During the past few years in the modern business landscape qualitative change has been observed in approaches to interaction between players of the market. Entrepreneurial law “kill or be killed,” forcing business to seek to displace competitors, gives way to a new approach – integration and partnership strategies.
Cooperation of all market participants is the key to business success.
The competition can be treated in different ways, but, undoubtedly, it is a resource-intensive process for any business. In modern economics, it is an integral part of the business community, so choosing the behavior strategies remains a pressing issue for many top managers and business owners.
In the context of rapid development of technology and overcrowding of the market companies face the fact that own resources and competencies do not always allow to maintain their growth rates and competitiveness. As soon as resources depleted – a tough struggle begins, with all market participants suffering from it. The only effective strategy in such an environment is cooperation with other companies. At the same time, today the practice of cooperation with indirect competitors is becoming more and more widespread. Instead of the constant struggle, the companies, especially from the IT sphere, prefer to create collaborations by integrating their products into solutions of larger market players.
Partnership between small and large businesses can bring mutual benefit: access to new technologies, markets and resources, increased profitability and business sustainability. Large companies gain access to new solutions, ideas and innovations that can improve efficiency of their business. Small business, in turn, gets the opportunity to use infrastructure, resources and a brand of a major partner for its development.
World experience
World’s largest e-commerce platform Amazon scales its M&A business, which involves combining the assets of two companies by merger and acquisition. The corporation is actively expanding its ecosystem, adding products and services from different areas of business to it.
Since 2010, Amazon has been actively looking for ways to go offline. One of the first steps along this path was the Amazon Locker project, launched in 2011.
This solution allowed customers to pick up independently their online orders from specialized cells located in public places, which made it easier to get items for those who couldn’t expect home delivery. In 2016 Amazon unveils Amazon Go store concept where customers could take goods and leave without passing through the cash register – the bills were displayed automatically through the Amazon Go app.
A breakthrough moment in Amazon’s strategy was the purchase of a supermarket chain Whole Foods in 2017. This allowed the corporation to access 450 high-end offline sales points and know how of an experienced retailer. Besides the company managed to strengthen significantly its subscription program Prime, which has now become a club program for Whole Foods, providing to consumers discounts on goods and free delivery. As a result, the consumer received convenient offline stores without cash registers, and the corporation itself was able to go offline and gain a long-expected impact in retail.
An even more intriguing example is Amazon’s acquisition of RING, specializing in the creation of smart doorbells. A few years ago the corporation faced an acute logistical challenge. Amazon courier came to the specified address, but often the buyer was not there. Courier took away the parcel back to the distribution center, then a new attempt to deliver the item was undertaken. Such an iteration of actions occupied a large amount of time, and at the same time the corporation incurred considerable costs.
As a result of integration with RING, Amazon provided its customers with the ability to receive parcels even without being at home. Couriers just left them inside the premises, where they received access from the buyer. At the same time the client saw through the cameras everything that the courier does at the time of delivery that ensured the safety of the entire process. Thanks to such an innovative approach Amazon has managed to scale further its core business.
Another interesting example of a cooperation strategy, not a rivalry, is a SalesForce case. This company has long had AI tools, using artificial intelligence, such as the Einstein product, which helps in data analysis and forecasting. Instead of resource-intensive development of its own intelligent assistant, SalesForce preferred to use Leverage OpenAI’s existing experience by integrating ChatGPT in Einstein. This allowed SalesForce to offer quickly its customers ready-made solution without spending resources on research of generative AI, and OpenAI focused on development of fundamental technologies that formed the basis of products of major players in the IT market.
Russian experience
Most Russian companies have smaller financial opportunities than their counterparts in foreign markets. For this reason partner collaborations, not M&A, have become the main business integration format in Russia.
One of the most striking examples of a collaboration of large business with small one is Tinkoff Bank, whose ecosystem has long included not only classic financial services. Tinkoff customers can engage investments, book travel, buy concert tickets, order food and perform other activities using solely this bank’s mobile application.
To build such lifestyle banking, the company uses a unique approach. Instead of developing its own products or expensive purchases of ready-made solutions, the company cooperates with other market participants, including representatives of small businesses. Due to this approach, Tinkoff expands its expertise and replenishes working capital, and small business gets new customers and profit growth. Tinkoff does not waste time on complex development, but at the same time it expands the range of services for its customers, a banking service remaining the core of its ecosystem.
For example, a few years ago, Tinkoff decided to launch its application for investments, but the bank did not have a brokerage license. Instead of long and labor-intensive process of obtaining it, the company took a different path – cooperation with the existing BCS broker. The companies did not compete with each other, but created a joint product. As a result of such integration, Tinkoff was able to scale its ecosystem, BCS received market development at the expense of new customers, and the end consumer got simple access to the exchange.
Another example is Gazprombank ETP product for customers and entrepreneurs participating in tender procedures. When creating a new service “Unified Personal Account” the company did not spend resources on development of a non-core product for itself, but trusted the ready-made solution, offering cooperation to Tenderplan. As a result, customers of electronic trading platform received a ready-made tool for successful work procurement, and companies have expanded their customer base.
Previously, big business in Russia tried to compete with small business. However, market changes in recent years have increasingly contributed to their cooperation. Import substitution, especially in the IT sphere, search for new logistics chains and restructuring of business processes require companies to possess ready-made solutions that large corporations can spend years developing.
Small business is more dynamic and able to respond more quickly to external change, helping these big customers.
For example, despite its own food production, Vkusvill has teamed up with small businesses across the country in as part of the Regional Shelf project. This cooperation allowed Vkusvill to simplify food logistics even in the most remote regions, and it enabled small businesses to supply their products to large federal holding.
In the current environment, the role of small businesses in digital transformation of large companies grows. Due to their integration, the ability to optimize business processes and replace solutions of foreign vendors improves significantly.
Conclusion
Small business cooperation with large business is an opportunity to develop your product thanks to equal access not only to shared resources, but also to each other’s competencies. Such an advantage is especially important for companies, which have niche expertise but lack the resources or expertise to create complex products.
Business integration provides quick access to technologies from other industries too, if their representatives are included in the general structure. This reduces significantly the time and costs of creation of products at the junction of industries. Ultimately everyone wins from such a partnership: business as well as consumer.
By Maxim Kuznetsov, business development expert, CEO and founder of the Tenderplan service