Co-Opetition - Adam M. Brandenburger [123]
Summing up our two stories in this section—Sega and Softsoap—both challengers used judo strategies to create a window of opportunity. Sega benefited from Nintendo’s reluctance to kill the 8-bit video game market, while Softsoap benefited from Procter & Gamble’s reluctance to risk its Ivory brand.
Playing Judo
How can a challenger counter an incumbent’s strength?
THE STRATEGIES
1. A challenger prices a superior product sufficiently high to avoid eating into sales of the incumbent’s existing product.
2. A challenger bets on an unproven product—one with some chance of failing.
WHY THEY WORK
1. The incumbent holds back from copying the challenger—copying would trigger price competition and accelerate cannibalization of its existing product.
2. The incumbent may copy the challenger—but doesn’t apply its existing brand names for fear they’ll be damaged if the product fails.
In both cases, the incumbent faces a dilemma.
The Old Drives Out the New?
The story of 16-bit video games is a classic example of how established players delay bringing out the next generation of products in order to limit competition with the current-generation product. Even after they decide to bring out the next generation, they aren’t off the hook. Just as the new competes with the old, the old competes with the new. The old product doesn’t just disappear. So when you do bring out a new product, the challenge is to prevent the loss of added value that results from competing with your old product. To protect your added value, do what you can to sever the links between yesterday’s and today’s games.
Revise or Perish It may be hard to believe, but some college textbooks are updated every year. Of course, textbooks get outdated and need to be revised but probably not that often. Why do publishers produce such frequent revisions of textbooks?
What’s really going on is that a used textbook is an extremely good substitute for a new one, especially when new textbooks cost $50 or more. Former students would be more than happy to recoup some of their $50 investments by selling their used books to the next cohort of students, who’d be happy to save the money. Students win and publishers lose.
This year’s game of selling textbooks is linked to last year’s game. Last year’s new textbooks become this year’s used ones and undermine the added value of this year’s new texts. To maintain the demand for new textbooks, publishers have to find a way to get used books off the market. They want to sever the link between last year’s game and this year’s game.
The publishers’ strategy is to revise, and revise again. Instructors prefer to teach their courses from the latest version of the textbook, making all the previous versions obsolete. The new students now have a big incentive to buy the new book, so the large stock of used books now has less effect on the added value of the new ones.
Frequent revisions work, but they’re costly. There are some other strategies publishers might want to try. They could rent textbooks along with selling them: say, $60 to buy and $30 to rent. This way, students wouldn’t buy a textbook unless they planned to keep it, and the resale problem would be solved. In the future, electronic publishing will give publishers even more control over their material. They’ll be able to “rent” books by providing network access to the material over the length of the course. That won’t mean that frequent revisions will become a thing of the past. On the contrary, publishers will be able to revise electronic books on an almost continuous basis, but for content reasons alone.14
Publishers aren’t the only ones who play the revision game. Software makers are masters at it. Clothing designers, record companies, fragrance makers, food magazines, and automakers play the revision game, too. This year’s new look, sound, smell, taste, and feel make last year’s obsolete. People have to keep buying in order to keep up.
But you can get carried away with the obsolescence strategy. To see how you can