In recent years, we have witnessed an ever-increasing number of cases when companies unite and build alliances to achieve common goals. And it is often done by competing businesses that represent one and the same industry. The term describing this phenomenon—“coopetition”—was coined as early as 1990s by joining the words cooperation and competition.
The reasons for competitors to cooperate
Coopetition can manifest itself in all kinds of ways. For example, famous fast-food networks that attract huge audience attention by exchanging stinging remarks as part of their advertising campaigns. There is also this simple case of cooperation between competitors that makes users’ lives easier—they can log in to some dating services using their credentials for rival social media. In this case, a platform that already has user credentials shares them with its competitors if authorized by such users. This cooperation helps competing businesses get to better know each other and the market, exchange valuable information, and increase their audience. These particular cases of coopetition pursue marketing objectives, but more global goals have the same principle as a basis.
Coopetition plays an especially significant role during crises. Remember how at the very beginning of the pandemic Pfizer and BioNTech joined their capacities to develop and produce the vaccine, which helped them launch their product in the market as early as the end of 2020 and manufacture millions of doses in 2021. Today, they continue partnership regardless of being competitors.
In recent years, coopetition has been intertwined with ESG trend. This phenomenon encompasses almost everything that we define as environmental and social business mission, and it is this very agenda that keeps together the majority of partnerships in the world of today.
Coopetition as such is consistent with civilization that is developing against the backdrop of limited resources, with nature itself urging the players to unite.
The interaction between competing players allows implementing new standards and industry practices that are advantageous for both companies and consumers, and eventually it becomes a story about sustainable development of the entire planet and its local territories.
In the polymer raw materials market, Sibur has taken on one of the leading roles in the field of separate waste collection and plastic recycling. It did not start out as coopetition, but eventually grew to be an industry practice that engages competitors and transforms the entire production chain, including that in related industries—for example, beverage manufacturers are looking more closely at ways to use recycled PET packaging.
IT is another sphere where coopetitive alliances are commonplace. Large-scale development projects are resource-intensive and require joint capacities and assets from all the stakeholders. Here, one example would be the artificial intelligence alliance formed by such competing ecosystems as Sber, Yandex, VK Group, and other leading companies. The alliance’s objective is accelerated AI implementation in education, scientific research, and practical business activities.
The right way to work together with your competitors
One basic requirement for joining efforts is having a common goal. In the case of ESG, the good news is that there is no need to reinvent a wheel—the 17 UN sustainable development goals are there to choose from and select one or a few that are the closest to your business. You can focus on social investment in the territories where your company’s production assets are located. It can involve reducing inequality between different species, fighting poverty, or developing local partnerships.
Knowing the ways your business can contribute to achieving these goals, you start looking for potential partners, who are players with similar interests and geographical factors. Once you have identified them, you may approach them and propose partnership.
Partnership types can be different. You can build alliances and co-finance some social endeavors in your region or exchange your in-house experts. In the latter case, for example, Company А’s employee becomes Company B’s expert to hold a tender for social project grants among local communities. When partnership type is agreed, regulatory documents are prepared accordingly, and all the partners approve them and follow those algorithms.
These are general rules for cooperating with your competitors, but still the list of concrete procedures is conditional upon a particular case. In some situations, you must provide for ways to settle patent disputes, and the methods used there will not differ from those common in intellectual property rights distribution for joint ventures (JVs). When two parties agree to do business together, a JV agreement always features a corresponding clause. It regulates the exact way of splitting the interests in ownership and in the right to possess the development resulting from the partnership. From a legal standpoint, this case of coopetition is in no way different from a JV. It is just that partners entering into this cooperation type must clearly understand their objectives and goals while formulating their claims to future intellectual property assets.
When coopetition is started, a lot of other questions pertaining to the traditional competition arise—trade secrets, target markets, clientele, and so on, but all of these can be stipulated as part of a cooperation agreement. On the one hand, it must provide for obligations of the partners (who are main business competitors) within the framework of social initiatives, and on the other hand, it must firmly set the coopetition limits so that the latter does not compromise the main business. This is the only chance for the partnership to prove socially sustainable.
