Thursday, May 26, 2005
Co-opetition
Co-opetition
© 1996 by Adam Brandenburger and Barry Nalebuff
This book was excellent concept of cooperation and competition at the same time in business.
A complement is anything which makes the first product or service more attractive.
The goal is to make the pie bigger rather than fighting with competitors over a fixed pie.
Opposite of competitor is a complementor. The game is composed of customers, suppliers, competitors, and complementors.
A player is a complementor if customers value your product more when they have the others product as well. What else might my customers buy that would make my product more valuable?
The more people that want a knowledge-base product, the easier it is to provide. This is because there is a large upfront cost. The bigger the market, the more development costs can be spread out.
Put yourself in shoes of other players to assess how valuable you are to them. Put yourself in the shoes of other players to anticipate reactions to your actions. Put yourself in shoes of other players to understand how they see the game.
PARTS: Players, Added Values, Rules, Tactics, Scope.
Philosophers have only interpreted the world. The point, however, is to change it. Karl Marx.
The greatest gain comes from changing the rules of the game itself.
Anytime you enter a game, you change it. It’s a new game because you have entered and joined the cast of players.
Sometimes the most valuable service you can offer is creating competition, so don’t just give it away. You need to get paid to play.
How important is it to the customer that you bid? There are many ways to get paid to play. You can ask for contributions toward bid-preparation expenses. You can ask for better access to information about the business. Ask to deal with a different person. Make the bidding an opportunity to meet senior management. Ask to meet someone who will appreciate what you bring to the table. You might ask customer to quote you a price at which he would give you his business. The customer gives you a signed contract, complete with price.
Hidden costs of bidding: your unlikely to succeed; the price is so low that you will lose; incumbent can retaliate; you help establish a lower price; you set a bad precedent; competitors will use low price as benchmark; think coopetition.
Bringing more customers into the game is a good idea. Paying customers to play, especially early adopters, is good. AOL understood that it had to lose money early. Getting a party going isn’t very different from starting a network. No one wants to go to an empty nightclub.
Yet another way to bring in more customers is to identify and stimulate complementary products. Developing complementary products brings more customers into the game.
Becoming your own customer is a way to develop the market, assure demand, and achieve scale.
Pay suppliers to play, form a buying coalition which is a larger buyer, do it yourself. You can help customers buy from existing complementors. Your greater size will attract more suppliers into the game.
Bring in competitors by licensing your technology to make money and to avoid complacency. Create second sources to encourage buyers to adopt your tech, do it yourself, and promote internal competition with teams.
Nintendo: One strong company and the rest weak.
To further stimulate demand, N made magazine with tips, etc. with a price so low the goal was to break even to stimulate demand. The magazine was an ideal complement to N games.
The trick is to spend $1 in such a way it is perceived as quality improvement of $2 to clients.
High quality is low cost. This establishes a virtuous circle.
Raise the amount customers are willing to pay by more than the incremental cost. Reduce cost without reducing willingness to pay by as much. If you have lower costs this helps to deliver a better product. Deliver a better product in way that helps you to lower costs.
The $64,000 question is how to develop a relationship. American Airlines spotted some underutilized resources, empty seats, and put them to good use. People got to take vacations in Hawaii that they otherwise wouldn’t have. American made a pie bigger and raised its value.
Say thank you and create loyalty by rewarding it. Many companies offer the best deals to new customers. That’s backwards. You want to treat your best customers the best.
Say thank you in kind, not cash; save best thank you for best customer; say thank you in way it will build your business don’t say it too quickly or slowly; say you’re going to say thank you; recognize you may have to compete for loyalty; think coopetition to wallow your competitors to have loyal customers also; don’t forget to say thank you even if you have a monopoly; say thank you to your suppliers as well as to your customers.
To prevent price wars, you may want to charge your own customers low prices and offer higher prices to your rival’s customers.
Perception is reality - Bishop Berkeley
Change people’s perceptions and you change the game. Shaping perceptions is the domain of tactics. By tactics, we specifically mean actions that players take to shape the perceptions of other players.
PowerPoint list price was kept high at $339 but bundled at a very low price into Office. So they felt they were getting the $399 product at a great deal.
Scope: The first step is to recognize the links between games. You can create new links between games or sever existing ones.
The existence of common players determines the possibility that the games are linked. They can be linked if people perceive them to be linked. You do something that the incumbent can’t match without hurting his existing business. You create a dilemma for the incumbent. He wants to come after you, but he doesn’t. Judo: Turn strength into a weakness.
Cannibalize yourself rather than let someone else eat you alive.
Package discounts are magic. Take two unrelated products. Increase sales without giving up much margin by offering package discounts.
There’s always a larger game.
Checklist for change: What is the Value Net; what are opportunities for cooperation and competition in relationships; would you like to change cast of players; who stands to gain or lose if you become a player; what is your added value; which rules are helping or hurting you; what new rules would you like to have; do you have the power to make those rules;
Amazon: http://www.amazon.com/exec/obidos/ASIN/0385479492
© 1996 by Adam Brandenburger and Barry Nalebuff
This book was excellent concept of cooperation and competition at the same time in business.
A complement is anything which makes the first product or service more attractive.
The goal is to make the pie bigger rather than fighting with competitors over a fixed pie.
Opposite of competitor is a complementor. The game is composed of customers, suppliers, competitors, and complementors.
A player is a complementor if customers value your product more when they have the others product as well. What else might my customers buy that would make my product more valuable?
The more people that want a knowledge-base product, the easier it is to provide. This is because there is a large upfront cost. The bigger the market, the more development costs can be spread out.
Put yourself in shoes of other players to assess how valuable you are to them. Put yourself in the shoes of other players to anticipate reactions to your actions. Put yourself in shoes of other players to understand how they see the game.
PARTS: Players, Added Values, Rules, Tactics, Scope.
Philosophers have only interpreted the world. The point, however, is to change it. Karl Marx.
The greatest gain comes from changing the rules of the game itself.
Anytime you enter a game, you change it. It’s a new game because you have entered and joined the cast of players.
Sometimes the most valuable service you can offer is creating competition, so don’t just give it away. You need to get paid to play.
How important is it to the customer that you bid? There are many ways to get paid to play. You can ask for contributions toward bid-preparation expenses. You can ask for better access to information about the business. Ask to deal with a different person. Make the bidding an opportunity to meet senior management. Ask to meet someone who will appreciate what you bring to the table. You might ask customer to quote you a price at which he would give you his business. The customer gives you a signed contract, complete with price.
Hidden costs of bidding: your unlikely to succeed; the price is so low that you will lose; incumbent can retaliate; you help establish a lower price; you set a bad precedent; competitors will use low price as benchmark; think coopetition.
Bringing more customers into the game is a good idea. Paying customers to play, especially early adopters, is good. AOL understood that it had to lose money early. Getting a party going isn’t very different from starting a network. No one wants to go to an empty nightclub.
Yet another way to bring in more customers is to identify and stimulate complementary products. Developing complementary products brings more customers into the game.
Becoming your own customer is a way to develop the market, assure demand, and achieve scale.
Pay suppliers to play, form a buying coalition which is a larger buyer, do it yourself. You can help customers buy from existing complementors. Your greater size will attract more suppliers into the game.
Bring in competitors by licensing your technology to make money and to avoid complacency. Create second sources to encourage buyers to adopt your tech, do it yourself, and promote internal competition with teams.
Nintendo: One strong company and the rest weak.
To further stimulate demand, N made magazine with tips, etc. with a price so low the goal was to break even to stimulate demand. The magazine was an ideal complement to N games.
The trick is to spend $1 in such a way it is perceived as quality improvement of $2 to clients.
High quality is low cost. This establishes a virtuous circle.
Raise the amount customers are willing to pay by more than the incremental cost. Reduce cost without reducing willingness to pay by as much. If you have lower costs this helps to deliver a better product. Deliver a better product in way that helps you to lower costs.
The $64,000 question is how to develop a relationship. American Airlines spotted some underutilized resources, empty seats, and put them to good use. People got to take vacations in Hawaii that they otherwise wouldn’t have. American made a pie bigger and raised its value.
Say thank you and create loyalty by rewarding it. Many companies offer the best deals to new customers. That’s backwards. You want to treat your best customers the best.
Say thank you in kind, not cash; save best thank you for best customer; say thank you in way it will build your business don’t say it too quickly or slowly; say you’re going to say thank you; recognize you may have to compete for loyalty; think coopetition to wallow your competitors to have loyal customers also; don’t forget to say thank you even if you have a monopoly; say thank you to your suppliers as well as to your customers.
To prevent price wars, you may want to charge your own customers low prices and offer higher prices to your rival’s customers.
Perception is reality - Bishop Berkeley
Change people’s perceptions and you change the game. Shaping perceptions is the domain of tactics. By tactics, we specifically mean actions that players take to shape the perceptions of other players.
PowerPoint list price was kept high at $339 but bundled at a very low price into Office. So they felt they were getting the $399 product at a great deal.
Scope: The first step is to recognize the links between games. You can create new links between games or sever existing ones.
The existence of common players determines the possibility that the games are linked. They can be linked if people perceive them to be linked. You do something that the incumbent can’t match without hurting his existing business. You create a dilemma for the incumbent. He wants to come after you, but he doesn’t. Judo: Turn strength into a weakness.
Cannibalize yourself rather than let someone else eat you alive.
Package discounts are magic. Take two unrelated products. Increase sales without giving up much margin by offering package discounts.
There’s always a larger game.
Checklist for change: What is the Value Net; what are opportunities for cooperation and competition in relationships; would you like to change cast of players; who stands to gain or lose if you become a player; what is your added value; which rules are helping or hurting you; what new rules would you like to have; do you have the power to make those rules;
Amazon: http://www.amazon.com/exec/obidos/ASIN/0385479492
