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Can Co-opetition Save your Company?

Posted by Gesuina Puangco | November 2, 2015


Co-opetition—a tactic where companies collaborate with their competitors—could be the surprising answer to some industries’ biggest problems.

 

The need for co-opetition arises when rapid changes occur within an industry (e.g. the advent of free media birthing a collaboration between record labels and streaming sites) or when resources are scarce (e.g. patents for necessary technology being held by competing parties). While it may seem counterintuitive, co-opetition is slowly becoming a strategy that more and more companies are utilizing to widen their options—and survive.Particularly in the freight and transport industry, with shipping capacity low and demands increasingly stringent (customers who want to ship goods want it done quickly), the need for efficient routes is pressing but unsustainable. With both an erratic availability of resources and changes happening over a smaller span of time, numerous challenges have arisen over the past few years. We take a closer look into co-opetition as a survival tactic and how it is becoming crucial to managing your supply chain, and inseparably, your business.  

Keep Your Friends Close…

A good cautionary tale of how crucial to success co-opetition can be is BlackBerry. The difference between BlackBerry in 2007— with a net worth of US $40B and BlackBerry in 2013—willing to be sold for a measly a tenth of its 2007 figure—has a lot to do with a failure to identify and deal with its competitors in the correct way. Underestimating Apple and the early iPhone, Blackberry didn’t see the need to cooperate with the right OS developers to create an easy-to-use app store and enough third-party programs to fill their inventory.

We can also see this phenomena at work in a more obvious way through tech businesses which have thrived: Apple and Samsung have kept their high percent of market shares by using their rivalry to sustain interest and promote new products—as well as making the most of each other’s strengths. For instance, despite patent disputes, Samsung is set to manufacture the new iPhone’s main chip.

Learn from Amazon

One of the biggest players in the co-opetition game across all boards is Amazon. When it began in the late 90s, Amazon was exclusively selling books. In 2000, it branched out and invited third party sellers to the Amazon Marketplace, including Borders, its stiff competition. By doing this, it at once eliminated its competition and expanded its market. In 2007, it released the Kindle. The Kindle’s popularity was usurped by the iPad release in 2010— but Amazon quickly partnered up with Apple (and later, Android) to release the Kindle App, again widening its market. By the end of that year, it grew to a 35 percent market share.

Co-opetition can Save the Freight Industry.

While co-opetition has done a lot to improve the technology industry, its biggest impact lies in transportation and logistics.

Ideally, shippers want big ships to carry a lot of stuff to one place in order to maximize costs and efficiency. But today, as shipping times decrease, ships and trucks are having trouble filling up their vessels to capacity within a small period of time. They don’t have the luxury of waiting a long time to fill up vessels, causing conflict between the need to deliver on time and the need to be cost-efficient. By working with a lot of different companies so as to solicit enough cargo to fill up bigger ships within the same period of time, each trip is made worth the money and effort spent.

In turn, companies have also benefitted from the availability and willingness of shippers. Amazon, for example, works with over 20 carriers and by utilizing a wide range of freight services to they’ve expanded the number of services they can charge more for. Having reliable, efficient partners has allowed them to raise prices on same-day deliveries so that even if a bigger vessel has to make a smaller delivery, the losses incurred are significantly lessened.

The Long & Winding Road

One major difficulty for the transport industry has been the last mile delivery phase, or the part of the shipping route where the package is delivered to an actual address because it costs more per unit of shipment. Instead of wasting fuel on working out extra routes to deliver a relatively small number of parcels per specific area, bigger shipping companies have been working with Third Party Logistics providers or 3PLs which work with a number of big shipping companies and consolidate their deliveries to create a route that is timely and cost-efficient.

Big shippers and smaller couriers are competing for the same pool of inventory—but by working together, they have widened that pool and are able to benefit from one another’s business. They are able to do more—and do it better.



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