How Nonprofits Can Compete and Collaborate Through Coopetition

Should nonprofits act more like businesses? To be sure, nonprofits can learn a great deal from business. Like any business today, we need to use data, invest in talent, understand the full cost of our work to build strong, sustainable organizations. A compelling mission is not an excuse for weak execution.

But I have always thought that question creates a false choice. A nonprofit isn’t simply a business with a tax exemption. Nonprofits often exist because markets do not serve everyone or meet every community need. In a traditional business, the customer receives the product or service and pays for it. Success is ultimately measured by profitability. In a nonprofit, those roles are split. The person receiving the service may not be the person paying for it, creating what I call a triangular relationship among the nonprofit, the client and the payer. The nonprofit must meet the client’s needs, demonstrate value to the payer and serve the broader public good. This triangular relationship makes the nonprofit business model more complicated. Nonprofits exist to create public value, not private profit. Mission, access, dignity and public trust must remain part of the calculation, even when they make the work less efficient. It is less clear if a nonprofit is successful. This is why we say, “Impact is the bottom line of the social sector.”

A better question is this: Should nonprofits borrow business practices?

The answer is yes, but only when those practices are thoughtfully adapted to the nonprofit sector. We should borrow business discipline without borrowing the wrong definition of success.

One business idea I believe deserves more attention in the social sector is the concept of coopetition. As we discussed last week, nonprofits compete for funding, contracts, attention, board members, volunteers and talent. At the same time, we also rely on collaboration and networks to advance our causes. Both things are true. Rather than pretending one cancels out the other, “coopetition” (a mash-up of the words cooperation + competition) gives us a framework for managing both.

What Is Nonprofit Coopetition? 

In an environment with limited resources, competition is inevitable. But even for-profit companies recognize that competitors can create value by working together. One of the best-known examples began in 1984, when General Motors and Toyota formed New United Motor Manufacturing Inc., or NUMMI, to produce vehicles in California. The partnership lasted 25 years and produced nearly 8 million vehicles before the plant closed in 2010. GM and Toyota remained competitors throughout the partnership, but they cooperated where doing so created value for both companies. That is coopetition.

The word coopetition is often attributed to Raymond Noorda of Novell and was later popularized by Adam Brandenburger and Barry Nalebuff in their book Co-opetition. They describe an approach that combines the advantages of competition and cooperation.

Social sector organizations have increasingly built networks to support their causes. Still, we can’t help but wonder: Could coopetition be better for the social sector than a singular focus on either collaboration or competition? Cooperation is important, but so is recognizing that nonprofits compete for funding, attention and talent. Coopetition allows each organization to focus on its unique value proposition, identify the value it brings to a collaboration and name the competitive tensions that exist within the collective.

Brandenburger and Nalebuff illustrate the concept with a simple analogy. Organizations can compete for a larger slice of the pie OR they can cooperate to make the pie bigger. Coopetition encourages both — aim for a better AND bigger pie in the social sector.

And, fortunately now, this is not just a business-school concept. Academic research in human services and nonprofit arts has documented organizations cooperating with groups they also compete against. In other words, the research gives a name to what many nonprofit leaders already know from experience: collaboration may be our preferred language, but competition for resources never left the room.

In my opinion, the choice between competition and collaboration is a false one. The real work is deciding where and when to do each while protecting the relationship and putting the community first. Coopetition recognizes that each organization should focus on its unique strengths and value proposition while identifying the places where working together can expand reach, improve results or strengthen the field. It does not require us to pretend competition has disappeared. It asks us to manage that competition honestly.

Six Rules of Nonprofit Coopetition

Based on the research, the work of Brandenburger and Nalebuff, and our experience with social sector organizations, I wanted to share our six rules for navigating the inevitable tension between competition and cooperation in the social sector, which we teach in our “collaboration” workshops.

Rule #1: Long-Term Relationships Are Vital to Social Change

Robert Axelrod’s book, The Evolution of Cooperation, dispels a myth within the social sector that trust alone is the key to achieving long-term goals. Instead, Axelrod posits that long-term relationships are also important. As he pithily states, “[F]or cooperation to prove stable, the future must have a sufficiently large shadow.” This illustrates that trust reflects what has happened in the past while long-term cooperation depends on confidence that the relationship will continue into the future. This is one of the reasons I now focus on relationship-building as a core skill in my leadership workshops and classes. Leaders need to choose partners with whom they can build lasting relationships, not simply complete transactions.

Rule #2: Make Reciprocity the Social Norm

Both Axelrod and noted researcher Dr. Robert Cialdini have studied the concept of reciprocity in humans. We naturally believe that favors must be repaid. However, the best negotiators know that it is important to be the first to give.

Taking the first step starts a natural process of give-and-take between individuals or groups. In a collaboration, it is important to set the expectation of cooperation and hold others accountable to it. In other words, don’t wait for someone else to do the work, and make sure the work is distributed fairly across the group. Effective collaboration requires both shared responsibility and individual accountability.

Rule #3: Remember That Politeness Is the Poison of Collaboration

A line often attributed to Polaroid co-founder Edwin Land says, “Politeness is the poison of collaboration.” It captures a problem we have documented many times in the social sector – our niceness tendency. We choose harmony at the expense of results.

True change comes from a higher form of communication — a true dialogue that includes a constructive exchange of ideas and points of view. With such high stakes in the social sector, effective collaboration requires forthright conversation and even productive debate. That does not mean being rude. It means caring enough about the outcome to say what is not working, name the inherent tension or power issues, and address the decision everyone is avoiding.

This is why we often recommend designating a facilitator and using ground rules, voting dots, and other meeting practices to encourage productive conversations and reach the best possible resolution.

Rule #4: Focus on Value Creation for Everyone

The best collaborations create value at two levels: for the collective and for each participating organization. It is also critical to maintain balance and deliver an equal exchange of value (see Rule #2). To do this properly, each collaborator must explain what they value most and how it can be better achieved through the collaboration. Then, the collaboration itself must create value for everyone involved. This bottom-up approach gives each organization a real stake in the result. If the collective is the only one to benefit while individual partners absorb the cost, the arrangement will not last.

Rule #5: Start Small and Then Build 

Great collaborations are built over time. Forge trust by jointly creating plans that synchronize mission, strategy and values and create a preferred future state (see Rule #1). Once your group establishes the plan, practice working together as a team.

As change management experts often advise, start with a small win and celebrate it. A joint training, referral pilot, shared purchase or coordinated event can teach you more about the relationship than months of talking about partnership in the abstract. In our collaboration workshops, we call this the “dating phase.” Before making a major commitment, organizations need a chance to learn how well they work together.

Rule #6: Create Learning Relationships

As the collaboration evolves, create an environment of continuous improvement. One practical way to do this is to conduct an after-action review, or postmortem, after each major initiative. One of our clients even conducts a “premortem” before every event to discuss what could go wrong. We love that idea, too.

If things are working, celebrate the success. If they could be improved, acknowledge that and find a more mutually beneficial approach. Ask what happened, what surprised you and what should change before the next round.

Make the Pie Bigger and Better

The social sector has moved from isolated action toward collaboration and system change. Coopetition offers a helpful way to think about the realities nonprofit leaders already face. We can cooperate around a shared cause while still competing for funding, attention and talent. Acknowledging that tension makes us better partners — not worse ones.

Do not shy away from competition. Use it to sharpen your strategy and clarify the value only your organization can offer. At the same time, keep looking for opportunities to cooperate in ways that can expand what is possible for everyone.

As with all our work, these six rules are still a work in progress. We would love your feedback and ideas. Where have you seen nonprofit coopetition work, and what made it possible? Share your experience in the comments on the blog.