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Coopetition Explained

In an effort to scale business, companies often pursue strategic alliances to expand their customer base, reach new markets, and provide added value to their current customers.

Contemporary enterprise companies have engaged in strategic alliances for decades, but as of recently the business community has seen an uptick in these partnerships. PricewaterhouseCoopers and alliance strategy expert, Benjamin Gomes-Casseres, highlighted the peak of existing global partnerships in their report, “Why Your Next Deal May Be a Partnership.” One of the primary takeaways demonstrated “the combined number of alliances and JVs (joint ventures) has increased in the past two years and is now at its highest level since the start of the century.”

Recent events such as the Coronavirus pandemic and the economic recession have made the notion of sharing risk with strategic partners to curtail potential losses an appealing strategy. While companies tend to look for potential partners outside of their industries “to cope with rising competition,” many global corporations are pursuing coopetition, or “the simultaneous existence of cooperation and competition between competitors” to get ahead. At first glance, the thought of collaborating with your competitors seems counterintuitive, but if executed properly, both companies will see the return on investment outweighs the potential drawbacks and reservations.

What is coopetition?

The basic understanding of coopetition stems from the concept of “cooperative games” in the 1944 book, Theory of Games and Economic Behavior, in which “binding agreements among the players” are formed to “allocate cooperative gains.”

 The phrase was not formally coined until the publishing of Adam M. Brandenburger and Barry J. Nalebuff’s 1996 book, Co-opetition: A Revolution Mindset. The pair asks business leaders to consider this “high profit means of leveraging business relationships” and abandon their traditional views of competition

Benefits of Coopetiton

Aside from the benefits produced by strategic partnerships that were earlier mentioned, coopetiton provides the opportunity to expand capabilities by sharing resources. Harvard Business Review recognizes the difficulty in developing organizational processes and technology in their analysis noting, “it takes so much money to develop new products and to penetrate new markets that few companies can go it alone in every situation.”

Blockchain Strategist at Fedex, Dale Chrystie provided an area of opportunity where shipping companies could collaborate. He explains “virtually each of these companies has their own databases, but they don't talk to each other well, if at all. This presents a great deal of friction in the global supply chain industry, with friction referring to the increased time, costs and resources required to move data between databases or across borders.”

However, it is important to note that engaging in collaborative competition needs to be met with the intention to learn as many western companies “are more interested in reducing the costs and risks of entering new businesses or markets than in acquiring new skills.”

Coopetition in Action

The 2014 announcement of the Apple and IBM partnership is a prime example of how two industry-leading companies combined their resources and expertise to capture larger shares of a market.

“By inviting rivals into its business model and thus creating a larger overall market, a firm can potentially capture a bigger share for itself down the road. “Take the so-called AIM alliance between Apple, IBM, and Motorola. Although Apple and IBM competed fiercely in the personal computer market, their collaboration on a new wave of microprocessors created new markets and opportunities for both firms.” 

President of BNSF, Dan Curtis also mentioned his company’s strategic intent to elevate the freight broker industry during a panel discussion at the Future of Trucking Virtual Event. “We're currently in a data sharing collaboration with some of our competitive set...It's part of an effort to really get a better price to shippers ultimately in real time that considers many of the aspects and factors that typically haven't been aggregated in a meaningful manner” he said.

The need to collaborate is greater than ever, especially in an industry as vast as supply chain and logistics. ZUUM intends to empower the industry by breaking down siloed information through their technology and continues to be a proponent of coopetiton.