Openness is a continuum: when to compete or collaborate

I've worked in both large public corporations and small privately held companies, and I've noticed that one of the reasons some companies manage to become larger is their ability to cooperate with others. They possess a strong ability to cooperate with customers and help them solve their problems. They work closer with suppliers. They jointly develop products with outside organizations (like universities, governments, and other institutions). Because of that ability to cooperate, they grow both organically and through successful mergers and acquisitions.

On the other hand, however, some companies actually pride themselves on remaining independent from their customers, suppliers, and development institutions. That desire to stay independent weakens their potential to grow. But, in some cases, this is the best action strategy. Being overly competitive can lead to negative behavior, but that doesn't mean competition itself is entirely bad. In many cases, it can be highly motivating for all parties (here, professional sports show the value of competition very clearly). Cooperation and competition must be balanced and one should know which approach is most appropriate in a given situation.

So, when should an organization cooperate and be more open, and when should it go the independent, closed route?

Partners or competitors?

When I was working at Isuzu Motors, I learned of several cooperative projects with competitors in Japan. Isuzu jointly developed diesel engines for Honda vehicles in the UK, even though they were competing against each other in the passenger car market in Japan. Nissan Diesel and Mazda bought light-duty trucks from Isuzu and named them differently for the Japanese truck market, even though Isuzu was selling the same vehicle in that market. Large corporations know how to find partners among their competitors. How did they do that?

Collaboration and cooperation require effort and hard work, particularly internationally. Here are some guidelines when deciding which is best, based on the book Friend & Foe: When to Cooperate, When to Compete, and How to Succeed at Both by Adam Galinsky and Maurice Schweitzer.

1. Problem simplicity. Is the issue at hand simple and easy to solve alone? If the project is so simple that any individual can do it alone, then opening the problem to the public and gathering advice in this way isn't really necessary. Doing so just isn't worth the effort. But if the problem is very complex and you don't have all the answers, being open and exposing the issue to many people with the skills, experience, and expertise you require would be the best strategy.

2. Human relations importance. If you want to build a long-term relationship with someone, exposing that person to a shared problem or project might be the way to build that relationship. On the other hand, if you are not particularly interested in building this kind of network, going it alone would be easier and simpler.

3. Knowledge of solution. If you possess all the knowledge you require in order to address the issue at hand (even if it is very complex), being closed and handling it on your own would probably be best and most productive. On the other hand, if it is an issue that you know very little about, being open and seeking outside support would be more appropriate.

4. Project process and duration. Can the issue be solved quickly and easily? If so, just addressing it by yourself might be the best approach. But if resolving the issue or solving the problem will require a longer period of time—and involve many tasks and milestones along the way—perhaps being open to outside help at many stages may be the secret to success.

Openness is a continuum

With this set of criteria, we can begin analyzing certain issues that organizations typically face and determining the conditions under which open and closed approaches will seem more likely. Of course, these two options are not mutually exclusive. Instead, imagine a continuum. On one end is complete openness, transparency, and collaboration; on the other is completely closed, secretive, and insular activity. Almost every approach will fall somewhere in the middle.

Let's examine five areas: resource allocation, domain knowledge, project duration, and growth opportunities.

1. Resources

In one case, both parties are trying to get something they both greatly need, but that "something" is in short supply. Therefore, they tend to push for all they can acquire. The parties are therefore more likely to lean toward competition. In the opposite case—an abundance of supply—both parties generally attempt to share available resources; they're not threatened if they do not get them.

When people are struggling to acquire resources, they tend to act in their own interests first and have difficulty identifying others' concerns. For example, when I was conducting sales training, I could sense those sales people experiencing financial difficulties. They couldn't pick up on the needs and concerns of their customers, as their own needs were so powerfully overwhelming. They tended to be closed and act competitively.

2. Importance

What is the cost of a project's failure? What are the rewards of success? Are they great, small, or nonexistent? Some projects can fail but have little impact to a company's critical functions, so simply investing the minimum amount of resources, time, and energy would be appropriate in this case. A closed, quick decision and execution would likely be best.

But if all stakeholders agree that a project is very important and no one can just walk away from it without serious consequences, greater cooperation and in-depth communication would make it successful.

The issue of power is also critical here. In some cases, one party has a great deal of power over others; the outcome of a project won't affect its operations as much as others'. So this party is in a position to make demands or act more competitively (if overly forceful, though, the weaker party might just simply walk away and seek other partners). On the other hand, if both parties have equal influence over the other (because a success or failure affects them both equally) then together they both can be successful. Without an agreement, they will suffer similarly.

3. Knowledge

If both parties have the same expertise regarding the issue or problem, they're more likely to be very competitive in a joint project. On the other hand, if all parties are bringing very different (but equally necessary) expertise to the project, greater cooperation could develop because the approaches better complement one another. Determining those complementary tasks is then the first step toward better collaboration.

4. Duration

For projects that can be completed quickly, one party can likely complete the work on its own. There may be no need to find collaborators to help complete it.

But if the project involves many tasks over an extended period of time, one party might not have the staying power to complete it. Therefore, the longer the time required and the greater the chance of delays, the greater the need for partnership and cooperation.

Moreover, if the project at hand is one that, once completed, will not lead to additional projects or activities, then both parties will likely try to acquire as much as they can in a single engagement, as they assume getting as much as possible now would be the best strategy. For example, say I want to buy a specific piece of land in a faraway location for a client I'm representing and will most likely never work on that kind of project again. I'm more likely to act competitively and push for the very best purchase conditions for the client.

On the other hand, if the first project will lead to many other even more important and profitable projects, then both parties will more than likely try to gain equally from this initial project and concern themselves with benefits they can provide to other parties. They will try to make sure other parties are satisfied not only with the project but also with them, as this will affect the success of future projects.

5. Growth

Small, somewhat successful businesses can survive by purely competitive effort, but growth potential is restricted if (as I mentioned earlier) they too greatly value their independence (being closed to outside partners). But, if a small company wants to grow in size, particularly to the IPO level, cooperative skills will be required to grow. A more open approach will be necessary.

This analysis should help you begin thinking about the factors that influence you, your teams, and the parties with whom you interact to be competitive or cooperative in certain situations. In most cases, the situation involves some combination of all these factors. As I mentioned above, being open is a continuum. In the second part of this series, we'll discuss a few specific cases where these factors come into play. Then we'll be able to better clarify the ideal strategy for any project.

This article is adapted from To compete or to collaborate? 4 criteria for making the call by Ron McFarland, and is published with the author's permission.