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Building A Business Around Frenemies

I wrote a few months ago about how cloud companies are in a unique position to make partners of their competitors, a phenomenon I call the "Frenemy Model." I’m still holding strong to this theory, even as there have been a number of massive developments in the industry since I wrote the first piece.

For example, when iCloud was first announced, many claimed that it would kill off startups that were focused on cloud storage. OfficeDrop was in the crosshairs of that speculation since we have a cloud storage offering, but I refuse to believe that we’ll be squashed by Apple. Or Box. Or Dropbox, for that matter. In fact, we make our app stronger by connecting to Dropbox, and I’d invite connections to iCloud or Box if our users demand it.

The core of the frenemy theory is this: The very nature of the cloud is collaborative, and users don’t want to be hamstrung by a certain service. If your company chooses to make other cloud services work well together, you’re going to attract a loyal user base.

Cloud storage isn’t anything new. It’s becoming a commodity. There are established services people use and can’t live without. Startups can’t be in denial of this fact, or risk obsolescence.

But it goes a level further than just playing nice with others. We can associate 40% of our revenue with our frenemy partners. This includes not only connecting with competitive services but also empowering the competition by licensing our software, essentially creating more competition for our apps. Having witnessed some pretty serious intellectual property wars in the past 5-10 years, I’d call this strategy "anti-proprietary."

Why risk everything to build a frenemy network when existing in isolation seems so much more appealing? It seems so counterintuitive, but makes so much sense because not many things built in isolation have ever really reached the mass market. Computers before the Internet were really contained to a small population of people. Now they’re pervasive enough that we have something called a digital divide—and it’s a big deal. Expensive enterprise software programs that aren’t compatible with others (I’m looking at you, Microsoft) are dying out in favor of more open, web-based platforms (like Google Apps).

Making money off of your frenemies is another story. You can’t be just another clone. For us, it was all about finding something that fits into people’s day-to-day work lives—the need to digitize paper—and making it function with most of the services they use. All too often companies overcomplicate what people really want. Steve Jobs was a genius at figuring this out and ushering in a new age of simplicity.

So maybe that’s it. The beginnings of the frenemy manifesto.

Keep it simple.

Don’t be selfish.

And remain open to the possibility that someone who could squash you might also be your biggest moneymaker.

[Image: Flickr user !'jonathan'!]