Coopetition in business – to fear or to embrace?

Coopetition or co-opetition is a buzzword used to describe cooperative competition. It is a combination of cooperation and competition.

Who coined the term coopetition?

It was first used in the early 1990’s by Raymond J. Noorda, the founder of Novell Corp., and gradually used more over the years.

Is competition better than cooperation?

Cooperation is always better, even between direct competitors.

What is cooperative competition?

A term referring to the benefits two or more companies experience while competing with each other for customers or markets.

It seems counterintuitive in any business or game to help a competitor. In the entrepreneurial world, however, there are a number of ways that helping others can end up putting more money in your own pocket and generate better practices for your business.

My philosophy about competition is best summed up by Henry Ford, who once said: “The competitor to be feared is the one who never bothers you at all but goes on making his own business better all the time.”

Keep making your business better, and you’ll have no need to fear your competitors!

A good way to constantly improve your own business, is by making friends with your competitors. Learn from them and grow. Watch their mistakes and victories and improve your business without having to “pay the school fees” yourself.

Remember though, coopetition does not come from a selfish “using the friendship you have with your competitors”, but rather from a genuine mindset of “a rising tide raises all ships”. Everybody does better by taking hands in collaboration.

How can you embrace the idea of coopetition to help your business grow?

1. Diversification

Business coaches teach that we shouldn’t put all our eggs in one basket. Change is a constant in all industries and the best defense is to diversify as it allows your business to move into related industries to make sure that you don’t become overly dependent on just one revenue stream. I believe many businesses were severely hurt during lockdown when their one income stream was stopped through no actions of their own. Coopetition is a safe way to investigate diversification by working with others in related industries.

• Market development

Market development ensures you dig deep into your current customers base by providing more complete solutions to them. Businesses often have one or two fields or products they specialize in but are usually unable to assist their customers with products or services outside their field of expertise.  This is where coopetition becomes invaluable. A business enters into a cooperative agreement with another business that offers as part of their expertise, those products and services which you can’t. Because you are the one offering this “extra” expertise to your current customers, you strengthen the relationship you have with them as they view you as the one solving their problems.

• Market penetration

As a small or midsize business, you probably already have good penetration in your home market, but outside of it, you may not be well known. Coopetition can assist in an even better market penetration by taking hands with businesses who also service your target market, but who are not in direct competition with you for your customers money. A novel idea which few business owners utilize is to give away their referrals or leads outside of their geographical area to their competitor in a neighboring area. When the relationship develops and their competitor understands why they’re doing it, they are likely to give away leads outside their area in return.

• Product development

The best way to develop even better products is to combine your innovative ideas with what others in your industry are already doing. With a strategic partnership, two competitors working collaboratively instead of against each other, can combine their product strengths with minimal cost and time, rather than each funding a new development.

Businesses combine their expertise for the benefit of all and the end result is that everybody wins – including the customer who is getting better service and better products!

Coopetition doesn’t mean that business stop competing. Capitalism inherently requires that they do. But it does lead to competitive businesses working together without ignoring their justified self-interest.

Examples of modern-day coopetition:

1. Microsoft / Intel – The demand for Intel chips increases when Microsoft creates more powerful software. Microsoft become more valuable when Intel produces faster chips.”

2. Amazon / Apple – Tongue in cheek the two giants became FRENEMY’s when Amazon agreed to distribute its e-books through the iPad’s Kindle app. Amazon wins as it got a wide market for its Kindle, and Apple’s iPad became a more comprehensive content provider.

3. Amazon.com – Amazon is leading the way with a coopetition-based business model. They’ve proven how value is created and growth ensured by cooperating with competitors.

If you are considering coopetition hoping to put your competitor at a disadvantage, don’t do it! It’s very risky, may cost you a lot of time and money it usually backfires – most competitors are not stupid or desperate.  Always make sure your intellectual property is protected up front with a two-way non-disclosure agreement.  Go into the relationship carefully, allow the trust to grow and always look for the win-win for both parties.

Smart entrepreneurs realize that sometimes they have to fight that natural instinct to consider competitors as the enemy. If you keep your customer’s best interest as your first priority, you will know when it’s time to think outside the box. That thinking, including coopetition, will pay big dividends for your own business growth, as well as customer relationships.

Will YOU consider reaching out to your biggest competitor and start the relationship?

Please share any coopetition success stories with us on info@thelife.digital