In most businesses, Time & Speed to market (buy) are the critical parameters of success while knowledge quickly becomes outdated, coupled with increasing market uncertainty. Developing new technology and market outreach independent of each other could be a risky investment and firms often look for alliance partners to build solutions. Value can be created by pooling and utilizing valuable resources. To create value, a vast majority of companies have been forming partnerships within and outside the relevant business ecosystem.

Paradoxically, some of them have also been extensively collaborating with their competing firms. Such alliances are called coopetition, which is potentially beneficial, but they carry certain risks for the collaborating organizations, too. In certain types of business environments, coopetition strategy can help you to innovate and improve market performance. It can bring improvement in existing products and services or can help in creating new products from scratch. Coopetition is mainly beneficial in knowledge‐intensive sectors when you are collaborating to develop interoperable solutions and inspiring industry standards.

You can view your company’s strategy formulation process as a game. You can define all the players – like Customers, Suppliers, Competitors, and Complementors – to identify opportunities for cooperation and competition with each of those players, with whom you can potentially form a strategic alliance. Playful experiences (with game theory) can help relevant stakeholders in explaining why firms adopt a coopetition strategy and how they can identify the parameters required to build a successful coopetition strategy. It can also help in evaluating the risks involved in coopetition and help in the crucial decision of opting for coopetition.

In 2009, due to the sky-rocketing oil prices, Southwest Airlines lost millions of dollars. To counter the difficult business scenario, they formed a partnership with other airlines and offered low fares while maintaining its position as a business-class airline.

For some of the organizations, it had been challenging to capture the value independently, and they used coopetition to fortify the brand in a losing situation, to increase the size of the market, and then to compete, eventually to capture valuable business. You need to understand how your company can get innovation benefits while simultaneously collaborating with competitors.

If you want to create a new market, you need to evaluate the compatibility between the offerings of your partners and the mutual benefits you can get via the collaboration. Apple and Microsoft teamed up to license mobile operating systems, and their features and patents. Similarly, Sony and Samsung had collaborated to develop LCD Technology. Nokia and Intel also collaborated for the development of the MeeGo smart‐phone operating system. They all collaborated mainly to dilute the risks and to reduce the cost involved in developing technology and standards.

These collaborations could create products for global consumers and gain economies of scale. Automobile manufacturing companies can probably use coopetition to utilize common manufacturing facilities and platforms, and finally produce cars under different brands. Insurance firms can use this in developing solutions to reduce insurance frauds. Now, Play can help in educating people on coopetition and prepare companies to create innovative solutions with competitors and create new markets. I will also talk about Nash equilibrium to help ease and understand decision-making when the dependency is on the competitor’s move(s). 

Let’s take a situation where a couple wants to see a movie, and they have got two choices; the first choice is ‘Movie Name 1’ and the second choice is ‘Movie Name 2’. The man prefers M1 while the woman prefers to watch M2. However, both want to watch a movie together. Which one should they go for?

It can be well understood with the equilibrium concept in Game Theory. According to Nash equilibrium, there is an equilibrium point at which “No player can profitably deviate, given the strategies of the other players”. Given this definition, Nash equilibrium outcomes are “See movie M1 together” and “See movie M2 together”. Although for both the outcomes, either it would be the man who would complain, or it would be the woman; there is no alternative outcome that is preferable to both. This game has also been termed as the “Battle of the Sexes” (Osborne and Rubinstein, 1994: p.15).

Companies can build applications based on the Nash equilibrium, in which the behaviour and interactions between various competitors are conceptualized. Those applications can be useful to predict the decisions of competitors and also to determine the best outcomes

Key Takeaways
Leverage ‘Play’ to prepare companies to develop innovative solutions with competitors is possible by evaluating and forming coopetition strategies with the right partners and eventually, creating new markets.