We all know how competitive the market can be. You might think you have the best business idea and once you are open for business, you find that a similar concept pops up a few weeks later. Of course, you are stumped! but what would you say if I told you that some organizations have made a breakthrough – they befriended their enemies. They got close to their competitors.
So what do you call cooperation and competition? Co-opetition.
Barry Nalebuff (1996) wrote a paper on Co-opetition and one statement sums this concept up nicely: “Complementors in making the market. Competitors in dividing the market.”
For example, the nail salon market is on its way to saturation in Bahrain. Competition is intense and the supply seems to outweigh demand. Some businesses are so cutthroat that it can get vicious. Rather than focusing on outdoing the competition, these businesses can unite and lobby for a new law or regulation to be passed, or apply pressure to an exclusive supplier in Bahrain that is asking for unnecessarily high margins.
According to Francesci Garraffo, co-opetition has four main advantages:
1. Exchange of knowledge
2. Collaborate on research and development activities – which may or not be applicable to startups and really depends on the industry
3. Market alliance for new standards – could apply to applying pressure to pass or relax laws or even shrink supplier margins
4. Collaborative agreement to integrate existing businesses. This applies mostly to merging previously competing businesses.
Another famous saying “keep your friends closer and your enemies closer” can mean the same thing. A statement often accredited to Sun Tzu (although there is a debate on whether those exact words where what he wrote) and Al Pacino in “The Godfather” – you can’t help but take notice of it. When analyzed, this statement can easily be applied strategically to a business. Keep track of not only your business partners but most importantly – of what your competitors are doing and stay ahead of the game.
In contrast to the traditional way of ‘winning & losing’ – cooperating and collaborating with your competitors (hello frenemies!) has a lot more advantages. Back in 1997, Microsoft saved its rival Apple by investing $150 million. This enabled both organizations to work closely together and learn from each other’s advancements. The rest, as they say, is history.
In a nutshell, whether you are a newly started business or an established one, realize that you do not operate in a silo. You have partners, suppliers, customers and competitors. Some competitors are fierce and can disrupt you, others are passive and just there – making money. It is important to get close to both types, no matter how difficult the feat proves to be. Knowing them makes you stronger.
