BOOK REVIEWS
By: GILBERT, JR., DANIEL R.., Business & Society, Dec98, Vol. 37 Issue 4, p468, 9p
Adam M. Brandenburger and Barry J. Nalebuff, Co-opetition, New York: Currency Doubleday, 1996.
290 pages.
I.
Co-opetition can be an important benchmark for those who shape the widening discourse about the "greening of
business" (hereafter, Green Business). It is not that coauthors Adam Brandenburger and Barry Nalebuff pay
much attention to the natural environment. None of the competitors who occupy the Co-opetition conceptual
framework get their hands dirty or their faces windburned.(n1) Other than one, one-page case buried in the
book's midsection (p. 127), there is nothing "green" about the playing field of competition that Brandenburger
and Nalebuff portray. Ironically, this separation between competition and the natural world is precisely why Coopetition should be useful in Green Business circles.
The Green Business discourse can make two distinct and lasting intellectual contributions to our thinking about
the playing fields of competition. Each contribution draws on, and adds to, the concept of human
connection.(n2) The significance of that potential contribution comes into clear view when we realize that
competitors are strangers on the playing field of competition where Brandenburger and Nalebuff situate Coopetition.
II.
Co-opetition is a breezy, energetic, and case-filled application of game theory to business problems.
Brandenburger and Nalebuff propose that game theory makes it logically possible to telescope cooperation and
competition into a clever hybrid idea called co-opetition. The coauthors credit Ray Noorda at Novell with
coining the term (see also Petzinger, 1997). Brandenburger and Nalebuff offer co-opetition as a challenge to the
maxim that one cannot practice both cooperation and competition.
Brandenburger and Nalebuff argue that winning in modern business competitions is often attributable to the
winners' simultaneous mastery of two skills. First, winning competitors take steps to enlarge the market "pie"
from which they can feed themselves and from which their rivals, suppliers, and customers can feed, too.(n3)
Second, winning competitors make sure that they are in a position to devour the lion's share of that "pie."
Brandenburger and Nalebuff call these skills "cooperation" and "competition" respectively. To catch the reader's
attention, the coauthors translate this pairing of cooperation and competition into the practice of "peace and
war."(n4) What makes this dual mastery possible, Brandenburger and Nalebuff argue, is a mastery of the
fundamental principles of game theory. The mark of a game-theoretic "co-opetitor" the coauthors show often, is
his ability to outsmart rivals, customers, suppliers, and anyone else who comes to feed in the market. This book
leaves little doubt that the coopetitive competitor is one tough, intensely focused student of others' weaknesses.
The conceptual lineage of Co-opetition is clear and diverse in four important respects.
First, Co-opetition is a faithful addition to the growing genre of "game theory for business" books.(n5)
Brandenburger and Nalebuff have produced a sequel to Thinking Strategically (Dixit and Nalebuff, 1991).
Indeed, Coopetition is an anthem in praise of game theory. The coauthors admit that game theorists have
sometimes been their own worst enemies when it comes to marketing the strengths of game theory.
Brandenburger and Nalebuff meet this marketing challenge. Co-opetition contains none of the mathematics and
payoffs matrices that can intimidate a newcomer to game theory. In the campaign to spread game theory,
Brandenburger and Nalebuff are eager evangelists.
Second, Brandenburger and Nalebuff sustain the spirit of the "five competitive forces" that Michael Porter set
forth nearly two decades ago in Competitive Strategy (1980). They do so with their "Value Net," in which
customers, suppliers, and competitors can play a "complementor" roles.(n6) The coauthors coin complementor
in the spirit (without acknowledgment) of the "good competitor" that Porter proposed a decade ago in
Competitive Advantage. Porter (1985) urged that the firm "must compete aggressively but not indiscriminately"
(p. 228). Brandenburger and Nalebuff concur in their own way.
Third, Brandenburger and Nalebuff acknowledge, in word and deed, the conception of strategic competitor that
Oster (1990) popularizes in her Modem Competitive Analysis. Neither the strategist who applies Oster's
framework nor the co-opetitive competitor has any desire to be a price taker in a perfectly competitive market.
True to the lineage of strategic management, Co-opetition is not an anthem for free-market capitalism (see
Gilbert, 1986). Instead, co-opetitive competitors jump intelligently (i.e., applying game theory) on lucrative
market imperfections that, Oster and Porter both warn, will eventually attract hungry imitators.(n7) To
discourage hungry imitators, Brandenburger and Nalebuff propose, co-opetitors must follow a detailed blueprint
for changing the rules of the games that they play (pp. 159-97).
Fourth, Brandenburger and Nalebuff are unabashed "front-runners" who praise one winner after another in the
annals of market competition. In doing so, they continue a long-standing tradition of Business Policy writing.
Co-opetition joins the recently released Forbes Greatest Business Stories (Gross, 1996) and Sloan's (1963)
timeless My Years With General Motors in the long line of literature in which the scorecard of business has two
only columns: winners and those unmentionables who fail to win (see Gross, 1996; Sloan, 1963).
For these reasons, Co-opetition can be a source of comfort and entertainment for many readers. This book is not
a radical business story. Brandenburger and Nalebuff know that. They do not break an "intellectual sweat" in
justifying the application of game theory to business. The coauthors seem content with the fact that others have
done that work for them.
This confidence about game theory provides an opening for those who join in the crusade for Green Business.
Green Business must, by definition, replace the playing field of co-opetitive competition in our minds and in our
sights. In two regards that I develop below, Green Business can be a fountainhead of alternative visions of the
playing fields of competition.
III.
A key concept in any discussion of human ecology is equilibrium. Human ecology pertains to the search for two
simultaneous and complementary equilibriums. One equilibrium is human harmony with nature. The other
equilibrium is humans' harmony with each other about their places in the natural environment. We commonly
discuss the former equilibrium in terms of "the balance of nature." We commonly describe the latter kind of
equilibrium in terms of norms and conventions about acceptable degrees of the balance of nature.(n8)
Humans' straggles to make sense of this pair of equilibriums are vivid in a sampler that includes Leopold's
(1970) A Sand County Almanac, Norris's (1993) Dakota: A Spiritual Geography, Quinn's (1992) Ishmael,
Callenbach's (1977) Ecotopia, Abbey's (1976) The Monkey Wrench Gang, Tepper's (1989) The Gate to
Women's Country, and McPhee's (1971) Encounters With the Archdruid. Regarding this intellectual struggle,
the very title of McPhee's (1989) The Control of Nature(n9) has a certain mocking tone to it. In each of his three
case studies, McPhee introduces us to a human community whose members condone complicated and daring
efforts to intervene in the balance of nature.
In Managing for a Small Planet, Stead and Stead (1992) argue that such a dual equilibrium must find its way
into management thought and practice. If the Steads and their allies are successful, then one intellectual
contribution of Green Business will be to "force" one premise into our consciousness and then into our ideas
about business competition. By that "green" premise, the members of any human community share, at a given
time, some agreement about the place that their community takes in the balance of nature.(n10)
In some communities, such an agreement can be endorsed tacitly and without much fanfare. Weekly
participation in recycling programs is a case in point. In some communities, such agreement can be public and
activist, such as "grassroots" initiatives to reject toxic waste dump sites. Certainly, in any human community,
there is room for alternative agreements about better versions of a balance of nature.(n11)
The upshot is that Green Business can introduce into management thought the idea that human beings are
inevitably connected on the subject of their places in the natural world. Furthermore, because business
competition can bring human beings into lasting ties with one another, Green Business can be an opening for
rethinking our conceptions of the playing fields of competition. Still, the Steads' are voices in the wilderness of
business competition. The intellectual lineage of Co-opetition is mainstream. Co-opetition is a sobering
reminder that a popular model of business competition is not friendly to the idea of human connection in the
conduct of business competition, green or otherwise.
Equilibrium per se is unimportant in the Co-opetition framework.(n12) Co-opetitive businesspersons are
concerned with wins and losses. Coopetitive businesspersons are not concerned with any lasting convergence of
interests in the form of norms and conventions that we might define as a particular "us" (Gilbert, 1996a: 63-86).
To co-opetitors, the playing field of competition is not something that human beings cohabit. Rather, the playing
field of competition is simply a supply of opportunities to win by means of shrewd, game-theoretic decision
making. Brandenburger and Nalebuff make it very clear (p. 5) that cooperation is merely one of a business
competitor's options.
Brandenburger and Nalebuff cannot make an argument for equilibrium in business competition, because they
are faithful game theorists.(n13) It is true that Co-opetition has room for three terms that imply that co-opetitors
willfully take steps to build stable human communities: mutual gain, cooperation, and peace. But, appearances
are deceiving here. The game theorist's versions of mutual gain, cooperation, and peace have nothing to do with
the concept of human connection. It is ironic that these meanings are divorced from human connection, but it is
not accidental.
In game theory, mutual gain occurs when two game players receive some positive payoff at the same time. But
the prospect of "win-win" that Brandenburger and Nalebuff hail as a co-opetitive innovation has nothing to do
with the mutual action by which human communities can endure. In game theory, mutual gain refers merely to a
fortunate result of egoists' decisions. In game theory, cooperation is merely the absence of a zero-sum result.
There is nothing joint about cooperation in game theory.(n14)
Accordingly, the importance of peace in Co-opetition is an exaggeration. Brandenburger and Nalebuff argue
that peace, such as a long-term supply contract, is useful only if it is a way for a co-opetitor to win.(n15) At best,
the peace that Brandenburger and Nalebuff describe is a trace during which the winner-to-be tolerates the
presence of others until the winner-to-be decides that he is prepared to outsmart them. That peace looks nothing
like what the framers of a peace treaty accomplish toward some improvement in human ties.
Here is a verdant opportunity for Green Business to make a second intellectual contribution. Green Business not
only makes room for lasting human ties at the heart of business competition, something that the best efforts of
game theorists Brandenburger and Nalebuff cannot ever produce. Green Business, by virtue of the emphasis on
green things, can also open our eyes in new ways to the playing fields of competition. Green Business can
change forever the way we talk about business competition, because Green Business is a way to marry sight and
idea.
IV.
Green Business, by definition, takes place along the margins where human institutions meet ecosystems.
Raphael (1986) uses the term edges to portray these margins. Accordingly, Green Business is an opportunity to
unleash our visual imaginations about the playing fields of business competition. Once our visions are
unleashed, our intellects can follow suit on the edges. This is a second potential intellectual contribution of
Green Business. Photographers and painters and poets and lyricists have blazed trails for management educators
who want to "see green" as they "talk green."
No longer must we visualize business competitors as human beings who are trapped in the sterile cubicles that
Adams (1996) satirizes in "Dilbert" cubicles stripped of any scent, sound, and vista of the natural world. The
competitors in Co-opetition never get out of the office.(n16) No longer must we visualize business competition
as something conducted in the unnatural world of digital signals zipping over global telecommunications
networks. And, no longer must we visualize "green" business competition as simply the absence of the dirty
stains that business competition can leave on the land. We can see today, as we could a generation ago, the
waste piles next to crumbling coalfield collieries, the marginal farming communities on the Great Plains, and the
remnants of the great North American bison herds. Green Business can replace both "nongreen" conceptions of
business competition--the sterile corporate landscape and the competition debris we have inherited--with new
visions of the playing fields of competition.
Green Business is something that we can see on such playing fields of competition as the fenced grasslands of
the Great Plains, the lock-and-dam system on the Mississippi River, the reforested slopes of clear-cut
mountainsides, and the sentinel of telephone poles stretching across the American West.
Green Business is an intellectual opportunity to ask imaginative questions about these sights and then to create
imaginative conceptions of the playing fields of competition. With the fenced grasslands in view, we can ask, as
Hasselstrom (1987) prompts us, in Going Over East: Reflections of a Woman Rancher, "What traditions of
competition can be passed along to our heirs?" Alongside a lock-and-dam system on the Mississippi River, we
can ask, "What interventions in the river ecology will spill over for those who ply the river long after we are
gone?" With a reforested clear-cut slope in view, we can ask, "Over what horizons in time are we responsible
for restoring the natural world that we have consumed?" Watching the wires from telephone pole to telephone
pole stretch to the long horizon, we can ask, "What avenues of communications are useful for sustaining human
ties and what avenues clutter our land and our ties to one another?"
All these questions turn on the importance of a "we." All these questions are cues to launch our interpretations
of business competition on the premise that lasting human ties are a good thing.(n17) All these questions, linked
to the green that we can see in our world, presume the existence of some stable human understanding that is
both familiar and open to debate by those who live by it. All these questions open our eyes to the playing fields
of competition as places where human beings are tied to each other over time.
Co-opetition, as a celebration of what shrewd strangers can accomplish, stops us from seeing human connection
over time.(n18) In the co-opetition way of thinking, it makes no sense that generations of football players
representing Harvard and Yale Universities have shaped and celebrated a rivalry that they call "The Game" on
plots of grass, dirt, and sky in Massachusetts and Connecticut (Goldstein, 1996). The Game is an equilibrium on
the playing fields of competition.(n19) The Game is an answer that generations of competitors have sustained
around the question, "How do we ensure that the very best of our rivalry is never forgotten?" A co-opetitor's
interest in such an equilibrium lasts only as long as his current winning streak.
V.
In sum, Co-opetition is a prime example of what happens when those who study competition do not spend very
much time lingering near, and participating on, the playing fields of competition, particularly those that consist
of grass, dirt, rock, water, and air. Green Business is an invitation to open our senses to the natural world and the
marks that we competitors leave on the world and on each other. Co-opetition takes us in the opposite direction.
Co-opetition will help you understand why "green" imaginations deserve a place in management education. It is
a book worthy of inclusion in the reading list of every first-year doctoral student and every student encountering
the principles of management for the first time.
NOTES
(n1.) I focus throughout this critique on the framework that Brandenburger and Nalebuff propose, not on the
particulars of a given case per se. The coauthors discuss the National Football League, where someone gets his
hands dirty. However, that contact with the natural environment is not part of co-opetition as the authors
develop the concept.
(n2.) This is human connection laced with the mutual empathy that distinguishes self-inrelation feminism. It is
not the thinner, more disposable kind of connection that, as Petzinger (1997) shows, is creeping into modern
business language. By contrast to the meaning that I employ throughout this critique, Petzinger does not use a
feminist meaning of "connection" in his discussion.
(n3.) To encourage co-opetitors to think in terms of enlarging the "pie," Brandenburger and Nalebuff deliver this
pep talk: "What matters is not whether others win--it's a fact of life that they sometimes will--but whether you
win" (p. 37).
(n4.) See Brandenburger and Nalebuff (pp. 4-5). The coauthors make very clear that "it's not Tolstoy" or the
historical evolution of a competition that interests them (p. 4). This becomes important below when the subject
turns to competitive equilibrium.
(n5.) For a comprehensive and readable introduction to the history of game theory, see Poundstone (1992).
(n6.) Regarding the Value Net, see Brandenburger and Nalebuff (pp. 16-39). The Value Net also looks very
much like a stakeholder map, but the coauthors do not claim a place in that line of ideas.
(n7.) Regarding the threat of competitive imitators, see Oster (1990: 81-103).
(n8.) For an introduction to a logical link between conventions and corporate strategy, see Gilbert (1996a: 87106).
(n9.) The Atchafalaya case is particularly instructive.
(n10.) The point is that the members of a community are always "in" some convention, even though it might not
be the best one that they can shape jointly. Put somewhat differently, I argue here from the premise that we can
make sense of "green" business by working with propositions other than "Be green. Make a lot of money." The
latter proposition is about a different kind of green.
(n11.) I point here to the possibility of alternative conventions. Although I agree with Schelling's (1978) claim
that "there is nothing particularly attractive about an equilibrium" (p. 26), I argue that an equilibrium can
become very attractive once the members of a community endow it with meaning as a convention that connects
them.
(n12.) For a fuller discussion of the absence of equilibrium from game theory, and the consequences of that, see
Gilbert (1996b).
(n13.) This is quite ironic. While hyping game theory, Brandenburger and Nalebuff cite the Nobel Prizes
awarded in 1994 to Professors Nash, Harsanyi, and Selten for their work in game theory. What Brandenburger
and Nalebuff then do not say is that these Nobel Prizes had something to do with the concept of Nash
equilibrium. For an application in the spirit of Nash equilibrium, see Gilbert (1996a).
(n14.) This idiosyncratic meaning of cooperation is vivid in the Prisoner's Dilemma (see Gilbert, 1996b: 16973).
(n15.) Brandenburger and Nalebuff (pp. 248-49) do make room for long-term contracts among the rules that a
co-opetitor can change in his favor. Still, long-term relationships are merely a matter of convenience for the coopetitor. Moreover, past competitions are irrelevant in the coauthors' discussions about any contractual
arrangement.
(n16.) Once again, I refer to the co-opetition concept, not to any case that the coauthors use.
(n17.) Nothing in this statement precludes further ethical critique of a particular human tie. For instance, a
conspiracy to sabotage someone else's professional projects comes to mind as one human tie well worth
examining more closely.
(n18.) The "co" in co-opetition is a cover for the acts of stalking and starving others that any co-opetitor must
take. The principles of game theory require those acts. A more appropriate prefix for "-opetition" could be the
"st" that stands for stalking and starving. The resulting concept is "st-opetition," a deterrent to the kind of
imagination that the Green Business can bring to discourse about the playing fields of competition.
(n19.) Every November, in the days leading up to the annual renewal of the football rivalry between Amherst
College and Williams College, The New York Times sports columnists show us masterfully that human
connection has a lasting place on the playing fields of competition. For another testimonial on this point,
narrated in Nebraska, see Janovy (1988).
REFERENCES
Abbey, E. 1976. The Monkey Wrench Gang. New York: Avon.
Adams, S. 1996. Still Pumped From Using the Mouse. Kansas City, MO: Andrews and McMeel.
Callenbach, E. 1977. Ecotopia. New York: Bantam.
Dixit, A., and B. Nalebuff. 1991. Thinking Strategically. New York: W. W. Norton.
Gilbert, D. Jr. 1986. "Corporate Strategy and Ethics." Journal of Business Ethics 5: 137-50.
-----. 1996a. Ethics Through Corporate Strategy. New York: Oxford University Press.
-----. 1996b. "The Prisoner's Dilemma and the Prisoners of the Prisoner's Dilemma." Business Ethics Quarterly
6: 165-78.
Goldstein, R. 1996. Ivy League Autumns. New York: St. Martin's.
Gross, D. 1996. Forbes Greatest Business Stories. New York: John Wiley.
Hasselstrom, L. 1987. Going Over East: Reflections of a Woman Rancher. Golden, CO: Fulcrum.
Janovy, J. Jr. 1988. The Fields of Friendly Strife. New York: Penguin.
Leopold, A. 1970. A Sand County Almanac. New York: Ballantine.
McPhee, J. 1971. Encounters With the Archdruid. New York: Farrar, Straus and Giroux.
-----. 1989. The Control of Nature. New York: Farrar, Straus, and Giroux.
Norris, K. 1993. Dakota: A Spiritual Geography. Boston: Houghton Mifflin.
Oster, S. 1990. Modern Competitive Analysis. New York: Oxford University Press.
Petzinger, T. Jr. 1997. "Joe Morabito Beats the Competition With Cooperation." The Wall Street Journal, 7
February, p. B 1.
Porter, M. 1980. Competitive Strategy. New York: Free Press.
Poundstone, W. 1992. Prisoner's Dilemma: John yon Neumann, Game Theory, and the Puzzle of the Bomb.
New York: Doubleday.
Quinn, D. 1992. Ishmael. New York: Bantam/Turner.
Raphael, R. 1986. Edges: Human Ecology of the Backcountry. Lincoln: University of Nebraska Press.
Schelling, T. 1978. Micromotives and Macrobehavior. New York: Norton.
Sloan, A. P. Jr. 1963. My Years With General Motors. New York: Doubleday.
Stead, W. E., and J. G. Stead. 1992. Managing for a Small Planet: Strategic Decision Making and the
Environment. Newbury Park, CA: Sage.
Tepper, S. 1989. The Gate to Women's Country. New York: Bantam.
~~~~~~~~
By DANIEL R. GILBERT, JR., Bucknell University
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BOOK REVIEWS
By: Armstrong, J. Scott. and Clark, Terry., Journal of Marketing, Apr97, Vol. 61 Issue 2, p92, 4p
Co-opetition[1]
by Adam M. Brandenburger and Barry J. Nalebuff (New York:
Doubleday, 1996, 290 pages, $25 hardback; a detailed description
of the content is provided on the Internet at
http://mayet.som.yale.edu/coopetition)
Why Can't a Game Be More Like a Business?
In this book, Brandenburger and Nalebuff use game theory to develop a set of guidelines that will "make it
easier to explain the reasoning behind a proposed strategy." The games that they use as analogies do not involve
sports with their zero-sum outcomes; instead, they consider a variety of games that allow for mutual benefit, as
well as harm, for the players. They use the term co-opetition, which is consistent with their message that
cooperation pays off in some situations, competition in others. They encourage readers to think about not only
how to play the game, but also how to change the rules. Examination of these games leads them to make
recommendations for managers, many of which are relevant to marketing managers. So, to the extent that a
game is like a business, this book should be useful.
My aims in reviewing the book are to ask: (1) Is it new? (2) Is it useful? and (3) Is it supported? The book has
flaws, particularly in the area of supporting evidence, but it is an important book.
What's New: Old Wine in New Bottles?
According to the Nobel prize-winning economist Kenneth Arrow, Brandenburger and Nalebuff (B&N
hereinafter) have produced an exciting new approach to business strategy. Is it new? Although B&N do not
discuss the history or development of their ideas, I recognized most of them. When they discuss strategies for
negotiated pricing, I found some are covered in Nagle (1987), often under different names. For example, B&N
refer to "discounted value" for a concept that Nagle refers to as the "pricing of bundled products." As a result, it
is not clear what is new.
They present many things as if they were new insights. By creating new names and clever slogans for strategies
(e.g., "E.T--the Wrong Call), B&N make it difficult to see where the ideas might have originated. It would have
been useful to trace the development of ideas so that these ideas can be compared with what we currently know,
and existing evidence can be examined.
They propose the term complementors to refer to organizations that sell products that enhance the value of
another firm's products. Complementors can collaborate to enhance the value of their products to customers.
Examples are companies that sell computer hardware collaborating with software companies and gas stations
linking with fast-food companies. If you are like me, you are probably thinking, "Oh yeah, I knew that." And in
presenting examples, B&N refer to alliances such those that General Motors made with Goodyear tires and
Prest-O-Lite headlights in 1913. So though the term complementors is new, the concept is not. Although there
has been a substantial increase in relationships among complementors in recent years, I agree with B&N that
managers do not think enough about potential complementors, how they should cooperate, and how to negotiate
with them. For example, B&N refer to Citibank's failure to think about complementors when it introduced its
automatic teller machine in 1977; B&N claim that it was only in 1991 that Citibank finally "woke up" to this
possibility.
The explicit consideration of complementors is new to me. For almost three decades, I have taught students
about the stakeholder approach to identifying objectives. When I have asked them to list possible stakeholders,
they suggest many groups, such as employees, customers, suppliers, distributors, local community, and
stockholders (along with some inappropriate groups such as competitors and government). However, no one has
ever mentioned complementors, nor have students used this concept when solving cases. By naming
complementors as a stakeholder group and including it on their checklist, B&N provide something new.
The book helped me to think through negotiation situations that I have not encountered. When B&N present
situations, the solutions were not obvious to me. For example, which partner should go first in a Texas shoot-out
to end a partnership (in which one partner states a price for its share of the partnership and the other must either
buy or sell at that price)? Furthermore, I am not sure that it would have occurred to me to pay suppliers to make
bids to me in situations in which competition is weak or that, as a supplier, I should be paid to make a bid to
supply services (Chapter 4). Judging from their examples, such as Holland Sweetener's attempt to supplant
NutraSweet as a supplier to Coke and Pepsi, these ideas did not occur to Holland Sweetener's managers, much
to the regret of their shareholders and employees. In that case, in mounting their challenge, Holland Sweetener
put Coke and Pepsi in a stronger bargaining position with NutraSweet, but NutraSweet kept the contract.
Much of the advice is overly general. It seems that they are saying "think clearly" or "think about what can go
wrong." They offer a useful framework that they call PARTS: Player (think about who is playing and who
should be playing the game), Added values (what does each player bring to the game?), Rules (what are the
rules, and can they be changed?), Tactics (what are some alternate tactics?), and Scope (can the game be
expanded?). They devote a chapter to each of these topics.
They do get more operational with their "value net." But when they use it to analyze a university, they produce
what I believe to be a traditional and misleading analysis (pp. 23-27): "Students as customers? ... It sounds
provocative, even heretical. Yet many universities need to start thinking this way" (p. 268). This is hardly a new
idea. By itself, it might even be a dangerous idea. Schools that have adopted this idea have encountered
difficulties with respect to learning as a goal, because they assume that the faculty members produce learning in
the students. Students can be considered as consumers, but they are also producers of their own learning. The
faculty are producers of knowledge, and, though this can contribute to learning, it does not ensure that students
learn. Different assumptions about who is the producer of learning lead to radically different conclusions about
how to improve the system.
B&N's applications of game theory are generally convincing and insightful. Certainly they reveal aspects of
some problems I had not considered. For example, they use game theory to explain programs for increasing
brand loyalty, such as the American Airlines frequent flyer program. However, I wonder about the usefulness of
some of their advice, such as, "Do not say thank you [to your customer] too quickly, or too slowly" (p. 140).
Would I be able to apply these or other rules successfully?
B&N's use of game theory leads them to some conclusions that run counter to popular thinking among
marketing managers. For example, they suggest an underlying principle that firms should treat their own
customers better than they treat their rival's customers (p. 190). Many firms violate this when they provide
incentives to win customers away from other firms. For example, new subscribers to a service are often given
lower rates than those given to loyal subscribers. Therefore, I expect that much of the discussion in this book
will be new to managers.
So, though most of this seems to be old wine, it is fine wine.
Is It Useful: Will It Improve Decision Making?
The basic argument is that by using game theory, managers can generate strategies, then select the best one.
Although I am not aware of any evidence, I believe that game theory might help in the search for alternate
strategies. (I also can imagine other ways to do this, such as by brainstorming using a diverse group of experts.)
However, to select the best strategy, sometimes a manager would need to forecast the outcomes. I am skeptical
that game theory is of value here because it is difficult to match real situations with games. Therefore, it will be
difficult to forecast what will happen when taking a strategy that is successful in a game and using it in an actual
situation.
B&N (p. 52) suggest, "To anticipate other players' reactions to your actions, you have to put yourself in their
shoes and imagine how they'll play the game. You look forward into the game and then reason backwards to
figure out which initial move will lead you to where you want to end up." Again, though this advice seems
useful as a way of identifying possible strategies, I doubt thai it is useful for predicting what will happen when a
manager adopts a new strategy in real life. The problem is that a manager must predict not only the initial
reaction from another party, but also his or her response, and then the other's response, and so on. It is a
daunting matter to think through all the possibilities, especially when the rules of the game are not always clear
and it is possible to change the rules.
B&N recognize these problems, and they suggest (p. 63) that the manager "ask a colleague to role-play by
stepping into that player's shoes." Instead, I suggest the use of role-playing simulations. This would first require
an accurate written description of the actual situation (not of a game that a manager believes to be representative
of the situation). Next, select people who can play the roles. Props can help to increase the realism of the role
playing. An administrator would try to ensure that the players do not step outside their roles and ask that they
improvise as needed. Role playing would then simulate the situation to determine what agreement the players
reach. Role playing for a given strategy could be conducted numerous times using different subjects to
determine the likelihood of various outcomes.
Therefore, whereas B&N suggest that managers think about the roles of the parties involved, I suggest that they
simulate the situation. This has been tested. Armstrong and Hutcherson (1989) compare role-playing outcomes
with those predicted by subjects who were asked simply to think about the problem. The study examined eight
conflict situations in experiments with 226 role-playing sessions. Role playing was superior to "thinking" in
seven of the situations, and there was one tie. Averaging across the eight situations, role playing correctly
predicted outcomes for 63.6% of the cases. In contrast, thinking was correct for only 18.2% of the predictions.
When I asked other subjects to think things through and I also gave them the role descriptions, they were no
more accurate than those who did not have the role descriptions (Armstrong 1987). The important aspect of role
playing, then, is that it goes beyond thinking by simulating the situation.
I would be happy to challenge game theorists to predict the outcomes of conflict or negotiation situations. My
bet is that role playing will provide more accurate predictions than can be obtained from thinking by the best
game theorists. Furthermore, role playing does not require that the managers have any knowledge of game
theory. Perhaps role playing could have been used to prevent adoption of the detrimental portions of the Federal
Election Campaign Act relevant to television advertising rates for political campaigns (p. 163) or the
unfortunate pricing rules in the federal government's Medicare reimbursement rules (p. 164).
In summary, I expect that B&N's recommendations will lead to a broader and more creative consideration of
strategies than might occur using current practice. But it will be difficult to predict the effects of various
strategies by using game theory.
Is There Support: Does Saying So Make It So?
B&N state (p. 8), "We're skeptics, and we want you to be skeptical too. We don't want you to take what we say
on trust." I am happy to oblige because I believe that managers should examine evidence before making major
changes in their procedures.
Is it valid to generalize from games? To demonstrate that their recommendations are useful, they first would
have to show that it is possible to match the real situation to the relevant game. The match should be close
enough that useful predictions can be made. I have reviewed the literature on the effectiveness of game theory
for predictions and have been unable to find any evidence to directly support the belief that game theory would
aid predictive ability.
Even if the games can represent real-world situations, it would be necessary to show that the recommendations
could be used properly by managers. B&N do not attempt this. Instead, they present cases of executives who
made what turned out to be poor decisions. The implication is that better decisions would have been made had
their recommendations been followed. But, for example, how do we know that analysts using B&N's advice
would have helped IBM to make better decisions with respect to Microsoft and Intel (pp. 154-56)?
I suspect that the major contribution of game theory to business strategy is to suggest strategies that are
otherwise not obvious. Here again, B&N do not discuss empirical research findings. They support their
conclusions with anecdotes of business successes and failures, an approach that I have always regarded as
fallacious because generalizations should not be made from a single example.
Although B&N ignore empirical research,[2] on those occasions when I was aware of relevant research, their
recommendations usually are consistent with the research findings. For example, B&N suggest (p. 8) that the
goal of a firm should be "to do well for yourself." They suggest that it is unwise for a firm to adopt a goal to
beat its competitors. This advice might seem old hat to economists, for whom profit maximizing is widely
accepted, however, in practice, managers often adopt the goal "to beat their competitors" (Anterasian and
Graham 1996). Much evidence supports B&N's advice (Armstrong and Collopy 1996). Here is an another
example: B&N examine strategies used by Nintendo for selling computer games. This strategy also has been
analyzed from a psychological perspective by Cialdini (1984), who reports on empirical studies about the use of
scarcity to sell products. Although B&N make no reference to this literature, their advice is consistent.
There were only a few occasions when my knowledge of evidence failed to support their recommendations.
Consider the following advice they provide (p. 151): "Compete aggressively for volume so that competitors
can't follow you down the learning curve." Is this consistent with their goal to do the best for themselves? What
about their advice on page 37: "What matters is not whether others win--it is a fact of life that they sometimes
will--but whether you win." (I suspect they meant to say "profit" instead of "win.") Why not study price
elasticity and then forecast the effects of alternative strategies in an effort to identify the most profitable
strategy? This could lead a firm to determine whether it is useful to increase production. In other words, it is not
clear that this advice contributes to good decision making, and it is easy to see how a firm could be misled into
trying to beat its competitors, a goal that the authors suggest avoiding.
It is hoped that Co-opetition will stimulate researchers to test B&N's recommendations. I suspect that some
recommendations will be useful and others will be misused. Right now, all we have is their word: "Thinking in
terms of competition and cooperation--thinking co-opetition--has already benefited numerous businesses." This
had the ring of an Infomercial. B&N credit the National Science Foundation and the Pew, Rhodes, and Sloan
foundations with supporting their research. Perhaps these foundations would be willing to support researchers to
test these ideas.
The issues can be tested. For example, which is superior: (1) thinking about the problem using games as
analogies, (2) using formal decision-aiding procedures that are widely available and have been shown to be
effective, or (3) unaided management thinking? For example, we could ask independent teams to write up twopage analyses and recommendations on the basis of advice from B&N's book. Other teams might be asked to do
the same without using the book, but using formal procedures such as brainstorming to find at least five ways to
improve return on investment, then using role playing to predict the outcomes, and finally making quantitative
estimates of the profitability of different alternatives. Still other teams might analyze the problem as they
normally do (perhaps by asking untested and misleading questions such as, "What is our mission?"). Does use of
the book lead different groups to the same recommendation? Does it differ from the recommendations by those
using formal procedures? Which recommendations are best? I would expect those using existing formal
procedures to do better than those using game analogies, and those following current practice to do worse. In
addition, I expect that conducting such "experiments" within companies would, in itself, lead to improvements
in decision making.
So will the people who use the concepts in this book make better decisions than will those who are armed only
with a traditional economics course or another book or "street smarts"? We have to trust the authors, even
though they tell us not to.
Discussion
I am generally skeptical when authors base their advice on their opinions. Opinion-based procedures, such as the
BCG (Boston Consulting Group) matrix and the experience curve, are likely to produce less profitable
decisions. Co-opetition is different. These opinions are based on a well-argued analogies games and business,
and they lead to useful recommendations.
At least, their recommendations seemed useful to me, B&N would describe a situation and then use game theory
to explain why things turned out as they did. Their discussion provided insight about the problem. At the time I
was working on this review, my wife and I visited a photographic exhibit by Harry Callahan. Callahan took
photographs in many cities that we have visited. We looked at photographs such as the one of a person in
Chicago and concluded that "he certainly captured the spirit of Chicago." Then we decided not to read the
caption first. In subsequent photographs, we could not figure out what city was being captured. Was my reading
of Co-opetition similarly deceptive?
Co-opetition is aimed primarily at practitioners. It could provide supplementary reading in strategy courses as
well as courses on pricing or negotiation. (Educators might want to use some of the 60 Powerpoint overheads
provided on the coopetition web site.) The descriptions of how executives at major corporations occasionally
make what seem, in retrospect, such poor decisions, might lead students to take the advice seriously. Their
games would serve as useful exercises in classes to illustrate various decision-making procedures.
The writing is excellent if, like me, the reader appreciates the style of the Wall Street Journal. However, the
overall organization is difficult to follow, the index could have been better (e.g., where is Axelrod?), and the
footnotes are distracting.[3]
Conclusion
The strength of this book is that it offers fresh and valuable perspectives on management. B&N summarize their
advice in a checklist (pp. 262-63) that should help managers to generate strategies. More important, the book
can help managers to develop strategies in which cooperation could be profitable and to identify situations in
which competition could be unprofitable. The book is likely to make a major contribution to management
thinking, and I have already recommended it to students and faculty. I expect that it will be read widely in the
business community.
Although I like the message, I remain skeptical. It is difficult to match games to real situations. We do not know
whether game theory, when compared with formal idea generation procedures, will improve the search for
alternative solutions. We have little evidence that game theory can substantially improve the way managers
think about problems. Finally, we lack evidence that game theory can improve predictions of the outcomes of
alternative strategies. So handle with care. After all, games are not exactly like businesses.
1 Helpful suggestions were provided by Wilfred Almadoss, Fred Collopy, Pete Fader, and Brian Wansink.
Corrections and improvements were also made using suggestions by Adam Brandenburger and Barry Nalebuff,
which is not to imply that they agreed with everything in this review. John Carstens, Jennifer Armstrong, and
Dara Yang provided editorial support.
2 They do mention Axelrod's (1984) empirical research on game theory, but it receives only two lines in a
footnote.
3 Pete Fader, a marketing professor at The Wharton School and a self-proclaimed footnote expert states, "Don't
you hate it when you go through the effort to check a footnote, only to find that it's just a useless quote from one
of the author's colleagues?"
REFERENCES
Anterasian, Cathy, J. L. Graham, and R. B. Money (1996), "Are U. S. Managers Superstitious About Market
Share?" Sloan Management Review, 37 (4), 67-77.
Armstrong, J. Scott 1987, "Forecasting Methods for Conflict Situations," in Judgmental Forecasting, George
Wright and P. Ayton, eds. Chicrester: John Wiley & Sons, 157-76.
----- and Fred Collopy (1996), "Competitor Orientation: Effects of Objectives and Information on Managerial
Decisions and Profitability," Journal of Marketing Research, 33 (May), 188-99.
----- and P. Hutcherson (1989), "Predicting the Outcomes of Marketing Negotiations: Role-Playing Versus
Unaided Opinions," International Journal of Research in Marketing, 6, 227-39.
Axelrod, Robert (1984), The Evolution of Cooperation. New York: Basic Books.
Cialdini, Robert B. (1984), Influence. New York: William Morrow.
Nagle, Thomas (1987), The Strategy and Tactics of Pricing. Englewood Cliffs, NJ: Prentice Hall.
~~~~~~~~
By J. SCOTT ARMSTRONG, The Wharton School, University of Pennsylvania
TERRY CLARK, Editor, Emory University
Copyright of Journal of Marketing is the property of American Marketing Association and its content may not
be copied without the copyright holder's express written permission except for the print or download capabilities
of the retrieval software used for access. This content is intended solely for the use of the individual user.
Source: Journal of Marketing, Apr97, Vol. 61 Issue 2, p92, 4p.
Item Number: 9705011688
A WAY TOO SHORT HISTORY OF FADS
Don't outsource your common sense. Not like last time. . .
By: Malone, Michael S.., Forbes, 4/7/97 Supplement ASAP, Vol. 159 Issue 7, p72, 1p
Total Quality Management. High Hopes: Systematically improving the quality of corporate operations toward a
goal of perfection can improve competitiveness and improve customer satisfaction and loyalty. Busted Dreams:
To hell with profits! We're going to make these damn things perfect.
Computer-Integrated Manufacturing. High Hopes: Implementing a combination of computer databases, process
control systems, and robotics can reduce operating costs, improve quality, and make possible high-margin mass
customization. Busted Dreams: No way to measure success except by the money you've invested. But at least
you can be entertained as you go broke watching the robots destroy your products.
Management by Objective/Theory Z. High Hopes: Establishing overall goals that become more specific as they
are implemented down through the organization allows greater employee independence while still keeping the
company oriented toward its long-term targets. Busted Dreams: Make the objectives too vague and they are
meaningless, too specific and they turn into a noose for employees four levels below you.
The Learning Organization. High Hopes: In the rapidly changing modern world, successful companies will be
those that can adapt quickly because they are built on continuously upgraded employee skills and knowledge.
Busted Dreams: It easily turns into a training and MIS sinkhole. No one has yet figured out quite how an
organization "learns" the right things.
Reengineering. High Hopes: The new competitive environment not only demands that companies revise their
products and services but that they also rethink their organization in light of advances in information-technology
telecommunications. Busted Dreams: In the hands of a manager without imagination (that is, most of them), this
becomes mindless downsizing, a meat-ax to cut away not only the fat but the flesh and bone of the enterprise.
Virtualization. High Hopes: New technologies make possible companies "without walls" that have a new, more
integrated relationship with suppliers, distributors, retailers, customers, and even competitors. Busted Dreams:
Set your employees free and they may never come back. How do you hold together a company scattered over
the landscape when you can barely maintain it with everybody in one building? And what are you going to tell
the poor bastards who still must go to the office?
Decentralization. High Hopes: Making corporate groups and divisions more independent, complete with their
own infrastructures, makes them more adaptive and competitive. Busted Dreams: Paradise for every empire
builder and renegade in the organization.
Flat Organizations. High Hopes: New information processing technology eliminates the need for the middle
layers of corporate hierarchy that used to act as information filters and now enhances the ability of senior
managers to handle a larger span of control. Busted Dreams: Some of those middle managers actually did
things. Important things. And if senior executives couldn't manage 10 people, how are they going to manage
200?
Critical Path Analysis. High Hopes: By studying how a company brings a new idea to market, one can
emphasize those components that contribute to this process while eliminating or cutting back those that don't.
Busted Dreams: Life isn't that simple--even though you will be paying experts to force you to think so.
Sales Force Automation. High Hopes: Sales is the last part of the company not revolutionized by information
technology. Giving the sales force access to large files of product, presentation, and competitive information
enables them to be more productive. Busted Dreams: No matter how you disguise it, salespeople know a hidden
control system when they see one. Wait until you see the annual cost of replacing all those laptops
"accidentally" dropped off car roofs.
Chaordic Organizations. High Hopes: With the rapid shifts currently taking place in commerce and society, the
best company organization is one that is essentially chaotic within a well-defined structure designed to use that
energy. Hence: "chaos" and "order." Busted Dreams: Just what we need, companies that are even more
unmanageable and out of control.
Post-Capitalism/Co-Opetition. High Hopes: The emerging global economy will require a new type of business
strategy, one that de-emphasizes winner-takes-all competition for new cooperative ventures that reward
everyone concerned. Busted Dreams: Yeah, sure. You go first.
Copyright of Forbes is the property of Forbes Inc. and its content may not be copied without the copyright
holder's express written permission except for the print or download capabilities of the retrieval software used
for access. This content is intended solely for the use of the individual user.
Source: Forbes, 4/7/97 Supplement ASAP, Vol. 159 Issue 7, p72, 1p