It’s Time to Think Differently About Competition

As managers and leaders we’ve been taught that our competitors are our “enemies.” While there may be good reason to protect a bon-a-fide competitive advantage at a given point in time, the historical notion that our competitors are enemies to be avoided and worse, even hated, also has significant costs. It’s probably time to re-evaluate the old thinking. Even more problematic, we have even been socialized to see others in our own organizations as competitors—vying for limited resources, promotions, incentives, etc. While friendly competition can certainly be a motivator in some cases, that is only viable over time in organizations if the competition does not have zero sum winners and losers. Some of the least healthy and most dysfunctional organizations I’ve ever seen are those whose cultures are based on winner take all competition. Those cultures are deadly for collaboration, collegiality, and teamwork.

When markets were more stable and even static over time; when operating environments had less regulatory risk; and certainly when demand outstripped supply (as was the case for decades in higher education), circling the wagons and operating as if every asset, idea, technology or product/service was “proprietary” might have made more sense. In the world we operate in today, however, which is not only volatile, uncertain, complex, and ambiguous (VUCA), but in which most organizations are forced to operate with limited capital and increasing overhead (caused by regulatory requirements, constantly changing technology, perpetual upgrades to products and services, increasingly expensive marketing, etc.), while also experiencing downward pressure on pricing, there are compelling reasons to see one’s former enemies as potential partners. Within organizations, the current environment requires a kind of collaboration that actually supports self-sacrifice and shared victories. Outside of or between organizations, the current environment supports formally unheard of partnership between competing entities.

To be clear, leaders must be thoughtful and purposeful when engaging “rivals” in partnership, but the reality is that across industries, most players experience the same kinds of challenges and risks, and thus similar potential benefits from effectively meeting those challenges and/or mitigating risks.

What are some examples where working with competitors makes sense?

In highly regulated industries, working together to improve overall compliance protects everyone while also improving industry-wide reputation. While there might be some temporary value in seeing a competitor crash and burn with a compliance problem, the collateral damage to the industry at large can be devastating. Two recent examples are higher education (for profit and not for profit) and cyber security breaches across multiple industries.

Another example, ironically, can be found in hyper-competitive contexts. For instance, many retailers now partner with Amazon, which previously was considered a bitter enemy. Such partnerships have allowed companies that are experts in a given retail sector to partner with the world’s expert in eCommerce and logistics to dramatically expand their customer markets. Similarly, airlines, which have historically also been bitter rivals, have partnered aggressively to sell seats on each others airplanes, so that they can offer more choices and bigger networks to their own customers. Of course these partnerships come with compromises, but they also solve what otherwise might be intractable problems and/or open what would otherwise be limited or closed markets.

One “industry” that is currently in serious decline in terms of customers (enrollments) and revenue is higher education. It is also an industry that has historically been profoundly insulated and generally closed to partnership with competitors. Not surprisingly, the vast majority of institutions of higher education share common problems that would benefit from shared efforts at resolution. Everything from student debt to retention and graduation rates, to the currently unsustainable financial models, is ripe for collaboration. The traditional higher education model, however, has been for each and every institution to build and maintain an entire, free-standing infrastructure, that must be wholly supported with that institution’s resources. It is not uncommon to see colleges or universities a few miles or even blocks apart that must each sustain separate physical plants, curricula, faculty, staff, and administration, technology, student services, housing, libraries, and every other element of what makes the institution an institution. The model is unsustainable and is one of the reasons that IHEs are shrinking and closing in record numbers. The future viability of the majority of higher education institutions will likely require some level of partnership with “competitors.”

The health care industry is similar, in which competing hospital systems each build and sustain separate, very expensive, free-standing clinical infrastructures. So far, the answer has not been to partner with competitors in ways that make sense, but to “vertically integrate” their own health care systems so that they wring every penny out of every billable event and keep those revenues within their own system via internal referrals. It is highly unlikely that the current health care model will continue unchanged either. In fact, as with higher education, partnering with “competitors” will likely actually become a competitive advantage as institutions work together in ways that improve customer/patient/student outcomes at lower cost and risk to the providers. Just imagine if one institution could offer desirable, shared facilities to students or patients at a fraction of the cost of building and maintaining those facilities separately? Or if two different universities could both improve student retention with shared mental health counseling resources at significantly less cost to both? It’s not unreasonable to even think of combining core assets and functions such as curriculum and instruction or financial aid in IHEs or imaging labs and urgent care among health care competitors.

As unlikely as it sounds to partner directly with what have traditionally been considered competitors, it may actually be a key strategy for surviving and thriving in a VUCA world.

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