Cooperative competition

Enabling a broad, diverse ecosystem of interoperable technical solutions often requires competitors to cooperate. Some thoughts on both cooperation and differentiation.

The impact of network effects in multi-sided platforms is well studied, and the current ecosystem has many well-known examples of network operators who have benefited. It is something that has influenced my thinking about the continued need for a broad, diverse, competitive but interoperable ecosystem of solution providers as a bulwark against entities that have a winner take all approach.

The default position for many companies is to grab as much mind-share and market share as possible for themselves, even at the expense of being profitable. And all too often, they are put on this ‘exit’ treadmill by their investors whose priority is to make somewhere around 10X return on their investment within five to seven years by having the company be acquired or through an IPO.

Thoughtful founders and companies don’t take the default path, but instead take a dual track approach to being successful in the marketplace because they understand that in order to be successful, their ecosystem needs to be successful.

So, one the one hand, they work together with their competitors on areas of mutual interest to ensure the existence and success of the ecosystem. And on the other hand, they sharpen their business models and product offerings to differentiate themselves in that ecosystem to be seen as more viable than their competitors.

In general, it makes sense to align both the areas of cooperation and areas of differentiation to that which a potential customer sees as reducing risk, eliminating a pain point or adding value.

Areas of cooperation

The three areas that I see customers seeking consistency across the board are Security and Privacy, Interoperability, and Usability. The prioritizations may vary across customers, but if the due diligence on the buy is being done by someone who has a clue, all three of these factors tend to be part of the minimum expected baseline because they reduce risks.

As such these are areas of cooperation with competitors, especially within the context of standards bodies or industry consortiums where distribution of control, sharing of complementary needs, risk, intellectual property and other aspects can be managed using consistent processes with broad buy-in.

Areas of differentiation

By its very nature and because it will be domain specific, it is hard to speak generically about differentiation, so I won’t even try. What is important to note is that customers will be willing to pay for value added services or pain point elimination built on top of a foundation of Security and Privacy, Interoperability and Usability.

This does require more work because this differentiation will only be possible because of investments in domain expertise, customer knowledge and business relationships and partnerships. But conversely, this makes it very hard for a competitor to replicate these because they are not that fungible.

The key, needless to say, is not to conflate the two areas!

cyberLinks: random and relevant

• The U.S. Department of Homeland Security Science & Technology Directorate Silicon Valley Innovation Program (SVIP) has a funding opportunity for startup companies which closes on September 20, 2020, for Emerging Needs related to COVID-19 Response & Future Mitigation. SVIP is seeking solutions that address both near-term needs and future capabilities to ensure preparedness. Capabilities sought are “(1) Test and Validation Service for Security & Privacy of Contact Tracing Apps (2) Video Analytics for Self-Screening at TSA Checkpoints (3) Methods to Rapidly Disinfect Surfaces at TSA Checkpoints and other DHS Facilities (4) Collection and Integration of Authoritative Quantitative Open-Source Information (5) Stand-Off Methods for Point of Care Entry Detection at DHS Facilities.” Register to attend the Virtual Industry Day on August 18, 2020 to learn more!

• The CEOs of Apple, Amazon, Facebook, and Google are scheduled to testify in front of the US House Judiciary Antitrust Subcommittee shortly and I have found many of the questions posed by Scott Galloway, Professor of Marketing at NYU Stern, to be both interesting and educational.