How COVID-19 is forcing companies into coopetition

The deeper a crisis, the stranger the bedfellows. So it is no surprise to see companies in the midst of what may well be the worst economic downturn in history, tying up in the oddest of combinations to tap whatever demand it will allow them to mine.

Some seem quite obvious, as when following the announcement of the stringent lockdown in India, FMCG companies such as the ITC moved quickly to fill the last mile distribution gap by tying up with food delivery chains such as Domino's, Swiggy and Zomato, to deliver orders ranging from food to hygiene products to customers.

There are others which are even more imaginative.

The Wall Street Journal (WSJ), for instance, is now selling a specially-curated programme in association with the National Geographic dubbed ‘The Future of Everything: Exploring Global Innovation by Private Jet’. The 24-day trip takes you across bazars in Samarkand (in Uzbekistan) while you discuss the impact of the Silk Road revival with archaeologist and National Geographic editor Kristin Romey and mull over innovations in sustainability, technology, and design with WSJ Digital Editor Yumiko Ono.

With just 75 passengers to a trip whose ticket price is a hefty $94,995, luxury and comfort as well as exclusivity are assured. More pertinently, for the National Geographic, which is doing many such private jet trips, and the WSJ, whose parent company, Dow Jones, reported a 4 percent decline in revenue for its latest quarter, that’s a potential $7 million revenue source.

An inevitable consequence of these times, such engagements offer several advantages ranging from cost-sharing to an expansion of the potential customer base, as well as an opportunity to capitalise on each other’s strengths. Thus, even as demand and supply chains faced severe disruptions, there have been a spurt of collaborations between companies across geographies in terms of sourcing components and raw materials, sharing manufacturing capacities as well as distribution depots and delivery vans.

What’s more, as the pandemic’s shadow deepens across businesses, sleeping with the enemy is no longer a taboo. In April, sworn rivals Sanofi SA and GlaxoSmithKline PLC announced a tie up to develop an adjuvanted vaccine for COVID-19, using innovative technologies that both companies have previously developed independently. The adjuvanted vaccine will potentially lower the dose needed and thus provide the vaccine to a greater number of people.

Some governments have also gone out of their way to support these collaborations. In April, Norway gave its airlines a three-month exemption from the country’s tough competition laws, allowing them to coordinate collaborative activities, which under normal circumstances may have been considered anti-competitive. In the United Kingdom too, the government temporarily relaxed elements of its competition law as part of a package of measures to allow supermarkets to work together on sharing data with each other on stock levels, on cooperating to keep shops open, and on pooling staff to help meet demand.

Of course, previous experience shows that such collaboration attempts among competitors often don’t work. In 2011, arch auto rivals Ford Motor and Toyota Motors announced that they would jointly develop a new hybrid system for light trucks which would power their respective hybrid rear-wheel drive pickups and SUVs over the next five years. Sadly the early bonhomie came to naught and two years later the companies ended their partnership after feasibility reports suggested that they might be better off going solo. The strangeness of the planned venture and its almost inevitable conclusion was summed up by Ford’s head of global product development Raj Nair, who was quoted as saying that both companies were “pleased with the ability to progress separately”.

That may not be an option as the world desperately chases a COVID-19 vaccine which is why most of the development efforts involve more than one company or institution. In fact, the best part of such collaborations between disparate companies is seen in their combined efforts to address the pandemic.

In South Africa, for instance, three different companies are working together to make hospitals safer for patients and healthcare workers. According to the World Economic Forum, chemicals and energy company Sasol has ramped up production of hand sanitizer and will split production costs with AngloGold Ashanti, a gold mining company which will in turn also provide the specially built bulk-storage tanks for the product while a logistics company Imperial Group is ensuring the sanitizer tanks are safely transported to the hospitals.

Now if only such coopetition could outlive this pandemic.

Sundeep Khanna is a senior journalist. Views are personal.