Co-Opetition - Adam M. Brandenburger [21]
In fact, if your complementors are too comfortable, that may leave you little, if any, pie. For on-line services, a critical complement is local phone service. If phone calls are expensive, on-line services have to compensate with low prices, perhaps so low that they can’t make money. That’s a major reason why on-line services haven’t taken off in Japan, where NTT dominates the telephone market and charges handsomely for local calls. By contrast, in most places in the U.S., local calls are unmetered, and this has helped fuel the explosive growth of America Online, CompuServe, and the multitude of Internet service providers. Cheap complements are your friend.
What about competitors? Surely here, at least, the relationship is clear. It’s survival of the fittest. It’s war. Sometimes it is war. Later in the book, we’ll see how Nintendo conquered all opposition to became a giant of the videogame business. We’ll also see how NutraSweet fought a price war in Europe to establish a valuable precedent. But the idea that it’s always war with competitors is overly simplistic. Often, the win-lose approach leads to a Pyrrhic victory. Win-lose becomes lose-lose. The classic example is cutting price in an attempt to steal market share. Competitors match your lower price, and the result is lower profits all around.
Another problem with waging war on competitors is that it can be very hard to kill them off. Often, you succeed only in wounding them, and the most dangerous animal is a wounded one. Now that you’ve lowered their profits, your competitors have less to lose and every reason to become more aggressive.
An alternative approach is to find win-win opportunities with competitors.
Win-win opportunities with competitors, really? People talk about cooperation inside the company, working in teams and sharing information. But stepping outside, it seems naive to think of letting competitors “win.” It isn’t. What matters is not whether others win—it’s a fact of life that they sometimes will—but whether you win.
Although it’s hard to get used to the idea, sometimes the best way to succeed is to let others do well, including your competitors. We’ve seen examples where companies regarded primarily as competitors are also complementors. Insofar as these companies succeed as complementors, they are clearly benefiting each other.
Thus, you may want to work together with your competitors in order to develop common complements. In the early days of the automobile, competing carmakers worked together to build roads. Today, competing hi-tech companies are regularly joining forces to build infrastructure and standards for the information economy. For example, to help make Java the next standard for networked computing, IBM, Sun, and Compaq, along with Cisco, Netscape, Oracle, and several others, came together in August 1996 to create a $100 million venture capital fund to promote Java technology.
There are also times when the best strategy is to let competitors succeed as competitors. In the remainder of this book, we’ll see cases where a company’s move to undercut competitors could easily undercut the company itself. We’ll show how to achieve win-win outcomes by avoiding mutually destructive competition. We’ll explore how giving away a bid often comes back to hurt you, and suggest a better way to compete. We’ll see how loyalty programs help everyone avoid falling into the price-war trap. We’ll examine how rules such as meet-the-competition clauses change the nature of competition. We’ll look at how to influence perceptions