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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?

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Comments: (2)

Nikhil Mittal
Nikhil Mittal - Wells Fargo - Charlotte 07 April, 2011, 06:29Be the first to give this comment the thumbs up 0 likes

Mutualism works well when the bigger entity gives a sense of protection to smaller ones and in parallel get themselves scrubbed off of unwanted things. Two things to concentrate here are: Protection and scrubbing-off unwanted things.

Looking at these two things, the more complex situation is of the competitors.

- The direct ones are the big fishes themselves, so no point asking them avail/provide protection and also they wont waste effort in scrubbing the unwateds.

- The smaller ones (perhaps tier 2 and below), are the niche players servicing a specific area in a specific manner. In a managed service environment, we can ask for a collaboration but not mutualism.

Fiona Hamilton
Fiona Hamilton - Volante Technologies Inc. - London 07 April, 2011, 09:52Be the first to give this comment the thumbs up 0 likes

I have had some experience of this over the past couple of decades and seen it work sometimes for periods of time although almost inevitably they have had a finite lifespan. Most occur when two companies have overlapping or closely abutting functional products or services. Think of it in terms of a Venn diagram. Both parties are often competing with larger entities that perhaps cover that whole space so working together allows them to compete. 

However; businesses, especially publically owned ones are driven by shareholder returns and market expectations. So inevitably the spotlight will fall on that intersection and the functional horizon beyond and be seen as fertile ground for future development of product or services. That's when the relationship crumbles. Trust is a key to keeping that relationship for as long as possible but people move on and sometimes the trust exits the building with them.

So it as well as keeping your enemies closer it is also a case of "Making hay whilst the sun shines". As long as you don't rely on the revenues from the relationship to stay afloat then why not leverage relationships of that nature. Just don't enter in to it believing the marriage is made in heaven and "till death do us part"!

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This post is from a series of posts in the group:

Innovation in Financial Services

A discussion of trends in innovation management within financial institutions, and the key processes, technology and cultural shifts driving innovation.


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