Cooperative competition

by ANIL JOHN

If you want to be  incrementally better, be competitive. If you want to be exponentially better, be cooperative. ~ Unknown

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!


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