Collaboration between competitors has been a fashion; Toyota and General Motors collaboratively assemble automobiles, Philips and Siemens develop semiconductors, Kodak gets photocopiers from Cannon, etc. However, in the times of Covid-19, the need for this collaboration is stronger than ever. This is because the COVID-19 outbreak has led to severe disruptions, affecting significantly all business sectors. Businesses are facing unprecedented challenges. Synchronized industry responses are essential—and even called for by the governments—to face the crises, like demand or supply chain disturbances, and to protect consumers. In turn, let me share with you how entrepreneurs can turn the pandemic obstacles into opportunities for growth in 2020 by harnessing the need for collaboration with competitors.
How Collaboration with Competition Brings Opportunities for Entrepreneurs
First, the collaboration with competitors may play a crucial role in planning your business recovery strategy after Covid-19. Leveraging on an alliance with the competitor to acquire modern technologies or expertise is not devious. It shows the capacity and commitment of each partner to capitalize on the skills of the other. I found that in each case where a Japanese company rose from an alliance stronger than its Western partner, it had made more efforts to learn.
Strategic intent is a vital element in the commitment to growth and learning. The willingness of businesses to enter alliances brings a change in competitive strategies, not competitive goals. NEC, for instance, has entered a series of collaborative ventures to improve its technology and product competences. NEC is the only business in the world having a leading position in computers, telecommunications, and semiconductors—irrespective of its lesser investment in R&D than competitors like Northern Telecom, Texas Instruments, and L.M. Ericsson. Its cord of partnerships, most remarkably with Honeywell, let it to leverage its internal R&D over the past two decades.
The Horizontal Collaboration
Amid the severe economic shocks led by COVID-19, a lot of industries are faced with declining demand for their products and services. Other industries, particularly healthcare and food, on the other hand, are adjusting fast to increasing demand requirements and shifting consumption patterns because of the large-scale population quarantine in most of the countries. Significant under or overcapacity has created many incentives, or even the need, to collaborate in ways that can push the limits of competition law.
As the COVID-19 crisis changes, businesses should be aware of, and adapt to, shifts in how competition authorities may view competitor collaboration. In the longer term, undoubtedly there will be questions as to whether this is impermanent, or instead signifies a “new normal,” which would reflect a noteworthy change in the tactic to competition law policy as well as enforcement.
Building Secure Defenses During Collaboration
For collaboration with competitors to succeed during Covid-19, each partner should contribute something unique: basic research, manufacturing capacity, product development skills, access to distribution. The challenge lies in sharing sufficient skills to take advantage of vis-à-vis businesses outside the alliance while stopping a wholesale transmission of the core skills to the partner. There is a very thin line to walk. Businesses must carefully choose what technologies and skills they pass to their partner. They must place safeguards against unintentional, casual transfers of information. The objective is to limit the transparency of the operations.
The kind of skill a business contributes is a crucial factor in how easily its partner may internalize the skills. The potential for transfer is highest when the contribution of the partner is easily transported (on computer tapes, in engineering drawings or the heads of technical experts); easily interpreted (it can be narrowed down to commonly understood symbols or equations); and easily absorbed (the competence or skill is independent of any precise cultural context).
The Essential Considerations for Collaboration
Collaboration between businesses to deal with the Covid-19 crisis may include exchanges of data or information (for instance, on how businesses are dealing with re-organizing their supply chain or workforce), travel limitations, or involuntary closure of sites. Businesses may try to assure adequate supply and the safety of that supply and talk about the best practices to diminish any supply chain disturbances or how to encourage health and safety practices in the workforce. In the hospitality sector, especially, the businesses may want to organize their cancellation policies or the cases for reimbursing customers. Such exchanges, having the specific goal of dealing with the crisis, might be legitimate. However, in no conditions should businesses discuss existing or future prices, volumes/output, costs, or plans for assigning markets or customers without first having legal advice. Any exchanges of data or information related to the company’s longer-term strategies and that go beyond what is sternly essential to address the crisis will likely increase antitrust risk.
Final Thoughts
During Covid-19 when most of the industries are suffering, running away from collaboration with competitors is no answer; rather an opportunity only smart entrepreneur can recognize and utilize.
