Although many businesses focus on outperforming competitors by taking advantage of their competitive advantages, many would actually benefit by forming a strategic alliance and turning their competitor into their business partner. While it may not be the most conventional approach, businesses have figured out that in some situations it’s better to focus on growing the entire market, rather than fight for the largest market share of a small market.
A recent Harvard Business Review article discusses why this strategy has emerged and how it’s been beneficial for companies. According to the article, the obsession by companies to outperform competitors may ultimately hinder their success, and as more and more companies realize this, the nature of competition and the way it’s viewed is changing:
“The basic goal of competition — companies need to out-compete in order to out-perform — is now holding back companies from financial success, such as the protected one described above. It is true that this axiom has long enriched companies that showed they were different from their competition in ways that matter to consumers and then consistently delivered this differentiation. But it also over-emphasized the importance to companies of ‘going it alone’.”
The article then goes on to explain how Nestle Waters North America is summoning a team of rivals to develop an alternative to the current packaging recycling system, which would ultimately reduce their manufacturing cost that is driven by the supply of plastic. The current packaging recycling system is inefficient, and NWNA realizes that it and its rivals would all benefit from a more efficient system.
Becoming business partners with a rival may be one of the most rewarding, yet riskiest decisions that your company may ever make. It certainly calls for a specific situation in which the entire industry has room for growth that can only be reached by an alliance of competitors.
The downside to making a competitor a business partner is obvious; how is it even possible to instill in such a relationship? The two partners will clearly be in the need of alliance management to guide the conversations and help reach an understanding. Even if an agreement has been reached, alliance management should be consulted in order to ensure that each party upholds its end of the agreement, especially after the overall goal has been reached.
If you’re interested in alliance management, or are considering becoming business partners with a competitor, contact us.
— by George Tyler