Traditionally, competition has been viewed as a zero-sum game in which one player wins and the other loses. Companies often focus on outperforming their competitors to gain market share and improve profitability, but the increasing speed of change and the impact of not innovating is pushing organizations in a different direction. Inaction can be incredibly costly, and companies that fail to innovate risk falling behind. So, rather than shying away, businesses should actively seek out collaboration opportunities with their competitors. If you are still suspicious here are a few reasons why:
1. Access a new geographical market or enter a new market segment
By partnering with a competitor who has a foothold in a region, the business can leverage its expertise and relationships to enter the new market. The same applies to market segments. The perfect example is how Mercedes partnered with Renault to develop a 1.5 diesel engine and enter the small car segment (A-Class and B-Class models), while Renault generated additional revenue by supplying the engines.
2. Risk-sharing benefits
Innovation often requires significant investment in research and development and comes with great risks. By collaborating with a competitor, businesses can share these costs and reduce the financial burden. The same with risk, by sharing resources and expertise, businesses can share the risks and rewards of a project or initiative.
3. Access to complementary resources and expertise
One of the benefits of partnering with competitors is accessing complementary resources or expertise to improve operations and drive growth. Let’s say that a biotech company has developed a promising new drug candidate but lacks the expertise and resources to conduct clinical trials. However, a competitor in the same industry has significant experience and expertise in conducting clinical trials. Rather than attempting to develop the necessary expertise and resources in-house, the biotech company could partner with its competitor. It can also create advantages for both against the others. How banks partnered to improve their services and compete with fintech is a great example.
4. Capitalize on opportunities that require speed
Collaborating with competitors for innovation can help companies to move quickly and take advantage of opportunities that may have a limited window of availability. Having access to a larger pool of resources, expertise, and knowledge to accelerate the development and deployment of new products or services, can help to reduce the time to market. Additionally, collaborating with competitors can help companies to capitalize on emerging trends or disruptive technologies that may pose a threat to their existing business models.
5. Influence new policies and standards
Partnering with competitors to innovate can also have an impact beyond the boundaries of the partnership itself. Companies can create successful cases to influence policymakers, leading to regulatory changes or improvements in industry standards. For example, in the energy sector, competitors may collaborate to develop new renewable energy technologies. The success of such collaborations can help influence policymakers to implement more favorable regulations and incentives for renewable energy.
6. Create a new base infrastructure
It’s not hard to imagine a scenario where competitors’ collaboration can result in a higher quality of services across the entire industry. Competitors can work together to establish new standards, protocols, and best practices that higher efficiency, lower costs and improve customer experiences. A well-known example is how the collaboration of several major players in the telecommunications industry resulted in the development of the 5G network infrastructure.
The benefits are clear, but it is not without its challenges. With the right strategy and approach, businesses can successfully innovate with their competitors and thrive. So, how can companies make sure the unlikely partnership has a happy ending
Download our guide ‘Innovate with Competitors: Unlocking the Power of Collaboration’ and learn how to choose the right partner, leverage collective knowledge and resources and overcome common challenges.
by Manuel Tanger, Chief Innovation Officer at Beta-i