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Business partners shake hands after successful negotiations.
There’s a buzzword for companies looking to blend two priorities: innovation and cost savings. “Coopetition”—which signifies collaboration among business competitors—is an idea that’s picking up steam.
The risks of collaborating with rivals might seem daunting, buta studyby the Multidisciplinary Digital Publishing Institute finds the benefits are likely to outweigh any disadvantages. The study found that this kind of collaborative competition, when it lasted from three to five years, had more than a 50% chance of mutually reducing company costs.
“Nowadays, the best partner might be your direct competitor,” says Paavo Ritala, a professor of Strategy and Innovation at LUT University of Technology in Finland. “Competitors tend to face similar markets and use similar resources and technologies. They typically have to deal with similar challenges at large. Thus, with rising costs of R&D and globalizing competition, it often makes sense to collaborate with competitors on product development, innovation and joint manufacturing.”
Ritala, who cowrote aScienceDirect reporton the “coopetition” idea, analyzes Amazon Marketplace—Amazon’s e-commerce third-party selling platform—as a business model that demonstrates coopetition’s efficacy. Ritala says that the partnership is a win-win situation: Amazon.com benefits since it gets a margin of the sales from the Marketplace, while its third-party sellers also benefit by getting access to a “very large customer base and a popular platform.”
Amazon justifies the terms of the partnership as being best for its customers. “Third-party sales are now 58% of our gross sales because we are committed to helping independent retailers meet the needs of Amazon customers around the globe,” said Amazon spokesperson Joel Sider. “This year we are on track to spend $15 billion on tools, services, programs and people to fuel the success of sellers, most of whom are small and medium-sized businesses.”
YouTube and Vimeo have a similar relationship. During an innovation panel at the 2019 ForbesWomen Summit, Vimeo CEO Anjali Sud shared that the video platform joined forces with YouTube, one of its main competitors by allowing creators to publish their videos to YouTube, as well as to other video platforms.
“What it unlocked was actually a totally new strategy for our company . . . one of the biggest value-adds in our product, and it all came from flipping the script in terms of how you think about whether someone is a competitor or a partner, and prioritizing the problem you want to solve,” saidSud.
“Coopetition,” while a contemporary idea, is actually nothing new. More than two decades ago, Yale School of Management professor Barry Nalebuff and NYU Stern School of Business professor Adam M. Brandenburger noticed an increasing number of these kinds of partnerships among rivals, especially in the digital space, and set out to research the theory that turned intotheir 1996 book,Co-Opetition. Today, the co-authors see the trend continuing in industries from automotive to smartphones.
Among the most striking current examples of coopetition, says Brandenburger, is that betweenApple and Samsung. While Samsung’s Galaxy and Apple’s iPhone are competing products, Samsung at the same time continues to be one of Apple’s main suppliers (the company supplies screens to Apple).
Although the idea of coopetition is becoming more accepted, says Brandenburger, “it is still often seen as a last resort.”
Part of the struggle for companies is understanding how and when to implement the strategy, notes Adrian Slywotzk, a partner at the consulting firm Oliver Wyman and the coauthor of aHarvard Business Reviewarticleexploring the coopetition trend. Slywotzk’s advice for business owners is to have a clear understanding of the functions that are unique to your company—you of course don’t want to collaborate with a rival in those areas. But where you’re both trying to get the same job done: That’s where he believes competitor resources should be allocated.
“Understand very clearly the dividing line between things that you must be the best in the world at versus those things where you’re wasting hundreds of millions of dollar