Is it time to break bread with a competitor?

Post image for Is it time to break bread with a competitor?

Joining forces with the ‘other guys’ might be the way to remain successful in the new economy, but take caution to do it right.

Hopefully, you’ve used this recession to become a more savvy business owner and/or manager. Personally, I’m amazed at how differently we now run our firm. As one striking example, we now regularly pursue strategic partnerships as a growth strategy. Perhaps the most fruitful arrangements have been those established with firms that have historically been our strongest competitors.

And so my question: “When was the last time you had lunch with your fiercest competitor?” This might not be as difficult for some as it has been for us. Like cross-town high school rivals, we wear our M&S blue with pride and celebrate victories loudly, often at the cost of the ‘other’ guys.

[callout]“We now must be smarter, more strategic, and more aggressive.”[/callout]

Something, however, is different now. There are fewer opportunities, and those available are highly competitive. We now must be smarter, more strategic, and more aggressive. So, I challenge you to consider a new strategic partnership with your most capable foe. He or she has been successful, and offers something unique to the market that you serve. A successful venture with this firm might allow you to:

 

* Divide the market— In this challenging economy, and as project selection becomes more competitive, a partnership with your strongest competitor will reduce competition and allow you to decide who gets projects. Consider that you might be better with a small piece of the pie, rather than with none at all.

* Fend off new competition— If you’ve found a niche, protect it by partnering with your closest competitor to jointly strengthen your positions and to fend off new competition.

* Deliver increased value to your best customers— Partnering with your strongest competitor may serve your client’s best interest. Ask them. They may love to combine the local connections of your firm with the technical specialty of a competitor.

* Add service depth— Join forces and increase your firm’s depth. Rethink the meaning of depth to mean local small firm connections and mega-firm horse power; or big-picture planning focus and deep technical expertise.

 

[callout]“issues can be mitigated by setting clear expectations, using partnering agreements, and consistently differentiating your firm’s service.”[/callout]

You might face pitfalls when “sleeping with the enemy.” Feared outcomes often include the poaching of key staff; loss of intellectual property, market advantage, or differentiation; and losing long-term clients. Although caution might be warranted, these issues can be mitigated by setting clear expectations, using partnering agreements, and consistently differentiating your firm’s service.

 

To successfully partner with competitors:

1) Start relationships early— It takes time to develop trust between firms, especially when past competition has been fierce. Expect these relationships to require concerted effort. Initially, chase small engagements and look for early, small wins. Small test-drives give you opportunities to iron out any partnering wrinkles.

2) Use partnering agreements Fences make good neighbors. Similarly, good partnering agreements provide opportunities to set boundaries and clarify expectations. Openly discuss potential pitfalls. Both firms will likely have similar concerns. An early success negotiating a partnering agreement will increase your confidence. Consider drafting such an agreement prior to the pursuit of a specific opportunity. These agreements take time, and will be difficult and distracting to draft when marketing an active opportunity.

3) Seek win-win arrangements— For partnerships to last and be productive, both firms must enter the agreement seeking mutual benefit. Like most relationships, partnering only works when both parties invest at least as much as they expect to get back. This is particularly true during early engagements, when both parties are cautious, and when both may expect the other to seek short-term advantages. Any such actions will quickly erode progress.

So, go ahead and break-bread with that cross-town rival and strategize opportunities to improve both businesses through a coordinated marketing effort. When doing so, start these relationships early, before marketing targets are identified; use carefully crafted partnering agreements to clarify expectations; and seek relationships that are win-win for all involved. Those who are successful with this approach may find they unlock new, untapped opportunities with existing clients and accelerate growth into new markets. Others, unwilling to take the risk, may find themselves cut-out of future project opportunities.

Derrick Smith is a partner with consulting firm MacKay & Sposito, Inc. (M&S), an infrastructure planning and design firm based in the Pacific Northwest. M&S services Water Resources, Energy, Community Development, and Geospatial clients and markets throughout the Pacific Northwest.

Derrick publishes regularly in several regional and national journals that focus on business development, project management, and human resources topics related to his industry. Derrick Smith’s thoughts and past articles can be found at www.derricksmith.net. He can also be followed @derrick_smith.

PDF Version of this article: [download id="4"] Example Teaming Agreement: [download id="5"]

Photo by Wally Gobetz

Originally published in the April 5, 2010 issue of the Zweig Letter.  www.zweigwhite.com

Leave a Comment

Previous post:

Next post: