Keep your friends close and your enemies closer

It’s not too often that Sun Tzu and Al Pacino in “The Godfather” give the same advice. This adage is a wise business strategy: Keep track not only what your business partners are doing but what your competitors are involved in as well. Many companies use winning and losing as a scorecard in their business. However, sometimes working together with a competitor is the best way to achieve a common business goal.

Adam Brandenburger called this “co-optition.”

Bill Gates has purportedly referred to it as “sometimes the lambs have to lie down with the wolves.” In fact, most businesses practice some form of cooperation with their competitors. Your company winning doesn’t mean that your competitor always loses. Conversely, when you fail, it doesn’t mean that you totally lose.

In the movie “A Beautiful Mind,” John Nash educated the audience on game theory, where “rational decision makers” are involved in a mix of conflict and cooperation.

The most extreme version of co-optition is where an entire industry gets together to solve industry-level problems. This model has been very popular in Japan.

A famous example of co-optition was when Microsoft and Apple worked closely together in the early years of both businesses. While it can be described as a love-hate relationship, a $150 million investment by Microsoft in Apple in 1997 actually saved that company. In the technology area, cooperation among competitors happens frequently because of the pace of technology. A recent example is for electric car manufacturers is to have all the same charging ports so the same charging infrastructure can be used by all vehicles.

Unfortunately, too much “co-optition” among competitors can lead to an anti-–trust lawsuit by the government. Just ask Apple, Harper Collins, Simon and Schuster MacMillan, and Pearson Publishers about ebooks!

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Barry Moltz is a Chicago-based serial entrepreneur, business consultant, marketing expert, mediator, speaker and author of several books on small-business success. Look for his advice on Crain’s blog for entrepreneurs every Monday. Barry is also a regular contributor to the American Express Open Forum.

Follow Barry on Twitter: @BarryMoltz.

Listen to podcasts of Barry’s “Business Insanity” radio show here.

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Crain’s small-business editor Ann Dwyer is on Google+.