Is the competition our enemy? Or more like an opponent in a fair competition? The answer to this question determines whether coopetition has the potential to create synergies and benefits for all. The term coopetition was defined by economists Barry Nalebuff and Adam Brandenburger, who published a book about it in 1996.
A combination of the words cooperation and competition, coopetition refers to cooperation between parties that are otherwise in competition with one another. This kind of cooperation generally functions as an alliance that bundles processes and shipments to provide benefits such as:
- Reduced costs
- Improved availability
- Lower risk
Trust in coopetition comes from transparency
To achieve these benefits, businesses need to work together, despite being in competition with one another. Cooperation is even possible among opponents – but there are rules to follow that do not apply to collaborations across the supply chain or between businesses in different industries:
Businesses across the supply chain don’t compete with each other, they collaborate to serve the end customer. That makes openness and transparency – the basic requirements of every cooperation – easy because the partners in the supply chain have the same goal and can only succeed together.
Between competitors in the same industry who share customers, this transparency must be limited and clearly defined, as the relationship is still a competitive one. The collaboration only applies to specific areas, for instance by cooperating on deliveries to a shared customer. Successful coopetition requires transparency in this one area, while others remain in competition and therefore without transparency between the businesses.
A classic example of coopetition can be seen in American sports leagues like the NFL, NBA and NHL. All the teams – which are pure commercial enterprises, unlike soccer clubs in Europe – compete with one another to reach the season championships such as the Super Bowl. And yet the teams collaborate closely to optimally market their product, which is professional sports. This leads to rules in the coopetition, like giving the first choice of new players to the previous season’s worst performing team. Another example is the salary cap, which prescribes a maximum salary for players in a team. Both elements help level the playing field in the NFL – very different from European soccer, where the best (and wealthiest) clubs buy the top players year after year!
Coopetition as an opportunity for supply chain management
Logistics and supply chain management are also well suited for coopetition. In supply chain, the benefits listed above can be achieved by bundling. The more processes can be bundled, the more benefits coopetition can bring. Coopetition is still a new approach in supply chain management because there’s plenty of hesitation to join forces with a competitor. Without rules like transparency mentioned above, there is no way to build the trust necessary for collaborating with a competitor. Yet only then is coopetition possible.
In my expert session on "The Rules of Coopetition" at 4flow Logistics Day – From corporation to collaboration, I demonstrated how businesses have looked beyond their own networks to implement coopetition. Would you like to learn more? Request to download my slides.
Dr. Stephan Seeck teaches and researches logistics and supply chain management at the University of Applied Sciences in Berlin in Germany. He has been active as a consultant for supply chain management for over 25 years, with a focus on the consumer goods, retail and e-commerce industries. Stephan regularly publishes articles on these topics in industry journals and speaks at conferences and other events.
Guest author
Dr. Stephan Seeck
University of Applied Sciences Berlin