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Collaboration versus Competition

February 03, 2021

If there is one thing the pandemic has forced businesses to do is to think outside the traditional business box. Under the circumstances, getting a leg up on the competition has become more irrelevant and surviving has become the top priority.

Businesses, which once avoided collaboration, are now working hand in hand to provide front-line products such as PPE equipment, logistics, and supply chain. As the pandemic continues to disrupt everyday life, businesses need to release the idea of gaining an advantage over the competition and, instead, take on a collaborative mindset to open up possibilities of reaching new markets and opportunities.

What is it about competition that has moved businesses to resist collaboration? By definition, competition is meant to build and support an industry. Competition directly benefits the consumer by offering improved services, more value, accessibility, and innovation. Competition encourages growth and reinvestment of resources to retain a position in the market or grow to become an influence within it. However, during times of economic strife, competition can potentially do more damage than good. It can distract from internal issues that should be a top priority such as cash flow, employee pay/retention, and supply. Businesses should consider what forces are affecting their internal workings and prioritize those in order to weather an economic downturn. After taking stock of what’s not working, how can they best begin finding answers on how to fix these issues? Collaboration.

Collaboration, especially during difficult times can encourage business owners to think more creatively about how they can better serve their clients. For instance, staying at home has forced many to create home office spaces, order delivery for many products, and communicate with others over the internet. If a business is not positioned to serve its clients due to these new changes, it can open an opportunity to connect and collaborate with a business.

Vertical integration is when two companies that serve a consumer along the different stages of the customer journey come together. Examples of vertical integrations include restaurants working with delivery businesses, client service-based businesses offering virtual meeting rooms, retail businesses integrating ecommerce into their retail model. Lateral integration is when two businesses serve the same consumer but not necessarily in the same industry. Lateral integration examples can include two restaurants putting on a cohosted event to increase orders, or a boutique clothing business create a pop-up show with a local bar. These types of collaborations have spurred innovative ideas that end up disrupting and even creating whole new industries.

There are some ways that businesses can best evaluate their position to find the best opportunities for collaboration. What challenges are directly affecting your customers? Is there a logistical or communication issue that prevents your business from reaching them? How are others in your industry solving this problem? Are other businesses in your market confronting the same issues? By removing competition from the business formula new ideas can form and innovation can thrive. However, a word of caution must be stated. It is important to state what resources will be shared in collaboration. Investing capital isn’t the only way to collaborate, keep in mind that serving a shared consumer is the best way to keep things fair and mutually beneficial when collaborating. Consult with a business attorney before signing any contract.

The best way to initiate a collaboration is to get to know your potential collaborator’s challenges and present your solution as it benefits them first, then present how it benefits you. This can open their mind to collaborating because they will see your genuine interest in mutually benefiting both parties.

“Business Tips” was written by Alejandro Castañon, Certified Business Advisor of Angelo State University’s Small Business Development Center. For more information on the topic of this article or the services of the ASU • SBDC, contact him at Alejandro.Castanon@angelo.edu.