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Cooperating with Your Competition

June 02, 2017 1:31 PM | Uli Stewart


When considering cooperating with your competition,  there is a natural tendency to resist.  In many instances those relationships can be beneficial and can lead to business growth,  as well as flexibility to take on different work and improving your reputation.

An engineering manager recently rehired a project engineer who worked for his company in the recent past. Shortly after the original hire, the manager told him that their work backlog was insufficient for sustaining their group. Based on tenure, his position would likely be eliminated. Out of respect for their relationship,  the manager called a competing engineering firm, with whom he had an established relationship, to let him know about the project engineer’s situation. The manager described the situation and shared the project managers’ resume, along with a strong endorsement.

Keeping in good standing with your competition just makes good sense. The sudden turn of business wasn’t the fault of the manager, and the project engineer appreciated the willingness of the manager to make the introduction. Referrals  and recommendations to a competitor are great examples of how collaboration can benefit everyone who is part of a business community.  With the changing needs of the marketplace, your competition may exchange employees with your company on a regular basis.  In Maine, we see this happen frequently.

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Yacht manufacturing is a business that would seem not to be affected by the fluctuations in the economy, but that is not the case. Layoffs were a part of the companies’ culture to adjust with their level of business. This is common with most manufacturing firms but nevertheless damaging to their reputation. Since 2008, one particular company has been on a tear with a  30% increase in orders  from last year.  The business is very labor-intensive, so skilled tradesman/craftsman are critical to the success of the organization.

Five years ago, the company hired a new General Manager , one who has struggled for the last 3 years to find the level of talent necessary to meet the demands of their growth.  This past year, his focus shifted. Along with tapping the local technical trade colleges for talent, he started speaking with his competition to ask them about establishing an alliance by providing their shops with overage work if they have the capacity.

The hope is that it would minimize the need to bring in more people and would require training and on-boarding resources only to be released in a 2-3 year time-frame, when their workload leveled off.  If they could stem this continual hiring influx, they can concentrate on developing their core competencies;  processes/lean optimization, materials enhancements, leadership skills, product development/brand development. By developing a  sub-contractor workforce with the competition,  they  hope to develop a stronger client focus and reduce the negative impacts that are associated with layoffs.

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Liam Holt is a  recent owner of a machine shop on the 495 hub of Massachusetts. Having been in the business for over 20 years for 8 different employers in the industry, he knows all the machine shop owners in the area.

“It’s very competitive but also supportive,” Holt explains. “People lend tools and give advice freely [whenever someone] encounters a problem.  It’s a favor bank that you help your local shops, because you never know when you will be in need of help.  The ultimate respect is when your competition recommends you on a job”

Recommending your competition happens in business all the time.  Your ability to accept work depends on many factors, including current workload, logistics, or willingness to undertake an all-or-nothing project. If you can best serve an existing customer by referring a better suited competitor,  it speaks volumes for your understanding that your customers needs come first.

Selecting a Competition Partner

When considering business partners, there has to be potential where both businesses benefit by working cooperatively. Trust and understanding are critical for determining consideration. When you refer a business or recommend a person, you take ownership in being a part of the process, good or bad.  There is risk associated with taking on any job, but when you recommend a business that you don’t fully know, that’s using bad judgement. Before you refer someone, you must know and trust them implicitly. Do they have the same values/business ethics? Do they stand by their product or service? Are they known as a company that overstates and under delivers? Or vice versa? Do they conduct themselves in a nonprofessional manner?

As you get acquainted with a prospective partner, be sure to speak with a few people/customers who know and/or have used their service. After making your choice,  collaborate on smaller projects that would minimize risk for damaging your reputation. When there is a deliverable involved, be sure to have periodic reviews for measuring performance for both parties for quality and customer satisfaction considerations.

Opportunities to Partner 

In the spirit of cooperation, here are comments from fellow ACE Member Doug Packard’s Coopetition article from Mainebiz May 30, 2011, about selecting a partner competitor.

The extent to which you partner with a competitor can take many forms. You may decide to rely on a range of partnerships, depending on the competitor and the type of customer engagement, such as:

 Referral system: Both businesses inform each other of opportunities that the other can handle more efficiently in return for an agreed-upon referral fee. To work well, both firms must refer business to each other on a regular basis.

– Sub-contractor relationship: Depending on the situation, the sub-contractor can represent the originating firm or themselves. The originating company invoices the customer and handles project management while the sub-contractor takes on particular tasks or skill requirements.

– Joint project partnership: Both firms work directly with the customer, and each invoices the customer for work performed. But the two firms also work closely in supporting the customer and collaborating on the project.

Developing New Partnerships

Getting comfortable with new partners can be daunting, but it can also help you to grow. Establishing a relationship with a trusted competitor can lead to discovery, awareness, or information that wasn’t known previously. Keep an open mind for fostering  competitive relationships, since it can lead to a better bigger-picture understanding.

In my friend’s words: “Many business leaders may not be ready to take the coopetition step. But those who are successful over the long run usually earn a reputation for thinking of customers’ interests first, and coopetition is one of the best ways to demonstrate that. There are few secrets you need to worry about protecting from competitors, because business success usually comes down to relationships and execution. If you do both well and take care of customers, you will succeed. Try developing a matrix of your products and services by industry and geography to see if there aren’t some opportunities to accelerate success with a coopetition strategy.”

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