Competing And Cooperating

Competing Competing and and Cooperating Cooperating MGMT 182 PROF. HAN

Business Business is is War War and and Peace Peace Cooperation in creating value Competition in dividing it up Not cycles of War, Peace, War ... Simultaneously War and Peace “You have to compete and cooperate at the same time”

Ray Noorda, Novell

Manual Manual for for Coopetition Coopetition • Leadership secrets of Attila the Hun? St. Francis of Assisi?

• How to cooperate without being a saint compete w/o killing the opposition

Business Business as as a a Game Game Chess, poker, sports? – Looking ahead; predicting competitor responses – Not win-lose – No rule book – People change the game – Success comes from playing the right game

The The Game Game of of Business Business • Who are the players? – Customers, Suppliers, Competitors

Plus Providers of complementary products and services

The The Value Value Net Net CUSTOMERS

COMPETITORS

COMPANY

SUPPLIERS

COMPLEMENTORS

Competitors Competitors & & Complementors 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.

Complementors Complementors & & Competitors: Competitors: The The Supply Supply Side Side

A player is your complementor if it’s more attractive 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 competitor if it’s less attractive for a supplier to provide resources to you when it’s also supplying the other player than when it’s supplying you alone

The The Supply Supply Side: Side: Examples Examples

Compaq & Dell compete with each other for the latest Intel chip complement each other in defraying Intel’s R&D costs American & Delta compete with each other for landing slots and gates complement each other in defraying Boeing’s R&D costs

The The Competitive Competitive Mindset Mindset • The bias: – Customers and suppliers have to choose between opportunities with us and with others – We’re taught to think in terms of constraints, trade-offs, substitution

• To correct the bias: Think complementor as well as competitor

Added Added Value Value What you get is based on your added value

Added Value = total value with you minus total value without you It’s what you bring to others

Cooperating Cooperating • Cooperation makes markets--increases size of the pie • Multiple roles: Your substitutors can also be your complementors • Citibank and ATM’s • Antique stores • Movie studios and videos

The The PARTS PARTS of of Strategy Strategy • • • • •

Players Added values Rules Tactics Scope

Changing Changing the the Players Players • Bring in suppliers and complementors by : – paying them to play (Nutrasweet) – forming buying coalitions (e.g. health care, car insurance) • Sometimes it pays to bring in competitors! – Second sourcing (Intel)

Changing Changing the the Added Added Values Values • Lowering others’ added values – The Nintendo story

• Raising your added value – Cost reduction, better differentiation, etc – GM Card – Frequent flier programs

Changing Changing the the Rules Rules • Lobbying for regulation – CPA requirements

• Meet-the-competition clauses – Carbon dioxide

Using Using Tactics Tactics • Sending signals to competitors – Murdoch’s mini-war

• Sending signals to buyers – MBA education

• Creating a fog – Pricing of new cars and phone calls

Changing Changing the the Scope Scope of of the the Game Game • Broadening the scope – Timex’s entry strategy

• Recognize links between games – Epson’s blunder

Mental Mental Traps 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