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Collaborate Rather Than Compete

Guest post by: Mark Deo

Article Overview: Many would say that our entire free-economy system is built on the foundation of competition. Competition drives the supply and demand curve, it is the catalyst in pricing models, and it fuels the need for innovation. Yet some have suggested that cooperation and collaboration with our competitors can be valuable.

Collaborate Rather Than Compete

Siemens, the global communications company, announced in 2004 that it would cooperate with their BIGGEST rivals, Motorola and Ericsson, with the goal of developing a standard for so-called “push-to-talk” technology. Now why would these competitors cooperate on such a mission critical technology? Aren’t they afraid that one competitor might hold back a key ingredient? Or that one competitor might use information gained to try to damage or eliminate the other competitor once and for all?

Not at all! They have far bigger fish to fry. You see, push-to-talk allows handsets to be used like walkie-talkies – a feature mobile phone operators believed would significantly increase their revenues by encouraging users to talk more. The three companies conducted tests to make their technologies totally compatible with each other, enabling customers of different operators to talk to one another – something that is essential if push-to-talk was to penetrate the mass market. Do you think this would have had a negative or positive effect on revenues and client satisfaction of each player? Do you think that this would increase the “attraction” of each of these players? You bet! In fact it could have literally revolutionized the telecommunications industry making Ericsson, Siemens and Motorola the only games in town.

Many would say that our entire free-economy system is built on the foundation of competition. Competition drives the supply and demand curve, it is the catalyst in pricing models, and it fuels the need for innovation. Yet some have suggested that cooperation and collaboration with our competitors can be valuable. “Co-opetition,” the book by Adam Brandenburger and Barry Nalebuff of Yale Business Management School makes a powerful case that under specific circumstances there is greater value in cooperating with certain customers, suppliers and even competitors rather than competing. The central concept is that we can create complimentary product or service relationships that allow products and services to become more important when purchased TOGETHER rather than separately. This relationship results in a reduction of marketing costs and ultimately an increase in market share, client loyalty, and even brand value. Using “game theory” the authors demonstrate how complimentary related products can lead to expansion of the market and the formation of new business relationships.

In order to increase our attraction we must seek out those partners that complement our business. A compliment is a product or service that makes any other product or service more attractive. The classic example of compliments is computer hardware and software. Faster hardware prompts people to upgrade. Powerful software motivates people to buy faster hardware. Just look at Windows and Pentium chips.

Awhile ago I needed to make color copies of a report, so where did I go? Kinko’s. We all know Kinko’s as a reliable, convenient and cost effective place to get your reports printed, copied and bound. But when I drove to the store I was shocked by what I saw. The name on the front of the store no longer said, “Kinko’s.” It said “FedEx/Kinko's.” Prior to acquiring Kinko’s, FedEx spent millions on testing the concept of combining locations. The test was so successful that FedEx eventually bought Kinko’s, lock, stock and barrel. It makes sense. If you are going to a store to design, develop, print, and copy business or personal communication material, doesn’t it make sense that you will want to SHIP it somewhere? For FedEx, collaborating with Kinko’s turned-out to be a tremendous windfall.

Discovering "Complimentors" is about finding a way to make the pie BIGGER rather than fighting over how to slice up a tiny Scooter Pie. So how do we identify competitors and complimentors? A player is a complimentor if customers value your product MORE when they have the other player’s product than when they have your product alone.

Let’s revisit our example of FedEx and Kinko’s. Customers value Kinko’s MORE now that FedEx is located directly inside the Kinko’s location. What used to take visiting two locations (a Kinko’s and a FedEx store) now takes ONE visit. This makes things smoother for the customer and increases value for both partners.

A player is a pure competitor if customers value your product LESS when they have the other player’s product than when they have your product alone. An example of this would be Coca-Cola and Pepsi-Cola. Either you have one or the other. You would be hard-pressed to find someone going to a convenience store and ordering a Coke and a Pepsi at the same time. One is valued in EXCLUSION to the other.

Here are some typical partners engaged in successful complementary marketing relationships:
- Universal and Burger King
- Sears and Allstate
- Visa and American Airlines
- Oscar Meyer Hot Dogs and Guldens Mustard

These represent collaborative relationships at the “end” of the supply chain. That is to say the collaboration occurs in the arena where marketers cooperate to increase the potential opportunity for each player. Collaboration can also be used at the “beginning” of the supply chain to significantly reduce the cost of manufacturing, development, or delivery. Suppliers and end-users can collaborate on technology, applications, processes, and even supply chain in order to make themselves more attractive as an industry.

Ed Marien, director of logistics and transportation management programs at the University of Wisconsin School of Business has made a career out of studying collaborative strategies. He said in an interview with “Supply Chain Brain,” an industry publication, that “collaborative alliances are a means of sharing strengths.” He cites Federal-Mogul, a piston maker for the automotive industry that is using its buying power to purchase sheet metal for many of its suppliers at a lower cost than they could negotiate alone. How about process collaboration? Consider Bridgestone/Firestone, which began mounting its tires on wheels at the request of automotive assemblers. As is happening in many cases, this activity has been spun off into a whole new business unit that now is mounting not only its own tires but also those of Bridgestone’s competitors. This unit has become one of the company’s fastest-growing and most profitable divisions, illustrating how alliances can lead companies to develop core strengths they did not previously have.

Who are good complimentors for your business? As a business advisor, good complimentors for me are attorneys, CPA's, designers, Internet professionals, computer consultants, training companies, TV and radio stations, magazines, newspapers, printers, and more. I challenge you to brainstorm a list of 5 to 10 complimentary businesses. Then make a list of specific contacts within those categories that can currently be utilized. First see what you can do to help them. Then watch the magic of co-opetition unfold!

With all these changes taking place in our society we are seeing the emergence of work-groups, virtual teams and alliances, affiliates and even cooperative competitive relationships like co-opetition. The way collaboration is being used in business today is literally smashing the traditional concept of supplier, vendor, and competitive relationships. The line between partner, competitor, and supplier is blurring. In order to be more attractive we all must collaborate rather than compete.

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Article Tags: adam brandenburger, barry nalebuff, catalyst, client satisfaction, competitor, complimentary product, critical technology, economy system, free economy, global communications company, management school, mass market, mobile phone operators, pricing models, rivals, service relationships, supply and demand, supply and demand curve, telecommunications industry, walkie talkies



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