Why sharing opportunities with competitors is a viable business option

In the first of a new three-part series, Peter Rouse argues that 'co-optition', when companies interact with partial congruence of interests, can be fruitful in business.

In this series I will be exploring the business of sharing an opportunity with others including your competitors; yes, ‘the enemy’ may be just who you should be working with.

Many a small business dreams of winning the big contract that sets them on a path to riches, though in the dreaming of it the small matter of how to deliver is usually left to the ‘little people’ or other magical intervention.

Small businesses can be destroyed by winning work that they are simply not geared up to deliver on, and yet many will nonetheless promise the earth and hope for the best. Small businesses also fail to win bigger and potentially more profitable business because the buyer rightly requires proof that they can deliver.

Buyers will deliberately exclude businesses below a certain size from tendering because they are unable to provide sufficient proof of scale so the buyer can be confident that if there is a default there will be a remedy; in other words that the supplier will not simply go bust. If there is a lot at stake it is to be expected that the buyer will prefer to deal with a business of similar size or larger, even if there is additional cost involved.

One key reason that small businesses can not punch above their weight is that there is a deep-seated reluctance to work with others, especially competitors, to mutual advantage. There are many explanations for this and all are based in human nature and the ever-present challenge of ‘trust’. My own belief is that trust is essentially about expectations as to what another will do or not do in particular circumstances; and if those circumstances are unexpected, then we expect the other to have regard to our interests in the choices they make. When we need someone to work with us we also need to know that they will behave according to our expectations; all too often we make assumptions and don’t articulate those expectations and that’s when ‘trust’ is destined to break down. So, we like the idea of collaboration but we are not quite sure how to do it.

We might not get things all our own way and will likely have to moderate our wishes in order to accommodate the interests of others. To achieve true mutuality and requires openness and transparency; something small business owners, used to being in charge and sharing information on a ‘need to know’ basis, are not always comfortable with.

Dealing with competitors is the hardest ask of all, principally because we tend to work on the basis that they are trying to take ‘our’ customers away when in truth the customer belongs to noone and, like us, pursues what they believe to be in their best interest.

In the early 90’s I first heard the term ‘co-optition’ and, having overcome my initial annoyance at another bastardisation of the language, came to be intrigued by the idea. According to the Wikipedia entry, the principles of co-optition are covered in game theory (where we get ‘non-zero sum game’ commonly known as ‘win:win’ from) and states: co-opetition occurs when companies interact with partial congruence of interests. They cooperate with each other to reach a higher value creation if compared to the value created without interaction, and struggle to achieve competitive advantage.

The example given is of the motor industry where manufacturers routinely cross-license technologies, take up minority stakes in each others’ businesses, use each others’ platforms, and enter into joint ventures to tackle markets, while continuing to compete ferociously. It can and does work.

So, if the prize is sufficiently tempting and you have a specific opportunity that you want to pursue is there a road map for collaboration that can be followed? The answer is yes, of sorts, and I will endeavour to provide some signposts in the next two instalments. In part two, I will set out some key stages of the journey to structured collaboration. In part three, I will deal briefly with forms of collaboration and types of agreement and structure that may be needed to make them work.

Read Part II here

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