Coopetition

With frenemies like these, why not share technology platforms?

Ronnie Reppe, CEO of Noria, explains how collaboration with your competitors can deliver good results if organised and managed well

At first glance, the Renault-Nissan-Mitsubishi alliance may seem confusing. It is not a joint venture but a much looser arrangement whereby the three carmakers intend to share 80% of their common platforms and technologies by 2026. But it works. Together, they are tackling some of the industry’s biggest challenges including the EV and battery evolution, autonomous driving and connected vehicles.

Other well-known examples of successful competitive collaborations include Sony and Samsung, Microsoft and Intel, Pfizer and Merck and the US-Soviet Union partnership that made the International Space Station a reality.

Sometimes, it makes sense for competitors to share their resources. Amid fears of recession in the UK and elsewhere, “frenemies” across every sector are saving on costs and avoiding duplication of effort by sharing platforms or frameworks.

COST BENEFITS

A 2018 Polish-Norwegian study on the benefits and drawbacks of “coopetition” (the simultaneous existence of cooperation and competition between competitors) found that the benefits outweigh any disadvantages and has a 50% chance of reducing company costs. Closer to home, one of the most successful examples of coopetition can be observed among the Norwegian banks. The major banks cooperated to form a company known as Bankenes Betalingssentral in 1972 with the mission to offer shared services across payments, IT, clearing and information services.

Smaller banks have similarly clubbed together in groups such as the SpareBank Alliance and Eika Group to collaborate on services, payments and IT infrastructure through economies of scale. More recently, Norway’s banks collaborated to make Vipps the marketleading mobile payment system in the country, overtaking Apple Pay.

COMPETITIVE COLLABORATION

advantage of the opportunities that arise from sharing technology. In reinsurance, the 13 P&I clubs that provide cover for approximately 90% of the world’s ocean-going tonnage share a common business structure, but not technology.

Going forward, we believe collaborating with competitors will be necessary to remain strong in the market. The secret is to find areas to share that are non-competitive, such as administration and core functions.

For example, Noria has several clients that share the same customer-facing framework and derive benefits including cost and operational efficiencies. Our core platform is not an area where insurers compete, making this an ideal target for pooling resources, saving costs and improving the customer experience.

If a function does not provide a source of competitive or strategic advantage, do not hesitate to outsource it or collaborate with competitors to slash costs. Doing so will enable you to focus your resources and energy into activities that truly differentiate your organisation.

Potential non-competitive areas in insurance include billing, collection and disbursement, customer relationship management, claims management, data storage and support

With frenemies likethese, why not share

“Potential non-competitive areas in insurance include billing, collection and disbursement, customer relationship management, claims management, data storage, and support functions such as finance and HR.’’

functions such as finance and HR.

Procurement is another area ripe for sharing, with the option to join Group Purchasing Organisations (GPOs) that leverage their collective buying power across indirect categories to drive deep discounts that would otherwise be unobtainable.

THREE INGREDIENTS TO COOPETITION SUCCESS

cybercriminals target the weakest link in a supply chain to infect stronger targets with their malware.

Organisations can protect themselves by isolating the shared platform from other systems or by rigorously assessing the cybersecurity level of third parties before providing any sort of system access.

3.Build trust To conclude, the most important ingredient for success in this kind of initiative is a healthy level of trust between the parties. A lack of trust will create a wall between the organisations that will hamper the flow of information and ideas necessary to create shared value.

Some ways to build trust include: • Aligning business objectives and interests; • Identifying issues, challenges and risks; • Being clear about what will and what will not be shared; • Setting ground rules for decision-making and issue resolution; and • Working on the relationship to recalibrate when required, continually strengthen trust between the organisation and celebrate success.

In my opinion, the three keys to successful co-operation with competitors is to change internal mindsets, ensure any shared platforms or other technologies are secure and build trust between parties.

1.Change internal mindsets about competitors The fact is that your main competitor has the potential to be your organisation’s most suitable partner. They are facing the same challenges, they have similar knowledge and skillsets, they are roughly the same size and may have a similar amount to invest in a shared solution.

If you are approached by a competitor about some form of sharing or collaboration, consider what will happen if you say no. Adam Brandenburger and Barry Nalebuff, who coined the term “coopetition”, point out that if you do not agree to a deal, someone else may take your place in it and forge a competitive advantage at your expense.

Yes, you are competitors, but not in every aspect of insurance. Find areas where you do not compete – for example, there’s little to be gained by both insurers building expensive customer interfaces when they could both use the same, white-label platform that can be customised with branding and other tweaks.

Remember also that cooperation isn’t just about cutting costs, but will create operational efficiencies and could unlock new innovation. For example, a group of Noria’s customers are currently cooperating in the development of a digital business intelligence tool. Together, they pool their insights and feedback and agree on what our software engineers should build next in each iteration.

2.Focus on security Coopetition creates a cybersecurity risk –not in the form of an underhanded attack from your “frenemy”, but by increasing your attack surface for cybercriminals.

Shared platforms must be highly secure or they risk becoming a way in to critical (non-shared) data in the event that your collaborator suffers from a cyberattack. The same principle applies in supply chain attacks, where