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Working with the “enemy”: Co-opetition is driving innovation today

Thu, Dec 11, 2008

Offshoring

Can business competitors actually gain from partnerships and alliances with each other? Can they compete and cooperate at the same time? Yes, indeed – it’s already happened in the high-tech industry and the trend is now spreading elsewhere.

Let’s start with a formal definition of what we’re talking about:

Co-opetition, describes World Wide Words, is the judicious mixture of competition and collaboration with companies, suppliers, customers, and firms producing complementary or related products. It can lead to expansion of the market and the formation of new business relationships, perhaps even the creation of new forms of enterprise.

“The traditional model says you have a fixed-size pie and you kill each other for a slice of it,” says Navi Radjou, a vice-president at Forrester Research Inc. in Cambridge, Massachusetts. “This new vision calls for collaboration to increase the size of the pie.”

The idea of co-opetition is not new in the high-tech industry. Ray Noorda, the founder of Novell, coined the word in 1996. He believed, given the vastness of network computing, companies could profit more if they cooperated on open standards and protocols instead of forcing customers to choose sides. Google’s advertising deal with rival eBay is the latest example. Through this deal, Google will provide web search advertising outside US to eBay. The two companies will develop an advertising product called click-to-call ads, which will let potential buyers talk with the sellers directly upon clicking the ad. Duet, a product jointly developed by Microsoft and SAP is another such example. It allows a Microsoft spreadsheet to pull data from SAP accounting system. Among other examples, PC operating system archrivals, Microsoft and Apple, joined hands for unifying Java applications on Windows and Macintosh systems, and America Online and Microsoft teamed up on various online offerings.

The power of co-opetition will only grow as products become more complex and as competition widens globally, says Businessweek. Co-opetition in the computer industry, through strategic alliances between software and hardware firms, has demonstrated several examples. Can small businesses in manufacturing (and other industries) also develop new products and markets through co-opetition? I think so. This new era of globalization has opened the door to co-opetition for small businesses as well. I think if small businesses embrace globalization and take the options it provides them seriously, co-opetition could be their answer – at least in addressing the new competition brought in by multinationals from BRIC nations I touched on in an earlier post.

Finally, in the past, we have seen competition as the key force behind innovation. That makes me wonder – if co-opetiton is today’s growing business trend – can it also be a main driver of innovation? If collaboration, as shown by P&G through its ‘Connect & Develop’ model, fosters innovation, so should co-opetition! After all, collaboration or cooperation is the essential part of co-opetition.

Co-opetition ‘“ potentially good for individual companies, both big and small, and potentially good for industries as well, through increased levels of innovation.

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