Coopetition: Meaning & Benefits for Business Growth

Posted in Blog, Entrepreneurship by Jo North

Coopetition: Introduction

The fundamental premise of coopetition is that businesses, even direct competitors, can achieve more together than they can separately.

Bringing people together from different companies has multiple benefits for everyone who participates. People learn from each other, get the opportunity to help others and put their new insights into practice in their own businesses.

I often facilitate businesses in the same sector coming together to achieve mutually beneficial goals in an appropriate way, given their truly competitive relationships. Examples include advanced manufacturing and electech clusters, engineering and transport businesses, arts and cultural organizations amongst many others.

Competition Law

It’s important that all collaboration complies with competition laws. Coopetition means competitor organizations supporting each other appropriately and legally. Sharing non-commercially sensitive aspects of their businesses, or forming legitimate joint ventures with complementary skills to bid for contracts each party would be unlikely to win alone, are examples of coopetition opportunities.

Innovation and growth through coopetition is becoming more and more important as open innovation and innovation ecosystems develop more and more.

In this article, I detail what coopetition is, how it benefits businesses, and some practical considerations for you if it’s something you’re looking to explore.

Definition of Coopetition

Coopetition is a blend of cooperation and competition among businesses. This isn’t a zero-sum game where one’s gain is another’s loss. It’s a plus-sum game where everyone gains mutual benefits.

Coopetition is when companies, who may sometimes be competitors, collaborate for mutual benefit. This builds on the concept that “a rising tide lifts all boats”.  In the case of new product development, coopetition can help businesses improve process efficiencies, resolve supply chain challenges, learn about new technologies and generate ideas.

The Genesis of Coopetition

The idea of coopetition emerged in the late 1990s. Barry J. Nalebuff of the Yale School of Management and Adam M. Brandenburger, formerly of Harvard Business School, wrote the seminal book “Co-opetition“. This book was a Business Week bestseller and introduced strategies of co-opetition as a new mind-set in the business world.

The Game Theory Behind Coopetition

Game theory, a branch of mathematical models, has deeply influenced the coopetition model. It introduces strategies where businesses can expand market share without undermining each other. The “Value Net” model by Barry Nalebuff and Adam Brandenburger shows how companies can convert competitors into collaborators.

Potential Benefits of Coopetition for Your Business

Enhanced Innovation

One of the most significant benefits of coopetition is the pooling of knowledge and resources for joint innovation. Two competing firms may have complementary skills and technologies, leading to the development and successful commercialization of new products or services that neither could have achieved on their own.

Cost Savings

Coopetition allows businesses to share the financial burden of research, development, and even marketing. When two companies collaborate on a project, they can split costs and resources. This leads to a more efficient use of capital.

Access to New Markets

Joining forces with a competitor can provide an entry point into new markets. A local company might partner with an international one to gain easier access to a global audience, benefiting both.

Risk Mitigation

Working together can spread business risks. If an endeavor fails, the losses are distributed, softening the blow for each individual company. If the project is a success, both parties enjoy the rewards.

Increased Market Power

Coopetition can lead to greater bargaining power for both companies involved. Joint ventures or strategic alliances may give the collaborating companies more influence over suppliers or even allow them to set more favorable standards in their industry.

Skill and Knowledge Transfer

In a coopetitive relationship, less experienced companies can learn from industry leaders. This can include best practices, technology know-how, or business acumen that might take years to develop independently.

Supply Chain Optimization

Businesses can collaborate to improve logistics and supply chain efficiency. This can involve sharing distribution channels, warehouse facilities, or transportation, leading to reduced operational costs.

Brand Enhancement

Being associated with other reputable businesses can elevate your brand’s status. The key is to collaborate with companies that uphold similar values and standards, ensuring that the partnership is beneficial from a branding perspective.

By carefully selecting a competitor to collaborate with, and by structuring the relationship in a way that mutually benefits both parties, companies can unlock a host of advantages that would be unattainable in a purely competitive environment.

Examples of Coopetition

Space Exploration

Even in space exploration, United States, Russia, Europe, Japan, and Canada are principal collaborators in the International Space Station, known for being the most politically complex space exploration program ever undertaken. This era of collaboration marks a shift from the competitive spirit of President Kennedy’s moon landing era.

Airline Business Alliances

American Airlines and other aviation providers show the practical benefits of collaboration through a shared customer rewards scheme.

Airlines partner with organizations outside the industry, e.g. financial services provider American Express. The alliance offers a partner program, again for customer rewards.

Coopetition in the Development of the COVID-19 Vaccine

Background:

The COVID-19 pandemic presented an unprecedented global health crisis, requiring urgent action. Normally competitors in a high-stakes market, pharmaceutical companies found themselves in a unique situation. The magnitude of the crisis led to a rare form of coopetition, as organizations shared research, resources, and even intellectual property to expedite vaccine development.

Key Players:

• Pfizer & BioNTech
• Moderna
• AstraZeneca & Oxford University
• Johnson & Johnson
• Various academic research institutions

Intellectual Property and Data Sharing:

Companies took the uncommon step of sharing preliminary research data to expedite the vaccine’s development. This act broke away from the traditional competitive mold, where intellectual property rights are closely guarded.

Global Reach:

The effort was not limited to one country but spanned several continents. This international coopetition sped up clinical trials and regulatory approvals, allowing the vaccine to reach people in a record number of countries in a short period.

Financial and Logistical Cooperation:

While each company pursued its own vaccine development, there were behind-the-scenes collaborations involving supply chain logistics and manufacturing capabilities. Several companies even signed agreements to manufacture the vaccines of their competitors, should one prove ineffective.

Regulatory and Scientific Collaboration:

Coopetition extended to regulators and governments, who provided fast-track approval pathways. Moreover, academic research institutions collaborated with pharmaceutical companies, providing valuable insights and statistical models to improve vaccine efficacy.

Outcomes:

The result was the unprecedented speed at which multiple vaccines were developed, tested, and distributed. This couldn’t have been achieved without some level of coopetition between these organizations. The collective action against a common enemy—COVID-19—led to one of the most remarkable achievements in the history of medicine.

The development of the COVID-19 vaccine serves as a compelling example of how coopetition can bring about extraordinary results. In facing a global crisis, competitors set aside traditional rivalries to achieve a common goal, saving millions of lives in the process. This case shows that in extraordinary circumstances, coopetition can be more than just a business strategy—it can be a global imperative.

Coopetition: Practical Considerations for Your Business

Competitor Analysis

Follow the steps in my article here to carry out a competitor analysis for your business. Identify potential areas where coopetition could bring mutual value.

Legal Concerns

Consult legal experts to ensure you’re within the bounds of competition laws. Create a coopetition agreement. Set up a comprehensive privacy policy to protect customer data.

Shared Goals

Clear communication is crucial. Both parties should agree on the end goal. This could be to break into a new market, improve a product, or something else. This mutual understanding sets the stage for a productive partnership.

Intellectual Property

Intellectual property (IP) can be a sticking point in coopetition. Draft clear agreements on who owns what, and how IP will be used or shared.

Resource Allocation

Decide upfront how resources like manpower and capital will be allocated. This avoids future conflicts and keeps the partnership moving smoothly.

Risk Assessment

Analyze potential risks. Knowing what could go wrong helps you prepare solutions in advance.

Performance Metrics

Set measurable outcomes to evaluate the coopetition’s success. This makes it easier to adjust the strategy if needed.

Exit Strategy

Always have an exit strategy. This ensures that both parties can walk away with minimum losses if the partnership doesn’t pan out.

Governance

Assign responsibilities and decision-making powers. A well-defined governance structure keeps the partnership transparent.

By paying attention to these practical aspects, businesses can apply coopetition effectively and harness its full potential.

Coopetition: The Way Forward

The traditional concept of business as a “game of business” where high profit means the only option is to beat out larger competitors is being replaced. Coopetition provides an alternative: a mix of competition and cooperation that benefits all parties involved.

Open innovation ecosystems are expanding, increasing the relevance of coopetition. In an increasingly connected world, adopting a coopetition strategy can be a game-changer.

Additional Reading

The New York Times has covered tech industry coopetition. Apple and Google compete in the mobile operating system market but collaborate in search services, for example.

Strategic Management Journal has several articles exploring coopetition. This article by Gnyawali, He, and Madhavan looks into the “Competition–coopetition paradox” and its effects on innovation in high-tech industries.

Adam Brandenburger, who is the J.P. Valles Professor at NYU, has continued to publish articles and studies on coopetition.

Industrial Marketing Management has published this paper, which is a summary of six coopetition-related articles.

Round Up

Round-Up: The New Paradigm of Coopetition in Business

Coopetition isn’t just a buzzword; it’s a transformative business strategy supported by academic heavyweights like Barry J. Nalebuff and Adam M. Brandenburger, authors of the seminal book “Co-opetition.”

The approach goes beyond the old rules of competition, introducing a new mindset where fierce competitors can find a common goal and engage in successful collaboration. From sharing intellectual property rights to jointly bidding for contracts, businesses are rewriting the rulebook on competitive engagement.

Coopetition is Global and Local

This strategy is not confined to a single industry or a small number of countries; it’s global. Take the jointly managed International Space Station, a culmination of a fierce competition between cold war rivals. It epitomizes how strategic alliances can be formed to accomplish a joint mission. In the tech industry, we see competitors like Apple and Google—a rivalry as old as search engines themselves—creating business networks to offer related products at a lower price. And they’re not alone; dozens of other companies across sectors are playing coopetition games, forming business relationships that would have been unthinkable a decade ago.

Coopetition Complexities

But coopetition isn’t without its complexities. It demands a careful understanding of the legal system, especially where antitrust laws are concerned. Businesses must also navigate the labyrinth of intellectual property rights to ensure that both parties can profit from their own products. These legal and ethical steps are not mere formalities; they are the first step toward a successful partnership.

Statistical models back the success of this strategy, showing tangible benefits like increased market share and higher profitability. It’s the secret sauce for many firms that have managed to stay ahead in a hyper-competitive landscape.

Coopetition for the Future

In various ways, coopetition is revolutionizing how businesses operate, offering a win-win situation where both parties benefit. As businesses continue to explore this avenue, it’s becoming increasingly clear that coopetition is more than a fad; it’s the future of how businesses will interact.