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Earlier this year I decided our family-owned printing company needed some help to straighten out operations. Production waste had climbed faster than sales growth over the previous six months, cutting into profits, and productivity wasn't what it should have been. We could have hired a manufacturing manager and added $150,000 to our overhead or brought in a consultant for $150 an hour. Instead, a local competitor agreed to lend us their operations manager. The reason was simply that they didn't want to lose him. He had helped turn around their operation, and now he was bored. They figured that if he took on the challenge of helping us part-time, he would stay put.

An unconventional partnership? No doubt. But more and more these days, our small company is forging creative alliances in order to stay competitive. We're teaming up with sometime rivals to bid on business neither of us has the capacity or ability to handle alone. In several instances, we've joined with competitors who manufacture plastic--we don't--but who lack our eight-color printing capability. We've landed one new large customer by agreeing to provide all of their packaging, which we do by partnering with rivals for products that we don't manufacture. We're even linking with rivals to create new materials for our major market, the produce industry, which they sell through us. They use our market presence to boost their sales, and we use their capabilities to boost ours.

Partnering with rivals may be necessary, but it isn't for the fainthearted. I often fret that one of our joint ventures will backfire, and some disaffected partner will walk away with our customer. We try to prevent this by agreeing on exactly where we will cooperate--and where we won't. For instance, with one rival we developed a plastic to package romaine hearts. That has increased our market share, but we still compete in other parts of the produce market.

By agreeing on the ground rules up front, a relationship of trust can evolve. Consider our new part-time operations manager. The arrangement wouldn't have been possible if we hadn't agreed from the start that he would keep our financial information confidential. Also, we made clear to our rival that we wouldn't try to lure him away to a full-time job without their permission.

Failing to agree on basic principles--and stand by them--can undermine a partnership in a hurry. Late last year we began making some eight-color packaging as a subcontractor for a rival who couldn't keep up with demand. It was a great deal for us because we didn't have enough work for our eight-color press at the time. And the packaging was far more sophisticated than what we had traditionally made, so we were forced to improve our quality. Unfortunately, one of our salespeople didn't honor the spirit of the partnership. Going behind the back of our partner, he showed the customer the work we were indirectly doing for them. Needless to say, the deal crumbled at once.

Win-Win. But for every cautionary tale, I can point to several success stories. Consider the complexities of how we won the account that included packaging we don't produce. We cemented the deal by getting rivals to fill in our product gaps. They won by getting business they wouldn't have otherwise. We won by getting a new customer who would have gone to a larger competitor that could have provided one-stop shopping. And the customer won because it got the product it wanted and only had to deal with a single supplier--a key element of its sourcing strategy.

As our industry consolidates and our small company is forced to battle with ever-larger rivals, I suspect we'll be able to stay independent only by forging alliances with like-minded smaller businesses. By doing so we'll be able to give our customers the service they've come to expect from us while providing the breadth of a larger company. It's a strategy the companies in nearby Silicon Valley have practiced for more than a decade. We'll have to become more adept at it if we plan to be here a decade from now.