Cooperate or Compete
Considering that an overriding motivational goal in strategy is to maximize your capacity for independent action, and considering that you want to succeed on your own terms, you can now assess whether it is to your advantage to compete or cooperate. Always keep in mind, however, that both competition and cooperation can help and hinder your company’s goals.
To illustrate the tight link between competition and cooperation, consider Michael Jordan of basketball fame, thought by many to the one of the greatest athletes of all time. His capacity for independent action on the court depended on the mutual cooperation of at least four other competent basketball players on his team. It also depended on having five other competent basketball players as competitors on the court. Opponents on the basketball court cooperated in the sense that they played and abided by the same set of rules, and through their efforts, Jordan could then showcase his superior prowess.
Jordan could not have been as successful if not for the interaction of both his teammates and his competition, and the patent strategist is just as unlikely to succeed without both. In business, the assessment of whether to cooperate or compete is rather straightforward; managing both to your advantage is more of a challenge. In short,
- Cooperate when the benefits of cooperation exceed the constraints imposed by cooperation, and seek to do so on your terms.
- Compete when the benefits of independence exceed the constraints imposed by independence, and seek to use the competitor to improve your performance.
- Do not look at cooperation and competition as a black-and-white issue; you will often cooperate and compete with the same entity at the same time.
Marshall Phelps, who heads Microsoft’s IP effort, states that, “Companies are partners, customers, and competitors at the same time.” This statement encapsulates the shades of gray we discussed earlier, because while some companies may lean more toward cooperation or competition than others, any attempt to make a black-and-white distinction between the two can lead to problems. For example, viewing a relationship as purely cooperative could cause you to relax your protocols for sharing ideas that you have not yet properly protected through a nondisclosure agreement. This could lead to a loss of a trade secret or lost patentability for disclosed inventions. Viewing relationships as purely competitive could cause you to shun a potential customer for your own products. So these three axioms bring forward questions about constraints that make any given relationship cooperative or competitive, and they are situation-specific more than they are organization-specific.
What are the constraints associated with cooperation? What are the constraints associated with independence?
Starting with cooperation, we usually see constraints as restrictions imposed by the contract to work together, compromises on how to do important activities, or restrictions imposed by agreed-on transfers of wealth between the two parties. Thus when the benefit of producing a patented product exceeds the licensing fees required to produce the product, or when both parties receive balanced enough value in cross-licensing arrangements, it encourages cooperation. If the licensing fees are too high, restrictions on use too binding, or contributions to the effort are unsuitably balanced, then it discourages cooperation.
Restrictions on independence that foster competition usually involve the scarcity of needed resources. It takes money to invent and protect inventions in the patent legal system. Money alone is a key driver of many relationships, and the glue that keeps them together even when parties may prefer to go their own way. So abundant or alternative resources that offer less restrictions to independence can foster completion since entities do not need the other entities to access those resources. If you have superior research and development resources, then you may also decide you can do best by competing in order to get a greater share of the wealth that develops. While setting up a joint venture, along with the possible sharing of intellectual property that goes into and comes out of the joint venture, often proves to the best option, retaining your freedom of action can be worth more than the resources a partner could deliver. It all depends. Business is ultimately about gaining and retaining good customers. Competitive decisions, even in patent strategy, ultimately need to take measure of the customers for which either or all would like to do business.
How have you cooperated regarding patents with other organizations, including competitors, to improve your capacity for independent action? When and why have your chosen to compete rather than cooperate? What precipitated a change from competition to cooperation or from cooperation to competition?
This blog post is excerpted from my new book, Outpacing the Competition: Patent-Based Business Strategy. Marshall Phelps, Corporate Vice President for IP Policy & Strategy, Microsoft, who peer-reviewed the first draft of the final manuscript, was kind enough to comment, for the dust jacket of the book, "Outpacing the Competition provides a useful IP management framework for rapidly evolving and inherently unpredictablee R&D environments where companies are partners, customers, and competitors at the same time."
