R&D Coopetition between rival firms
When competitors join forces to share ideas and create value that they will ultimately compete for on the market, you would think this would be a recipe for disaster. Not so, as the telecommunications sector perfectly illustrates. So-called “coopetition” offers a possibility for rival firms to collaborate in their long-term interests in an exploratory manner, so long as such partnerships are formed well in advance of any product or service release, thereby keeping R&D costs down and meeting the needs of all partners to innovate.
In the current climate of rapid technological advances and global competition, where not all firms possess the required in-house R&D resources to get the job done on their own, the need for input from other market players is stronger than ever. Telecommunications is emblematic of this situation, hence the increasing tendency for theoretically rival firms to collaborate early on in the business chain to devise potential products and services for which they will eventually end up competing upon release onto the market. By co-creating value and thereby increasing the market size, they give themselves the best possible chance of capturing a larger slice of the pie.
Complementary strategies mean complementary partners
The short product life cycle, possibilities for technology convergence, and generally high R&D costs make the telecommunications sector one that is especially conducive to such “coopetition”. Crucially, any firms considering entering such a partnership need to be on a similar strategic wavelength, in the spirit of joint exploration of innovative ideas rather than exploitation for their sole individual interest. The difference between cooperation and competition lies in the timing of the collaborative effort in relation to final release onto the market. Partner firms will ultimately compete in customer-related activities such as manufacturing but will collaborate in more remote activities such as pre-competitive R&D. In short, those entering the partnership are agreeing to share the risk of failure but with the prospect of reaping the rewards of working together further down the line.
The Celtic-Plus test case
A recent litmus test was carried out focusing on the Celtic-Plus cluster of key European mobile operators and infrastructure manufacturers, who have been working together since 2003 under the umbrella of the Eureka Pan-European network of large firms, SMEs, research institutes and universities spanning 39 countries. The telecommunications sector is an especially useful case in point due to the overall saturation of the market, a general downturn in growth and the fierce competition posed by mobile virtual network operators. As a result, the need to innovate is greater than ever, hence the good sense it makes for potential rivals to team up. An array of board members and R&D managers representing the firms Eurescom, Telefonica, Nokia-Siemens, Deutsche Telekom, Alcatel Lucent, Ericsson, Telenore, and France Telecom were questioned as to their reasons for getting involved in the partnership in the first place, what they perceived to be the levers for success, their expectations upon entering the “coopetition” set-up, and the overall benefits.
A success story
Celtic-Plus is characterised by a bottom-up strategy that serves as a testing zone before partners enter the potential “danger area” of commercial product or service release, thereby making it more likely for partners to agree to assume jointly the potential risks and investment required at this relatively early stage in the process. The relative immaturity of the technology being conceived was also key for those involved to sign up for the partnership, as was the opportunity it offered not only to devise new ideas together but also set a standard for subsequent application. Above all, the results of the various interviews conducted revealed that most participants felt they were engaged in a genuine win-win situation where coopetition was viewed as an opportunity rather than a threat, and where the role and contribution of each partner was clearly defined from the outset. What emerged clearly was that the pillars of success of such a collaborative set-up are openness, flexibility and a convergence of ideas.
The management question
Celtic-Plus is a very real example of a successful coopetitive venture. However, from the smoothest such operations through to the less productive ones, management remains an issue for further exploration. Tensions will inevitably rise within such set-ups, so managers must anticipate such scenarios and researchers continue to explore how the dynamics of more defective collaborations could be handled. Celtic-Plus is also a benchmark in terms of exploratory coopetition. However, it would also be of interest to establish how the type of project (exploratory or exploitative) governs the choice of partners and the structuring of the project as a result. Social capital (i.e. trust) and governance mechanisms also require further investigation regarding their impact on the setting up a coopetition partnership in the first place. However, what remains clear is that coopetition remains a highly viable alternative to under-resourced firms trying to go it alone. Sleeping with the enemy need not be a bad thing, so long as the terms are established from the outset.
This article draws inspiration from the paper The Determinants of the Emergence of Coopetition Strategy in R&D, written by André Nemeh and Saïd Yami and published in International Studies of Management & Organization 46 (2016).
André Nemeh is an assistant professor of Strategy and Innovation at Rennes School of Business, France. His research interests include Inter-organisational Relationships, Organisational Learning, Technological Innovation and Strategic Management and Coopetition strategy and technological innovation in high-tech sectors.
Saïd Yami is a professor of Strategy at The University of Lille and Kedge Business School, France. His research interests include Corporate Strategy, Strategic Innovation, and Entrepreneurship.