Collaboration is a powerful business tool for companies, regardless of their size or industry. It typically refers to organisations working together to address problems and achieve goals that seem to be out of reach when working alone.

By combining the effort and expertise of different organisations, all partners in the network are better able to innovate and grow, and increase their competitiveness on many levels.

Business collaboration benefits

Key benefits of business collaboration fall under several categories:

• Financial benefits - for example, the ability to boost domestic or export sales, to tender for larger contracts or cut costs by sharing resources.
• Human capital - for example, the ability to develop employees' skills and capabilities, safeguard jobs, increase employment and encourage staff motivation.
• Physical capital - for example, the ability to share facilities, resources, equipment and raw materials.
• Intellectual capital - for example, the ability to tap into combined expertise, knowledge and capabilities.

Collaborative competitiveness

Business networks may provide member companies with access to resources that would otherwise be beyond the scope of a single business. Individual businesses can face several limitations when trying to compete in global markets. This may include scale and expertise.

Through collaboration, businesses can often complement each other and specialise in different areas to compete in markets usually beyond their individual reach. See what makes a successful business collaboration [5].

Collaboration vs competition

In collaborative working, communication and information sharing between partners is essential. However, this doesn't mean that it requires you to give up all your business 'know-how'.

Collaboration can take many forms and you can build a network in a way that allows companies to complement each other without risking their market share or intellectual property. Read about the different types of business collaboration [6].

Collaborative networking can take many forms. From strategic alliances and partnerships to business networks, development networks or even regional and national collaboration.

Business networks

These involve businesses working together for specific purposes where the collaboration has identifiable and measurable benefits to all participants in the network. Key features of a business network are:

• a group of businesses as the core (although members may include academia and other organisations)
• a restricted membership
• agreed co-operation between members
• common business objectives likely to boost mutual competitiveness and financial gain

Development network

These are the most basic forms of networks consisting simply of businesses associating with other businesses. Their activity is often confined to:

• networking
• the exchange of information
• shared services

These networks are usually informal and unstructured. They are also less likely to have a purpose linked directly to financial gain or competitive advantage for the members.

Regional business network

These are geographically defined groups of companies, educational institutions, local councils and economic development agencies connected by linkages across sectors. They can make up business clusters [11] which share a common regional location, where 'region' is defined as:

• a geographical area
• a labour market
• an economic unit

Regional networks often bring benefits to businesses but this is not always their sole purpose. They are often motivated by broader goals of regional and national economic development. Find Northern Ireland business networks [12].

Different manifestations of collaboration networks

Some common forms of collaboration networks include:

• Virtual organisation [13] - this type of partnership uses technology to collaborate and relies heavily on telecommunications.
• Virtual enterprise [14] - this is a temporary grouping of businesses that come together to solve a problem or respond to a particular business opportunity, co-operating via computer networks.
• Extended enterprise [15] - this is collaborative working between participants in a supply chain concerned with providing goods and services to the market. Companies can work independently (eg through the open market exchange) or cooperatively (eg through agreements and contracts).
• Virtual organisation breeding environment [16] (VBE) - this is a cluster of organisations that make themselves available for opportunities. They agree to the main working and sharing principles to enable them to create dynamic virtual organisations that can respond to rapid changes in the market needs.
• Business ecosystem [17] - this is a network of businesses (eg suppliers, distributors, customers or even regulatory bodies) involved in delivering a product or service through both competition and collaboration.

With technology and many industries changing rapidly, ways of collaborative networking continue to evolve. The key thing to remember is that all businesses behave differently and that successful business collaboration [5] doesn't rely on a single definitive model.

The ultimate aim of collaborative networking, in whatever shape it takes, is to gain access to skilled labour, additional resources and opportunities for sharing ideas and growing profit. See more on the benefits of business collaboration [1].

A successful business collaboration doesn't rely on a single definitive model or way of working. All businesses are different. Depending on your operational, cultural and financial approach, certain types of business collaboration [6] may suit you better than others.

Nevertheless, some common elements make collaborative networking success more likely. For example:

• transparency and trust - between different members working as one team
• mutuality and solidarity - working together for the benefit of each other
• information exchange - communicating openly about problems and ways of working

Businesses that collaborate may also find it helpful to have a similar culture, operational synergies and a desire to make collaboration work. Support from top management and key people within a business will also contribute to successful collaboration.

Stages of business collaboration

Collaborative networks are often achieved in stages involving:

• exploration - looking at the potential benefits and ways of collaborating
• assimilation - transforming the ideas into a working collaboration
• exploitation - pooling resources and knowledge to create new processes or products

Challenges can emerge at each stage of this life cycle.

Planning for collaboration

A foundation of any collaboration is establishing:

• a clear purpose
• an agreed business opportunity
• clear rules of engagement between members

This will allow you to set clear expectations regarding the inputs and outputs of members. It will also enable you to align the interests of the initial membership. Once you define the focus of the network, you can assess and design the criteria for additional members to bring the greatest benefit.

Establishing a business collaboration

After agreeing the collective business goals, you should implement a formal partnership arrangement. This will establish clear roles and responsibilities in the new network. You should also draw up:

• a formal project plan
• a risk register
• governance procedures to manage the different business interests within the group

Many successful collaborations appoint one company to act as a project lead. A major company with a high profile as the flag bearer for the network can bring greater visibility to attract new members, funding and customers.

See also how to set up a business collaboration [2].

Delivering a collaborative network

Successful collaboration relies on trust as much as the viability of the project itself. Ensuring that members work honestly and openly is a priority. The simplest way to achieve this is through effective communication between members. For example, you may want to:

• schedule meetings at regular intervals
• identify clear roles for individuals in project change or snags

Each member of the network should follow agreed procedures and protocols. You should communicate these clearly to all members.

A fair gain sharing mechanism should be in place to ensure long-term success of the collaboration. Correct legal documents can help you support this aim and formalise the rules of engagement. See legal documents for business collaboration [18].

The way you set up a business collaboration can determine how successful the network might be. Progress will depend on a range of issues, including how clear and realistic the group is about their objectives, and how committed members are to working together.

Any collaboration must take into account key strategic elements to ensure that partners can work together in the long term. That may include resources, commitment, intra-organisational support, the business case, and technology. Learn more about what makes a successful business collaboration [19].

Establishing collaborative networks

Collaborations naturally evolve over time. The table below identifies the various stages of business collaboration. It also outlines what information you might share and what activities you might undertake in each, as you build your network.

You should support and formalise your collaboration with the correct legal documents, which will set out agreed rules of engagement. See legal documents for business collaboration [18].

Legal agreements can help avoid uncertainties between different members in a business collaboration. They can clarify things like:

• the nature, scope and duration of the relationships
• the allocation of responsibilities
• the decision-making structure
• the accountability processes
• the ownership and control of the outputs
• the division of revenues derived from the collaboration

A number of useful legal documents can help you protect your own individual business, as well as the collaborative interest of the network.

Letter of intent

A letter of intent provides an overview of the goals and objectives of the proposed network. It proposes what collaboration should include, how long it would last, the activities members will encourage, and the expected benefits. It also establishes the points of contact for the collaboration. Find a sample letter of intent [20].

Memorandum of understanding

A memorandum of understanding is a document describing a bilateral or multilateral agreement between members of the collaboration. It outlines each party's intent to agree or do business with one another. Find a sample memorandum of understanding [21].

Consortium agreement

A consortium agreement is a document to help businesses share information, network and collaborate. The detail provided in the agreement can help ensure any intellectual property that arises from the collaboration is managed effectively. The agreement will establish boundaries for key issues. See model consortium agreements for collaborative research [22].

Collaborative network ground rules

You should consider documenting some ground rules from the start of the collaboration. This gives you a non-legally binding way for members (current and future) to agree to the minimum set of acceptable behaviours and processes.

Handling new network member enquiries

You can consider creating a workflow tool for existing members to evaluate requests from potential new network members.

Role of the network facilitator

This document outlines the essential and desired skills required by the facilitator and an indication of the key tasks expected of them.

Invest Northern Ireland support and encourage the creation of collaborative clusters in Northern Ireland with their Collaborative Growth programme [7].

A range of support is available for Northern Ireland businesses that are looking to collaborate with other companies, academia or research partners. The support can be advisory or financial and it can help strengthen your business, raise its profile and open up new business opportunities within and outside Northern Ireland.

Collaborative Growth Programme

Invest Northern Ireland (NI) Collaborative Growth programme provides funding of up to £25,000 to SME-led networks that want to work together on innovative projects. You must meet certain eligibility criteria to apply for funding under this programme. Find more information on the Invest NI's Collaborative Growth programme [7].

Innovation Vouchers

Innovation Vouchers enable small businesses to work with expert knowledge providers (such as universities and colleges) to develop innovative solutions to business issues. The voucher is worth up to £5,000. Invest NI typically hold four Innovation Voucher calls for applications per year. Learn more about the Innovation Vouchers [23].

Enterprise Europe Network

Invest NI also hosts the Enterprise Europe Network (EEN) in Northern Ireland. The EEN supports and advises businesses across Europe and helps them find EU partners, access European funding for research and development, and improve their presence in new markets. Find out more about the Enterprise Europe Network [24].

Horizon 2020 Programme

Horizon 2020 is the main source of European funding for collaborative research and innovation. Invest NI can help Northern Ireland businesses find collaboration partners and opportunities, and understand if they meet the criteria for application. Financial support may also be available - see help for Horizon 2020 applicants in Northern Ireland [25].

Innovate UK

Innovate UK run funding competitions to enable individual business and groups to pursue research and innovation opportunities. Some of these competitions are open for collaborative projects led by any UK-based companies. Search Innovate UK competitions [26].

Knowledge Transfer Partnerships (KTPs)

A KTP is a three-way partnership between a business, an academic institution and a qualified graduate delivering a project lasting about two years. The scheme is run by Innovate UK and co-funded by Invest NI. Find out more about the Knowledge Transfer Partnership scheme [27].

Competence centres

Competence centres bring together universities, research institutes and innovative businesses to carry out strategic collaborative research in areas with a direct industrial focus. Any NI-based business that wants to collaborate in applied research at a reduced cost can get involved. Four centres currently operate in NI: connected health, sustainable energy, advanced engineering and agri-food.

Co-Innovate programme

InterTradeIreland's Co-Innovate programme supports SMEs and micro-businesses in Northern Ireland, the Border Region of Ireland, and Western Scotland to deliver success through innovation. There are different strands in the programme - some supporting cross-border research partnerships, business-to-business partnerships and network/cluster projects. Find out more about the Co-Innovate programme [28].