Source: Inc.com | Greg Satell | March 23, 2019

You collaborate to discover, but compete to develop and build

Boeing and Airbus are arch rivals, competing vigorously over decades for supremacy in the global aviation market, much like DowDupont and BASF do in chemicals. Yet all of these companies, along with many others, collaborate at places like the Composites Institute (IACMI). They do this not out of any altruism, of course, but self-interest.

It is at places like the Composites Institute that profit-driven companies can explore the future with top notch scientists from places like Oak Ridge National Laboratory, Michigan State University and Purdue as well as dozens of smaller companies active in the space. To not participate would be to risk being cut out of important developments.

This type of activity is not entirely new. In the 80s, semiconductor firms along with the Department of Defense, created SEMATECH to drive advancement and regain competitiveness, while still fighting it out in the marketplace. Today, as we enter a new era of innovation, it is becoming even more imperative to know when collaborate and when to compete..

The Value Chain and Competitive Advantage

In Michael Porter’s landmark book, Competitive Advantage, the Harvard professor argued that the key to long-term success was to dominate the value chain by maximizing bargaining power among suppliers, customers, new market entrants and substitute goods. The goal was to create a sustainable competitive advantage your rivals couldn’t hope to match.

Porter’s ideas dominated thinking in corporate strategy for decades, yet they had a fatal flaw that wasn’t always obvious. Thinking in terms of value chains is viable when technology is relatively static, but when it advances rapidly it can get you locked out of important ecosystems and greatly diminish your ability to compete.

To understand why, consider open-source software. When Linux first rose to prominence, Microsoft CEO Steve Ballmer called it a cancer. Yet more recently, it’s current CEO announced that the company loves Linux. That didn’t happen out of any sort of newfound benevolence, but because it recognized that it couldn’t continue to shut itself out and compete.

To thrive in an ecosystem driven world, you must constantly widen and deepen connections. Instead of always looking to maximize bargaining power, you need to look for opportunities to co-create with customers and suppliers, to integrate your products and services with potential substitutes and to form partnerships with new market entrants.

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