Why collaboration benefits your business?

As a business consultant, a large part of my job is to help businesses either create or perfect their competitive advantage. Competitiveness is a huge factor in the business world – no surprise here.  Having a competitive edge makes your business stand out from the crowd and gives reason to customers to prefer you over other companies. No wonder then that we are all so obsessed with being competitive.

However, I feel we often forget the other side of the coin and its benefits – collaboration. This is particularly true for small businesses that tend to be busy surviving or growing and perfecting their value proposition.

At the same time, collaboration has been on the rise among large multinational organisations. Companies such as Google, IBM, Cisco, H&M, BMW, Alexander Wang, etc. have all ventured into different collaboration projects in order to stay relevant and successful. Oftentimes, quite successfully so.

This being said I believe that SMEs could learn a lot and benefit from doing the same rather than looking out for themselves only.

There are a number of good reasons for businesses, large and small alike, to work on common goals and projects but here are just a few:

Wider Reach

Through creating a mutual product or service, both organisations get to tap into markets that they might not have even dreamt of tapping into. In other words, each company involved gets to reach out to the clients of the other. Take BMW & Louis Vuitton for example. A while ago BMW created a new sports model called BMW i8 and Louis Vuitton designed an exclusive, four-piece set of suitcases and bags that fit perfectly into the car’s rear parcel shelf. BMW customers might not be Louis Vuitton’s target demographic but now they will get to experience the Louis Vuitton brand too.

Shared Costs

Engaging in an innovative project is risky mainly because it is often costly. By working together on offering something new, companies can share the costs that go into crafting their new product or service and thus share the risks too. Not to mention that they also get to share the expenses on any marketing effort as well as distribution costs.

Economies of Scale

Apart from the shared costs, collaboration also helps reduce input costs. By working together businesses gain purchasing and bargaining power and can thus achieve economies of scale by enjoying larger discounts by suppliers.  This is particularly beneficial to smaller companies that normally don’t have the influence and the resources of large organisations.

Innovation & Inspiration

Every organisation is different in terms of processes, procedures, know-how, and everything really. And every organisation is better at something than the other. Working closely together is an opportunity for both organisations to learn about best practices and approaches from each other that they can then apply to their own business.

Networking

Regardless of the amount of money you can afford to put into marketing, there’s nothing as effective as word of mouth and connections. The success of smaller organisations especially is very much dependent on referrals. By creating an alliance with another business you increase your organisation’s outreach. Inevitably, new acquaintances and new connections are made which normally leads to more business opportunities at a later stage.

Improved Image

By creating an alliance with a better-known firm, you would benefit from affiliating your name with their brand. For example,  the eyewear company Luxottica joined forces with Google to create the fashionable Google glasses a few years ago. While Luxottica is successful on its own, partnering with Google has definitely helped the brand.

Synergy

By pooling in resources and taking advantage of complementing expertise and knowledge both organisations benefit from being able to offer a much better product or service,  at a lower expense and with a lower risk.  Consequently, this creates a competitive advantage for both organisations.  Consider Uber & Spotify’s alliance for example. Their partnership made it possible for Uber users to enter a car greeted by their favourite playlist – it comes at no cost for the end customer, it makes Uber more attractive and gives Spotify an edge too.

Collaboration is powerful.  And it’s gaining popularity for a reason – it allows companies to craft better products and services while sharing R&D costs, marketing costs and distribution costs, as well as the risk and learning from each other at the same time.

I came across a quote recently and it said:

Competition makes us faster. Collaboration makes us better.

True I believe. Essentially, collaboration is nothing but competitiveness on a whole new level.

If you want to know more about leveraging collaboration and growing your business in an organic and sustainable way, please don’t hesitate to contact me. I have extensive experience in the field of business development and leadership and would be happy to chat with you and help you boost your business results.