If you are the type of Solopreneur or business owner who believes that a primary business goal is to annihilate and destroy your competition, then you're likely destined to become a less successful entrepreneur. Research now demonstrates the wisdom of the adage “keep your friends close and your enemies closer.”
A 2004 study conducted by James Westphal, professor of management at the University of Texas at Austin, examined CEO friendships in 293 US companies and found that regardless of the intensity of competition within a given industry, rival CEOs who formed friendships enjoyed distinct business-related advantages over those who shunned competitors.
According to Westphal, not only is it possible to make friends with competitors, it's advisable. He explained the advantages of friendships among rivals this way: “When business owners get together, what do they do? Talk shop.
In other words, by getting to know rivals, you'll obtain information and get exposure to perspectives that can help make you more successful. Follow a bit of counter-intuitive advice and realize that business is not always a zero-sum game. A competitor's win does not automatically mean your loss.
If getting chummy with the competition makes you feel a little queasy, then get friendly with a competitor based in another locale. The distance will create a boundary that could make it comfortable for the two of you to trade ideas about topics like how to make clients happy, how to take advantage of, or protect yourself from, market trends, or social media and advertising strategies.
In some instances, you may decide to cooperate with a competitor. It's potentially risky, but forming a strategic collaboration with one of your competitors can benefit the bottom line and help both entities to thrive. It can be a smart expansion or survival strategy for Solopreneurs and small business owners who are trying to remain viable. Maybe there is a partnership you can set up with the right semi-rival? It's called coopetition .
Coopetition can also mean establishing a referral relationship. Accountants and bookkeepers have done this forever, with much success. Their functions have similarities, but each party knows and respects boundaries.
In the June 15, 2014 issue of the New York Times Bernard L. Schwartz, former CEO of the Loral Corporation, spoke of how his brother reached out to his main competitor, whose warehouse was destroyed in a fire.
“This guy was basically out of business, because his customers could not wait for him to come back. (The brother) called him — they knew each other from trade organizations — and said '… I want to make a proposal to you. Why do not you let me serve your customers and when you get your plant back up, you can have them back?
'That's going to be good for me, because I will have the extra business for that time. But I guarantee you that I will not keep your customers when you're ready to come back on board. ' The brother later explained, “If it happened to me, I'd be out of business. It could happen to anyone.”
Create the conditions for successful coopetation by defining boundaries and expectations and working only with someone you know to be trustworthy. Do not underestimate the potential for difficulties in establishing and sustaining such an arrangement.
Assumptions about appropriate customer service or corporate culture can derail your best intentions. Careful planning and execution are crucial. In close collaborations, a written non-disclosure, non-compete agreement is essential.
Finally, remember where friendship ends and business begins. There will be sensitive issues that are best kept to yourself, like new business initiatives. Keep your antennae raised as you and a worthy competitor mull over ways to share resources or expertise and boost profits in the process.
Thanks for reading,