Devise successful coopetition strategies

Many executives would consider the idea of collaborating with a direct competitor as hazardous, and rightly so. Feedback on strategic alliances show that there is a very real risk that one of the partners will take advantage of the relationship to strengthen its position at the expense of the other. Indeed, many Western high-tech firms sense that they have received the short end of the stick in their joint ventures with their Asian counterparts. They have the impression that they provided their partners with the means to boost the latter’s technological capacities at a cost considered to be ridiculously low in retrospect. What is more, many alliances fall through prematurely or fail to generate the expected benefits. The failure rate of alliances is frequently situated between 50 and 70%—which represents a considerable level of risk!

Even so, forming alliances with competitors may be an obligatory step toward great successes. Sanofi, for example, joined forces with competitor BMS to develop and market Plavix, a drug that prevents blood clots. The resulting alliance produced blockbuster results: Plavix became the second most sold drug in the world in 2010. Only by combining the resources and sales network of the two competing partners was this feat possible.

This strategy of partnership between competitors could well be the most promising way to seize opportunities linked to digital transformation. For instance, on the automotive market, consumers increasingly demand connected solutions, such as real-time traffic information, identification of free parking nearby, etc. To take advantage of this trend, equipment suppliers will have to position themselves quickly and on a large scale. Hence the benefit of coopetition strategies, according to the experts in the McKinsey report Competing for the connected customer.

Successfully forming an alliance with a competitor is not self-evident. The natural rivalry between players inevitably complicates the collaboration. Notably, it is particularly difficult to maintain the balance between seeking synergies and preserving the competitive advantages of each party, especially since obtaining the expected benefits often requires collaborating over a period of years. Beyond the pitfalls inherent to any partnership, what specific mindset and management practices are needed to address the atypical context of coopetition strategies?