Competitor alliance: Why cooptition is a business imperative

The new mantra for success in the modern business environment is cooptition. The word is a combination of cooperation and competition: it is a scenario where business rivals continue to compete in some areas, but cooperate in others. This is something that was unthinkable a few decades ago, when organisations almost went out of ?their way to eradicate the competition.

Cooptition is often driven by several factors. These include:

• social agendas;

• knowledge and skills development;

• globalisation;

• joint initiatives;

• global political and economic turbulence;

• government regulation; and

• new developments in trade ?and industry.

Social agendas

Businesses are increasingly developing ?a social agenda. Diverse organisations have come together for corporate ?social responsibility (CSR) initiatives ?and campaigns.

The Asian Forum for CSR, one of the leading events in the sector in Asia, has active participation by over 450 business leaders to make our world a better place. Many organisations come together to do joint activities in areas such as biodiversity, disaster management, global warming and waste management.

The United States Climate Action Partnership (USCAP) is an ever-expanding alliance of major businesses and climate and environmental groups. USCAP is calling on the federal government to enact legislation for the significant reduction of greenhouse gas emissions.

Its members include AES, Alcoa, Alstom, Boston Scientific Corporation, ?the Center for Climate and Energy Solutions, Chrysler, The Dow Chemical Company, Duke Energy, DuPont, the Environmental Defense Fund, Exelon Corporation, General Electric, Honeywell, Johnson & Johnson, the Natural Resources Defense Council, NextEra Energy, NRG Energy, PepsiCo, PG&E Corporation, ?PNM Resources, Rio Tinto, Shell, ?Siemens Corporation, The Nature Conservancy, Weyerhaeuser and the World Resources Institute.

The Global Social Compliance Programme is a programme driven by the improvement of working and environment conditions in global supply chains. It comprises global buying companies working towards improving the sustainability of their supply base. These include Philipps-Van Heusen, Tesco, Carrefour, Hasbro, Chiquita, Walmart, HP, Marks & Spencer and IKEA.

The Business of a Better World also has some of the world’s leading companies working together to create ?a better world.

Knowledge development

Companies are also working together directly or indirectly to develop knowledge and skills that will positively affect ?their industry.

According to a recent Gartner study, analytics and business intelligence is the top priority for CIOs in 2012. The main software vendors in the analytics industry – SAS & SPSS – have a support process for academic institutions that encourages them to offer programmes in analytics. SAS allows instructors and participants to use cloud versions of almost all of its offerings, free of cost.

Both companies do not restrict any institute from using a rival software to enrol. This is a major step away from the past, when software companies often ?used to restrict others from using a ?rival platform.

A postgraduate training programme in analytics offered by MICA and Ivory Education is receiving active interest from companies such as Genpact, WNS, IMRB, Global Scholar, Hansa Research, Impetus Research, iResearch, Evalueserve and TNS.

They are interested in promoting the programme internally to help train their employees for analytical roles. Often these companies actively compete for business, but work together for training and development.

Globalisation

Globalisation is primarily due to growing cooperation between countries, which is leading to international integration. It is building a greater level of cooperation across the globe.

Globalisation has allowed many companies to enter new markets. In new markets, companies of the same domain and perhaps with the same national origin have aligned together closely to achieve their local business interests. In many countries, there is a stronger bond between rival companies than ever before.

In global markets, one model does not fit all. Business environments are different and they rapidly keep changing. Organisations need to come up with innovative strategies and approaches ?to build and maintain their presence. ?They also need to integrate into local markets and evaluate approaches such ?as outsourcing and near-sourcing.

Joint initiatives

India is one of the most amazing growth stories in the past decade. There is growing cooptition between global and international organisations to make the India story work for everyone.

This year’s Global India Business Meeting was co-organised by AIAI, AIMA, AECA, VOKA, the Commonwealth Business Council, the European Business and Technology Centre, the Europe India Chamber of Commerce, TiE Global and the Young Presidents’ Organisation, and was attended by business leaders from across the world. This is another example of how organisations representing different interests are cooperating to develop international trade with developing countries like India.

Global turbulence

The global economy is facing some of its most turbulent times in the past few years and has caused turmoils across the world. The sovereign debt crisis has put several countries on the brink of virtual bankruptcy.

Developed countries like Japan, Italy, Greece, Portugal, Ireland and the United States have debt levels that are more than 100 per cent of their GDP. The UK, Singapore, France and Canada have public debts of more than 80 per cent of their GDP.

This debt doesn’t decrease, but is ever-increasing. The current crisis is attributed to them not meeting their immediate financial commitments. In the long term, not many countries have plans to eradicate or reduce public debt.

While most governments in the ?world claim to promote capitalism, they are used to working like teenagers who have no financial education but hold credit cards with no limits and post-retirement payment periods. Most government budgets result in deficits and they keep borrowing much more than they can ever afford to pay back.

Governments have doled out billions in unsustainable benefits. Benefits in the UK alone such as tax credits, housing benefit, child benefit, disability living allowance, income support, incapacity benefit, jobseeker’s allowance and council tax benefit cost the government over US$100bn every year.

In order to bring stability to the economy, governments are passing ?their burden to their country’s inhabitants through tax increases and cuts in benefits. People used to these benefits will not like them to go away.

Equally, higher taxes cause resentment among taxpayers. Taxation in many countries have reached the stage that they will lead to a stifling of growth. This, combined with other factors such as a rise in global food prices, fuel prices and other factors, has put tremendous pressure on people.

Civil society has emerged as a major force in the political system. People are also rising against rampant corruption in countries such as India, China, the Philippines and Thailand.

The jasmine revolution (aka Facebook revolution) that spread across many Arab countries also had its origins in economic difficulties. The existing political system is under threat in many countries and unprecedented changes are expected.

Government regulation

Governments around the world have become more active in overseeing and regulating businesses. The actions of ?large organisations are facing closer scrutiny worldwide.

A few years ago, Vodafone acquired the Indian assets of an Indian telecom company in a multi-billion US dollar transaction conducted through an entity in Mauritius. The government of India tried its best to tax the transaction, but it lost the legal battle in the Supreme Court.

In response, the government of India introduced the Finance Bill 2012 that allows for retrospective taxes. The government will be able to tax past transactions (even till 1952) that have been conducted overseas for assets in India. International investors have joined together to protest against this change.

Organisations have started cooperating with each other to stand together for any regulatory challenges that may not affect them individually, but may have an impact on them collectively.

Recently, the Indian courts passed a judgement against the allocation of mobile spectrum to companies by the government and asked the process to be initiated again. In order to ensure that the new process is favourable to them, fierce rivals are lobbying actively for lower-spectrum pricing in the ‘interests of customers’.

The globalisation index 2011 released by Ernst & Young shared an interesting perspective. It said: “An uncertain and dynamic policy environment – especially rising protectionism – is causing considerable concern. Companies should engage with policy makers to make the right decisions, combine local knowledge with global coordination and build stronger relationships with tax administrations.”

Trade and industry

The Philippines has achieved great success in the outsourcing industry. While Barack Obama is repeatedly talking about outsourcing to Bangalore, the Philippines has quietly become the leading player in the voice-based call centre industry. It overtook India last year and enjoys annual business of nearly US$5.5bn.

The Philippines Economic Zone Authority (PEZA) has provided a host of benefits to outsourcing companies, driven by the efforts of director-general Lilia De Lima, who oversees a very competitive team of dedicated officials.

PEZA acts as a facilitator and is behind the major difference in the Philippine economy. It accounted for 87.3 per cent of total investment in the Philippines in Q4 2011, according to the National Statistical Coordination Board.

One of the major factors in the success of the outsourcing industry in the Philippines is cooptition. Meanwhile, Indian outsourcing companies are continuously fighting with each other over clients, benefits, perks and employees.

Indian outsourcing companies give benefits like picks and drops, subsidised or free meals and illogical allowances (one company even gave a dating allowance). Indian companies spend a huge amount in creating their own infrastructure.

The Philippines is a different world. Outsourcing companies are mostly in eco-zones close to or within shopping malls. These companies don’t offer picks and drops: employees use public transport. There are no free lunches: employees eat at food courts in shopping malls. These companies also follow ?ethical practices about recruiting from other companies.

PEZA, the Business Processing Association of the Philippines (BPAP) ?and other industry organisations often ?host meetings and events. Top management from outsourcing companies interact more regularly on one platform than they do in India.

In no time, the Philippines has ?gained additional business of US$5.5bn, thanks to cooptition. It also has the additional advantage of being an important US ally and a former US colony. Barak Obama is much less likely to talk against the Philippines.

The outsourcing industry in the Philippines is a testament of what is possible by having harmonious relationships across organisations ?in a single industry.

The way forward

This is not to say that competition between organisations will be completely eliminated. It will definitely remain, but cut-throat competition should be a thing of the past.

Firms should work towards adopting an organisational culture that enables them to function in this upcoming world order. Those that are not planning to do so in the near future should immediately reconsider their organisational strategy. Those who adopt cooptition quite early will stand ?to benefit.

This will not only help firms themselves, but will make the business environment more sustainable. It will also help organisations to become more ?responsible and to align together ?for the greater good.