COLLABORATE WITH YOUR COMPETITORS AND WIN Gary Hamel, Yves L. Doz, and C.K. Prahalad (HBR, 1989) GROUP 2 Juhana Harmanen Helena Henno Elli Leino Valeriya Zhuvertseva

Assignment ✓ List pros and cons of engaging in cooperation with competitors. ✓ Based on the article, in what situations would such cooperation be encouraged? ✓ List other real-life instances when cooperation can be encouraged!

The study Focus: 5 years of studying 15 strategic alliances around the world (1989) Research questions: What is the role of strategic alliances in the global success of Asian companies? How do alliances change the competitive balance between partners? Does winning at collaboration mean the same to different companies? What factors determine who gains most from collaboration?

Forms of collaboration Aside from the degree of complexity and collaboration, firms should also take into consideration the motivation for both parties involved. Questions you might want to ask yourself include: Are we looking to optimize and reach economies of scale? How will we reduce risk and uncertainty? Should we focus on acquisition of resources or key activities? Reference: Successful Partnerships & Strategic Alliances book. Peter Simoons Collaboration Complexity TransactionsOutsourcingChannelLicensingAlliancesJoint VenturesM&A Non-equity Equity Trust THE ALLIANCE SPECTRUM “AN ALLIANCE - In international politics, the union of two thieves who have their hands so deeply inserted in each other's pockets that they cannot separately plunder a third”. Ambrose Bierce

Cooperative Strategy Corporate Strategy Competitiv e Strategy Why to collaborate with competitors? Uncertainties - Environmental uncertainties - Demand uncertainties Resource needs Complex tasks and time pressures Customized (asset-specific) exchanges - Human-asset specificity (requires networks or hierarchy) Frequent exchanges Reference: additional article: General Theroy of Network Governanve. Jones, Hesterly & Borgatti, 1997

Rules of competitive collaboration Collaboration strengthens the parties against others although weakens vis-á-vis. Cooperation is a low-cost route for new competitors to gain technology and market access. Strategic alliance should not be assessed by its longevity, but rather by the shifts in competitive strengths on each side.

Rules of competitive collaboration Competitive tactics (Asia) vs competitive goals (Westerns). Alliances should establish and enforce specific performance requirements. No performance, no technology transfer. Collaboration is competition in a different form. Harmony is not the most important measure of success – Complementing each other (Westerns) Learning from partners is paramount. – Digesting others skills (Asia) Cooperation has its limits. – Companies must defend against competitive compromise.

Working with your competitor? Pros ● Acquire new technologies ● Acquire new skills ● Avoid investment ● Share investment risk ● Gain competitiveness Cons Competitive compromise May not be more than sophisticated outsourcing Giving away key competences

When should you engage in cooperation? - Do you have similar strategic goals with the potential partner? - Do you have different competitive goals? - Is your company a small player compared to the industry leaders? - Is your partner a small player compared to the industry leaders? - Can you learn from your partner? - Do you know when to shut up? ✓ ✓ ✓ ✓ ✓ ✓ YES NO

Real Life examples Samsung used to be a memory chip and touch screen supplier for Apple Beneficial to Samsung because they learned the smartphone technology while working with Apple and are now the market leader in smartphones. Apple sued Samsung for IP theft in many countries starting in 2011 → Winner: Samsung Microsoft had no expertise on how to make phones and Nokia had an outdated operating system. Together they made the first Windows Phone. Finally the Nokia phone once so successful were sold to Microsoft with all the patents. → Winner: Microsoft & &

Other reasons for collaboration Personal relationships Enabling technology (e.g. cloud collaboration software) Solving bigger problems (collective responsibility) ●Zero Discharge of Hazardous Chemicals

Conclusion Companies engage in collaboration with their competitors for very different reasons. Example: the U.S. the government has given attention to joint ventures and competitor collaboration in the form of antitrust legislation. There is a good reason for this because sometimes the collaboration is just trying to avoid the laws of competition. The article did not address this issue at all. Learning how to borrow is a key aspect in the paper. Reference to dynamic capabilities. It plays an important role if a company wants to profit from collaboration with competitors. Yet Teece et al. (1997) had not yet published his seminal work on dynamic capabilities. Reference: Teece, Pisano & Shuen (1997): Dynamic Capabilities and Strategic Management

Conclusion The article is from cambrian era, so maybe the rules of collaboration have changed because of ICT-technology and the changes in the competitive environment. Some articles that could replace this work in the SMOTI course: Research papers on co-opetition – Co-opetition strategy a new kind of interfirm dynamics for value creation. G.Dagnino, G.Padula, 2002 – Co-opetition between giants: Collaboration with competitors for technological innovation. Gnywali & Park, 2011 More elaborating papers on alliance choice – Das, T.K.; Teng, B.-S.: A Risk Perception Model of Alliance Structuring, in: Journal of International Management, 7(1), 2001, 1-29.

Back-up: How to collaborate? Reference: Das, T.K.; Teng, B.-S.: A Risk Perception Model of Alliance Structuring, in: Journal of International Management, 7(1), 2001, Choose alliance type according to the perceived risks, trust among the partners and intended resources exchanges Unilateral Contract-based Alliance Minority Equity Alliance Bilateral Contract-based Alliance Equity JV Unilateral Contract-based Alliance Minority Equity Alliance Bilateral Contract-based Alliance Equity JV Performance Risk Relational Risk high low Company B Property-Based Resources Knowledge -Based Resources Property-Based Resources Knowledge -Based Resources Company A