Coopetition: What Is It and How Can It Help Your Business Grow?
When businesses are looking to grow without going the M&A route, they commonly look at one of four strategies: market penetration, market development, product development or diversification. It makes sense that expending into new markets, increasing profitability of customers you already have, developing new products or moving into a whole new line of business would all be good ways to increase your bottom line.
But there’s another growth strategy that is frequently overlooked even though it’s often a win for the customer: coopetition.
“Coopetition” combines “competition” and “cooperation” into one idea. It may seem that these two concepts are diametrically opposed, but in fact, competitors can often benefit from cooperating with one another strategically. Doing so, however, requires creative thinking, Often, we look at others in our industry as enemies against whom we must battle for customers, territory and market share. But when we think of our competition this way, we may be selling ourselves and our customers short. After all, while companies in an industry might be similar, they typically serve different customers and have different strengths and weaknesses. This can leave gaps between the product or service they offer, and the needs of the customer.
Coopetition eliminates these gaps. Coopetition looks vertically at a market and recognizes that competitors can also be a suppliers, as in the case of Microsoft and Intel. It looks horizontally at markets as well, recognizing that a company might have good market penetration in one region, while not in another.
Coopetition recognizes these kinds of differences as opportunities for organizations to complement one another, rather than compete. This approach transforms differences into growth opportunities for both parties. Competitors then become collaborators, developing joint solutions that more completely fulfill the customer’s need.
Winning the Game by Changing the Rules
When only one company can win, customers lose. Coopetition, on the other hand, creates opportunity for all the players involved. So how does coopetition work in the real world? And how common is it?
As it turns out, coopetition is common in the IT industry. Organizations like mine, Tolar Systems – that is, MSPs, VARs, integrators and consultancies – are nearly all engaged in coopetition, whether we think of it that way or not. Whether you call it channel sales, up-selling, product bundling or integration, the IT industry depends on coopetition.
Look at it this way: Application and infrastructure delivery is increasingly centralized. The local presence and specialized expertise that MSPs and VARs provide becomes essential to serving customers, whether they’re in remote markets or have unique business needs. Technology convergence is another factor creating more opportunity for coopetition. Once, technology companies had very defined roles. Today, the line between hardware, software and infrastructure is blurring under the cloud model and so are the services needed to support it.
Want to learn more about how coopetition can transform your business? Join Phillip Poarch, VP of operations for 2018 MSP Newcomer of the Year Tolar Systems, for a panel presentation, “1 + 1 = 3: How Coopetition Drives Bigger Sales for All” at Channel Partners Evolution. Use discount code POARCH to save!
Take telecommunications, for example. Communications equipment, applications and infrastructure are converging around unified communications as a service — cloud-based applications that combine VoIP phone service, messaging, meeting and collaboration tools. No longer can organizations specialize only in networking, or application integration, or hardware installation. Increasingly, customers demand a more complete and integrated solution.
The diverse array of skills and expertise required to support solutions like these makes coopetition a viable strategy for remaining competitive in a rapidly changing industry. That’s why companies like Microsoft and many other technology providers are looking to coopetition arrangements to improve service to customers, while reducing the cost and overhead of doing business. This in turn is creating opportunities for smaller firms like MSPs, VARs and integrators to collaborate and thrive.
It’s a model that is applicable outside IT as well. Any organization that wants to grow or adapt quickly to change would do well to look carefully for opportunities to work with others in their industry to provide a more complete solution to customer needs.
Coopetition: A Win for the Customer
So, how can you incorporate the idea of coopetition to help your business grow? Start by looking at the four most common organic growth strategies; coopetition can enhance your success with any of them.
- Market penetration – Many small and midsize businesses have good reach in their home markets, but outside that geographic area they’re not well known. Yet, they may have other strengths they can bring to bear. Coopetition facilitates market penetration; by working collaboratively with organizations within your target markets, you bring more complete solutions to those customers.
- Market development – Market development is about providing more complete solutions for customers you already have. Many organizations have one or two specialties they handle very well, but they may be unable to help customers with needs outside those concentrations. By entering into a coopetition relationship with an organization that delivers services you lack, you can serve the customers you already have in more ways.
- Product development – Two heads are better than one, so if your organization is looking for ways to innovate and develop new products to meet a customer need, coopetition is a way to build on what others in your industry are doing. Two competitors can work collaboratively to develop new offerings, using the solutions and expertise both have already developed.
- Diversification – Lastly, we all know that we shouldn’t put all our eggs in one basket. Industries grow and evolve over time. Diversification is a defense against change, as it allows your business to move into related industries so that you’re not overly dependent on one revenue stream. Coopetition can allow your business to diversify, by working with others in related industries.
Coopetition changes the rules. It allows organizations to combine their expertise with that of others to create a more complete solution for customers. Rather a zero-sum game with one winner and one loser, competitors become collaborators, who develop solutions that allow everyone – including the customer – to win.
As vice president of operations for Tolar Systems, Phillip Poarch develops strategies, service offerings and new lines of business that leverage technology to drive customer success. Phillip works closely with Tolar Systems’ clients to analyze their needs and develop IT solutions to transform their businesses through collaboration and best practices.
Phillip also oversees growth, marketing and sales initiatives at Tolar, developing unique solutions that enable Tolar to meet the needs of its growing client base. Phillip received a Bachelor’s degree in Management from Abilene Christian University. He lives in the Abilene area with his wife and two children.