Coopetition: what if your competitor became your best ally?
In the early 2000s, in the suburbs of Toulouse, the atmosphere was heavy in the offices of Airbus Defense Space (EADS at the time). The American 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 is therefore excluded from this high-end global market. How can it catch up?
Airbus Defense Space has neither the resources (human, financial or technological) nor the skills necessary to develop a new satellite platform alone. Its European competitor, Thales Alenia Space, finds itself in the same impasse. The two European leaders are therefore unable to compete with the American manufacturer on the global market.
Against all odds, although competitors Airbus Defense Space and Thales Alenia Space will join forces to jointly address the technological challenge facing the European space industry. In 2005, they invested more than 400 million euros to start a project to create a new high-end satellite platform called Alphabus.
Twelve years later, in 2017, Airbus Defense Space and Thales Alenia Space have returned to the telecommunications satellite race and are 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 firm have an interest in to ally with one's worst enemy ?
Coopetition, a new strategy?
In the mid-1990s, the president of Novell invented the neologism “coopetition” to describe his company’s practices. A contraction of cooperation and competition, the term coopetition characterizes interorganizational relationships 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 allows us to go beyond the traditional opposition between competition and cooperation. The concept of coopetition has made it possible to highlight entrepreneurial practices and to analyze the phenomenon of cooperation between competitors from the perspective of paradox and duality.
In order to transcend the paradox of coopetition, Eastern thought enlightens us. It allows us to understand the issues of coopetition, particularly through the figure of yin and yang. This symbolic representation teaches us that any cooperative relationship necessarily includes a certain degree of competition and vice versa. Yin and Yang thus perfectly symbolize the interdependence of a firm 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. Strategic management researchers offer some answers.
Generally speaking, firms that adopt coopetition strategies seek to benefit from the advantages of both cooperation and competition. Why deprive yourself of the benefits of one or the other of these strategies when you can claim the accumulation of these benefits? 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 greater share of the value created, a larger share of the pie.
More specifically, coopetition strategies are determined by a set of external and internal factors. As the development of the drugs Plavix and Aprovel by competing pharmaceutical companies Sanofi and BMS perfectly demonstrates, competing firms are more likely to cooperate when it comes to innovation. The importance of R&D costs, the speed of technological progress or the need to be the first company to market an innovation, explain the need for alliances between competitors. Consequently, coopetition strategies are very widely observed in high-tech sectors.
Firms choose to cooperate 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, which makes 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 established a joint venture to jointly develop LCD technology. The jointly developed technology will be integrated into the respective product lines of the two partners. Sony and Samsung thus continue to compete in the market with products based on the same technology.
The digitalization of the economy reinforces the need for cooperation between competing firms. By allying with a competitor, companies hope to create a disruption in their market, allowing them to benefit from a blue ocean and a sustainable competitive advantage. For example, in the IT field, Microsoft and Salesforce have decided to publish a joint CRM software called CRM Dynamics. More emblematically, we can think of the alliance relations between Apple and Samsung, which are also competitors in the smartphone market.
But coopetition strategies are also 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, the implementation of this paradoxical strategy poses a number of difficulties for managers.
How can individuals from two competing firms actually work together? What information can or cannot be shared with one's partner? Coopetition strategies also question the legal framework. How far can companies go?
New theories and new analytical frameworks are needed to understand these strategies and coopetition and to support firms in their approach.
Paul Chiambaretto, Teacher-researcher, Montpellier Business School – UGEI and Anne-Sophie Fernandez, HDR lecturer in strategy, University of Montpellier
Visit original version of this article was published on The Conversation.