In the HBO documentary Spielberg, famed director Steven Spielberg recounts his early days as a movie director.
He was friends with a group of young directors who would all become legendary: George Lucas, Francis Ford Coppola, Brian DePalma, and Martin Scorsese. Sometimes, they collaborated with one another.
Lucas helped Coppola by editing the famous montage sequence in The Godfather featuring newspaper headlines. DePalma suggested to Lucas that he begin Star Wars with a text crawl like the ones featured in old-time movie serials. Spielberg and Lucas collaborated on the Indiana Jones movies.
They wanted each other’s movies to be good, but not too good. It was a game of friendly competition where each one drove the others to greater success.
The same is true for Business Artists. We shouldn’t just look for partners outside of our core market. We can also look inside our markets for competitors who can partner with us to create strategic successes for both parties.
The question is, how do you figure out whether you should collaborate with a partner who might seem to be your competitor?
A Formula for Collaboration
This might work in the movie business, where people can see lots of movies and are customers of many different directors and studios. But how does it work when you are considering a partnership with a company that’s a direct or indirect competitor, and your customer isn’t going to buy the same thing from both of you?
In these cases, you focus on the principle of the net value of collaboration. Here’s a simple formula to break it down:
Collaboration Value > (Collaboration Costs + Opportunity Costs)
For example, when SAP does an enterprise resource planning (ERP) integration, it must commit a team of developers to the project for several months. Integration is the process of connecting your company’s software to other applications for greater efficiency.
While this may sound like a net win, there is actually an opportunity cost to devoting resources to these integrations. The reason is that you have to sacrifice client-facing consulting and engineering time, which directly affects revenue.
Ultimately, when the collaboration value of integrations outweighs the costs, SAP can then offer clients a suite of accessibility that was otherwise impossible. But it required a sacrifice on the front end of the process.
Co-opetition is becoming increasingly important for sellers to understand as they build relationships. COVID-19 ushered in a new age of remote work and the acceleration of the gig economy. Companies don’t need to have all the capability (or their employees) under one roof to succeed. They need to have a network of providers and know how to contract with them at the right terms to create the most value for their customers.
Examples from the Tech Industry
I remember when Skype came on the horizon. I made great use of this video communication platform, created by a Scandinavian company, from the mid-2000s to 2014 when I traveled abroad to call back home. You probably used it, too. We would say, “Skype me when you get there.” It was such a ubiquitous tool that even corporations used it.
Then, Microsoft bought Skype. However, they stopped investing in it and turned it into an enterprise communication tool that only worked well for existing Microsoft shops. You could use it to share a Microsoft Office file, but no other competing products outside their closed ecosystem.
As a result, other companies got into the game. You’ve probably used more than one of these: Join.Me, GotoMeeting, Webex, or AdobeConnect.
They all gained traction until Slack came along and impressed everyone with its rapid growth. I remember doing a sales workshop for Slack when they only had thirty sellers. We were workshopping their sales process, looking to define the most critical moments in a customer lifecycle, from discovery through purchase, to implementation and renewal.
There was something very different about working with Slack. They had an open ecosystem and a partner mindset from the beginning. They didn’t see themselves as simply a communication platform at all. Instead, they seemed intent on being a workflow platform where anyone can use them as the conduit to get work done.
Do you want to drop in a Google note, not a Microsoft one? No problem. Don’t want to use our video, but instead drop in a Zoom meeting invite? Go for it. Don’t want to log into your CRM to tag new sales activity? You can do it right here.
This latter functionality encouraged Salesforce to spend a whopping $28 billion to acquire the company in 2020, the most expensive subscription software acquisition of all time, paying twenty-six times Slack’s forward revenue.
Time will tell how that deal will play out. It has been a rocky start, reportedly due to clashing company cultures.
There Are No Guarantees
When you are figuring out the best pathway to success, there are no guarantees you’ll be successful.
Just as going against your direct competitor can go well or be disastrous, so can co-opetition. But as you think about the future of your company or business, I encourage you to consider the incredible possibilities of partnering with people who might be your current competitors.
Could there be a great opportunity to serve your market in a way nobody else is? Could it open up new relationships? Could it simply be a lot more fun than trying to dominate your industry yourself?
Only you can answer those questions. But I can tell you one thing for sure: you’ll never get to explore those possibilities until you start to see your current competitors as potential collaborators.
Abraham Lincoln famously put his political rivals in his Cabinet because he knew it was better to keep his “enemies” close. He was humble enough to realize they had knowledge and insight that could benefit him. We’d all do well to follow his example in business today.
