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2. Co-opetition. C o - o p e t i t i o n. Slides adapted from those of Barry Nalebuff. Based on the book, Co-opetition , by Adam M. Brandenburger & Barry J. Nalebuff . Business is War & Peace. Co-op eration in creating value Comp etition in dividing it up Simultaneously War & Peace
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Co-opetition Slides adapted from those of Barry Nalebuff Based on the book, Co-opetition, by Adam M. Brandenburger & Barry J. Nalebuff
Business isWar & Peace • Co-operation in creating value • Competition in dividing it up • Simultaneously War & Peace • “You have to compete and co-operate at the same time” • hence,co-opetition
Business is a Game • Game is made up of 5 PARTS • Success comes from playing the right game • People can change the game being played by changing its PARTS
P-A-R-T-S Players Added Value Rules Tactics Scope
VALUE NET GOVERNMENTS Customers Competitors Company Complementors New Current Substitutes Suppliers
PLAYER ROLES • Customers give us money for our product output. • Suppliersgive us input resources for our money. • Competitors are players whose product sales decrease the value of our products to customers. • Complementors are players whose product sales increase the value of our products to customers. • Competitors also are players whose input purchases decrease our attractiveness to suppliers. • Complementors also are players whose input purchases increase our attractiveness to suppliers. • Many players are in more than one role, so sometimes your firm competes and sometimes your firm cooperates with the same player.
Competitors & Complementors 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.
Multiple Roles for Players Competitive threat or complementary opportunity? • Movie theaters & video rentals • Banks and Equity Markets Complementors in making the market Competitors in dividing the market
Customers GOVERNMENTREGULATORS • Students, Parents • Government Subsidizers • Donors • Employers • Other colleges UIC Competitors Complementors • Other colleges • Grade & High schools • Bookstores, Kinko's • Employers • Lenders (private, gvt.) • Other public colleges • Private colleges • Corporate colleges • Other charities • Other gvt. units • Free-lancing faculty Suppliers • Faculty, Staff, Administrators • Publishers (books, journals, internet) • Subcontractors (food, construction, etc.) • Other colleges
Added Value What you get is based on your firm’s added value Added value = total value with your firm minus total value without your firm
Added Value • Raising your firm’s Added Value • TWA Comfort Class • Frequent-flyer programs
Rules • Rules structure negotiations between buyers and sellers • Rules come from • custom • contractual arrangements • the government
Contract Rules • In games with rules, you need to anticipate their reactions to your actions • Games in business do have some rules • Most-favored-customer clauses • Meet-the-competition clauses • How do MFCs change the game? • less incentive to negotiate • guaranteed cost parity
Strategic Rules • Mass-Market Rules • Chrysler and Guaranteed Rebate • Frequent-Flyer programs and the GM Card • Changing the Rules • Not written in stone
to change perceptions Tactics
Tactics “Perception is Reality” • Perceptions of the world, regardless of whether they are accurate, drive behavior • Tactics are actions taken to shape other players’ perceptions
Scope • Is PART the whole? • Recognize the links between games • Epson in laser printers • Links through • Players • Added values (complements) • Rules (most-fav.-cust.) • Perceptions (threats, precedents)
Think Big There is always a larger game
Allocentrism • Added value • Put yourself in the shoes of others to assess your added value • Rules • Put yourself in the shoes of others to anticipate reactions to your actions • Perceptions • Put yourself in the shoes of others to see how they see the game
Changing the Game:Players Questions • What is your firm’s Value Net? • What are the opportunities for cooperation and competition? • Would you like to change the cast? What new players would you like to bring into the game? • Who stand to gain if your firm enters? Who stands to lose?
Changing the Game:Added Value Questions • What is your firm’s added value? • How can you increase your firm’s added value? • Can your firm create more loyal customers and suppliers? • What are the added values of the other players? • Is it in your firm’s interest to limit their added values?
Changing the Game:Rules Questions • Which rules are helping your firm and which are hurting it? • What rules would you like to have in contracts with your firm’s customers & suppliers? • Does your firm have power to make rules? Does someone have power to overturn them?
Changing the Game:Tactics Questions • How do other players perceive the game? • How do these perceptions affect the play? • Which perceptions would you like to preserve? • Which ones would you like to change? • Do you want the game to be transparent or opaque?
Changing the Game:Scope Questions • What is the current scope of the game • Do you want to change it? • Do you want to link the current game to others? • Do you want to delink the current game from other games?
Avoid Mental Traps • Seeing only part of the game • Failing to think methodically about changing the game • Believing that success must come at others’ expense • Accepting the game as it is