Imagine you and an accomplice have just been arrested on suspicion of committing a serious crime, let's say a robbery of some kind.

Each of you blames the other for the botched attempt.

You are taken to the police station and held in separate rooms. You know that the police don't have enough evidence to convict you as yet, because you weren't actually caught red-handed, but you also know that there is no way in hell you want to go to prison – not even for a day. You are far too good looking for that!

After a while, a detective enters the room and makes the following proposition:

"You have two choices," he begins "you can choose to confess or keep stum. If you 'fess-up' and that idiot friend of yours next door stays quiet, then I will drop all charges against you, and he will do some serious time.
"And the opposite applies too: if he confesses and you stay silent, then he will walk and you'll do the time."

He pauses for a moment to let that option sink in. Then he continues.

"If both of you confess, then you'll both do time, but I'll make sure that you get a reduced sentence, say, 6 months each."

He eyeballs you as he speaks those words. He then gives you another option.

"If you both refuse to talk, then I will only be able to convict the pair of you for acting suspiciously near the scene of a crime, which would probably mean a one month sentence each."

He tells you he has made the same offer to your accomplice. Then he leaves you to stew for a while.

Which option would you choose?

You may be familiar with that particular scenario. It's known as the Prisoner's Dilemma.
There are many versions of it floating around and it is often used to highlight, amongst other things, the tensions between self-interest and the greater good.
You will have figured out that in the ideal world, by both keeping quiet, you each get a token sentence.
In other words, by cooperating, you can get the best result for BOTH parties.

But, in the real world, and seeing as you blame your accomplice for the failed robbery in the first place, plus the fact that you fear going to prison, you are most likely to try and 'out-smart' him or her; in doing so, the safest option is therefore to 'confess'.
But, highly likely, he or she will also figure that out, so the probable outcome is that you'll both confess and end up doing 6 months – more time than you would have done, had you cooperated.

That's a very short, and probably superficial, synopsis of the Prisoner's Dilemma, but it does help to flag some issues about cooperative versus competitive strategies.

Human nature is a wonderful thing.

There is a clear lesson from the Prisoner's Dilemma, that being how competition is not always the best strategy; in fact, it can often be self-defeating.

Now, let's get a couple of things straight for starters.
I am all for competition – thrive on it, in fact – but only when it's what I call 'smart' competition. And despite the widely held view that competition is ALWAYS good, and that winning is everything, there are plenty of downsides to 'dumb' competition.

Think of it from two angles, if you will:

What dumb competition can do to us as individuals: we always hear, and in fact I have said it many times myself, that 'competition brings out the best in us'. It does, but again only when the smart tag is attached to it.
By that I mean, when competition is for competition's sake alone, it can actually bring out the worst in us, especially if we develop a 'win-at-all-costs' mentality.
It's not an exaggeration to say that some people turn into downright jerks when the competitive streak takes over.

What dumb competition can do to organizations: now, as I alluded to a moment ago, when there is no competition that's never a good situation, so I would not promote that viewpoint.
Still, organizations too can suffer from the effects of dumb competition and this can have serious negative consequences; particularly when 'winning' becomes more important than 'excelling', or when the rules become irrelevant in the face of the desire to outperform competitors, or the market as a whole.
We only have to look at the current carnage that has resulted from the fact that testosterone clouded thinking for almost a decade in the banking sector.

So, to me, competition is good when smart: and it's smart when it leads to long-term added value, makes us – as individuals, organizations and customers – feel better, not worse and when it delivers outcomes other than we 'beat' someone, or something else.

Still, even with those qualifiers attached, I believe that there are times when 'cooperating' is actually the better option over 'competing'.

And, yes, even in the cut-throat world of business.
In these tough times, I think that all business owners and managers should look more closely at where they might cooperate to compete.

Coopetition

In their highly respected book, Cooperate to Compete, three of the world's foremost authorities on global competitiveness – Kenneth Preiss, Steven L. Goldman and Roger N. Nagel – promote the idea that we should consider our businesses as "interprises".

I like that concept. A lot.

As a result, they argue, we should seek to form closer, more interactive relationships with customers, suppliers, and especially competitors. Now, I don't pretend that this idea of 'Coopetition' – as Ray Noorda, the founder of Novell coined the term – is a new one, but I think that the potential advantages of combining both competition and cooperation strategies will be an even more important driver of growth in the years ahead.

Sure, it's happening already in many sectors including our own, for example:

Hospitality; as a simple example, look at food courts where all the restaurants are located together in one space sharing equipment, hygiene and cleaning services, etc. The approach brings the consumer to the one location (cooperation) but allows them to decide between the various options available (competition).

Retailing: look at how Amazon works closely with other retailers and producers such as Toys R Us, Target, and Office Depot to name but a few. Amazon provides sales platforms and distribution networks for a fee, whereas the participating companies gain exposure to Amazon's massive customer base.

Car Industry: for instance, take the arrangement between PSA Peugeot and Toyota to share components for some models; in fact there are lots of similar examples across the motor industry.

Software: even Microsoft and Apple, once sworn enemies, are now beginning to build closer ties on software development.

So Coopetition is hardly new, but I think we have only scratched the surface on it as yet. By the way, you should also think internally here – particularly if you are in a large organization, because there are often internal divisions and dumb competition going on between departments which can affect business performance.

In a very simple way, I saw Coopetition in action when I was on holidays some years back. On the island of Paros in Greece, as is the case in most seaside resorts there is a long strip where everyone congregates, particularly in the evenings.
Most of the foot fall comes from one end, then proceeds down the strip, does an about turn and comes back again.
As you enter the strip, there is a guy selling hot snacks such as small Kebabs and the like. If you buy one off him, he gives you a little ticket which you can use to get a discount for an ice-cream off his mate down at the far end of the strip.
And, if you buy an ice-cream off that guy, he then gives you another ticket with which you can get a cheaper coffee off the first dude when you get back to the top of the strip…

Okay, pretty minor in the greater scheme of things, but what it does show is that there is always scope for a bit of Coopetition, regardless of context. You should really think about where you might increase the potential for Coopetition in your business over the months and years ahead, through:

  • Sharing skills and expertise – when you come together with a competitor, you create a mix of skills and expertise which makes the whole stronger than the individual parts; all you need to do then is to define ways in which you can use that extra strength for mutual benefit.
  • Reducing Costs – as an example, by their very nature, many competitors in the same field use similar raw materials and inputs; it's what they do to turn them into outputs that differentiates the companies. But there is always scope for joining forces to bulk purchase, or negotiate better terms from suppliers.
  • Joint Marketing – of course there are always rivalries between competitors in terms of gaining the bigger slice of the pie. That said, it is in both parties' interests if they can market together in a way that makes the pie bigger. That's good for everyone.
  • Pooling backroom functions – activities such as administration, for example, are undoubtedly important but rarely do they give a firm any competitive advantage. So there is nothing to stop, even two direct competitors, from pooling those functions; in fact, as they are likely to be similar processes in each business they lend themselves to being pooled in order to reduce costs.

I could go on, but you likely get the point: the scope for Coopetition is broad and deep. Sometimes we are, often unintentionally, blind to those opportunities because we get hung up on the idea of competing, or as the title of this article – a quote from that legendary coach Vince Lombardi – suggests, we get trapped in the mindset that winning is all that matters.

Sure, it does mean everything, but then again, that depends upon how you define 'winning'

Enda Larkin has over 25 years experience in the hotel industry having held a number

of senior management positions in Ireland, UK and the US. In 1994 he founded HTC Consulting, a Geneva based firm, which specialises in working with enterprises in hospitality and tourism. Since that time, he has led numerous consulting projects for public and private sector clients throughout Europe and the Middle East. He is author of Ready to Lead? (Pearson/Prentice Hall 2007), How to Run a Great Hotel (How to Books 2009), 'Quick Win' Leadership (Oak Tree Press 2010) and Journeys – Short Stories and Tall Tales for Managers which is due to be published in March 2012. He may be contacted via www.htc- consult.com or at [email protected]. Read his Blog at www.htc-consult.com/new/blog

Enda Larkin
HTC Consulting
+41 (0) 22 700 8675
HTC Consulting