Nov 18, 2019
Coopetition
Why Collaborating with your Competitors Can Be the Key to Innovation
** This is a continuation of the blogpost about different innovation governance models. You can read part one HERE **
Do you remember who invented the liquid crystal display (LCD) back in 2003 that disrupted a whole industry and thereby brought the era of traditional tube televisions to an end? Even though you may not think of a particular person, you certainly have names of tech giants popping up in your head, right? Actually, you are very right when more than just one name comes to your mind since two of the tech giants — Samsung and Sony — both did: the two competitors invented LCD together by merging their R&D activities. As a result, they reached the two top ranks in TV market and increased their value tremendously.
What is Coopetition?
What Sony and Samsung did here is widely known as coopetition — the similar pursuit of collaboration and competition between firms producing or developing complementary or related products. The motivation to engage in coopetition can vary: Competitors may aim to increase the size of the current market, create a whole new market, become more efficient or improve their competitive position.
Cooperation of competitive global players with start-ups and research initiatives seems inevitable. Challenges related to big topics such as AI, IoT, digital healthcare or autonomous driving require new approaches and new answers. The complexity of such challenges makes it impossible for just one corporation to find satisfactory solutions.
However, many corporates are still very conservative when it comes to collaboration. They’d rather own something than find a way to collaborate outside of their safe R&D bunkers. This very often results in corporates simply duplicating their innovation efforts and thereby wasting time and resources without adding any value. In other words: an economic disaster.
Challenges could be tackled more efficiently and effectively if the forces of individual corporations, startups and research institutions are united. The example of Samsung and Sony shows that this does not have to come at a cost of losing the market share or profitability. If coopetition is performed well, it may well lead to higher turnovers and increased profits. Keeping in mind that this governance model also includes a lower financial risk for the companies as the investment is consortium-based, the possible profits clearly exceed the risks.
In cases of coopetition between corporations and startups, this model allows for combining the best of both worlds. Start-ups are agile, their organizational structure promotes innovation and drives change forward — this is exactly what large corporations lack. However, corporations know how to handle large scale and have the necessary capital to do so. Such coopetition structure enables companies to address problems from new and unconventional angles to find answers to questions that have never been asked nor answered before.
Enough theory. Does coopetition actually work in the real world?
Yes, it does. Here are some examples:
Coopetition was carried out successfully by the Israeli airline El-Al when they formed their own acceleration and venture capital arm “Cockpit” to invest in promising start-ups all around the world. They partnered with Lufthansa Systems, Boeing and Gate Group to create innovative solutions for the whole airline-industry. To date, Cockpit has co-developed 10 Proofs-of-Concept, five of which have been successfully commercialized, and has grown a portfolio of 12 start-ups.
Another success story was written by Apple, IBM and Motorola when they joint their R&D activities to produce new, RISC-based microprocessors.
Amazon engaged in coopetition when they introduced the “marketplace” in 2000: Competitors of any size and from any industry could list and sell their products alongside Amazon’s own propositions on the online marketplace run by Amazon. While the advantages for Amazon seemed to be obvious (increase customer base and therefore market share), this was also a great opportunity for traditional non-virtual retailers to expand their businesses without having to set up costly online platforms.
Is all the effort really worth it?
In the end, sharing knowledge and resources might be the only effective way to tackle 21st century challenges. Arie Levy-Cohen, Co-Founder and CFO of Singular DTV, is convinced that coopetition is the only way to survive for industries. In an Interview about the future of Blockchain culture he states that “Coopetition comes, for [him], from the concept that we need to ensure that the planet survives so that we can all then have the chance to compete with each other in whatever ways we want. We are in a massive phase transition where the old economy, the old systems of finance, the centralized operating systems that rule the world, the totalitarian, top-down approach that arrests the value and makes you a serf to the system, is about to be turned on its head.”
Whether you agree with him or not — the fact that more and more industries are disrupted by new and emerging technologies and innovative solutions is undeniable. Coopetition offers a way to keep up with the pace of technological advancements and free yourself from counterproductive and narrow mindsets in order to drive innovation and sustainable growth forward.
** This is a continuation of the blogpost about different innovation governance models. You can read part one HERE **
