Co-opetition, the Common Sense of Competition

There’s a fascinating term in marine biology to describe the service that ‘cleaner fishes’ provide to other fish, including their natural predators, of removing dead skin and surface parasites; it’s called mutualism – food in exchange for a scrub. When cleaning is underway, a wary truce is called between the cleaner and host species.

In the terrestrial world of finance, Credit Unions have long been known to collaborate with each other in a spirit of ‘co-opetition’ which is now enthusing the bigger banks as well. Is this a sign of maturity of the banks of the future, which recognise the futility of playing a lone hand when a partner could lower the stakes? Indeed, many savants believe that co-opetition, or collaboration between rivals, may soon be the norm rather than the exception in competition.

Not that collaboration between banks is an entirely new concept. White-labelling and loan syndication have been around for decades. But the success of the shared services model has proved that co-opetition is perfectly workable on an extensive scale and at the granular operational level. Especially for globalised operations and entry into new markets.

Besides the usual suspect, namely non-core processes, fraud/AML prevention and exchange of global regulatory information are some of the areas ripe for co-opetition.

The catch, if you can call it that, in this otherwise win-win situation lies in agreeing to and implementing a deal that is fair to all parties. In a marriage between unequals, the larger institution may continue to act like a customer rather than a co-service provider or worse, undermine the smaller bank’s priorities.  Rather than flexing their muscles, co-opeting partners must focus on bringing discipline, governance and strategic thinking to the relationship. Demarcating the competitive space from the co-opetitive one and establishing clear rights and responsibilities is a good place to start.

The flip side....

An old saying goes, “Keep your friends close and your enemies closer.”  Is co-opetition one way of keeping a tab on your rivals? In a dog eat dog world, can we really trust our competitors? What do you say?