Collaborate with Your Competitors and Win

Collaborate with your Competitors and Win

        This is a paper written by Gary Hamel, Yves Doz, and CK Prahalad published in 1989 in the Harvard Business Review. Their study focused on 15 strategic alliances, which took them more than 5 years to finish.

        When competitors enter into a collaboration, companies knew that there is something in it for them – for the company. Collaboration is a strategic alliance between firms with a goal of providing a mutual benefit for each firm. Collaboration between companies is a good thing, only if both practice a give and take type of relationship, and they benefit from each other without compromising each other’s competitive position in the industry.

        Reasons cited why companies enter into a collaboration are as follows:

1. It is a low cost route in terms of technological advancement and market access. Companies knew that it will take them a considerable amount of money to develop new products and penetrate new markets if they do it on their own. Like in the case of ICL (a British IT company) and Fujitsu (Japanese company), both have entered into a technology-sharing agreement way back in 1981 to help each other bear the cost of heavy research and development. According to industry estimates, this kind of arrangement saved ICL around $1 billion to $3 billion.

1. Time is a critical factor and with the existence of alliances, it provides shortcuts to improve production efficiency and quality control

1. Gain insights from partner’s business practices and strategies. This would subsequently enable them to strengthen their competitive advantage or core competencies and benchmark their existing practices.

With the different forms of collaboration and its spread have triggered unease about its long term consequences. According to the study, there comes a point wherein one company weakens the other and vice versa in a competitive collaboration.

This kind of trend is observed particularly in alliances that involve Wester and Asian companies. When they did the study, they particularly looked at cooperative ventures between US and Japan, Europe and Japan, US and Europe (known as the Global Triad – greatest economical entities). They did not look into how long the partnership lasted, instead, they focused on how companies use competitive collaboration to enhance their internal skills and technologies while they guard transfer of competitive advantage to their partners.

They say that a company that gains the most in a collaboration adheres to the following principles:

1. Collaboration is competition in a different form. When entering a collaboration, one must not forget that competition still exists. They must have clear strategic objectives and understand how their partner’s objectives will affect their success.
2. Harmony is not the most important measure of success. Most successful collaborations do not always have win-win scenarios. Occasional conflict may be the best evidence of mutually beneficial collaboration.
3. Cooperation has limits. Bargaining between 2 companies continue to evolve and sometime go even beyond the legal agreement or the objectives of the top management. When one compromises too much, it could make the company vulnerable to losing market share to your partner. It also important that employees across levels are aware on information that is sharable and not. This also includes monitoring information of which the partner requests and receives.
4. Learning from partners is paramount. Companies should see collaboration as an opportunity to learn from their partner’s capabilities and use such information to enhance their competencies and effectively diffuse learning throughout the organization.

New learnings and technologies acquired as a result of a collaboration is not devious. In fact, entering in such manifests eagerness to improve the business. Strategic Intent is an essential ingredient to demonstrate commitment to learn. According to this study, it was observed that in Japanese-Western collaborations, it is the Japanese that come out stronger, or benefit more from it because they were seen to make greater effort to learn. One reason offered is that in a collaboration, Japanese are more into learning new skills, while Western companies are more into avoidance/reducing costs and risks of entering new business or market and most of them do not go way beyond it.