First Develop Trust

Automotive Manufacturing & Production, Jan, 2000 by Rick Dove

Trust is essential in company-to-company relationships--principally because the lack of sufficient trust is the primary barrier to outsourcing knowledge work, but also because trust is at the core of all relationship formation and effectiveness, a strategic concern as the business environment speeds up.

The analysis we did here of barriers to outsourcing knowledge work (September '99) was from the customer's perspective, rather than the supplier's, but the impediments are not one-sided. Many of the customer-perceived reasons are self-fulfilling prophesies. Insufficient trust, the biggest barrier, is a prime example.

Trust develops between two parties because they understand each other fairly deeply. The trust issue that inhibits outsourcing as a consideration generally stems from a superficial and one-sided point-of-view, rather than real knowledge.

Outsourcing the creation of intellectual property (IP) is where the barrier issues become the sharpest. A discovery workshop we conducted at an IP development organization highlighted the supplier perspective on the issues. IP-Dev, as we'll call it here, had been focused on government contract work, and wanted to move into the commercial sector. It would like to be your company's out-sourced R&D arm.

It has fundamental strengths in the sciences, and in applying science effectively to the problems and opportunities of product and process design. It is deeply experienced in practical manufacturing, and not lost in a world of inapplicable theory. It has deep talent that you don't have. It understands things about your work that you don't understand. It lives to apply its knowledge and talent to your problems and opportunities in ways you would consider effective and innovative. But it finds you very difficult to deal with.

I'm not painting IP-Dev as being unequivocally great. It's just that it, like some others, such as Sandia National Laboratories, has specialty niche areas of great depth that you could never justify, nor attract, as full time Employees--you just don't have enough really interesting problems to keep this kind of talent engaged.

In seeking commercial R&D work, IP-Dev found its biggest impediments to center on issues of intellectual property: ownership, needs for protection, and methods for protection. It was in the business of applying fundamental principles of science to the solution of specific product and process problems. Too often, would-be customers wanted to prohibit it from solving related problems for others as a condition for a working relationship.

IP-Dev saw these barriers as technology-based issues. In reality, it is the trust issue all over again, in thin disguise. Workshop participants brought in from outside the organization were quick to point this out, and suggested that the commercial market strategy focus on earning a market image and positioning of unparalleled trust. Something no other such organization had yet taken, and yet it was the core issue for IP outsourcing.

The creation and maintenance of trust-based relationships is heralded by many people as anew and necessary strategy for combining cooperation and competition in today's business environment. In reality, trust-based relationships are the only kinds of working relationships. Always have been, always will be.

Withoutsomebasis of trust there is no engagement. Trust is not a new concept, but rather one with a new importance that now requires more explicit knowledge and more attention to management skills.

What is trust all about, anyway? Research referenced in the accompanying figure suggests that there are three types of trust: calculus-based, knowledge-based, and identificationbased. They develop sequentially, one building on the other.

Herein lies the nub of the problem. Outsourcing IP development prudently requires a stage-three trust relationship, yet the outsourcer can't get there without traveling through stages one and two, which takes time, perhaps a year or few. And it happens between people more so than between companies. Meaning that trust cultivated at a single point may be lost with turnover or reorganization.

In the end, the degree of real trust between two parties is directly related to how well they know each other. That it typically takes years to build stage-three trust is not based on immutable law, only on the typical serendipitous way things have been done. Nor does it mean that cultivating a relationship that will eventually lead to IP outsourcing needs to be a loss leade--other less sensitive knowledge work can be done in the interim.

Developing Stage-three Relationships A response ability analysis (August'99) of the dynamic issues bares the nature of the problem and provides guidance for a solution. Though both parties in a knowledge work outsource relationship stand to gain, and therof or bear independent responsibility for developing sufficient trust in the relationship,we'll look onlyat a sampling of the supplier side here.

Cultivating trust should be a conscious relationship development strategy with managed objectives, performance metrics, and progression monitoring. If trust must first be developed then that's what must be done, not securing (if you are the supplier) or outsourcing (if you are the customer) a sensitive IP development contract.