Coopetition: what if your competitor became your best ally?
In the early 2000s, in the suburbs of Toulouse, the atmosphere was tense in the offices of Airbus Defense Space (EADS at the time). The American company Boeing Space System had developed a telecommunications satellite platform capable of supporting heavy and very powerful payloads.
Paul Chiambaretto, Montpellier Business School – UGEI and Anne-Sophie Fernandez, University of Montpellier
This new technology gives the American company an unprecedented competitive advantage in the telecommunications satellite market. Airbus Defense Space is unable to compete and finds itself effectively excluded from this high-end global market. How can it catch up?
Airbus Defense Space does not have the resources (human, financial, or technological) or the expertise necessary to develop a new satellite platform on its own. Its European competitor, Thales Alenia Space, finds itself in the same predicament. The two European leaders are therefore unable to compete with the American manufacturer on the global market.
Against all odds, competitors Airbus Defense Space and Thales Alenia Space are joining forces to tackle the technological challenge facing the European space industry. In 2005, they invested more than €400 million to launch a project to create a new high-end satellite platform called Alphabus.
Twelve years later, in 2017, Airbus Defense Space and Thales Alenia Space returned to the telecommunications satellite market and are now considered major players in the sector. The Alphabus project illustrates a counterintuitive interorganizational phenomenon of cooperation between competitors and raises the following question: Why would a company have an interest in team up with one's worst enemy ?
Coopetition: a new strategy?
In the mid-1990s, the president of Novell coined the term "coopetition" to describe his company's practices. A combination of cooperation and competition, the term coopetition characterizes interorganizational relationships that are both cooperative and competitive.
But cooperative relationships between competitors are nothing new. Inthe 6th century BC, Sun Tzu was already recommending this type of strategy in his treatise on military strategy. However, the introduction of the concept of coopetition makes it possible to move beyond the traditional opposition between competition and cooperation. The concept of coopetition has made it possible to highlight entrepreneurial practices and analyze the phenomenon of cooperation between competitors from the perspective of paradox and duality.
Eastern philosophy sheds light on how to transcend the paradox of coopetition. It helps us understand the challenges of coopetition, particularly through the concept of yin and yang. This symbolic representation teaches us that any cooperative relationship necessarily involves a certain degree of competition, and vice versa. Yin and yang thus perfectly symbolize the interdependence of a company and its competitor.
Why cooperate with your competitor?
However, it is difficult to understand why competitors find themselves involved in these paradoxical co-opetition relationships. Strategic management researchers offer some answers.
In general, companies that adopt co-opetition strategies seek to benefit from both cooperation and competition. Why deprive yourself of the benefits of either strategy when you can claim both? On the one hand, cooperation allows firms to create more value, to increase the size of the pie. On the other hand, competition allows each firm to hope to capture a larger share of the value created, a larger slice of the pie.
More specifically, coopetition strategies are determined by a set of external and internal factors. As perfectly illustrated by the development of the drugs Plavix and Aprovel by competing pharmaceutical companies Sanofi and BMS, competing firms are more likely to cooperate when it comes to innovation. The high cost of R&D, the rapid pace of technological progress, and the need to be the first company to market an innovation explain the need for alliances between competitors. As a result, coopetition strategies are widely observed in high-tech sectors.
Firms choose to cooperate in order to access resources (human, financial, or technological) and skills that they do not have. In many cases, these resources and skills are held by a competing firm. Two competing firms have portfolios of resources and skills that are both complementary and similar, making their combination more efficient. By cooperating, competing firms will develop new capabilities that they will then use individually to improve their competitiveness in the markets.
Coopetition, an omnipresent strategy?
Many companies today are adopting coopetition strategies. In 2004, Sony and Samsung created a joint venture to develop LCD technology together. The jointly developed technology will be integrated into the respective product lines of both partners. Sony and Samsung thus continue to compete in the market with products based on the same technology.
The digitization of the economy reinforces the need for cooperation between competing firms. By joining forces with a competitor, companies hope to disrupt their market, allowing them to take advantage of a blue ocean and a sustainable competitive advantage. For example, in the IT sector, Microsoft and Salesforce have decided to publish a joint CRM software program called CRM Dynamics. A more emblematic example is the alliance between Apple and Samsung, which are otherwise competitors in the smartphone market.
But coopetition strategies can also be found in less technology-driven sectors. In the airline industry, more and more airlines (such as Air France) are entering into alliances with competitors in order to offer their customers a greater number of destinations. In the wine industry, some competing winemakers have decided to create joint brands and appellations (such as AOCs) to gain visibility and increase the size of their market. Similarly, in the tourism industry, we are seeing the development of cooperative strategies (such as joint advertising) between competing hotels to attract tourists to their cities.
However, adopting these coopetition strategies presents new challenges for companies. While cooperating with a competitor may seem like a sound strategy for firms, implementing this paradoxical strategy poses a number of difficulties for managers.
How can individuals from two competing firms actually work together? What information can be shared with partners and what cannot? Coopetition strategies also raise questions about the legal framework. How far can companies go?
New theories and analytical frameworks are needed to understand these strategies and coopetition and to support companies in their approach.
Paul Chiambaretto, Professor, Montpellier Business School – UGEI and Anne-Sophie Fernandez, Senior Lecturer in Strategy, University of Montpellier
The original version of this article was published on The Conversation.