What is Co-opetition?
Co-opetition is the act of cooperation between competing companies; businesses that engage in both cooperation and competition are said to be in co-opetition. A way to recognize where this might successful is to identify your ‘niche market’.While we may seem to be providing a similar product or service, there will always be a uniqueness in the market you are choosing to serve. Certain businesses gain an advantage by using a judicious mixture of cooperation with suppliers, customers and firms producing complementary or related products.
Cooperating with a business who is also working in your market sounds counter to business growth to many people. It may surprise you to hear examples of companies that work together with direct competitors in order to experience growth for both. Think of it like a NASCAR race or the Tour de France; drivers and cyclists “draft” off of each other, taking turns with who leads the way, working together to conserve fuel and energy to benefit the individuals. Everyone is running their own race, and working with competitors along the way.
How does it work?
Based on a combination of various management theories and game theory, the concept of co-opetition is a novel approach for companies to create a competitive advantage. The essence of the strategy considers the advantages of companies in competition with one another joining forces and working together in order to improve the standing of both companies.
This often helps when each company is working against a third, and struggling to be competitive. Their cooperation increases the market share of both companies to maintain a foothold against another rival. The ultimate aim of co-opetition is that organizations pool their skills and knowledge in order to innovate, boost their industry, and increase product or service value.
Many experts say such collaboration took off because of the rapid convergence of many high-tech industries, brought on by the advent of new technologies. As software companies such as Microsoft expanded onto the Internet, it became possible to compete and cooperate with others at the same time. Now, Microsoft works with Intel to upgrade technology at a blistering pace, by creating software that requires faster computer chips. It benefits each company individually and the industry as a whole. Also consider how Google funded Mozilla’s free, open-source Firefox web browser – a Chrome rival – to limit the influence of rival browsers, Microsoft’s Internet Explorer and Apple’s Safari. Co-opetition has been a key driving force in the rapid escalation of the technology we use in our everyday lives.
Co-opetition in Business
One business example comes from Entrepreneur: think of all the specialized social-media sites that allow the use of your Facebook or Twitter credentials, instead of making you create a new one. That’s a win-win-win deal, since the ease-of-use attracts more people to the new site, it enhances the Facebook brand, and it simplifies the customer interaction. At least two competitors had to cooperate to make that happen.
Another example of global co-opetition is the teaming of manufacturers Ford and Toyota to design the Atlas Ford F-150 Hybrid concept. Ford sells America’s favorite trucks, and Toyota makes the world’s best-selling hybrids. Together they created a vehicle that neither company could do as well alone, and increased the market share for both companies.
The U.S. government is getting on the co-opetition train via the United States Postal Service’s agreements with direct competitors Fed-ex and UPS. Shipping agreements are helping to lower operational costs and raise revenue for all three. This way, Priority and Express Mail items can be dropped off at any FedEx or UPS. The private companies, which have more efficient shipping logistics and cross-country warehousing, provide shipping to the local post offices, and the USPS becomes more efficient with delivery on the last mile, including to post office boxes. Not only are each of the companies benefiting, but we get our packages more efficiently. Wins all around!
Challenge yourself to look outside of the box to develop your business by initiating, leveraging and redefining relationships with other businesses to create and define value. If you are contemplating using co-opettion to put your competitor at a disadvantage, don’t do it. It’s risky, generally backfires, and costs you a lot of time and money. In every case, make sure your intellectual property is protected up front with a two-way non-disclosure agreement. Be cautious, not paranoid.
Very best wishes for your every success,