? This section is partt of our Financials, Profitability and ROI Program.
These failures generally stem from poor financial oversight, lack of transparency, or inadequate differentiation between joint projects and core business operations. Here are some notable examples:
1. Boeing’s 787 Dreamliner Development Delays
• Issue: Boeing’s collaborative approach to building the 787 involved multiple suppliers and partners sharing responsibility for major sections of the aircraft. Boeing’s existing internal CoA struggled to track the costs and contributions of various partners effectively. This led to delays, cost overruns, and quality issues.
• How a Tailored CoA Could Have Helped:
• A separate CoA for this collaborative project could have more clearly tracked partner-specific costs, milestone payments, and liabilities.
• Improved financial transparency might have identified cost overruns or supplier issues earlier, enabling better risk management and mitigation strategies.
2. Joint Ventures in Oil and Gas (e.g., Shell and Sakhalin Energy)
• Issue: Shell’s involvement in the Sakhalin-2 project in Russia faced significant cost overruns due to environmental compliance issues and underestimation of partner contributions. Inadequate tracking of joint venture expenditures contributed to these challenges.
• How a Tailored CoA Could Have Helped:
• A customized CoA designed to track joint venture costs and regulatory compliance requirements might have provided clearer visibility into expenditures.
• It could have facilitated more accurate forecasting and accountability for partner-specific financial contributions and liabilities.
3. Nokia and Microsoft Partnership (2011)
• Issue: When Nokia partnered with Microsoft to produce Windows-based smartphones, both companies faced difficulties in aligning their operations and managing the shared financial responsibilities. Lack of a clear financial structure to delineate joint efforts from core business led to confusion and ultimately poor performance.
• How a Tailored CoA Could Have Helped:
• A dedicated CoA for the collaboration could have better separated innovation costs and joint investments from regular operations.
• Improved transparency in tracking joint marketing expenditures, development costs, and revenue-sharing might have highlighted areas where the collaboration was faltering.
4. Airbus A380 Supply Chain Complexity
• Issue: The Airbus A380 program suffered from production delays and cost overruns due to misalignment between different manufacturing partners across countries. Each partner had their own systems for tracking costs, leading to poor integration and oversight.
• How a Tailored CoA Could Have Helped:
• A unified, project-specific CoA could have standardized financial tracking across partners.
• This would have improved transparency in cost allocation, progress tracking, and issue identification, potentially avoiding costly delays.
5. Healthcare Collaborations and Research Grants
• Issue: In some cases, hospitals or research institutions collaborating with pharmaceutical companies on drug development have mismanaged research funds due to mixing grant-funded projects with internal budgets. This can lead to non-compliance or financial misreporting.
• How a Tailored CoA Could Have Helped:
• A distinct CoA for collaborative research would ensure proper tracking of grant funding, partner contributions, and joint expenditures.
• This approach helps ensure compliance with funding guidelines and reduces the risk of misallocating resources.
Key Takeaways
In each of these cases, the challenges stemmed from poor differentiation between collaborative innovations and core business activities. A tailored CoA could have:
• Increased Transparency: Clearly delineated costs and revenues associated with partnerships.
• Enhanced Risk Management: Enabled earlier detection of financial and operational risks.
• Improved Accountability: Clarified responsibilities and financial contributions of each partner.
• Facilitated Better Decision-Making: Provided more accurate insights into the performance of joint ventures.
By isolating collaborative efforts within a separate CoA, organizations can mitigate these types of failures and improve the likelihood of success in innovation initiatives.