Often used to describe females who tangle with their female friends, it didn’t take long for the term to become part of our contemporary lexicon when the popular HBO series, Sex and the City put it out there in no uncertain terms. Well, we’ve known politics to make strange bedfellows, but it seems that even business is ready to make friends out of enemies.
Globally, whether its telecom, PC giants, media houses, banks, automobile industry or FMCGs, companies are fast learning to be friends with their competitors.
Examples are plenty. Without Intel - AMD wouldn’t exist - yet they are fierce competitors. Toyota is licensing its hybrid technology to it’s competitors in the auto industry.
Nestle sells countless food products to retail - yet competes with it through their Nespresso subsidiary (which sells coffee direct to consumers). Google, a business partner of WPP, competes with the latter in the advertising world. So what gives?
If both are partners and competitors at the same time, it cannot make for an easy relationship . More generally, frenemy also refers to two opposing parties, be it in personal relationships or in larg- scale interaction between nations, organisations , political parties, etc., that are mutually beneficial , yet are at odds to be mutually destructive.
Yet, in the world of business, the terms ‘frenemies’ and ‘coopertition’ , probably capture the real transition happening in the marketplace
Coopertition has been around in the Silicon Valley for a long time now and is the basis for huge developments in the software industry. Says Radhesh Balakrishnan, director, competitive strategy, Microsoft India: “Organisations can create more value for the customer if they come together at a certain level. Customers, today, are using heterogeneous environment. Making it all work together makes it necessary to interoperate.
For instance, Microsoft and Yahoo have made the IM services interoperable, which means that Yahoo users can directly interact with MSN users and vice-versa . However, we would still compete with Yahoo and love to see the number of MSN users grow.”
The frenemy mindset allows companies to come together to work on a specific development effort that helps speed up the whole process and capture value for certain technologies each has developed.
It also allows companies to use the benefits of wide ranging technology solutions while remaining focused on its core technological capabilities.
In fact, Stuart Read, marketing professor at IMD, Switzerland, points out another classic example of how companies cooperate yet compete.
Take Barco and Sony. Barco is into projection systems industry, buys tubes (components) from Sony to build its projectors - and also competes with Sony’s own finished projectors.
Competition to grab the largest market share doesn’t stop telecom giants like Airtel and Vodafone from proposing to share infrastructure or Coke and Pepsi to come together to lobby for their reputations in the pesticide crisis.
”The concept of frenemies or coopertition is becoming an increasingly pressing issue as business systems become more complex and as firms try to focus on only their core competence - outsourcing the rest of the business system to ‘partners’ (perhaps friend - perhaps foe) who have unique expertise. When taken together its easy to see when the environment gets more complex, and firms want to simplify their own role/position the natural outcome is that they have to collaborate with more organisations and some are inevitably competitive,” says Read.
It may be too early to say how encompassing the frenemy tactic will be for industry as a whole, but it’s imperatives are compelling enough.
The growth guru, Verne Harnish, founder & CEO, Gazelles, an outsourced corporate university for SMEs says, “The need for instant and continuous communication, and the power of globalisation, has driven competitors to create industry standards.
This has been an initial key driver for getting competitors to cooperate at the most basic level. For growth firms, they often need to partner with their large competitors, serving as subcontractors on various projects. The large competitor has the market clout; the small competitor has some special expertise.”
Though competition is largely irrelevant in early markets, the basic logic being there is no point competing over something that does not exist. The priority, therefore, is to create it and then argue who gets what.
“IBM and MS who collaborated heavily, 20 years back, to create the PC market, are today, competing with each other,” says Read. They now fall into the broad group of frenemies.
Just as the Internet helped make the nonsensical phrase ‘All your base are belong to us’ a well-recognised piece of the gen-Y lexicon, in a cluttered market segment aimed at an over-stimulated demographic, frenemy as a strategy just might work.
PC Mehra, professor sale and marketing, IMI (International Management Institute) says, “Companies are fighting for shelf space. There is a tough competition not only in product but also among various product categories.
For instance, if a consumer wants to spend a leisurely evening, he has the option of buying an expensive dress, going for a movie, eating at a nice restaurant. The need for collaboration among competitors arises to create the demand within your category. Once there is a demand, companies can compete for shelf space.”
This could mean transcending the flash and fizzle of what is considered traditional competition, which by no means is over.
And that could, after a little inward look.
“The reason companies often need to create external enemies is so they can provide their employees something to rally around - give them a reason to forget their internal challenges and focus on ‘beating someone’. It plays to the competitive juices that flow within people. It was like Nike declaring early on ‘we want to crush Adidas,” says Harnish.
But what will companies have to do to avoid waving the white flag? The answer boils down to balance, says Read. “In the Barco/Sony example - all Barco wants to assure is that it gets to compete with Sony’s projectors fairly.
That Sony components does not give an advantage to their own internal customer.”
Mehra agrees, “Wavelengths have to match. If the other company doesn’t appreciate the ideas generated by your company, the whole exercise is a waste. There has to be maturity within the brand as well as the people working for it. Then only can the benefits of these alliances trickle down to the customers”.
The neat dividing lines of business are being erased and redrawn.
Dr. Neil Rackham, author of the classics SPIN Selling and Rethinking The Sales Force and a top sales researcher in the world and makes a key point - in the future all the real value gains will be between companies more than within companies i.e., all the action is at the boundaries between organisations.
This means that the way organisations work together is changing, significantly.
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