Friend or foe?

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Collaboration has become an increasingly prevalent watchword in business, with companies more attuned to the value of working with others.

But what happens when organisations work with, rather than against, their competitors? Whether for collective good or individual benefit, cooperation strategies can strengthen business – to a point.

Cooperating with others, either in times of crisis or calm, can allow organisations to tap into collective strength and harness joint resources.

James Crick, assistant professor in marketing at Loughborough University, has been studying the issue of cooperation with competitors – or ‘coopetition’ – for a few years. He says there is a clear opportunity in a joined-up approach, particularly for smaller, under-resourced organisations, helping them to access equipment, information or knowledge that they wouldn’t otherwise have.

“Although it may not lead to firms having a competitive advantage, it may be the difference between surviving and failing within the market,” Crick says. “If firms are working hard to cope with all the shocks that everyone else is facing in the commercial world, it might mean the difference between being in business or having liquidity problems.”

During times of crisis, the importance of collaboration becomes ever more apparent, and even necessary.

As Covid-19 took hold, Boeing and Airbus partnered to study how the virus behaves in aeroplanes; UK competition laws were temporarily relaxed to allow supermarkets to share data with each other to help keep stock levels up; and pharmaceutical companies began working together to develop a vaccine.

Crick’s most recent paper, published in Industrial Marketing Management, focuses on the advantages and disadvantages of coopetition during the pandemic. One of the paper’s recommendations for practitioners is that, during a worldwide emergency, organisations should consider the potential mutual benefits of coopetition strategies – to meet unprecedented demand, improve performance and the efficiency of supply chains, or simply to survive within a volatile market.

Businesses must be aware of the extent to which they are legally permitted to engage in such strategies, however, as government rules do not permit forming monopolies. While coopetition may be allowed to help firms cope in times of crisis, they can be penalised for collusive competitive practices. There is also a fine balance to be struck between a mutually beneficial relationship and an arrangement that could end up harming a business.

Collaborating with competitors has its disadvantages and can be a hindrance if businesses don’t proceed with caution. Tension between organisations if strategies are not managed correctly, power imbalances, trust issues, and opportunistic behaviours can all negatively affect the success of cooperative arrangements, says Crick.

“Firms losing intellectual property can also be a drawback, or simply sharing an excessive amount of information, losing their USP, and diluting their competitive advantages,” he adds.

Evaluating the success of coopetition strategies will vary depending on the businesses’ objectives, which is a challenge in itself if these are not aligned. While some may cooperate to learn how to treat their customers better – measuring that by customer satisfaction scores – others might want to focus on financial or market metrics, such as profitability and market share.

A rising tide 

Of course, there are other, more subjective, metrics for success – such as quality and reputation. For example, Crick cites the wine industry, in which some businesses want to collaborate for the greater good of their region.

“In a group of established wine producers in a particular region, they’ve worked for decades to establish that wine region. Imagine a competitor comes to that region, or buys an existing vineyard, and doesn’t know what they’re doing. They could ruin the reputation that everyone has worked tirelessly to develop – so they cooperate with their competitors to make sure people are producing at the right level and to reduce the chances of it going wrong.”

In service-based industries, where companies often compete for a finite amount of customers or resources – for instance, client budget – businesses can only cooperate to a point, short of entering into more formal arrangements, such as strategic partnerships.

“No matter the extent to which firms are happy to work with one another, there will always be a point where that competitive instinct kicks back in and rivalry resumes,” says Crick.

So, beyond the crisis, is this a sustainable way of working in the longer term? According to Crick, the challenge lies in companies’ ability to engage in coopetition to an “optimal level”, which is difficult to do.

“It’s about choosing what you might refer to as ‘complementary competitors’ and trying to determine whether they are actually going to be helpful or a hindrance. If you’re collaborating with competitors aimed at a different set of customers, it’s ‘apples and oranges’ and it can be a hindrance to survival.

“But it’s also being able to acknowledge when things are going wrong, and when to say: ‘Is it time to go our separate ways and resume operating individualistically?’”

‘Coopetition and Covid-19: collaborative business-to-business marketing strategies in a pandemic crisis’, James M. Crick, Dave Crick, Industrial Marketing Management, Volume 88, July 2020

This article was first published in the October 2020 issue of Impact.