Co-opetition can boost your company’s innovation and lower costs

School playgrounds around the world became battlegrounds in the 1990s for a variety of reasons, but perhaps one of the most brutal wars was the one waged in favor of Nintendo and Sega. The die-hard denizens of Team Mario and Sonic clashed day in and day out over the perceived merits of the video game consoles they chose (or were chosen for).

Much of the advertising material in trade publications at the time focused not on promoting one’s own products, but rather on trashing competitors’ products—and insulting those who committed the heinous crime of buying them. This, in turn, fired up the player bases and sent them, overflowing with urine and vinegar, into those fields armed with the kind of verbal ammunition they needed to overcome.

The battles were bloody; tolls probably incalculable. While the losers sat in detention, the winners celebrated in distant boardrooms. War is hell.

But one of the spoils of this particular war was an early and highly publicized example of the modern boon that is “cooperation.” The beginning of the end of this no-holds-barred era of vicious corporate pugilism came in 2001, when Sega’s dire financial situation caused the company to pull out of the hardware business.

As a direct result, Sega’s ubiquitous mascot Sonic the Hedgehog’s next game was released exclusively on none other than Nintendo’s then-new handheld system, the Game Boy Advance.

Work together

Veterans of the console wars of the 90s were shocked: the unthinkable had happened and the world would never be the same again.

However, some saw it. In fact, it was a message that had grown louder since it was first proposed in the middle storm and stress those warlike earlier times. In 1996, a book was published that charted a new course for the business world in the following years. In one of the clearest cases of leading by example, Harvard Business School’s Adam M Brandenburger teamed up with Yale School of Management’s Barry J Nalebuff. Coquette.

The book outlined a business strategy of finding common ground with rivals to combine advantages and maximize profits. The pair were inspired by the growing number of partnerships between competitors in the early 1990s, businesses that saw beyond the quick benefits of fierce competition to a world where teams and collaboration could deliver even better results.

The origins of the concept can also be traced to game theory, where mathematical models illustrate the ways in which cooperation between rivals can be beneficial to all involved. As the practice spread, fears grew that businesses could leave dynamic industries in the dust if they weren’t open to the unlikely alliance.

Risk

Today, the philosophy of coopetition can pay huge dividends for those willing to take the risk. Perhaps the biggest example is the ongoing partnership between Apple and Samsung. Although they may seem to be in opposite corners of the ring, Samsung supplies Apple with screens for its iPhones.

Cupertino’s most famous resident is also in bed with the Amazon; in 2018, Apple became a certified seller on the e-commerce giant. Previously, third-party sellers were the only option when buying the tech giant’s goods through Amazon.

But that was just the build-up to the 2021 announcement that Apple, Amazon, Google and more than 170 other companies had joined an alliance called Project CHIP (Connected Home over IP). The initiative aims to bring greater compatibility to the smart home concept and end years of competing products that have confused and alienated consumers.

Participants benefited from one of the most important lessons outlined in Brandenburger and Nalebuff’s book: knowing when and how to implement a co-op strategy because, as Brandenburger told Forbes in 2019, “it’s still often seen as a last resort.”

Common goals

While co-op may be a natural fit for the tech industry, other markets have had a harder time getting up to speed. Auto companies spent the 20th century fiercely guarding secrets and innovations against the specter of industrial espionage, but the disruptive innovations of the 21st century changed all that.

The advent of Uber has given automakers a new outlet for emerging technologies. In 2017, Daimler approached the ride-sharing pioneer to act as a vehicle for its newly developed self-driving cars; Uber immediately saw benefits for both companies.

As it acknowledged at the time: “Car manufacturers like Daimler are essential to our strategy because Uber has no experience in making cars… So instead of making them ourselves, we want to work with the best car manufacturers in the world.”

For Daimler, it was a chance to transcend its status as a manufacturer and instead establish itself as a “mobility provider,” a reality that has forced many auto giants to change course over the past two decades.

Join forces

The key to a successful cooperative venture is to recognize when the time is right. It’s not just about waving the white flag and hoping for the best; the first step on the road to common competition for any business must be to understand exactly what makes your company unique. That way, in the event of a potential meeting of the minds, you know exactly what you’re bringing to the table.

You will also know where your shortcomings are, gaps that will be filled by any partner you choose to join forces with. As long as both sides gain similar benefits and no one has a significant advantage over the other, cooperation makes sense.

It’s also about understanding that consumers are overwhelmed with choice like never before, and making the “best of both worlds” available makes their purchasing decisions much easier. After all, the win-win result at the end of the co-op rainbow is not just for the participating companies and their shareholders.

Perfect timing

Nowhere was this more evident than in the early days of the COVID-19 pandemic, when pharmaceutical titans Pfizer and BioNTech put aside their differences and pooled their resources to develop a vaccine against a virus that is spreading around the world at an alarming rate.

The collaboration resulted in a vaccine that reached the market much earlier than if the two companies had worked independently, and subsequently helped mitigate the impact of COVID-19 around the world.

In an increasingly connected world, the sour rivalries and guarded tones of yesteryear are likely to remain. The benefits of cooperation – sharing strengths rather than secrets, fostering innovation rather than wasting money and resources trying to keep up, setting standards and not scrapping them – are clear to any company that wants to be the best it can be. The race for the prize doesn’t have to be a lonely affair over the long haul; it became a relay race.

Just ask the video game players who, thanks to co-op, have found common ground in a no-man’s land far from the battle lines of days gone by. When Epic Games’ 2017 battle royale game Fortnite became a worldwide phenomenon, the industry’s Big Three – Microsoft, Nintendo and Sony – began discussing the possibility of cross-platform play. Instead of dividing the Fortnite player base, the trio broke down their walls and allowed players to play together, regardless of the console they owned.

By coming together and sharing the spoils, the industry brought peace to the playground. And if Mario can change, maybe there’s hope for us all.

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