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Cooperating with your competitor has advantages By Steve Burns, Capital News contributor In most of the modern theories of business, fierce competition is seen as the key force that keeps a company a lean, mean, innovation machine. In fact, if you ask most entrepreneurs, the competition is the enemy not to be cooperated with under any circumstances. However, realities of today's global marketplace dictate that your company can't possibly possess all of the specialized knowledge and skills that is available to your customers. But many businesses are gaining a competitive advantage by implementing a mixture of competition and cooperation in their business strategies. Cooperation with suppliers, customers and firms producing complementary or related products can lead to expansion of the market and the formation of new business relationships, perhaps even the creation of new ventures. Call it sleeping with the enemy or call it what you will but it can work very effectively in taking your business to the next level. The term coopetition was coined by Ray Noorda, the founder of Novell. The concept, and the word, have been taken up most enthusiastically in the high technology industry, where strategic alliances are common in order to develop new products and markets, particularly between software and hardware firms. As a previous column pointed out, especially in the rapid-growth high technology industry, keeping abreast of competitors and their developments is crucial to your business' survival. What we are seeing is that rather than trying to stamp competitors out, it's often more in your best interests to work with them to facilitate their progress. In a recent market research project for a technology company, what we found was very interesting. Both companies, although competing fiercely in virtually all of the same marketplaces and for the same customer base, possessed unique competencies that the other did not have. In the mainstay markets, they competed fiercely and had equal competencies. However, in their niche markets, some of which had overlapping customer bases, they each had a different but successful market penetration approach. The research was clear– our customers needed the products, services and skill sets that our competitors had and likewise for their customers. After devising a coopetition strategy with the company, we approached the competitor and presented them with our business case for how we could both expand our marketshare by coopetition within these niches. It took almost three months of negotiating and posturing but in the end the result has been a 125 per cent increase in sales and a 38 per cent profitability increase for our client and 115 per cent increase in sales and a 35 per cent increase in profitability for our competitor. Both CEOs view the relationship as cooperative and collaborative and it has led them to further explore a number of new markets that they would like to dominate together. All from a little coopetition … There are many lessons that our business can learn from the coopetition concept. It is exactly the opposite of the ultimate win-lose view of the business world that comes from the attitude that: “It is not enough to succeed. Others must fail.” This simply doesn't always have to be the case. In fact, most businesses succeed only if others also succeed. For example, in the technology world the demand for Intel chips increases when Microsoft creates more powerful and complex software. Microsoft software becomes more valuable when Intel produces faster chips. It's mutual success rather than mutual destruction. It's win-win. Gone are all of the old assumptions about dominating your competition at any cost. The main reason that entrepreneurs don't cooperate with their competition is that they truly believe that their business possesses all of the skills and abilities that can satisfy all of their customers' needs. While this may be true in some cases, if we were honest with ourselves we would readily admit that some of our competitors offer unique products or services to their customers that we simply do not have. In contrast, your business also has unique capabilities that your competition simply cannot match. The real question is how can you and your competitors work cooperatively together to expand existing market and exploit new markets that either company wouldn't be able to obtain on their own? Coopetition doesn't mean that you no longer compete. For capabilities that are the same between yourself and your competitors, go ahead and compete fiercely. However, seize market opportunities with your competitors by cooperating in instances where you can collectively gain more market share together that would not be possible independently. So is business peace? That doesn't sound quite right, either. We still see fierce battles with competitors over market share, fights with suppliers over cost, and conflicts with customers over price. So if business isn't war and it isn't peace, what is it? It is peaceful coopetition with competitors – it is sleeping with the enemy with one eye open. Explore the benefits that coopetition can bring to your business. Steve Burns, CA, CMC, CFP, is the President and CEO of Burns Innovation Group Inc. (www.burnsinnovation.com) and Steve Burns Inc. Chartered Accountant (www.steveburns.ca), which provide consulting and accounting services to entrepreneurs. You can reach Steve at 763-4716 or via e-mail at: |
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