4 minute read 16 Mar 2020
Three men discussing in office

How “co-opetition” can drive transformation

By Nam Soon Liew

EY Asean Regional Managing Partner

Passionate about driving economic opportunity, diversity and inclusion. Advocates digital technology transformation for value creation.

4 minute read 16 Mar 2020

Disruption can be an opportunity for differentiation as the line between competition and collaboration blurs in today’s ecosystem economy.

Digital innovators are revolutionizing the business landscape. The emergence of Big Tech companies spells a shift in the appreciation of value from products to services and from tangibles to intangibles such as intellectual property, network reach and accessibility.

By virtue of their extensive scale and ownership of proprietary platforms, Big Tech companies are able to iteratively test new innovations with willing users for their own benefit and that of their customers. Big Tech companies not only set trends by anticipating user needs more efficiently and at a lower cost; they also shape user behaviors through their disruptive business models and creation of proprietary ecosystems.

A unique trait of Big Tech companies is that the ecosystems they create span conventionally defined industries, with strategic areas for participation by partner companies. While Big Tech companies are fellow business players, many are also channel platforms that may be leveraged and partnered with for deeper insights and stronger products.

While Big Tech companies are fellow business players, many are also channel platforms that may be leveraged and partnered with for deeper insights and stronger products.
Nam Soon Liew
EY Asean Regional Managing Partner

Agile businesses increasingly recognize the upsides of doing business today in the ecosystem economy, viewing disruption as an opportunity for differentiation as much as an existential threat. Given the scale of Big Tech companies, “co-opetition” (cooperation with competition) with them is in many instances, a more sensible and strategic way forward, rather than competing directly. 

Collaboration as the new innovation

As part of their business strategy, business leaders can plan for partnerships and alliances as strategic maneuvers to be part of the Big Tech game. Doing so helps the business to improve its speed to market by building on its existing strengths and harnessing those of others in complementing their weaknesses.

For example, in collaborating with highly networked transportation companies, food and retail players leverage the logistics connectivity of these companies and focus on increasing their online presence, product improvement, efficiency of warehousing and customer service. 

According to research on disruption conducted by the Economist Intelligence Unit (EIU) and supported by EY, nearly a quarter of organizations surveyed have used M&A and JVs as avenues to address or drive disruption. Yet, rapid changes in the business landscape are also compelling companies to explore more fluid and agile alliances.

The same report found that nearly one-third of the firms surveyed have formed a strategic alliance with a company in their industry, and one-quarter have partnered with a player in a different industry. In the financial services sector, nearly a third of the organizations have formed strategic alliances with their counterparts to address disruptive forces. Many also view collaborations with FinTech firms as a way to drive digital innovation. 

Having said the above, the most suitable partner may not always be the biggest technology player, and the greatest strategic opportunities may not require the latest technology. Growth opportunities will still need to be assessed based on business fundamentals. For any partnerships proposed, boards need to challenge management to critically assess what exactly is the addressable market.

Companies that undergo transformation through partnerships need to also be mindful not to alienate existing customers, while looking at the untapped market opportunities. The fundamentals of building customer trust, as well as addressing consumers’ data, privacy and security concerns should remain core to any collaboration within ecosystems.

Shape the playing field

Whether rightly or not, Big Tech companies are commonly perceived as businesses that discourage competition, play unfairly by manipulating data and the media, and require stricter regulations for data governance, cybersecurity and the digital economy. 

Public policy is changing to keep pace with the digital marketplace, but may not always be fast enough. This means that opportunities are present in the ecosystem economy for further improvement. Corporate leaders who are strategic about their roles can get involved with governments, industry associations, or even Big Tech companies themselves, to shape the playing field.

Questions for boards to consider:

  • Does the board bring to bear the necessary experience and mindset toward disruptive and ecosystem thinking?
  • Does the company have a strategic road map for business transformation and digital innovation?
  • Do you know of non-competitive companies with objectives or a purpose aligned to yours?
  • Can the company acquire new capabilities from partnerships that add value?
  • What is the addressable market size and potential profit pools that can be strategically monetized with the right partners?

Summary

Given the scale of Big Tech companies, “co-opetition” (cooperation with competition) with them is often a more sensible and strategic way forward. However, the most suitable partner may not always be the biggest technology player, and the greatest strategic opportunities may not require the latest technology. Growth opportunities still need to be assessed based on business fundamentals. For any partnerships proposed, boards need to challenge the management to critically assess what exactly is the addressable market.

About this article

By Nam Soon Liew

EY Asean Regional Managing Partner

Passionate about driving economic opportunity, diversity and inclusion. Advocates digital technology transformation for value creation.