How Amazon collaborates with competitors

I’ve written a few times about the value inherent in collaborating throughout the supply chain.  It’s one thing to collaborate with supply chain partners, but quite another to do so with competitors.

It’s a topic I touched on a few years ago, as a whitepaper by logistics company DHL highlighted the value that can come from working more closely with your rivals.

Such thinking is always helped by an example, so a recent report into what the authors call coopetition at Amazon is well worth a read.

The report suggests that Amazon has taken advantage of three distinct kind of business model, all of which enable them to be cooperative with its rivals.

1. Amazon Marketplace,
2. Amazon Services and Amazon Web Services
3. Amazon Kindle

Through this cooperation, the report suggests that Amazon have been able to both create new markets for itself (and the rivals), whilst also raising the size of existing markets.

A major benefit of this approach is that it enables Amazon to distribute the usual expenses incurred by operational issues throughout the competitor network, thus allowing its own resources to be utilized more effectively.

The study, which was published in the Industrial Marketing Management journal and was the most read article in the journal during 2014.

The paper suggests that Amazon Marketplace offers the company a unique opportunity to engage with rivals by recruiting them onto their platform.  So even if a rival is capable of selling a product that Amazon also stocks, but for less money, Amazon still retain a slice of the action.

The Web Services offering are a fine example of inside-out innovation, whereby Amazon offer up something they excel in (their platform) to other retailers, whether they be Borders or Netflix.  Not only does this advance the platform by giving it many other users to experiment with, it also gives Amazon another revenue source.

Finally, the Kindle enables coopetition by allowing content to be distributed to various other platforms.  So if an iPad user wants to use Kindle based content, they can do without having to also obtain a Kindle.  This allows Amazon to sell their own content on competing platforms.

“Amazon.com’s method of doing business with its competitors is rare on this scale. The company’s strategy is to be the world’s most customer-centred business enterprise. Consequently, Amazon.com’s mindset is not competitor-centred, as is often the case with companies. The digital business model excellently enables this sort of business action. However, I believe that the competitor cooperation-driven business mode could function in other sectors than only that of the ICT field,” the authors declare.

The study provides a nice example of how collaboration does not need to be limited only to those with whom you have a friendly relationship, but how it’s also possible to cooperate very effectively with competing firms.

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