Collaborations Within Competition

Spend Matters welcomes this guest post from Abinaya Govindarajan, of GEP.

True to the popular adage “unity is strength,” more and more companies are coming together to compete effectively in the global marketplace. This article explores some of the areas within the automobile industry where this unity has led to cost-effectiveness and looks to identify the recipe for success in such programs.

An Unusual Alliance

The unusual partnership of the German rivals BMW, Audi and Mercedes is in response to reducing their dependency on technology companies in the autonomous car space. The three companies came together to deliver a $3.1 billion bid to buy HERE, Nokia’s next-generation mapping business. The maps produced by HERE are highly detailed, thereby enabling future self-driving vehicles to accurately travel without human intervention.

This is a definite setback for technology companies, among others, that have been investing in research and development for self-driving cars and have been vying for the spot of unexpected entrant to the automobile industry. For instance, Apple is believed to be developing an autonomous vehicle program, and Uber has said it aims eventually to field a fleet of driverless vehicles.

Collaboration for Safety

BMW, Honda and Yamaha have joined hands on an initiative to focus on developing intelligent transportation system (ITS) applications that increase driver safety for motorcycles and scooters. This aims to create a shared network that will enable road users to make coordinated and informed decisions about planning safe and efficient routes.

In another story, the Electrical Power Research Institute, along with eight manufacturers and 15 utility companies, is developing a cloud-based software platform for integrating plug-in vehicles with smart grid technologies. This will enable electric vehicle owners to automatically charge during off-peak periods to save hundreds of dollars while being environmentally efficient at the same time. Utility companies, on the other hand, can avoid upgrading transformers and other distribution assets, and resulting savings can be passed on to utility customers. The project could also result in curbing greenhouse gas emissions — a small step for the companies involved and a giant leap for efforts to a cleaner environment.

There have been examples in other industries, too, that have brought numerous benefits — cereal manufacturers, technology and Apple revolutionizing the music industry with select partnerships, to name a few.

It seems we have figured out the recipe for successful partnerships at the industry level for many causes. If we take a step back to see what has been the success of these partnerships, a few elements clearly stand out — senior leadership attention and involvement in value creation, potential disruption to the existing business, long-term outlook and charting a clear project vision.

We feel that the companies are showing a great level of maturity in working with and outside of the competition at an industry level. However, there were many instances where the companies tried to forge a partnership at a functional level, such as marketing, procurement and research, that did not take off and, in fact, failed at a very nascent stage.

For more interesting thinking on procurement, visit the GEP Knowledge Portal.

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