Co-opetition
Playing the Right Game
• Business is not about winning and
losing.
• Business is not about how well you
play the game.
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Two Types of Games
• Rule-based games
– players interact according to specified
“rules of engagement”
• Freewheeling games
– players interact without any external
constraints
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Rule-based games
• To every action, there is a reaction
• To play, look forward far into the
game and then reason backward to
figure out which of today’s actions will
lead you to where you want to end up.
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Freewheeling Games
You cannot take away from the game
more than you bring to it.
– namely, you cannot take away more
than your added value.
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Insight of Game Theory
Focus on others, rather than
focus on your own position.
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Insight of Game Theory
• To look forward and reason backward,
you have to put yourself in the shoes
of other players.
• To assess your added value, you have
to ask not what other players can
bring to you, but what you can bring
to other players.
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From Lose-Lose to Win-Win
• The GM’s credit card program (1992)
• Successful business strategy is about
actively shaping the game you play,
not just playing the game you find.
• Looking for win-win strategies has
several advantages.
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The Game of Business
• The game of business is all about
value: creating it and capturing it.
• The Value Net framework
– a mixture of cooperation and competition
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Value Net Framework
Customers
Substitutors
Company
Complementors
Suppliers
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Who is a complementor?
Someone whose products make your
products more valuable or whose
products are made more valuable by
yours
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Competitor and/or
Compelmentor
• VCR and Hollywood studios
• IBM’s mistake
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Changing the Game
• Access the Value Net for your
business
• Identify the PARTS
– players, added values, rules, tactics and
scope
– To change the game, you have to change
one or more of these elements.
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Changing the Players
• It might be smart to change who’s
playing the game. That includes
yourself.
• Example
– HSC can offer the value of creating
competition to Coke and Pesi. Shouldn’t
give it away for free.
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Changing the Added Values
• Raise your own added value or lower
that of others
• Example
– TWA’s introduction of Comfort Class
– Adam and 26 of his MBA students
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Changing the Rules
• To analyze the effect of a rule, look
froward and reason backward.
• Example
– Kiwi airline’s judo strategy: by staying
small, it (a newcomer) turns the
incumbent’s larger size to its own
benefit.
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Tactics: Changing Perceptions
• Some tactics work by reducing
misperceptions (i.e. lifting the fog),
some work by creating or maintaining
uncertainty (i.e. thickening the fog)
• Example
– Daily News vs. New York Post (1994)
– Disagreeing to agree
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Changing the Scope
• A game in one place can affect games
elsewhere, and a game today can
influence games tomorrow.
• Example
– Sega turned Nintendo’s 8-bit strength
into a 16-bit weakness.
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The Traps of Strategy
• I have to accept the game I find myself in.
• Changing the game must come at the
expense of others.
• I have to find something to do that others
cannot
• Failing to see the whole game
• Failing to think methodically about
changing the game
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Buyers
Willingness-to-pay
Price
Value
Created
Firms
Firm’s Share
Cost
Suppliers
Buyer’s Share
Supplier’s share
Opportunity cost
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Example 1
Consider a game between two suppliers,
two firms, and one buyer. Each supplier
can transact with at most one firm, and
vice versa. Each supplier has an
opportunity cost of $10 of providing
resources to a firm. The buyer has a
willingness-to-buy of $100 for the first
firm’s product, and a willingness-to-pay of
$150 for the second firm’s product.
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Example 2
Consider a game between four suppliers,
three firms, and two buyers. Each supplier
can transact with at most one firm, and
vice versa. Similarly, each buyer can
transact with at most one firm, and vice
versa. Each supplier has an opportunity
cost of $10 of providing resources to a
firm. Each buyer has a willingness-to-buy
of $100 for a firm’s product.
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Example 3
Following example 2, suppose each
buyer has a willingness-to-buy of $100 for
the product of the first or second firm,
and a willingness-to-pay of $150 for the
product of the third firm.
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Value-based Business Strategy
Firm
Competitors
Willingness-to-pay
Opportunity cost
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