Dropping Competitive Barriers Will Help Manufacturing Succeed

An industry that has often resisted change may be on the cusp of a future where competition and collaboration are one and the same.

(Image courtesy of Chris Fox.)

(Image courtesy of Chris Fox.)

Whether we’re talking about labor, IP, capital or bandwidth, the democratization of resources has become a powerful tool in every sector. The worlds of engineering and manufacturing have seen advantages with this idea in numerous ways. Product developers have gotten prototyping and production funding via Kickstarter at the napkin-sketch stage, Wikifactory is providing engineering resources and open CAD for collaboration, and businesses like Xometry are connecting organizations that need products made with manufacturing businesses that need to keep spindles running.

Especially in manufacturing, this democratization has led to an awareness of the fragile balance between proprietary competitiveness and being able to improve the bottom line. Collaboration and partnership have long been valuable in the manufacturing space, but they have often been limited to companies that can incorporate each other’s products and are less about innovation.

For example, it’s not uncommon for a large machine tool company to partner with a workholding company to leverage each other’s value in the marketplace. The workholding company benefits from being placed in a large company’s machine, and the machine tool company benefits from being able to exemplify simple solutions with its tools.

But, what if two large machine tool OEMs worked together? Or two workholding companies innovated together? Or even, two machine shops leveraged each other’s industry and business experience to drive more business for both?

(Image courtesy of Chris Fox.)

(Image courtesy of Chris Fox.)

According to a recent Harvard Business Review article titled The Rules of Co-opetition, “the practice [of co-opetition] is common in a wide range of industries, having been adopted by rivals such as Apple and Samsung, DHL and UPS, Ford and GM, and Google and Yahoo.”

Supply chain challenges and overall production issues during COVID-19 have also created an industry-wide realization that there might very well be a need to work together in unexpected ways. The World Economic Forum has even started researching how the pandemic may lead many manufacturers to adopt more collaborative business models.

What Is the Benefit of Co-opetition?

Most manufacturers’ gut reaction to any sort of collaborative effort is an immediate and forceful “No.” While use cases like cell phone companies and Silicon Valley software giants seem to make cooperation worthwhile, the industrial arena is often a world rife with trade secrets, proprietary information and general competitive aggression.

The competition in this space is so aggressive that every two years at the International Manufacturing Technology Show (IMTS), there were stories circulating about salespeople sabotaging booths—even going as far as urinating in machine coolant tanks.

Needless to say, there is a high bar for value before many of these companies would be willing to undertake any sort of collaboration. So, what is the benefit and value of collaboration?

According to the Harvard Business Review, “[Cooperation] can be a way to save costs and avoid duplication of effort. If a project is too big or too risky for one company to manage, collaboration may be the only option. In other cases one party is better at doing A while the other is better at B, and they can trade skills.

“In 2013, Ford and GM agreed to share transmission technologies. This made sense because they had complementary capabilities: Ford led in 10-speed transmissions, GM in nine-speed. The arrangement saved both money, had no significant strategic impact, and freed their engineers to work on next-generation electric vehicles, giving each company a leg up on other automakers.”

The term “co-opetition” is key when it comes to determining the benefit of collaboration. Working with a partner can have a myriad of benefits, but it must be approached the right way so as not to jeopardize business strategy.

While this seems like common sense, the unfortunate reality is that many manufacturers have often not bothered with these collaborative efforts because of the challenges that drawing these lines can present, regardless of their value.

Xometry is a platform that provides a marketplace for custom manufacturing, connecting buyers with machine shops and other manufacturers. The company’s provision as a connecting resource has also led to collaborative efforts between very large (Fortune 100 companies) and extremely small businesses (one- or two-person shops).

Dan Richards, VP of Supplier Marketing at Xometry, explained, “Manufacturing best practices and tools that help a shop be more productive should be encouraged, not hidden under a veil. Xometry has experts on staff, many with decades of experience running shops and supply chains. Our team works with our suppliers to help make them better and troubleshoot when there is a problem. We are in it together. For our supplier base, Xometry has a community forum that allows shops to interact with each other, share stories, ask questions, and give some great advice.”

While there are many large companies that do a broad range of engineering and manufacturing, there is a world of growth for smaller manufacturers. And collaborative efforts may be the best way for them to scale beyond hyper-niche manufacturing.

Richards continued, “Smaller manufacturing has always had a strong U.S. presence, and a large chunk of those businesses have fewer than five employees. According to the National Association of Manufacturers (NAM), there are approximately 190,000 manufacturers with less than 20 employees. A drive toward digital and entrepreneurship is a positive for this trend—platforms like Xometry make it easier to find work to get a new shop off the ground. In addition to larger shops, a familiar dynamic we see is an employee of a larger manufacturer taking advantage of this environment (and low-interest rates) to start their own business with a family member or friend.”

Steering the Iceberg That Is Manufacturing

There are several important reasons why manufacturing is often slow to adopt new business trends and changes—whether it’s capital investment, retooling, change management, and so on, they are all justifiable reasons to move slowly.

That being said, the first thing that needs to change before valuable new business concepts like co-opetition can even be considered is mindset. Changing the mindset of viewing competition as a should-be target for sneaky (and dare I say, frat-style) sabotaging to seeing competition as a potential opportunity to build and innovate is key.

“Cooperation with rivals also has an important emotional aspect,” noted the Harvard Business Review. “Some people are comfortable with the idea that there can be multiple winners, and some are not. As a result, co-opetition may end up being a strategy of last resort even in cases where it should be a first resort.

“That isn’t always easy, because people tend to think in either/or terms, as in either compete or cooperate, rather than compete and cooperate. Doing both at once requires mental flexibility; it doesn’t come naturally. But if you develop that flexibility and give the risks and rewards careful consideration, you may well gain an edge over those stuck thinking only about competition.”

The aphorism  “a rising tide lifts all boats” seems to fit when we can approach cooperation with an understanding and proper acknowledgment of competition—or co-opetition.

Richards said, “A healthy manufacturing community has broad benefits for the economy. What we have found is that the U.S. manufacturing base is highly capable and diverse. Historically, the biggest challenge is finding the right supplier for the job who has the capacity to do the work. Xometry solves this with its platform by becoming the matchmaker pairing work with the best supplier for the project’s scope.”

Xometry’s business of connecting the dots among the supply chain of manufacturing seems to be a step in the direction of building a generation of manufacturers that are willing to be both competitive and collaborative. And big businesses like GM and Ford are finding ways to mutually leverage their resources on an even more direct level.

Adopting the concept of co-opetition may be the best possible future for all manufacturing and engineering businesses, but there is certainly a caveat to proprietary processes and intellectual property. The future of co-opetition might not be opening your books up to your competitors, but entertaining a collaborative effort that is mutually beneficial (with clear lines drawn) may very well drive the future of this industry.