Other Links

Information Technology Meets Co-opetition

03 March 2010

The Information Age is now well understood. Change is the norm and the emergence of new technologies continues unabated. For many industries however, the greatest IT-related opportunities of the current time may have more to do with a new breed of business partnerships – particularly partnerships between competitors – than with technology itself.

A precedent for IT-enabled co-opetition exists today in manufacturing and distribution supply chains. Suppliers use sales data and order information from retailers to reduce overproduction, transport costs and lost time. Retailers use product and delivery data from suppliers to simplify and improve stock control, leading to more sales and lower holding and labour costs. It is a win-win arrangement and integration between these business partners is thriving.

The key difference between IT-enabled cooperation, as in the case of the supply chain, and IT-enabled co-opetition, is that the business goals of supply chain partners are predominately complementary. Naturally, when businesses rely on IT to support relationships with direct competitors, the risks and rewards of the initiative must stand up to added scrutiny.

In the last say, 5 years, a number of shifts in technology and business have either reduced the barriers to IT-enabled co-opetition, increased its value, or both. When taken as a whole, the following nine points amount to a fundamentally stronger and more valuable environment for IT-based relationships between competitors.

1. Richer B2B interactions are now possible. Using web services, business partners may move beyond simple data transfers to the secure, real-time integration of business processes.

2. Connected partners are more plentiful. The penetration of broadband services and the adoption of e-business languages have increased the partnering options (and therefore the net value) available to an individual business through its participation in a B2B network.

3. Integration has been simplified. The adoption of XML and other standards has freed systems vendors and in-house IT professionals to concentrate on the business meaning of system interactions, rather than low-level technicalities.

4. High quality applications are available at low cost. With open source software and other trends it is increasingly cost effective for shared facilities to operate independently of parents. These applications cover a spectrum from CMS and ERP, to learning management, and may be accessed via rich web 2.0 interfaces.

5. Infrastructure is virtually ‘on tap’. Thanks to virtualisation and cloud computing, servers (web, database, application and others), may be commissioned, secured, scaled, and operated cost effectively, without the overheads of large enterprise computing environments.

6. Highly scalable platforms are more viable. A range of development tools and techniques has lowered the barriers to distributed applications. Platforms that scale from a few business partners, to several thousand business partners, are now more viable.

7. Platform components can move in-house. With an increasing number of distributed applications enterprises can take components in-house more often, for ultimate control and security.

8. Security has been strengthened. Improvements at the application, database and OS layers, and the widespread use of encryption, make enterprise strength security options available to businesses of all sizes.

9. Technology is more manageable. Techniques for strategic planning, managing projects, delivering IT services, developing software and effecting change are now well developed and widely understood. This translates to fewer disconnects between business and technology, a factor which is critical in the case of a joint venture.

 
IT-enabled co-opetition is not a cure all, and the idea of competitors working together will meet an emotional response in some industries. But given the vast potential of information technology, and the investments made thus far, it is reasonable to expect that business leaders will push past the overly simplistic pursuit of information technology for individual competitive advantage.

Globalisation and the increasing complexity of products and services are driving business collaboration to new levels, adding to the case for industry bodies, associations and partnerships to start the discussion. Eventually businesses of all kinds may feel at least some compulsion to explore IT-enabled co-opetition.

When information technology meets co-opetition, competitors continue to share the same market space but industries become stronger, and the basis of competition is better aligned to the values of shareholders, customers, or both. It has the potential to rewrite the rules of many industries.

	Kim Prince is an e-business and technology consultant based in Sydney. He works with a wide range of organisations throughout the Asia Pacific region, using technology and business thinking to improve the way they operate. www.kimprince.com, February 2010.

[1] Nalebuff, Barry J & Brandenburger, Adam M 1996, Co-opetition, Profile Books Ltd, UK.

[1] In other words, the ‘network effect’ is in operation. Each business that participates in the network increases the attractiveness of the network to other businesses.

[1] Notably, Software as a Services (SaaS).

[1] In intensely competitive scenarios this is an attractive ‘peace of mind’ measure.

Written by: Kim Prince

Candidate & Client Quotes

• Advisory + M&A