How Small Businesses Can Do Better Together Than Apart With Coopetition

You already sense it. The game has tilted toward collaboration as the new face of competition. A small business competing in isolation is like an individual bringing a knife to a gunfight, especially when big corporations have tanks and missiles.

In market after market, firms that once fought for inches now build lanes together, then race in them. The giants signpost the shift. Apple and Samsung are dueling for smartphone sales, while Samsung’s component arm supplies the OLED displays that make iPhones glow. This summer, they even expanded their partnership, and Samsung now supplies chips from a Texas factory for Apple’s iPhones. Apple and Google wrestle for mobile mindshare, yet Google pays Apple billions each year to be the default search engine on iPhone. The rivals compete in devices and services, while cooperating where both gain reach and revenue.

Automakers offer another lesson. Ford and General Motors jointly developed transmissions to spread costs and accelerate time-to-market, while still going head-to-head in showrooms. BMW and Toyota have partnered on hydrogen systems and even a shared sports car platform, each preserving its identity while pooling the heavy lift.

Even in the entertainment industry (where rivalries are legendary), competitors team up when the infrastructure is heavy and the outside threat is larger than the fight between them. Microsoft and Sony agreed to explore cloud and streaming services together while still slugging it out for players and titles.

This idea has a name with roots in strategy research: coopetition. Coopetition is a blend of "cooperation" and "competition," where competing entities work together toward a common goal while still maintaining competitive interests in other areas. This concept allows businesses to collaborate in certain aspects, such as research and development, while competing in the marketplace for customers and market share.

Small Businesses Can Benefit From Coopetition, Too

If major corporations can alternate between contest and collaboration, what does that mean for the underdog that lives on cash flow and speed? It means advantages. Small firms can trade fixed costs for access and turn local trust into a regional footprint. Crucially, you can do it without dulling your edge. You can protect your absolute advantage and still grow through smart alliances. Think of it like neighbors who decide to share the cost of digging a well. They may still cook their food separately, but sharing water helps both survive.

Big companies embrace this logic because it works. The question is no longer whether cooperation has a place in competitive strategy; the question is how small businesses can use the same playbook to grow faster and reach farther without giving away the crown jewels.

Why Coopetition Should Be a Small Business Default

Why should small businesses embrace coopetition? There are plenty of reasons, the biggest being:

• Because demand wants convenience. Customers prefer bundles, one-stop solutions, and fewer handoffs. A florist and a baker who package wedding day services together remove friction. A design studio and a print shop that quote as one provider save a buyer time. Coopetition aligns with the buyer reality that shoppers now have endless choices and convenient options will often win out.
• Because platforms compress margins. When discovery and delivery run through a few giant rails, the small player who goes solo often pays the toll twice. Multinationals like Amazon, Walmart, Alibaba, and Jumia (in Africa) can cut prices in ways small shops cannot. If small businesses keep fighting one another, they may all lose to the bigger giants.
• Because constraints are real for small businesses. Many small businesses don’t have enough money for marketing, technology, or research. Competing alone drains these scarce resources. Collaboration addresses shortages of cash, capacity, and credibility. For instance, shared kitchens have become an on-ramp for growth companies that need commercial grade space without crushing overhead. Volatility punishes the isolated. Little wonder there are co-working and co-warehousing spaces growing. Companies that might fight for the same shelf space share equipment, know-how, and even suppliers in a neutral space.
• Because the cost of differentiation is moving up the stack. Customer experience, story, taste, and trust are uniquely yours. Everything else is infrastructure. Sharing infrastructure lowers cost and increases speed.
• Because networks reward interoperability. If your category grows because rivals agree on a standard, you sell more to a bigger market. If you insist on going it alone on every input, you pay more and move slower.

The Concept of Loneliness and Friction Tax

The loneliness tax is the hidden cost you pay when you run your business alone. For example, a small restaurant owner can spend all their savings on marketing but still struggles to fill seats. Right down the street, another restaurant is also struggling. If both teamed up to run a joint food festival, they could attract bigger crowds, share costs, and both make more money. In other words, when you refuse to collaborate, you carry all burdens alone, and your growth is slower.

The friction tax is the cost of fighting your competitors unnecessarily. For example, two small grocery stores in the same neighborhood lower prices every week to outdo each other. Customers enjoy the price war, but the stores are bleeding profit. If they agreed to share delivery or other costs, they might save money. Their constant “fight” created friction that drained them.

How to Collaborate While Still Competing

Think like an owner of a portfolio of bets, not a single bet. In practice, that means you decide, at the level of a function, where you will collaborate and where you will compete. For example, you can share the back office and fight for the front office.

• Put your business at the center, then have these 4 partners (your customers, your suppliers, your complementors, and your competitors) surround you. Then, seek opportunities where a joint move could expand the value that flows through the system. Perhaps you and a nearby rival could co-import raw materials to cut freight costs. Perhaps two boutiques could create a shared trunk show calendar that rotates venues and mailing lists. Perhaps three landscaping firms could rotate a specialized machine and collaborate on overflow jobs in peak season. The choice of where to collaborate should be the place where the cost is high or the customer benefit is obvious.
• Decide on what is out of bounds before you shake hands. Fixing prices or wages, dividing up markets, and other agreements that dull rivalry cross legal red lines in the United States. Recent enforcement shifts have removed the old comfort of broad safe harbors, so small businesses should formalize purpose, scope, and information barriers, then get counsel when in doubt.
• Build the smallest possible experiment and measure real outcomes. This might mean testing a one-season joint bundle for wedding vendors, a three-month pooled procurement of packaging with clear savings targets, or a shared pop-up store through the holidays with agreed staffing and revenue splits.
• Choose governance that matches the ambition. For lightweight efforts, a memorandum of understanding and a shared channel will do. For heavier lifts, use a special purpose vehicle, a buying consortium, or even a cooperative with bylaws and member voting.
• Protect your edge without starving the partnership. Keep your brand, your customer data, and your secret sauce on your side of the fence. Share only what advances the joint outcome. When tech is involved, set data minimization rules and define who owns improvements. When services are involved, define service levels and escalation paths. When creative work is involved, set credit conventions up front. A cooperative like Stocksy shows how clear rules can protect individual creators while strengthening the shared platform.

Practical Ways for Small Businesses to Practice Coopetition

1. Bulk Buying Together: Instead of buying stock individually at higher prices, small businesses in the same line (say, salons, retail shops, or farmers) can pool money and buy in bulk at lower prices.
2. Shared Marketing: Competing fashion designers can organize a joint runway show. Competing tour guides can market one travel package together. Competing restaurants can hold a food festival.
3. Joint Training and Learning: Several small businesses can contribute to bringing in an expert for a class or workshop, something they couldn’t afford individually.
4. Cluster Strategy: Just like food trucks, businesses can position themselves close together to attract bigger crowds. A row of bookshops or tech repair shops often brings more customers than one shop standing alone.
5. Collaborating for Big Contracts: Sometimes, a small business cannot fulfill a large order. Instead of rejecting it, competitors can partner to deliver together. This builds credibility and future opportunities.

Guardrails That Keep You Safe

When small businesses come together, the excitement of new opportunities can make them overlook the fine print. But you shouldn’t dive into a collaboration without rules that keep everyone safe and focused. Think of these rules as the guardrails on a highway (they don’t stop you from moving forward, they keep you from crashing).

• Name the purpose in the first sentence of every agreement and read it aloud in the first meeting. If your purpose is to reduce carbon in logistics, you know what information belongs in the room and what does not. If your purpose is to expand access to customers, you will stay far away from pricing talk.
• Keep the collaboration proportional. The smaller and more targeted the scope, the easier it is to govern and the harder it is to drift into forbidden territory. When you do scale up, bring counsel early.
• Agree on how the partnership ends. Sunset dates prevent zombie alliances. Exit clauses that define who owns the work reduce drama. Postmortems capture the learning so your next partnership starts stronger.

A Closing Challenge for Small Businesses

As a small business owner, ask yourself these 2 questions:

1. Where am I paying a loneliness tax?
2. Where am I paying a friction tax?

Every place you answer yes is a candidate for coopetition. If you embrace coopetition with clear eyes and clean boundaries, you will find that collaboration is not the end of competition. It is the way you make competition worth winning.