Collaborating with the competition
One of the most innovative, tricky and rewarding business trends has been the idea of working with your competitors rather than simply against them.
There are many reasons that this is a good idea. At the heart of globalisation lies the idea of interdependence, of networking, of learning from others. You can grow your business by sharing knowledge and resources with your competitors.
Entrepreneur.com’s Erika Napoletano reports on Chris Mara, a recording studio owner who has succeeded because of collaborating with his competitors. Mara didn’t have the resources to build a modern recording studio, one with high-tech equipment, so he opened up a retro or vintage recording studio instead. Larger studios didn’t even consider him competition because of this. He began getting referrals from these studios for artists that wanted to recreate classic sounds and Mara also sent clients to studios that better suited their needs. Mara also networked with vintage studios in other cities and would refer clients to these if they were closer. He explains that he and his competitors network in order to better their common industry. Mara also hosts summits and workshops that help recording studio owners compare notes on everything from mixing music to determining prices.
Evan Rosen of Collaboration Blog was inspired to write: “The Culture of Collaboration” after learning about the collaboration efforts of competitors BMW and Toyota. These rivals have decided to combine their efforts into electric car battery research and BMW is supplying diesel engines to Toyota. They’ll still compete in terms of luxury cars.
Rosen explains that collaboration makes senses: If it creates value for all those involved; if the parameters are clear; and if it includes non-differentiating processes.
Sharing the electric car battery research definitely helps both BMW and Toyota; the diesel engine deal frees Toyota up a bit while decreasing BMW’s cost for production by increasing volume. As far as the parameters, BMW and Toyota have made clear what they will collaborate on and what is proprietary information for each company. In terms of non-differentiating processes, Rosen explains that it makes sense for competitors to share processes that don’t contribute to their individual brands. He gives examples of this: two newspapers can share the same printing process or two sauce makers might share the same bottling process. Sharing resources in this way can save companies money. Are there ways you may be able to collaborate with your competitors? There are some things to consider. In a 1989 article in Harvard Business Review, researchers Hamel, Doz and Prahalad outlined these considerations. The information is so apt today that they have been reprinted on Auburn University’s website.
First of all, there are different types of competitive collaboration: cooperative research, joint ventures, outsourcing agreements, and product licensing. Secondly, the gains of collaboration include: low-cost technological advancement, low-cost market access, insight into other business practices and strategies, strengthening of competitive advantages and core competencies and the ability to develop benchmarks based on your competitor’s practices. There are risks associated with competitive collaboration say the authors. Western firms often enter joint ventures in order to lower costs in the short-term while Asian companies tend to enter collaborative projects in order to gain business insights or technology. It is the long term strategising that Western companies often miss and are less careful about protecting proprietary information than Asian companies. Asian companies may share specific skills or procedures that then weaken their position competitively. What can occur because of this is that the Western company may weaken its position by revealing too much in terms of strategy and the Asian company may feel that it must trade a differentiating competency; dependence of one company on another may increase; and employees may end up switching alliances.
It’s very important to protect your company while you collaborate with the competition. Hamel, Doz and Prahalad explain that you must never forget that your competition can harm you and that you have to put strategic objectives into place. You must also be prepared for conflict, that complete harmony isn’t the most constructive state for innovation. You must also decide what you will share and make sure that all of your employees understand what is strictly proprietary knowledge, technology or processes. Most of all, you must view competitive collaboration as a mutual learning experience: you are not only the benefactor or superior contributor to an alliance. Different degrees of dependence are common and is what makes collaboration successful: It’s important that each member understands their position.
The most successful collaborations are those that: are viewed as mutual learning experiences; are bounded by understanding of what is shared and what is proprietary; what is shared is not a core competency that differentiates the companies in terms of their competitive advantage; and gatekeepers are established to guard proprietary information. In addition, companies that are smaller than industry leaders often benefit most from competitive collaboration.
The writer is an executive coach and HR training and evelopment expert. She can be reached at email@example.com or www.academiaofhumanpotential.com. Views expressed are her own and do not reflect the newspaper’s policy
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