Competition taking a new turn on working together more than ever before. Here’s how to think through the risks and rewards Co-opetition”—Cooperation

Competition is taking a new turn on working together more than ever before. Here’s how to think through the risks and rewards

Co-opetition”—cooperating with a competitor to achieve a common goal or get ahead—has been gaining traction for three decades. Yet many companies are uncomfortable with the concept and bypass the promising opportunities it presents. Start by analyzing what each party will do if it chooses not to cooperate and how that will affect industry dynamics. Sometimes working together is a clear win, but even if it isn’t, it may still be better than allowing someone else to take your place in the deal—which could leave you at a disadvantage. You’ll also have to manage resistance within your own firm and alter internal mindsets. Co-opetition requires mental flexibility, but firms that develop it can gain an important edge. There is a name for the mix of competition and cooperation: co-opetition. Now the practice is common in a wide range of industries, having been adopted by rivals such as Apple and Samsung, DHL and UPS, Ford and GM, and Google and Yahoo. There are many reasons for competitors to cooperate. At the simplest level, it can be a way to save costs and avoid duplication of effort. If a project is too big or too risky for one company to manage, collaboration may be the only option. Co-opetition raises strategic questions, however. How will the competitive dynamics in your industry change if you cooperate—or if you don’t? Will you be able to safeguard your most valuable assets?

In the tech industry, thinking through alternatives to a deal is complicated because companies have multiple relationships with one another. For e.g. is one of the world’s largest phone manufacturers, Samsung is also one of the largest suppliers to phone manufacturers (including Apple, across several generations). Cooperating with Apple meant that Samsung would get this benefit and that its screen-technology rivals would not. It takes two to cooperate. The underlying economic reason that working together was advantageous to both sides was that Samsung had the best screen and Apple had a loyal customer base. Amazon gives rival sellers on Amazon Marketplace access to its customers and warehouses. Why?

For starters, while it loses some direct business and the associated markup, it makes a commission on Marketplace sales. Even if the net effect were negative, blocking rival sellers from its platform would push them to other sites that could compete with Amazon. More important, though, when Amazon shares its platform, it becomes a hub—the starting place for any search. It makes money when a person looking for a book or a computer cable comes to its site and purchases additional, higher-margin products like electronics or clothing. Amazon also learns about the customer’s preferences and can use this data to offer better recommendations and more accurately identify which Amazon-branded products to offer. Opening up Amazon Marketplace allows Amazon to operate more warehouses and increase shipping volume, thereby reducing shipping times and lowering overall costs.

Changing Minds -Cooperation with rivals also has an important emotional aspect. Some people are comfortable with the idea that there can be multiple winners, and some are not. As a result, co-opetition may end up being a strategy of last resort even in cases where it should be the first resort. Ultimately, getting the right mindset requires choosing the right people. For this, it's important to staff the cooperating teams with people who are open to the dual mindset of co-opetition. That is not always easy, because people tend to think in either/or terms, as in either compete or cooperate, rather than compete and cooperate. Doing both at once requires mental flexibility; it doesn’t come naturally. But if you develop that flexibility and give the risks and rewards careful consideration, you may well gain an edge over those stuck thinking only about competition. We hope that a better understanding of co-opetition will help businesses, managers, and countries find a better way to work and succeed together.

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