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How Co-opetition Replaced Competition

Companies no longer feel the need to crush their rivals and are working together

12Apr

Ayn Rand once noted that, ‘Competition is a by-product of productive work, not its goal. A creative man is motivated by the desire to achieve, not by the desire to beat others.’ Despite her high standing in certain spheres of the business community, this has been one of the more forgotten aspects of her philosophy. Success in the corporate world has long been considered synonymous with crushing the competition. However, this view of the world is increasing becoming irrelevant.

The necessities of the modern world mean a ‘winner takes all’ attitude is no longer suitable. With technology evolving so rapidly, connectivity so intense, and the threat of disruption so pervasive, many companies are arriving at the conclusion that what is good for the industry as a whole is good for them as a company. They are forming mutually beneficial partnerships in which competitors exploit synergies and leverage one another’s creativity, experience, and resources to create maximum value - far greater than a fixation on maintaining competitive edge by making things as difficult as possible for rivals at all costs.

Collaboration when it involves direct competitors working together in an area that is not their core competency, but where they have at least a partial congruence of interest, is known as co-opetition. Essentially, co-opetition is a word executives use for collaboration to make them feel better about working directly with their competitors. It is not a new idea, but it has gained greater pre-eminence in recent years. It was first brought into the public consciousness by management professors Adam M. Brandbenburger and Barry J. Nalebuff, in their book Co-Opetition, which posited that businesses that form co-opetitions become more competitive by cooperating, and should therefore consider both cooperative and competitive ways to change the game. This can manifest itself in any number of ways, from information sharing through to integrating and streamlining processes

The idea of co-opetition has proved particularly popular in declining industries. Take, for example, the magazine industry, often held up as a textbook example of one on the way out. The internet has transformed how all content is consumed, and many publishers are seeing some incredibly harsh declines. Condé Nast, for one, recently reported that circulation of its titles had fallen 8.9% year on year.

One notable outlier is The Economist. Results for the financial year ending March 31st 2016 showed group revenue of £331 million, up 2% on 2015 when it made $328 million and group operating profit of £61 million. Circulation of The Economist remained robust at 1.6m. As part of its renewed focus on digital, it nows gets nearly 11 million unique visitors to its website per year. Digital subscriptions are up 14% are social audiences are up 26%. Gross profits are up nearly 20%.

At the heart of this is a concerted effort to work alongside competitors for the good of the industry, to present a united front in the face of market forces that seem desperate for them to fail. In his recent presentation at the recent CFO Rising East Summit, Daniel Surette, VP of Finance at The Economist, said that around 10 years ago, they noticed that one of the plants they printed out of in California sent out a truck delivering to a postal depot that had barely any copies in it. The plant alerted them to another competitor who was leaving the same plant with the same problem, and suggested that they share the truck. Leadership at both organizations scorned the idea, saying that they would prefer to have half empty trucks than allow rivals to share distribution channels.

Today, however, it is a different landscape. Hit with a secular decline in print ad sales and changes to digital media, publishing leaders are now more willing to talk, to share trucks so forth. Where The Economist would in the past send out 20 trucks every week, this has been reduced to five. Surette notes that, ‘As an industry, everyone needs each other - no-one benefits if competitors start falling off. They are all in it together.’ This also means that at the postal depot, they are quicker to process it and it gets to newsstands quicker. It has also had an environmental impact too in that there are less trucks out on the road and thereby less emissions.

It is also vital in the early stages of new technologies, particularly in sharing data. In a recent interview with us, Cindy Mallory, Business Analyst and VR Game Developer at DreamSail Games, noted that:

‘I’ve been lucky enough to meet some amazing game developers while exhibiting at conventions like GDC, Twitchcon, and PAX that are kind enough to answer my ridiculous emails. I send out requests (with smiley faces) that ask intimate development questions regarding active session stats on their games, efficacy of marketing campaigns, and developmental systems inquiries ranging from production duration to team size to agile software preferences. The industry guidance and support system I’ve cultivated for my team demonstrate a willingness in the VR space to share for the greater good. We are in uncharted territory with a disruptive technology. Online communities offer support while developers create tutorials, give talks, and publish devlogs.’

‘Co-opetition, otherwise known as cooperative competition, is a principal chronicled in game theory. The mechanisms of juxtaposed competition and cooperation take place in industries where there is a congruity of interests. The collective contribution of competing companies creates a phenomenon of encouragement that fosters research and knowledge sharing. This, in turn, accelerates content creation, VR development accessibility, and the rate of consumer adoption. As DreamSail progressed past R&D and pre-production into vertical slice development, I’ve gained mentors and friends who work for VR studios vying for the same small demographic. In the early stages of production, insights, and partnerships provided by pioneering developers, who are rooting for us to succeed, have made all the difference.’

This idea of sharing resources is now everywhere. Companies like Uber and Airbnb have brought the idea of sharing into the mainstream. While there will always be a place for competition, in the current climate it cannot be the be all and end all. Co-opetition can make 1+1=3, 4, 5, 15 - whatever it takes. And many companies need this. A piece of a bigger pie is far better to have than a tiny pie all to yourself.

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