Why there’s never been a better time to partner with your competitors

The concept of “coopetition” has been around for over a century, but thanks to recent technology developments, it’s perhaps never been as relevant as it is right now.

A mashup of “cooperation” and “competition,” “coopetition” describes a scenario in which competing entities (usually businesses) collaborate on an effort of mutual benefit.

We see examples everywhere these days, such as the recent partnership between pharmaceutical rivals Pfizer and BioNTech to collaborate on a COVID-19 vaccine. Each company could have gone it alone, but both realized that as partners they could quicken the pace of clinical trials, get a product to market faster, and grow each of their businesses more than they could separately.

Technology markets are particularly fertile ground for coopetition. Apple and Samsung have been bitter competitors for years, but in 2019 they formed what was called an “unthinkable partnership” to deliver Apple video content on Samsung TVs. The reason: Apple needed to diversify into video entertainment, and Samsung got a prime channel to reach its audience.

After sniping at each other for years, VMware and Amazon Web Services stunned the industry with a partnership announcement in 2016. Although they continue to compete vigorously, both companies realize they have more to gain by simplifying choices for their customers about where to deploy workloads. Similarly, Netflix goes head-to-head with Amazon in streaming entertainment but runs most of its business in the AWS cloud.

Frenemies forever

Coopetition happens when all parties in the relationship realize they have more to gain by growing an entire pie than by increasing their slice. “It will happen only if everybody isn’t trying to do everything,” said Ajeet Singh, co-founder and executive chair of data analytics firm ThoughtSpot.

Singh, who negotiated a partnership with arch-rival Hewlett-Packard when he was at Nutanix, became a student of coopetition at one of his first jobs working for defense contractor Honeywell. “I saw that aerospace was a prime example of coopetition,” he said. “Honeywell, GE, and Pratt & Whitney were partners, suppliers, and customers of each other. They competed and cooperated on the same project.”

A variety of forces are converging to make coopetition a more attractive option in an increasingly digital business environment. One is simply that customers are more in control of their relationships with the companies that do business with them. They have more choices than ever and are more than willing to switch providers if they can get a better product next door. Businesses are also getting more comfortable with the idea that they should focus on what they do best and farm out the rest.

On the technology front, cloud platforms have made it easy for online businesses to enhance their services with functionality that would be impractical to develop themselves. The plumbing that enables all these connections is the application program interface, a type of software connector that lets programs talk to each other and exchange rich information. Cloud services and APIs let digital platform owners quickly plug in components—even from competitors—to deliver services that enhance customer satisfaction.

“Technology is moving toward best-of-breed where customers can say they want analytics from one provider, database from another, and cloud from a third,” Singh said. “APIs enable tight integration.”

Partnerships that work

Business leaders are also realizing that competitors can give them leverage to grow their business. When my bank wanted to add a feature to its online service that lets customers send and receive money to non-customers, it could have built its own payment system—a process that might have taken years given regulations and the number of other financial institutions involved. Instead, it chose Zelle, a digital payment system developed by a consortium of U.S. banks. Zelle already had the infrastructure and the partnerships in place, and plugging the service into the online banking system was a relatively trivial task.

Given that many of the world’s largest companies have embraced coopetition, it’s a good time to look at how it can work to your own benefit. The journey starts with taking a customer-centric approach, Singh said. Adopt that big-pie perspective, realizing that no one can own an entire market anymore.

“Think about winning the war as opposed to every battle,” he said. “Enable good companies to innovate,” and thus grow the ecosystem for everyone.

Think also about how your rivals can become your customers. You can use APIs to expose processes and data that others will pay for or integrate into their own digital services, which can become a source of new business for you. Keep an open mind, and you may be surprised at the opportunities that emerge.

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Copyright © 2021 IDG Communications, Inc.

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