How to Collaborate with Competitors and Win

This article is a reprint of Wise Bread's contribution to OPEN Forum from American Express -- where small business owners can get advice from experts and share tips with each other.

Advertiser Disclosure ▾

This page contains affiliate links from which we receive a compensation. Like many publications Wise Bread is supported by affiliate commission from partner companies whose products appear on our site. This may influence which products we write about and the location and order in which products appear. We aren't able to cover every product in the marketplace.

Wise Bread Picks

• Travel Rewards Credit Cards
• Cash Back Credit Cards
• 0% Balance Transfer Credit Cards

For a boutique vineyard in the Yadkin Valley of North Carolina, the presence of local competitors is a business advantage. Pamela and David Blackwell, owners of Brandon Hills Vineyard tell me that nearby vineyards lend credibility to the area’s viability as a wine region and have created a destination for agro-tourism.

The notion that competitors can (and should) collaborate seems to be becoming a mainstream concept. But defining the specific methods and quantifying benefits to the bottom line may be unclear to many business owners. In a recent conversation, Blackwell talked with me about how collaboration works for his vineyard.

Steps to Useful Collaboration

Think about your business both in terms of its unique character as well as its relationship to competitors. Be intentional about getting to know potential collaborators, focused on benefiting the industry and your mutual profitability.

1. Cast a vision for your business.

Having a clear vision sets the stage for friendly collaboration. Rather than spending time thinking of ways to one-up or imitate competitors, the vision keeps you focused on creating a one-of-a-kind customer experience and achieving your business objectives.

2. Define your competitors.

Naming the companies in the same space as your business is a reasonable start but does not cover the entire competitive landscape. Whatever draws customers away from your business is your competition. For example, nearby vineyards can be classified as competitors to Brandon Hills Vineyard; however, regional street festivals and sporting events tend to dampen visitor traffic and represent another form of competition.

By defining the competition, you can begin the process of discovering 1) what businesses will make ideal collaborators; and, 2) how innovative marketing ideas can most benefit your group of collaborators.

3. Participate in professional associations.

Joining a well-established trade group lays the foundation for more advanced efforts in collaboration. Associations offer opportunities for forming relationships with direct competitors and pursuing professional development. Participation in activities, committees, etc. can provide name recognition within the industry and establish your business as a trustworthy, credible collaborator.

4. Name what is causing pain.

If your business has challenges in a certain area (for example, difficulty in obtaining capital funding, need for expertise in product development, or problems reaching target audiences), then your competition is most likely experiencing similar pain or has faced these problems in the past. Collaborations are often centered on dealing with these challenges.

5. Visit competitors.

See what your competition is doing. Gather information about their niches, target audiences, product offerings, and styles of service.

There is no need to act furtively; instead be open about your identity and purpose. Competitors can decide to share ideas freely or show you the door. A productive relationship with competitors invites, never forces, collaboration.

6. Join or start a new collaboration.

Casting your vision and narrowly defining problems can help you to see the rationale for joining a certain group, discover topics for discussion among colleagues, and cause you to start a new organization. You may also find ways to adapt national initiatives at the local level.

For example, David noticed that many vineyards established “wine trails” comprised of nearby competitors. Sch groupings combine to create a tourist destination as many people like to visit multiple sites in one trip. So, he spearheaded the effort to create the Shallow Ford Wine Trail.

5 Benefits of Collaboration

There are both tangible and intangible benefits to collaboration. Many owners enjoy the mutual support as well as greater industry esteem that coming together can bring. However, the tangible benefits can be just as plentiful. Collaboration can help save money on operating and capital expenses, improve product quality, and generate higher sales.

1. Vendor Sourcing and Evaluation

Finding reliable vendors that serve specialized needs is a benefit of collaboration relevant in particular to start-up companies. Your business can streamline its purchasing processes, minimize time in vetting vendors, and avoid costly mistakes.

2. Expense sharing

Group buys of equipment and supplies are made possible through collaboration. As a result, businesses can get bulk rates that may have been unattainable alone plus split freight expenses.

Likewise, competitors can collaborate on advertising that may be cost prohibitive otherwise. For example, trail members purchase ads in metropolitan newspapers to attract tourists for day trips or weekend jaunts.

3. Capital funding of infrastructure

Infrastructure expenses can be shared among competitors, either directly or indirectly. That is, companies may share office, production, or distribution space; or come together to work with a third party that provides such space and related services.

For example, rather than sink capital into the purchase of a production facility, Brandon Hills Vineyard contracts with an outside company to make its wine. The presence of competition makes such an arrangement possible. There are several vineyards nearby that also use these services. The owners provide direction to assure the proprietary nature and unique style of their wines, and preserve cash rather than spending money to build and maintain infrastructure.

4. Free expertise

Business owners can tap expertise from competitors through venues such as association-sponsored panel discussions as well as more casual meetings with colleagues.

The method of sharing varies. For example, there is a monthly winemakers’ roundtable in which winemakers present problems for colleagues to analyze and solve. This process helps individual businesses address quality issues and boosts product quality throughout the region, benefiting all collaborators.

5. Cross-promotions

Cross-promotions are commonplace among complementary businesses but not as prevalent among competitors. This approach can be useful in reaching larger audiences and raising awareness.

For example, members of the wine trail collaborate on special events on a regular basis. Multi-course dinners with wine tastings involve sessions at each vineyard. A charity bike ride hosted by Brandon Hill Vineyards included a rest stop at a member vineyard.

On an impromptu basis, members cross-promote their competitors by encouraging customers to visit neighboring vineyards. They also make specific recommendations based on in-depth knowledge of product specialties as well as the nature of the guest experience.