Total Pass is a bizarre startup born out of the teamwork of six competitors in the fitness industry. Learn how to make competition your ally with the 'coopetition'.
15 min read
You see a competitor as someone you cannot trust, with whom you cannot share information or make friends. Much less teaming. He is your enemy to win. At least this is the prevailing vision in business around the world.
The bad news is that the competition is getting more fierce, that exponential technological advances can take you off the market in a few months, that customers are more demanding and that they don't forgive the error.
To face the growing challenges of your company, all you have to do is think differently and look for options that would have seemed suicidal recently. One of these options is called “coopetencia” or “coopetiton”, which the Cambridge dictionary defines as “the act of working together with a person or company that is your commercial competitor in a way that benefits both of them”.
The term arises from a fusion between the words ” competition ” and ” cooperation “, and refers to opportunistic collaboration between different economic actors that are also competitors, using the advantages of both. The concept, which is also known as competitive collaboration, became popular in 1996 with the publication of the book Co-opetition by Adam M. Brandenburger and Barry J. Nalebuff.
A classic example of this type of alliance occurred in November 2005, when IBM and Oracle, rival companies in various sectors, established a partnership in order to capture the ERP market for SMEs.
So-called free software is also a very good example of coopetition practice: several of these development projects (like Apache and Linux) were and are funded by competing companies.
At the country level there are also examples. Russians and Americans, who were competing in space during the Cold War, have in recent years collaborated with each other for the benefit of science, dividing the huge costs involved in the projects.
There is even a very clear and surprising recent example. After three years of operating in China, in August 2016, failing to compete against DiDi, Uber sold its business to it in that country. By incorporating the UberChina business, valued at around $ 8 billion, DiDi's valuation reached $ 36 billion, making Uber the largest DiDi shareholder, with a 20% stake in the company. combined.
Luis Antonio Márquez, director of Innovation and ship at EGADE Business School , Mexico City campus, explains that “the concept is derived from Game Theory, where it is weighted to maximize profits and reduce losses, working as a team: instead of face, complement each other. “
IN PLAN OF CUATES
Four years ago, the idea came up in Brazil to unite several companies in the fitness sector to go together in the corporate market. Thus, Grupo Bioritmo , creator of the Smart Fit brand, created a digital platform that brings together seven brands to offer a more varied menu of gym options.
With the idea of replicating this model, Alfonso Gómez Benet, CEO of Smart Fit México, brought together several directors and owners of the main gym chains in the country. “In that spirit, we began to meet informally with different players, almost like friends. In that conversation, the idea of using the Brazilian platform to create a Mexican alliance that offered this service in Mexico came up, ”he says.
The Mexican fitness market is very attractive, as it is the fourth place in the world with the highest growth in this industry and reports an approximate value of $ 1.8 billion, according to the International Health Racquet Sportsclub Association. In addition, for five years it has maintained growth of 20% and it is expected to grow 300% by 2020.
To attack the corporate segment of this market, TotalPass was born in February 2019, a new startup, with its own structure, in which six of the main competitors in the fitness sector in Mexico participate: 9Round, C + Deportivo, Snap Fitness, Smart Fit , Sport City and Sports World that together offer a total of 1,400 spaces to practice all kinds of physical conditioning exercises, individual and collective.
This network offers special prices and coverage to companies with more than 500 collaborators. The offer also includes, in its highest price range, access to the more than 2,000 “studios” of the Fitpass network throughout the country.
Until the end of 2019, TotalPass had already signed more than 150 contracts with different large corporations and had 1.5 million affiliates.
“We went out to the market subsidizing the company a bit, that is, lending people, facilities, to test. And we had a very successful success: the market welcomed us with open arms because the brands we were allied with were brands that inspired confidence. It was a milestone. ”
Alfonso Gómez Benet, CEO of Smart Fit México.
But starting was not so easy. The initial lack of confidence in teaming up with the competitors had to be overcome. “The first challenge was how to convince of the idea's agnosticism. And it was to the extent that more players were adding that they were raising the totally understandable mistrust that there could be ”, recalls Agustín Adelantado, CEO of Sport City.
“It is difficult to understand,” acknowledges Salomón Rayek, 9Rounds advisor, but says that a couple of talks later understood the benefits of participating, thanks to the transparency of the objectives. “We saw that the spirit was to make the cake big, the win-win, and we quickly understood that the theme was: let's get together to do something that nobody can do alone.”
How does TotalPass work? Corporations choose one of the three Total Pass schemes, depending on the level of benefit they seek to provide to their collaborators: they can cover the entire cost, partially cover it, and the collaborator contributes a small monthly payment via payroll or transfers the complete cost to the collaborator payroll discount.
Each corporate collaborator can enroll in different categories of gyms and studios, according to their possibilities and preferences. With this flexibility of payment schemes, the collaborator obtains savings of between 25% and 50% in the memberships of the leading gyms in the country, also eliminating the cost of registration and regular annuity.
With a web and mobile platform, TotalPass provides nutritional, fitness and medical assistance programs. It also offers companies the service of activating and promoting fitness programs for more assertive communication within their company.
Some of the large companies that have already contracted this service are Bancomer, Teleperformance, Uber, Alsea and Nestlé.
TotalPass moves like a startup, but with the expertise of six leading brands. “It is a company that is an undertaking, but with all the advantages of the experience and brand positioning of our chains. You have the best of two worlds: you have this agility of entrepreneurship, where the operation is super agile, every day you have to be making decisions and making adjustments, ”says Isaac Kalby, co-founder of 9Round Mexico.
Alfonso, from Smart Fit, who at the moment is the rotating general management of the new company, reiterates: “It is a pure and hard startup. The platform evolves every day. We have weekly change sprints, and the team is doing a very good job of identifying the changes and getting them up on time and doing them fast. These applications have the mission of satisfying needs or dying. Startups have that risk. ”
FROM THE COMPETITOR TO THE ALLY
If the TotalPass example convinced you to enter the cooperative, now you should see the different ways you have to approach this collaboration scheme. Depending on its nature, cooperation can be vertical, horizontal or complementary.
Vertical agreements occur between companies that intervene at different stages in the value chain of the product or service. For example, they have a supplier-customer relationship. The objective is specialization through greater vertical integration.
Horizontal agreements are between direct competitors in the market that want to carry out the same activity together. The objective is to achieve economies of scale and a market distribution.
Complementary agreements are between companies that are not directly rivals, but could be in the future. The objective is diversification to reach a more market, looking for complementary products. An example occurred with the agreement between Coca-Cola and Nestlé to market Nestea.
In order not to blindly start your cooperative adventure, here are some tips from the managers who created TotalPass:
- Be friends with everyone. “Be friends with everyone because everyone can be competing, but everyone can also be helping,” recommends Alfonso Gómez Benet, Rotary CEO of TotalPass.
- Be empathetic to your competitor's interests. “Play with the cards on the table and be empathetic with the concern of the possible player with whom you want to associate,” advises Agustín Adelantado, CEO of Sport City.
- Take off your prejudices. “Be brave and don't let the prejudice of the brain close an opportunity without having explored it. Go ahead and talk to whoever you want to talk to. Even if you think that it is not going to pull, something good will always come out, ”says Alfonso. “You have to be open and think about how to add, how to make the cake bigger by allying yourself with the competitors,” adds Salomon Rayek, 9Rounds adviser.
- Learn the best of both worlds. When several leaders of the fitness market in Mexico joined forces, they contributed their expertise and knowledge to the new startup, but TotalPass also provides companies with more traditional models with agility and innovation. Isaac Kalby, co-founder of 9Round, says that Totalpass “is a company that is an enterprise, but with all the advantages of the experience and brand positioning of our chains. You have the best of two worlds. ” Agustín, from Sport City, comments: “What we are trying to do is incorporate startup thinking into our companies, like all the speed of decisions.”
- Be transparent and communicate effectively. “Transparency between competitors makes it happen, and that's how we understood it,” says 9Rounds' Salomon. It is necessary that there is transparency between all areas of collaboration and that this transparency is communicated effectively to the entire organization to generate a culture among the teams. Beatriz Orantes, Commercial Manager of Total Pass, says that “the challenge is to transmit this transparency from the Council to the operation and operate under that principle. The challenge is to generate that culture within the company ”. Diego López, Operations Manager of Total Pass, adds that “transparency and communication between all areas is essential.”
- Set the clear rules for fairness. “The constitution was a little bit complicated to find the legal way to establish a company that had equity between competitors, in which there was transparency, in which there was a feeling of real cooperation, in which there was a clarity of the mission, in the there would be no mistrust ”, acknowledges Alfonso, from Smart Fit. “Total Pass is a totally independent entity, but governed by the set of companies, and it is there where all the clubs that joined contributed a lot in the constitution of this company so that each one had a voice and vote, and felt that it did not matter. what is the size of your company, you have the floor ”, says Agustín, of Sport City.
- Do it fast and correct on the way. When the opportunity to ally with your competition arises, take advantage of it immediately because the timing and benefits may soon run out. “You have to do it quickly and you can correct things on the fly in the typical speed sprint,” says Alfonso. “At Board meetings, everyone talks about their experience in corporate selling, and that helps us polish the product. We are still innovating, growing and changing it ”, shares Beatriz Orantes.
Although coopetition is nothing new, it will be a business strategy that will occur more and more frequently in Mexico and the world, given the increasingly challenging conditions in the business world.
It is, says Luis Antonio Márquez, of EGADE, a very inclusive scheme that democratizes access to products and services. However, it warns of some risks about what type and size of players make use of this collaborative practice. “You have to be careful because this type of coopetition can give rise to monopolistic or oligopolistic practices.”
COOPETENCE, FOR WHAT?
If you are going to take the step of allying with your competitors, you must first be clear about what you are looking for. There are several reasons to work cooperatively:
- Create a new market. When you combine the strengths of your company with those of your competitor, a strategic combination is achieved that can help them gain a new market segment, which they could never access in the same period of time or at the same cost.
- Cost sharing and economies of scale. Companies work together in segments of their business where they believe they can minimize their costs, but without compromising their unique attributes.
- Offer of related products. Your customers can benefit from offering your competitor's products as a complement to your own products. This is called up selling or cross selling, and the two parties share the profits.
- Integrated offer. If your competitor has a similar product that could complement yours, you can reach an agreement for both to offer an integrated package or a new product. Another way to cooperate is to create a new critical offer to confront a common enemy.
- Cross endorsement. If your competitor doesn't really compete with your direct market, they can refer to each other without anyone losing customers. Affiliate marketing could be one of the most effective (and easiest) ways to partner with someone else in the industry. This works for two companies with different products, but similar clientele, to increase the market for both.
- Possible investor. Once you have established your credibility and value, you can extend your strategic partnership to a financial relationship. That way, your competitor can become your investor, and maybe even end up merged.
SOURCE: Article: “Make your competition work for you,” by Martin Zwilling, Harvard Business Review , April 29, 2011.