CO-OPETITION
by Adam M. Brandenburger and
Barry J. Nalebuff
CO-OPETITION
• RECOGNIZES THAT BUSINESS
RELATIONSHIPS HAVE MORE THAN
ONE ASPECT
• BY IDENTIFYING ALL THE PLAYERS
AND ALL THE INTERDEPENDENCIES,
GAME THEORY EXPANDS THE
REPERTOIRE OF STRATEGIES
LOOK FOR
COMPLEMENTARY
OPPORTUNITIES AS WELL AS
COMPETITIVE THREATS
BIGGER ‘BIGGER PICTURE’
• GAME THEORY GIVES MORE
COMPLETE PICTURE OF BUSINESS
RELATIONSHIPS
• AVOIDS EXCLUSIVE FOCUS ON
COMPETITION(win-lose)
• RECOGNIZES THAT CHANGING THE
GAME DOESN’T CAN RESULT IN
WIN-WIN
Game theory
• Using game theory allows us to consider
“changing the game” WHY is that helpful?
• You can make the game you want…to your
advantage. HOW?
• Change the player, added value, rules or
tactics.
• PARTS are the levers for moving the world
of business ala Archimedes.
Change Players
• Even if you can’t make money in a game,
figure out who stands to gain from your
entry and make them pay (Holland
Sweetener)
• once you’re in the game try to change who
else is in the game; try to bring in
customers, suppliers, complementors,
competitors (e.g.credit union/auto sales)
ALLOCENTRISM
• ADDED VALUE: PUT YOURSELF IN
THE SHOES OF OTHER PLAYERS TO
ASSESS HOW VALUABLE YOU ARE TO
THEM
• RULES: PUT YOUR SELF IN THE
SHOES OF OTHER PLAYERS TO
ANTICIPATE REACTIONS TO YOUR
ACTIONS
• PERCEPTIONS: PUT YOURSELF IN
THE SHOES OF OTHER PLAYERS TO
UNDERSTAND HOW THEY SEE THE
GAME
YOUR ADDED VALUE=
THE SIZE OF THE PIE WHEN
YOU ARE IN THE GAME
MINUS
THE SIZE OF THE PIE WHEN
YOU ARE OUT OF THE GAME
Change Added Values
• With a monopoly its ok to limit the added
values of other players (nintendo)
• In competitive situation, you need to build
your own added value, e.g. improve quality
at low incremental cost or vice versa
• but only way to protect added value is to
create relationships with your customers
and suppliers…have a loyalty program
(Aadvantage), because it doesn’t
disappear even when imitated!
Change Rules
• Usually we think we should charge more to
our customers and less to competitors
• changing this rule is possible, e.g.,
introduction GM card (cash award)and
Aadvantage (in kind award): latter is better
because it increase the size of the pie by
delivering more value for same price)
Change Tactics
• Shift perceptions
– lift fog, e.g.display credibility through
guarantees, free trials, ads or ask for credibility
by requesting guarantee, pay for performance
contract
– preserve fog, e.g hide information, explain
away failure
– stir up the fog e.g. create complex pricing
schemes
Change Scope
• Look at the game as part of an even bigger
game…change the links between
– added values--price superior product high so
you don’t eat away at incumbent’s existing
product
– rules--if you have power get long-term contracts
with suppliers, or offer package discounts
– tactics--get another player to believe that what
you will do in one situation depends on what
happens in another.
THE VALUE NET
CUSTOMERS
COMPETITORS
company
SUPPIERS
COMPLEMENTOR
COMPANIES ARE
• COMPLEMENTORS IN MAKING
MARKETS
• COMPETITORS IN DIVIDING UP
MARKETS
SYMMETRIES OF THE VALUE
NET
CUSTOMERS AND SUPPLIERS PLAY SYMMETRIC
ROLES
COMPETITORS AND COMPLEMENTORS PLAY
MIRROR-IMAGE ROLES
• A PLAYER IS YOUR COMPLEMENTOR
IF IT’S MORE ATTRACTIVE FOR A
SUPPLIER TOPROVIDE RESOURCES TO
YOU WHEN IT’S ALSO SUPPLYING THE
OTHER PLAYER THAN WHEN IT’S
SUPPLYING YOU ALONE
• A PLAYER IS YOUR COMPETITOR IF
IT’S LESS ATTACTIVE FOR A SUPPLIER
TO PROVIDE RESOURCES TO YOU
WHEN IT’S ALSO SUPPLYING THE
OTHER PLAYER THAN WHEN IT’S
SUPPLYING YOU ALONE
• A PLAYER IS YOUR
COMPLEMENTOR IF CUSTOMERS
VALUE YOUR PRODUCT MORE WHEN
THEY HAVE THE OTHER PLAYER’S
PRODUCT THAN WHEN THEY HAVE
YOUR PRODUCT ALONE.
• A PLAYER IS YOUR COMPETITOR IF
CUSTOMERS VALUE YOUR PRODUCT
LESS WHEN THEY HAVE THE OTHER
PLAYER’S PRODUCT THAN WHEN
THEY HAVE YOUR PRODUCT ALONE
THINK COMPLEMENTS
• FIND WAYS TO MAKE THE PIE
BIGGER RATHER THAN FIGHTING
WITH COMPETITORS OVER A FIXED
PIE
• eg. Microsoft benefifts when Intel develops
a new chip