Does Co-Opetition Work for a Startup?

31 Oct

Last week, Microsoft made making the Surface tablets generally available in several countries. This release, marks a turning point on the relationship model between Microsoft took and long term OEM partners such as Dell or HP. With Microsoft venturing into the manufacturing of their own tablet, it will start competing directly with the OEMs while, at the same time, expanding their relationship to grow the Windows 8 ecosystem. This is a classic Competition + Collaboration model known in the industry as Co-opetition.

While Co-opetition is very common in different segments of the software industry such as venture capital or private equity investment, it’s certainly not very popular in the enterprise software space. For years, we have seen enterprise software through the lenses of companies like Oracle that foment fierce, “take no prisoners” type of competition. Traditionally, the enterprise software ecosystem has drawn a very clear line between partners and competitors and combining the two was very unusual at best.

However, in recent years, the expansion and diversification of the enterprise software landscape has also changed the collaboration and competition models used by a lot of enterprise software vendors. When thinking about Co-opetition models, it’s important to notice that they can be fundamentally different from the perspective of large enterprise software company than from a startup. While well-established enterprise software vendors can implement Co-opetition mechanisms with other vendors without disrupting its fundamental business model, a startup can be banking its entire future in these type of partnerships.

While conceptually Co-opetition models might appear very compelling, there are a few elements I would recommend any startup to evaluate carefully before establishing a partnership with a competitor. Here are some of the most important ones:

What sides pull the most: Collaboration or Competition?

When entering in a partnership agreement with a competitor, you should very honestly determine which aspect of the relationship is more important to your company: collaboration or competition and if you are going to be able to separate the two. If beating your competitor carries more weight in the strategic plans of your startup then chances are that the partnership won’t be very effective.

Can you be a true partner to a competitor?

Partnerships are only effective if both sides can benefit from it. As a startup, you need to honestly determine if your company can be an effective partner to your competitor or if the relationship is only going to be conditioned to the competitive nature of both businesses.

How important is the partnership?

This might sound like a trivial question but it’s one that results difficult to answer honestly. While any partnership might result appealing as a startup, establishing a Co-opetition relationship with a competitor can result in more trouble that is worth. Is you have doubts if the partnership with a competitor is strategic to your startup, my advice would be avoid it and focus on discovering and building your core business model.

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Posted by on October 31, 2012 in Uncategorized


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