Coopetition: what if your competitor became your best ally?

In the early 2000s, the atmosphere in the offices of Airbus Defense Space (EADS at the time) in the suburbs of Toulouse was heavy. The American Boeing Space System has developed a telecommunications satellite platform capable of carrying heavy, high-powered payloads.
Paul Chiambaretto, Montpellier Business School - UGEI and Anne-Sophie Fernandez, University of Montpellier

Inventing new forms of cooperation. VisualHunt

This new technology gives the American company an unprecedented competitive edge in the telecommunications satellite market. Airbus Defense Space is unable to compete, and finds itself excluded from this high-end global market. How can we catch up?
Airbus Defense Space has neither the resources (human, financial or technological) nor the skills to develop a new satellite platform on its own. Its European competitor, Thales Alenia Space, is in the same predicament. The two European leaders are therefore unable to compete with the American manufacturer on the world stage.
Against all odds, despite being competitors, Airbus Defense Space and Thales Alenia Space joined forces to meet the technological challenge facing the European space industry. In 2005, they invested over 400 million euros 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 are back in the telecoms satellite race and considered major players in the sector. The Alphabus project illustrates a counter-intuitive inter-organizational phenomenon of cooperation between competitors, and raises the following question: Why would a company have an interest in allying with your worst enemy ?

Is coopetition a new strategy?

In the mid-1990s, the president of Novell coined the neologism "coopetition" to describe his company's practices. Resulting from the contraction of cooperation and competition, the term coopetition characterizes inter-organizational relations that are simultaneously cooperative and competitive.
But cooperative relationships between competitors are not new. In the 6th century BC, Sun Tzu already recommended this type of strategy in his treatise on military strategy. However, the introduction of the concept of coopetition enables us 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 angle of paradox and duality.
To transcend the paradox of coopetition, we turn to Eastern thought. It enables us to understand the issues at stake in coopetition, notably through the figure of yin and yang. This symbolic representation teaches us that any cooperative relationship necessarily includes a 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 relationships of coopetition. Researchers in strategic management have suggested some answers.
Generally speaking, firms adopting coopetitive strategies seek to benefit from the advantages of both cooperation and competition. Why deprive yourself of the benefits of either of these strategies when you can claim them all? On the one hand, cooperation enables firms to create more value, to increase the size of the cake. On the other hand, competition enables each firm to hope to capture a greater share of the value created, a larger slice of the cake.
More specifically, coopetition strategies are determined by a combination of external and internal factors. As demonstrated by the development of the drugs Plavix and Aprovel by rival pharmaceutical companies Sanofi and BMS, competing firms are more likely to cooperate when it comes to innovation. High R&D costs, the speed of technological progress and the need to be the first company to market with 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 gain access to resources (human, financial or technological) and skills they do not possess. In many cases, these resources and skills are held by a rival firm. Two competing firms have portfolios of resources and skills that are both complementary and similar, making them more efficient to combine. By cooperating, competing firms will develop new capabilities which they will then use individually to improve their market competitiveness.

Is coopetition a ubiquitous strategy?

Today, many companies are adopting coopetition strategies. In 2004, Sony and Samsung set up a joint venture to develop LCD technology together. The jointly developed technology will be integrated into the two partners' respective product lines. Sony and Samsung thus continue to compete on 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 create a breakthrough in their market, enabling them to benefit from 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 package called CRM Dynamics. More emblematic is the alliance between Apple and Samsung, who are also competitors in the smartphone market.
But coopetition strategies can also be found in less technological sectors. In the airline sector, more and more airlines (such as Air France) are engaging in alliance strategies with competitors to be able to offer a greater number of destinations to their customers. In the wine sector, some competing winemakers have decided to create common brands and appellations (such as AOCs) to gain visibility and increase the size of their market. Similarly, in the tourism sector, we are seeing the development of cooperative strategies (such as joint advertising) between competing hotels to attract tourists to their city.
However, the adoption of these coopetition strategies presents new challenges for companies. While cooperating with a competitor appears to be a relevant strategy for firms, implementing this paradoxical strategy poses a number of difficulties for managers.
How can individuals from two competing firms really work together? What information can or cannot be shared with a partner? Cooperative strategies also call into question the legal framework. How far can companies go?
The ConversationNew theories and analytical frameworks are needed to understand these strategies and coopetition, and to support firms in their approach.
Paul ChiambarettoTeacher-researcher, Montpellier Business School - UGEI and Anne-Sophie FernandezHDR Senior Lecturer in Strategy, University of Montpellier
Visit original version of this article was published on The Conversation.