other as a competitor. I don’t see you as a competitor, you do not see me as a competitor. That’s one type of alignment.

The other type of alignment is, “I see you as a competitor, and you see me as a competitor.” Now the interesting thing about it is both types of alignment work way better than misalignment. So, if you see me as a competitor and I see you as a competitor, it’s going to work out just fine. You’re going to bring your lawyers, I’m going to bring my lawyers. We’re going to meet up. I’m going to play stuff close to the chest, you’re going to play stuff close to the chest. We have a good understanding, like, “Look. This is an arm’s length. We’re not going to be friends here. We are competing.” So, all good, right? We get exactly the kind of collaboration we expected. We get a collaboration among competitors.

If you and I don’t see each other as competitors, it’s a much more friendly kind of thing. It’s a little bit less well-defined, but we’re also not going to be ripping each other off. I’m going to come in without lawyers, you’re going to come in without lawyers, and it’s going to be like, “Let’s just work together. We’re going to figure things out. Here’s what we are doing.” It’s going to be an open collaboration.

The critical thing, really, is the misalignment. I’m coming in there a little bit naïve and saying, “Hey, Dan. Here’s all my stuff. Check it out,” While you’re like, “Hey, I think of Henning as a competitor. Well, this is kind of stupid that he shares all this stuff, but why not? I’m going to rip him off.” You shouldn’t be surprised if afterward, I’m not willing to renew the collaboration.

Loney: You mention in the paper the Sony PlayStation. Give us the example of how that fits into this research.

Piezunka: This is the juicy story around the Sony PlayStation. Obviously, the Sony PlayStation ended up being one of the prime competitors of Nintendo. You might think, “Oh, the two were always competitors.” But not at all. Sony was actually a supplier to Nintendo. The two had partnered in developing a console together. Sony had no intention whatsoever to enter the console market on its own, so they developed this thing for Nintendo, and they had this expectation. They go to this big game fair and say, “We’re going to announce this collaboration with Nintendo, and it’s going to be great.” And they do exactly that. They go to the game fair and say, “Great news. We are Sony. We got this collaboration going with Nintendo.”

The next day, Nintendo announces another collaboration with Phillips, that they also develop a game console with them. And Sony says, “What on earth is going on? We thought we are collaborating and conquering this market. Now you are telling us you’re collaborating with us, but you also at the same time seem to be competing with us.” They felt insulted and they said, “You know what? This is insane. We are now feeling no loyalty whatsoever towards Nintendo. We are going to enter this market ourselves. We have built up all this knowledge. We don’t have to hold back. They didn’t treat us well, and so we entered this market.”

What’s interesting about this example is that both parties can get screwed. In this example, Sony gets screwed because they get ripped off by Nintendo. But Nintendo eventually gets screwed because of the way that Sony then responded to it and said, “We’re going to fight back. We are not going to take this.”

Key Takeaways for Companies

Loney: What are the most important things for companies to understand from this research?

Piezunka: I recently presented this to a very senior consultant. And the senior consultant said something like, “This confirms exactly what I’ve seen in 20 years of practice. Firms are not sufficiently strategic about collaborations.” Now think about, what does it mean to be strategic? Strategic does not simply mean to say, “Oh, this is what I want.” But also, to develop a very good understanding of what the other side wants.

The funny thing about this — we are doing all of this based upon publicly available data. We leveraged companies’ 10K reports. So, all these companies would have had to do is to open up the 10K report of their competitor and say, “Hey, is this actually how they see us?” But you see, firms are not always clear about this.

I’ll give you a little bit of a juicy example. I presented this at Wharton to all the professors. And there was a little bit of pushback. People said, “It should be clear if somebody’s a competitor or not.” And then I raised the question, “Please raise your hand if you think that NYU Stern is a competitor.” And about 30%, 40% of the hands went up. And I said, “You see, that’s exactly the issue.” Obviously, NYU Stern is a collaborator of us. We hire great PhD students from them. They hire great PhD students from us. We co-write papers with them, so there’s a lot of collaboration. But we are also competing against them. Right? We are competing in the market for MBA students, for faculty, for PhD students. And even so, while Wharton is clearly winning (laughs), they are still a competitor of us. Or you can think of them as a competitor of us.

But it’s not always clear if you’re a competitor or if you’re a collaborator. So, you want to be very thoughtful. You want to be strategic about it. How do others see you?