May 22, 2017

Social business and the competitive landscape

It used to be relatively easy to determine who was a competitor and who was not. Competitors were, simply put, one’s rivals. They were companies that offered similar products or services to one’s own company, and to succeed in business one needed to beat them. Quite often the sole goal of advertising was to differentiate one’s business from that of key competitors, and to point out all their faults.

While competition in the traditional sense is still very much alive, things are now more complex and nuanced. Due to the advent of social business and new ways of offering services that were not previously possible (e.g., Uber, which uses mobile technology to enable people to get a taxi, private car, or rideshare) the competitive landscape may be viewed as more of a changing scenario than a fixed set of companies.

The nature of competition actually started changing a few decades ago when the technology industry reinvented it with a new approach called “coopetition” (a combination of the words cooperation and competition). In almost a literal interpretation of the old saying about keeping one’s friends close and one’s enemies even closer, many fiercely competitive technology companies started working together for their mutual benefit. IBM and Apple worked together to create a new computer chip and IBM Global Services started repairing HP’s computers and installing Oracle’s databases, despite the fact that IBM had competitive hardware and software offerings.

To those unfamiliar with the coopetition concept, according to Wikipedia: Coopetition occurs when companies interact with partial congruence of interests. They cooperate with each other to reach a higher value creation if compared to the value created without interaction”

While this approach may have originated in the technology world, it has expanded as new business models and openness to collaboration has changed other sectors of the market. One example is the arrangement between PSA Peugeot Citroën and Toyota to share components for a new city car that is sold as the Peugeot 107, the Toyota Aygo, and the Citroën C1. This approach enables both companies to save money by sharing costs while still remaining very competitive. Other arrangements of this type allow those participating to either save money, develop something quickly, or create a more advanced product than either company could have done alone.

We can see this trend of working together in the rise of open source communities who work collaboratively, across boundaries to create new solutions, or to improve on things that currently exist. While the products developed may lead to the creation of profit based entities, many who participate in these type of communities believe the main purpose for developing something is about creating something that will benefit all. As such, they may make their product available for minimal or no cost.  These type of collectively developed product offerings can have a significant impact on the competitive landscape of the existing players.

Sometimes collaboration takes the form of competitors working together on infrastructure projects. This could be soft drink companies cooperating to develop a clean water supply, which both need to create their products. While this is not necessarily a result of social business, the open, collaborative world of social business does help promote and reward this type of pro-social effort, thus increasing the incidence of such behavior.

The use of social platforms to create new businesses for specific vertical industries can have a significant impact on how business gets conducted and whom one competes with. One example is the hospitality industry, in which a new company, Airbnd, has changed the competitive landscape quite a bit. In this case, traditional hotels have had to enlarge their view of the competitive set to include normal folks, with a spare room or a couch, who are willing to be hosts.

The lesson to be learned is that in the world of social business, competition can come from anywhere and everywhere.  The key is to make sure one monitors the trends in their market and adapts their strategies accordingly. And, while businesses may still compete, figuring out how to collaborate with one’s competitors to achieve mutual benefit may actually be the best way to succeed.

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About Andrea Goldberg 2 Articles
Dr. Andrea Goldberg is a social business thought leader with a unique cross functional perspective. A former IBM Marketing Vice President and organizational psychologist, she works at the intersection of social media marketing, technology and organizational change. As the leader of her own firm, she enables clients to develop new capabilities and transform their organizations. She is also an adjunct professor in both Marketing and I/O Psychology programs.