PoS Jan 2015 | How to Profitably Co-operate with Competitors

In January 1999 Konkan Railway (India) did something strange. They introduced a service that would carry their competitors on their open cars.

Sleeping with the enemy…

Railways and trucks compete for freight. With the launch of Roll On Roll Off service they offered to carry laden trucks across the ghat (hilly) stretch of over 400 kilo metres (later extended over 700 kilo metres). Fully loaded trucks drove up on flatbed cars and drove off at their destination.

….. it pays

The ride cut truckers’ time over the mountainous stretch to half, saved precious fuel and cost, and was safer. The service has proved so popular that the Railway has carried over 350,000 lorries in the last fifteen years and now earns Rs. 500 million annually from it.

In one stroke Konkan Railway made competitors their customers. Was it innovative? Of course, but more significant is the way the Railway re-imagined an adversarial relationship into a fruitful, symbiotic, and win-win one.

A question of mindset

In the hyper competitive world of business today it is much harder to create and sustain competitive advantage than it once was on the basis of unique or attractive features. They are quickly copied.

Re-assessing competitors and recasting relationships with them can be a wise, healthy, and profitable move. And it is not always hard to do. It just requires a change of mindset.

A small company in Tamil Nadu had developed an organic manure containing natural plant growth hormones, in gel form. It could be dissolved in water used for farm irrigation. In the solution form it permitted measured dosing. It reduced wastage as solid fertilisers are prone to.

Cheap imitation

With diligence and perseverance the Company established a niche and built sales volume of approximately 10 MT per month. Soon copycats entered with somewhat inferior gels at much cheaper prices.

Their boat rocked, the Company agonised over several options: reduce price, match competitors’ quality, step up promotion expense, or increase dealer margin to gain market push. In the end they decided to do nothing except frequently reiterate to retailers the superior functionality of their product. In 12 months their sales had climbed to 40 MT per month.

Now that there were several players promoting the new concept, the market grew rapidly. Competitors gained, more farmers benefited, and the innovator established market leadership in their segment.

Competition is valuable

Embracing competitors is not an alien concept. In many industries firms undertake contract manufacturing for competitors. Partnering with competitors to buy raw material can drive down costs, improve quality and speed up deliveries. Suppliers help create value for a business.

Partnering competitors can interest vendors to serve you better. Consider the possibility of joining hands with your enemy to draw larger numbers of prospective employees. Would you be able to attract as many good people on your own if you are a small player?

Competitors are not nuisance. They help expand the market. Recognising this reality is the first step towards re-imagining how to co-operate while competing with them.