Why Cross-Functional Collaboration Is Imperative to Business Agility

Allison Mandel

Smart business leaders understand that maximizing diverse skills and expertise across multiple areas of the business is vital to their company’s success.

The majority of CEOs rank collaboration among the top three most critical components of innovation and the most important trait they look for in their employees. Yet, although business leaders understand how critical agile collaboration is, they’re simultaneously reporting that their cross-functional teams are completely dysfunctional.

The reality is that business leaders are not quite grasping just how absolutely imperative cross-functional collaboration is for driving future growth, innovation, and business agility.

Three in four CEOs report that collaboration is the most important trait to look for in employees
Two in three CPG professionals rank collaboration as a critical component of innovation
74% of CPG professionals believe their company is not collaborating effectively at all
75% of cross-functional teams are dysfunctional

High Performing Concepts

Between growing complexities, increased volatilities, and technological disruption, the pressure to rapidly innovate is on. The link between innovation and collaboration has been studied countless times, and it’s clear that when it comes to new concepts and innovation, large teams made up of people with diverse backgrounds consistently outperform small, traditionally siloed teams.

According to a Nielsen Benchmark study on the impact of collaborative ideation on innovation performance, concepts developed by teams of three or more people have 156% greater appeal with consumers than those developed by teams of two or fewer people. There’s a distinctly positive relationship between the number of collaborators working on a new idea and its level of innovation and originality.

team-white

Concepts developed by teams of three or more people have 156% greater appeal to consumers

source: Why Collaboration Leads to Higher
Impact Innovation
, Nielsen

The correlation between diversity and innovation is not just a coincidence. Recent research from BCG-Technical University of Munich demonstrates that facilitating dialogue between people with varying industry backgrounds lights an innovative spark within, bolstering their creativity.

Indeed, innovation has a much higher chance of occurring when a diverse set of employees with varying skills, interests, and expertise work together. Diversity in industry background has the most significantly positive effect on innovation as compared to other types of diversity (age, gender, country of origin, etc.). Interestingly, the impact of diverse industry backgrounds is even more apparent in large, complex companies, according to the BCG experiment.

Employee Engagement & Productivity

Beyond boosting creativity and innovation, collaboration also builds intrinsic motivation. Stanford research shows that collaborating on a project — even just the mere idea of working together — inspires people to become more engrossed in their projects, work for longer time periods, and express greater interest and enjoyment in their tasks. Perhaps even more important is that collaboration also has a positive effect on overall work performance.

As McKinsey notes in their 2018 Agile Compendium, successful agile organizations comprise networks of autonomous, empowered teams that operate not only collaboratively, but with high standards of accountability as well.

This isn’t random; teams that are held accountable for their work deliver higher quality results. Engagement increases when employees are managed with a high degree of freedom, accountability, and trust, and this is because employee engagement is derived from a sense of psychological ownership over work, as HBS research notes.

Teams that are held accountable for their work deliver higher quality results.”

Even something as seemingly insignificant as allowing employees to choose their own titles can dramatically increase their overall satisfaction, engagement, and productivity. Imagine the positive effects of encouraging employees to own their ideas, products, and teams. Now consider the time and cost savings without the constraints of waiting for manager approvals. Employees would be able to respond proactively to concerns and immediately address issues, simultaneously freeing up senior team members to focus on larger strategic goals, system designs, and providing guidance when necessary.

Access to the Right Skills and Expertise

As companies gear up to rapidly innovate, business leaders are realizing that mission critical work is necessarily cross-functional, drawing upon resources with increasingly specialized expertise. This kind of work often relies heavily on skills that fall outside of the domains and areas of expertise that a company has developed over the years.

Without access to the right skills, companies don’t stand a chance at coming up with new products and services that are relevant to today’s customers — let alone doing it fast enough for it to even matter.

Today’s golden age of business innovation has changed how companies get the most important work done. Gartner research predicts that more than half of major new business processes will incorporate elements of the Internet of Things by 2020.

workflow-indigo

More than half of new business processes will incorporate elements of IoT by 2020

source: Analysts Reveal Five Unexpected Implications Arising From the Internet of Things, Gartner

Businesses increasingly need access to specialists with skills in data science, analytics, cloud services, information security, and software development — they need people who can implement IoT into their systems and processes.

However, few organizations possess all of these capabilities, as an HBR report points out, which is why major companies are forming more and more partnerships, sharing assets to create new possibilities for everyone. Research by PwC supports this concept as well, demonstrating that more than a quarter of CEOs expect to collaborate with startups or entrepreneurs in 2019

28% of CEOs expect to collaborate with startups in 2019
52% of CEOs are exploring the benefits of humans and machines working together
39% of COEs are considering AI’s impact on future skill needs

Indeed, innovative companies are pushing the boundaries and breaking down traditional silos to facilitate cross-functional collaboration, thereby creating an ecosystem of active partnerships across internal and external pools of talent and enabling them to access just the right talent they need.

It’s no secret that companies struggle to break down traditional silos and collaborate effectively. However, companies that do not invest in successfully doing so are taking a monumental risk at self-destructing, ultimately sacrificing a chance at substantially improving their competitive advantage and revenue by developing high-impact concepts and new ideas.

If operating with business agility is the engine of innovation and future growth, then cross-functional collaboration is a vital part of the fuel needed to run that engine. Business leaders committed to building an agile future for their organizations must see beyond functional silos and realize that creative cross-functional collaboration is imperative for business agility.

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