What is Coopetition and How Are Smart Companies Using it to Grow Their Businesses?

October 26, 2016 Sara Toole

Coopetition2

Coopetition (co-opetition) is a portmanteau, a word used to describe the concept of “cooperative competition”. It’s a business strategy that uses insights from game theory to understand when it is better for competitors to work together to increase the benefits for all players. In coopetition, competitors collaborate, pooling their resources for mutual gain.

Coopetition was first widely studied and discussed in the 1996 book, Co-opetition, appropriately co-authored by Adam M. Brandenburger ofHarvard Business School and Barry J. Nalebuff of the Yale School of Management. Academic institutions collaborating on research were among the first to utilize it. As a business strategy, it has most often been (quietly) used by large, sophisticated (often multi-national) companies. But these days, its principles make great sense for businesses and organizations of all kinds. In today’s networked world where it has never been easier to implement, it’s a strategy you should thoughtfully consider applying toyour business.

Game theory is the underlying principle of coopetition. Game theory suggests that when you’re losing the game, you need to change the way it is being played. Its origins date back to World War II when the British navy, losing a never-ending game of cat and mouse with German submarines, realized they needed to change the “game” they were playing. By applying game theory and working with both the US and Canada on the high seas, and in the area of technology sharing, the British dramatically improved their success against the Germans.

As Brandenburger and Nalebuff noted in their book, business has often been thought of in terms of war, most famously expressed by author Gore Vidal: “It’s not enough to succeed. Others must fail.” But their research led them to conclude that most businesses actually succeed when other businesses succeed. So, “Not war. Not peace. But rather, war and peace.”.

The authors point to the Microsoft / Intel relationship as one of the best-known examples of coopetition: “The demand for Intel chips increases when Microsoft creates more powerful software. Microsoft becomes more valuable when Intel produces faster chips.” That’s not a win/lose proposition, but rather, a win/win. It doesn’t imply that businesses shouldn’t compete. Indeed, capitalism inherently requires that they do. But it does suggest that business competitors can work together without ignoring their justified self-interest.

Coopetition can work between direct or indirect competitors on both a vertical (partnering with suppliers or distributors) or horizontal (direct competitors teaming to expand markets or improve their positions against other competitors) basis. It can manifest in the form of everything from link exchanges to affiliate marketing, and result in benefits such as cost-savings, distribution efficiency, extended market reach, and product up-selling, bundling or integration. It can also lead to mergers.

The “Wintelpartnership is just one variation of coopetition. More recent notable examples include manufacturers Ford and Toyota teaming up in 2013 to design the Atlas Ford F-150 Hybrid concept (Yes, an F150 plug-in! Ford sells America’s favorite trucks, Toyota makes the world’s best-selling hybrids); Mortal enemies Apple and Microsoft teaming up on the licensing of mobile operating system features and patents; and Google andMozilla working together (Google funded Mozilla’s free, open-sourceFirefox web browser – a Chrome rival – to limit the influence of rival browsers, Microsoft’s Internet Explorer and Apple’s Safari).

Today, companies and organizations are continuing to apply the concept of coopetition in increasingly innovative ways.

Real estate technology company, HomeASAP is using the strategy in an imaginative way with Search Alliance, a groundbreaking national lead-gen co-op network for real estate agents. The peer-to-peer style platform links thousands of local agent IDX websites to power a nationwide home search, enabling agents and brokers serving any market and aligned with any brand to work cooperatively (while still operating as competitors) to provide a superior home search experience for consumers. The net effect enables agents to regain market share of consumer home search web traffic from major national portals like Zillow, while lowering the cost of lead generation.

Considering there’s over 1.2 Million Realtors® and approximately 2.5 million real estate agents and brokers total in the US, each representing their own individual “small business”, that’s a massive coopetitive effort. Mark Bloomfield, Founder and CEO of HomeASAP says over 14,000 agents are already using Search Alliance, and he expects that number to grow to 100,000 by the end of 2017. The network is free to join.

The U.S. government is getting in on the coopetition act via the United States Postal Service’s (USPS) agreements with direct competitors Fed-exand UPS. Transit agreements are helping to lower operational costs and raise revenue for all three. Under the agreements, Priority and Express Mail items can be dropped off at any FedEx or UPS. The private companies, which have more efficient cross-country warehousing and shipping logistics, provide shipping to post offices serving the intended destinations where the USPS becomes more efficient with delivery on “the last mile”, including to post office boxes.

Coopetition is even being used in the NGO space to help resolve issues like global warming. Refrigerants Naturally is a non-profit that was established by fierce competitors Coca-Cola, Pepsi Co, Red Bull, Unileverand others to work jointly to develop sustainable refrigeration technologies to combat climate change and ozone depletion, by replacing fluorinated gasses with natural refrigerants.

The ways you might use coopetition for your business or organization are limited only by your imagination. Remember, the game you think you may be restricted to playing is really only a matter of perspective. There’s always a larger game waiting to be played. It’s up to you to change it. Do you know any good examples of companies or organizations using coopetition for their strategic advantage? If so, please share them!

Author information

Sara Toole

Sara Toole

Sara Toole is the Director of the Small Business Forum. She has a wide range of experience, from marketing and project management at the world's biggest companies to running a marketing agency for small businesses.

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