Ecological transition: what if companies opted for coopetition?
"I have a tall cappuccino for John...". A phrase John hears every morning in his Starbucks in Palo Alto, before jumping into his Tesla to drive to work in San Francisco. It's such a natural routine that John almost forgets that both his coffee and his car are the result of an unnatural entrepreneurial strategy: coopetition, a word that combines cooperation and competition.
Anne-Sophie Fernandez, University of MontpellierAudrey Rouyre, Montpellier Business School and Paul Chiambaretto, Montpellier Business School
The cup that John inserts into his car's cup holder is the result of a collaboration between McDonalds and Starbucks, who, although major competitors in the fast-food and take-away beverage sectors, are closely associated in their policy of reducing food packaging waste. Similarly, the Tesla John drives on the Californian roads is built using many parts and technologies from Tesla's fierce competitors, such as Daimler and Toyota.
The idea that coopetition, i.e. alliances between competing companies, enables the development of new innovations, is a fairly widespread one. However, as we explain in a book, summing up the benefits of coopetition as simply the creation of economic or financial value is simplistic. Over the last ten years or so, various studies in management science have shown how such strategies can develop not only economic value, but also societal and environmental value. Developing the use of such strategies nevertheless seems to require changes in European law.
When sharing rhymes with efficiency
Defining what constitutes a green innovation is not always easy, and two complementary approaches can be considered: through the product and through the design process.
The first is to apply the qualifier "green" if the product designed is more environmentally friendly than existing products. In this logic, an electric car (like John's Tesla) can be considered a green innovation, since it pollutes less than a car powered by fossil fuels.
Developing a greener product is often a more radical and riskier innovation than a non-green one. To develop such innovations, the resources and skills of a single company are often not enough. It seems necessary to call on the expertise of an entire sector. As a result, competing companies pool their know-how, technologies and knowledge to develop new green standards within their industries.
To ensure the ecological transition of aeronautics, for example, eleven competitors including Airbus, Dassault Aviation and Saab have joined forces to create the Cleansky network, comprising 54 companies of all sizes, with the aim of inventing and producing the green aircraft of tomorrow. Also in the aviation sector, CFM International, a joint venture between two rival engine manufacturers, Safran and General Electric, has succeeded in developing jet engines that reduce carbon dioxide emissions by over 15% and nitrogen dioxide emissions by 50%. Neither Safran nor General Electric was capable of developing these new green technologies on its own. In the space sector we studied, MTG was developed by the two leading satellite manufacturers, Thales Alenia Space and OHB, with the aim of tracking weather trends and potentially forecasting future natural disasters.
The second approach focuses on the process used to produce the same end product: is it less resource-intensive? From this perspective, a new petrol or diesel car can be considered a green innovation if its construction requires less energy or consumes fewer resources than competing models.
Mutualizing competing production or logistics chains can therefore prove effective. This was the strategy adopted by Nestlé in the mid-2000s, when it cooperated with Pladis, one of its competitors in the UK, to carry out joint deliveries. Under the slogan "We compete on the shelf, not in the back of a lorry", the two groups managed to save an average of 28,000 km of deliveries a year, equivalent to 95,000 liters of fuel and 250 tonnes ofCO2.
For companies of all sizes
It's not just large corporations that are concerned. As we have shown in our work, many start-ups and SMEs join forces with competitors to strengthen their capacity for innovation. Their survival is often at stake, as smaller companies do not always have sufficient resources to develop products and bring them to market.
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The same applies to CSR and ecological transition issues. SMEs would like to take up these challenges, especially as their customers and stakeholders are increasingly sensitive to them. Given their limited resources, however, they often have to make trade-offs that force them to prioritize their day-to-day operational activities to the detriment of their environmental commitments.
Cooperating with competitors can provide them with the resources they need to continue their activities, while at the same time making a commitment to CSR and ecological transition. In South Africa, several small competing wineries that did not have the capacity to develop their own bottle recycling network have taken collective action to develop solutions for recycling glass and limiting the waste of resources.
Large corporations and SMEs can also interact. For example, Nestlé Waters and Danone, both competitors in beverage distribution, decided in 2017 to join forces and invest in the small Californian start-up Origin Materials, which develops plastic bottles made entirely from sustainable and renewable resources.
Legislative changes needed
If coopetition is virtuous and helps companies make the ecological transition, why aren't more companies doing it?
The first reason is the tension generated by these paradoxical strategies. Indeed, cooperating and competing at the same time generates tensions that are often difficult to ignore. Our study of the space industry suggests that particular attention should be paid to the sharing and protection of information.
Beyond this, there is still some uncertainty as to the legality of such alliances between competitors. Article 101 of the Treaty on the Functioning of the European Union considers as "incompatible with the internal market and prohibited all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the internal market".
However, it is not always easy to prove that a coopetition agreement is not likely to restrict or distort competition. When we looked at the real estate sector in Europe, we observed that coopetition strategies can lead to an increase in property prices, thus reducing the purchasing power of customers, but bringing more value for sellers.
This is why regulators in the European Union, but also in Australia, are increasingly considering explicitly incorporating exemptions to prevent competition law from preventing competitors from working together if the agreement helps accelerate the ecological transition of the companies in question.
However, the balance to be struck between competition law and environmental law remains subtle, for example when airlines and their rail competitors join forces. In any case, a change in the legal framework seems necessary to accompany a change in corporate practices in the face of the scale of the environmental challenge that awaits them.
Anne-Sophie Fernandez, HDR Senior Lecturer in Strategy, University of MontpellierAudrey Rouyre, Assistant Professor in Strategic Management, Montpellier Business School and Paul Chiambaretto, Associate Professor and Director of the Chaire Pégase, Montpellier Business School
This article is republished from The Conversation under a Creative Commons license. Read theoriginal article.