Co-opetition – When does partnering with a competitor make sense?

“Co-opetition”, one of the most intriguing terms to emerge in recent times in the business world. It gracefully merges two seemingly contradictory words - "cooperation" and "competition" – challenging the notion of competition between businesses in the same industry.

Traditionally, in the business world, competition is often seen as a zero-sum game with rivals battling it out for market share and dominance. However, in many industries, collaboration between competitors, known as "co-opetition," has emerged as a strategic approach that can lead to mutual benefits and growth. Co-opetition challenges the traditional notion of competition by fostering strategic alliances that allow companies to leverage each other's strengths while maintaining their competitive edge. But when does partnering with a competitor make sense? Let's delve into the concept of co-opetition and explore its benefits, challenges, and its application in supply chain and logistics.

Understanding co-opetition

Co-opetition, a term coined by Adam M. Brandenburger and Barry J. Nalebuff in their book, Co-opetition, refers to the simultaneous cooperation and competition between companies. In the fiercely competitive business landscape of today, the notion of collaborating with your competitors might seem counterintuitive. After all, isn't business all about outsmarting and outperforming your rivals?

In co-opetitive relationships, companies recognise that they can achieve greater success by collaborating on certain aspects of their business while still competing in other areas. This approach allows competitors to access resources, technologies, or markets that would otherwise be out of reach. Co-opetition suggests that partnering with competitors can lead to mutually beneficial outcomes and drive innovation.

Dynamics of co-opetition

At its core, co-opetition revolves around the idea of "co-opetition moves" – strategic actions that blur the lines between cooperation and competition. These moves can take various forms:

> Joint ventures - Competitors join forces to pursue common objectives, such as developing new products or entering new markets. By pooling resources and expertise, companies can achieve synergies that wouldn't be possible individually.

> Setting industry standards - In industries where interoperability is crucial, competitors may collaborate to establish industry standards. While this cooperation facilitates compatibility and market growth, it also sets a level playing field for competition.

> Shared infrastructure - Companies can collaborate to share infrastructure or distribution channels, reducing costs and improving efficiency. This approach is common in industries like telecommunications and logistics.

> Collaborative research - Competitors come together to fund collaborative research initiatives, pooling their knowledge and resources to tackle common challenges or explore new technologies.

Despite its potential, many companies dismiss the concept of co-opetition, focusing too intently on the competitive elements rather than embracing the broader scope of collaboration, and therefore failing to tap into the extensive opportunities that partnering could offer. This reluctance generally stems from fixating on the small overlap where competition occurs.

Establishing alliances becomes relatively straightforward when they are forged between entities offering complementary products and services. In these instances, the narrative of seamless collaboration and the "better together" notion follows a clear trajectory. The outcome is a win-win-win scenario, benefiting each partner and, more crucially, their shared customer base. However, when businesses share both overlapping and complementary products and services (essentially, competitors in some respects and collaborators in others), the path toward joint success becomes more intricate.

Benefits of co-opetition

> Innovation acceleration - By collaborating with competitors, companies can combine their resources, expertise, and knowledge to drive innovation. This collaboration can lead to the development of groundbreaking products, services, or technologies that might not have been possible individually.

> Cost sharing - Certain industries require substantial investments in research, development, and infrastructure. Co-opetition allows companies to share these costs, making it economically viable for both parties to engage in high-risk, high-reward ventures.

> Market expansion - Partnering with competitors can open doors to new markets and customer segments that might have been difficult to penetrate individually. This can lead to an increased market share as well as revenue growth.

> Risk mitigation - In uncertain and rapidly changing markets, co-opetition can provide a buffer against risks. By sharing knowledge and insights, companies can collectively adapt to challenges and minimise the impact of disruptive forces.

> Learning opportunities - Co-opetition provides a unique opportunity for companies to learn from each other's strengths and weaknesses. This exchange of knowledge can lead to organisational growth and improved business practices.

Challenges of co-opetition in Supply Chain and Logistics

In the supply chain and logistics industry, co-opetition presents unique challenges that stem from the complex and interconnected nature of the sector. While collaboration among competitors can offer benefits such as cost savings, improved efficiency, and enhanced service offerings, it also brings forth several hurdles that must be navigated effectively. Here are some of the key challenges of co-opetition in the supply chain and logistics industry:

> Confidentiality and IP protection: Businesses must establish robust confidentiality agreements and security measures to safeguard their proprietary information while engaging in collaborative activities.

> Trust and relationship management: Establishing mutual trust, transparency, and effective communication channels are essential for successful co-opetition.

> Competing priorities and objectives: Balancing individual goals with collective interests requires careful negotiation and compromise. Misalignment of objectives can lead to conflicts of interest and undermine the effectiveness of co-opetition initiatives.

> Operational integration and compatibility: Integrating operational processes, systems, and technologies with those of competitors can be complex and time-consuming. Differences in infrastructure, standards, and protocols may pose compatibility challenges, necessitating significant investments in integration efforts.

> Risk sharing and liability: Establishing clear risk-sharing mechanisms, contingency plans, and liability frameworks is essential to mitigate potential risks and protect the interests of all stakeholders.

> Antitrust and regulatory compliance: Engaging in collaborative agreements or strategic alliances with competitors requires careful legal scrutiny to ensure compliance with antitrust regulations and avoid accusations of anti-competitive behaviour.

> Maintaining competitive advantage: Businesses must navigate the fine line between sharing benefits and safeguarding proprietary strengths to avoid diluting their competitive position in the market. Maintaining differentiation and value proposition amidst collaborative efforts is crucial for sustaining long-term success.

> Change management and organisational culture: Overcoming resistance and fostering a spirit of collaboration, and aligning employees with the strategic objectives of co-opetition initiatives demand effective change management and leadership support.

Despite the challenges that may arise, the concept of partnering can remain viable. Overcoming obstacles such as internal buy-in, lack of executive sponsorship, funding disparities, and incompatible corporate strategies may be demanding, but the potential rewards make the endeavor worthwhile. Collaborating through co-opetition can unlock new opportunities for innovation, efficiency, and competitiveness in an increasingly interconnected global marketplace (with the potential to fend off competition from a mutual adversary). Often, the benefits outweigh the inherent risks and complexities of collaborating with a company perceived as a direct competitor.

When does co-opetition make sense?

The returns from various forms of supply chain collaboration vary based on operational types and the synergy between involved entities. When competitors strive to reach the same target customers, they construct downstream supply chains to deliver parallel products to similar or closely situated locations. Consequently, the most significant returns from supply chain collaboration stem from partnerships between competitors, giving rise to the concept of supply chain co-opetition.

While co-opetition offers numerous benefits, it's essential for businesses to carefully evaluate whether partnering with competitors aligns with their strategic objectives and organisational culture. Here are some scenarios where co-opetition may make sense:

> Industry standards and regulation compliance - In highly regulated industries or sectors facing common challenges, such as environmental sustainability or cybersecurity threats, collaborating with competitors to establish industry standards or address collective concerns can benefit all stakeholders.

> Research and development - Joint research initiatives can accelerate technological advancements. Partnering with competitors to develop or adopt new technologies can help businesses stay competitive and capitalise on emerging trends.

> Supply chain efficiency - Partnering with competitors in the supply chain can lead to cost savings and streamlined operations. Sharing transportation, logistics, or distribution networks can optimise operational efficiencies and reduce expenses – an advantage for all parties involved.

> Market expansion - When entering new or emerging markets, partnering with a local competitor can provide valuable insights into cultural nuances, consumer preferences, and regulatory hurdles. When entering new markets or expanding into existing ones, collaborating with competitors can provide valuable insights into cultural nuances, resources, regulatory hurdles, or distribution channels that accelerate the growth trajectory.

> Combining expertise - Forming strategic alliances with competitors to pursue joint ventures, research collaborations, or co-marketing initiatives can create synergies that drive innovation, enhance market visibility, and generate shared value. Competitors with complementary strengths can collaborate to offer comprehensive solutions that cater to diverse customer needs.

Examples of co-opetition in supply chain

Supply chains face constant pressure to improve efficiency and operational distinctiveness, which are critical to businesses. A widely embraced approach to counteract this pressure is supply chain collaboration. This involves two or more companies joining forces to manage parts or all their supply chain operations together. The goal of this teamwork is to generate significant benefits and advantages for all involved parties.

Numerous companies have adopted collaborative relationships, enabling them to pool risks, access strategic resources, curtail costs, amplify profit performance, and ultimately gain a competitive edge over time. Here are a few examples:

> Maersk and CMA CGM: Maersk and CMA CGM, two of the world's largest container shipping companies, have participated in collaborative initiatives such as vessel sharing agreements (VSA) and alliances. These agreements allow the companies to optimise vessel capacity utilisation, reduce costs, and offer more comprehensive global shipping networks while still competing in the marketplace.

> Retail industry: Retailers may engage in co-opetition through joint ventures or partnerships aimed at improving supply chain efficiency and customer service. For instance, multiple retailers may collaborate on shared distribution centers or transportation networks to reduce costs and streamline logistics operations while continuing to compete for customers in the retail market.

> Automotive industry - In the automotive industry, competitors often collaborate on initiatives related to standardisation, innovation, and sustainability. For example, rival automakers may collaborate on developing common standards for electric vehicle charging infrastructure or sharing best practices for sustainable manufacturing processes while still competing for market share in vehicle sales.

Co-opetition in the Australian market

Supply chains in Australia have been navigating a dynamic landscape, characterised by the persistent drive for operational efficiency and distinctive strategies. The concept of supply chain collaboration has gained remarkable traction within the Australian business community, echoing global trends. Companies across various industries have recognised the value in synergising their efforts, opting for initiatives where multiple entities share segments of, or entire, supply chain operations. This collaborative approach is proving instrumental in securing significant advantages that resonate well in the Australian market.

The decision for Australian companies to partner with competitors adds an interesting dimension, shaped by the unique characteristics of the local market. As competitors aim to reach the same discerning Australian customers, the alignment of downstream supply chains and the provision of similar products become crucial. Thus, the significance of supply chain collaboration gains added weight, particularly when it involves partnering between competitors. This underscores the evolution of supply chain strategies within Australia's market ecosystem.

uTenant's role in enabling co-opetition

Co-opetition is not a new concept for uTenant; in fact for the past couple of years, uTenant has cultivated an organic marketplace where co-opetition is not only possible but probable. uTenant plays a crucial role in enabling co-opetition in the supply chain and logistics industries, here's how:

> Network expansion - Bring together third party logistics (3PL) providers, product owners (brands), supply chain specialists, property partners, tenants, and landlords in a thriving ecosystem; linking competing businesses with complementary needs.

> Identification of synergies - Analyse the strengths and weaknesses of different businesses within the same industry and identify areas where they can collaborate without compromising their individual competitive advantages. For example competitors sharing resources like transportation and warehouse facilities to reduce costs or optimise inventory management.

> Benchmarking and best practice - Help businesses understand where they stand relative to their competitors and identify opportunities for improvement through collaboration.

> Risk mitigation - Collaboration can also help mitigate risks in the supply chain, such as disruptions due to natural disasters, geopolitical events, or economic downturns. By pooling resources and expertise, competing businesses can build more resilient supply chains that are better equipped to handle unexpected challenges.

> Innovation and research - Facilitate collaborative efforts that foster innovation within the industry by encouraging knowledge sharing, and joint research and development initiatives.

Ultimately, uTenant serves as a catalyst for co-opetition, facilitating collaboration and mutual benefit among competing businesses and our partners by leveraging our industry expertise, network, and resources.

Conclusion

Collaborating with competitors in supply chain and logistics can bring big benefits, but it also comes with challenges and risks. Some companies choose to avoid partnerships with rivals because of these risks. However, a better approach is to develop mechanisms to overcome these challenges and minimise the risks. In today's uncertain world, avoiding risks completely is likely to fail. Ironically, not taking risks is the biggest risk in such a situation.

Curious to learn more about co-opetition and any potential collaborations for your business? uTenant enables co-opetition by leveraging its industry expertise, network, and resources to facilitate collaboration and mutual benefit among competing brands and their partners. Get in touch with uTenant's team of experts to discuss.

Published: 5 March 2024