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Would the title of ‘Collaborative Competition’ not sound like an oxymoron at first glance? If one is forced to compete with other sets of players in the sectors that one operates in, how is one supposed to collaborate with the same set of players? At the B-schools and in all the business/marketing training programs, we are coached to develop that competitive spirit to beat our competitors at their own game. So, where is the question of partnering with these competitors? However, if one delves deeper in the subject, is it really that much of a paradox or a contradiction or should one look at the concept with an open mind?

The concept that I have defined and termed as ‘Collaborative Competition’ entails the disciplines of a live-in relationship, for want of a better example. The concept can and does work rather seamlessly and smoothly where the needs of all parties to the collaboration have strong convergence, forced or voluntary, which leads them to get together for a common cause. The rules of engagement and partnership are pre-defined and spelt out to a large extent. It is akin to a joint venture amongst parties where the rules of the game are encapsulated contractually and unfailingly, an important component is also severance terms.

The benefits thereof could be immense as long as the basic rules are in place. One rule arguably, I believe, needs to be that the collaborators should not let go of their battle to retain and hook more customers into their fold. Simply speaking, all areas of collaborative competition might be possible except where it extends to ceding control over customers. Let’s look at a sample of business areas where such collaboration in practice is working effectively to enable us to get a more efficient understanding of the concept.

Take the case of the manufacturing companies that require huge amounts of fossil fuels to fire their power plants and assembly production lines. With the ongoing battle across the globe to lay hands on all available sources of raw materials and fuels, there are numerous examples of collaboration amongst competitors to jointly bid and acquire sources of fuel and raw materials. While in some instances it might originate due to sheer size of the asset or the associated financial unaffordability for a single player; there are also instances where the collaboration is deliberate to avoid a bidding war involving a winner’s curse.

On the other hand, the players in organized retailing are ensuring that for procurement of their individual private labels, the set of outsourced vendors are developed to ensure timely and cost-effective supply. The effect of the common cause of procurement of quality goods at economic price is that the same outsourced vendor might supply to multiple players and cumulative volumes allows the vendor to share benefits of economies of the scale. Haven’t heard any of the competitors complaining or grudging about this passive but effective collaboration!

The key for entrepreneurial startups is to identify similar areas where they could collaborate, manage costs in an effective way and create an efficient setup on the back of reduced redundancies and unduplicated efforts where the potential to collaborate exists. So, shake hands with the competitor, gently!

The views expressed here are personal.

BHARAT BANKA is the Founding CEO of a leading private equity firm.

©Entrepreneur July 2011

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Bharat Banka, business, competition, customers