Why would I collaborate with a competitor?

A: You wouldn’t, at least not with just any competitor. But, there is strategic value in Co-Opetition! Take a lesson from Alan Mulally, Ford CEO, and his meeting with Fujio Cho, the Chairman of Toyota!

Ford Chief Executive, Alan Mulally, recently made a 24-hour trip to meet with Toyota Chairman Fujio Cho. To many, that just doesn’t make sense! Why would he do this, especially since only a few years ago, Bill Ford Jr., then Ford’s CEO, proclaimed “my goal is to fight Toyota and everybody else and come out on top,” in an interview with Time magazine. “I’m not ceding anything to Toyota. They’re an excellent company and they’re a terrific competitor, but I look forward to taking them on”, he added.

Perhaps it’s the comment of “Toyota as an excellent company and a terrific competitor” that motivated Mulally to ask for the visit. Ford is struggling to bounce back from one of the worst crises in its history – a third quarter loss of $5.8 billion in North America alone. Toyota, on the other hand, is poised to become the world’s biggest auto company in 2007.

Co-Opetition simply defined is the strategic collaboration between perceived direct competitors that leads to an accelerated development of a mutually-beneficial solution – and, the practice is a strategic asset to both sides. Seasoned executives have long understood, appreciated and discreetly engaged externally-perceived fierce competitors for collaboration towards the achievement of one of three goals:

  1. Defeating a common enemy, such as pending legislation or a new entrant in the market
  2. Greater market potential, by the whole being greater than the sum of its parts
  3. Saving a market niche from extinction with innovation

According to December 26, 2006 article in The New York Times, senior officials at both Ford and Toyota confirmed that talks between the two teams had focused on the development of environmentally friendly technology, such as hybrid-electric and hydrogen fuel systems, as well as ways that Toyota could help Ford improve its manufacturing efficiency! This is consistent with visits last summer between General Motors, French Renault, and Japanese Nissan, where the topics were joint purchasing and car production ideas. But Ford and Toyota’s relationship goes deeper than that – actually back to the 1950s when Ford helped Toyota regroup after World War II. It has been widely reported that Toyota also came to Ford in the 1980s when it was looking to jump-start its production capabilities in the U.S.

The key players who engage in these cooperative endeavors also tend to have a predetermined tie to the opportunity at hand. Mr. Cho, Toyota’s current chairman, for example, worked under Taichi Ohno, the famed Toyota Kaizen production system designer, emphasizing waste reduction, workforce collaboration and continuous process improvement on the factory floor. Cho also ran Toyota’s plant in Georgetown, Kentucky before becoming chief executive and, subsequently, chairman. James P. Womack, co-author of The Machine That Changed the World, makes a powerful argument for Toyota having nothing to gain by letting Ford fail. That could explain Toyota’s licensing of its dominant hybrid technology to Ford to integrate into the Ford Escape SUV. Ford also buys hybrid parts from Aisin Seiki, a supplier owned partially by Toyota. Mulally, likewise, is a student of Kaizen and used a form of it at Boeing, where he ran the commercial airplane division.

Are there competitors in your market who could become strategic alliance partners on key initiatives? Could you collaborate against a common enemy or share unique R&D initiatives to innovate in your market? Can your partnership give both companies a broader product portfolio, access to new or emerging markets, or a reduced cost of customer acquisition? A discreet outreach to a strategic leader on the other team could prove not only interesting, but incredibly viable to your long-term success as well.

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