Co-Opetition - Adam M. Brandenburger [74]
But there was also a win-win element when AAdvantage was introduced. With more loyal customers, American wasn’t about to start a price war. Indeed, it could even raise price. That gave the other airlines some room to raise price, too. Along with the win-lose component in terms of share shifts, there was a win-win element in terms of pricing.
Imitation of AAdvantage eliminated the win-lose component and reinforced the win-win effect. We saw that when every airline has a frequent-flyer program, customers are more loyal. Price cuts are less effective and price rises less risky. There’s less incentive to compete on price. The result is greater price stability, especially in the business travel market.
In sum, imitation of win-win strategy is healthy, not harmful. So if you come up with a win-win strategy, you don’t have to keep it secret. It’s not a problem if your strategy becomes widely known and widely imitated. In fact, that’s all to the good. The more competitors that adopt your strategy, the better for you.
By the same token, in writing down the theory of loyalty programs in this book, we haven’t undermined their effectiveness. On the contrary, we hope that what we’ve written will prompt more companies to set up loyalty programs—and the more that do, the better.
Unhealthy Imitation
Not everything is win-win. You have to be prepared for the possibility of unhealthy imitation. What can you do if gains are temporary? You need to create a long-lasting series of temporary gains.
The trick is to run faster and faster. You make a better product. Others then copy you. But by then you’re a step ahead. You’ve already improved your product.
The game isn’t about how good your products are; it’s about how good you are at improving them. It isn’t where you are; it’s how fast you’re moving. It isn’t position; it’s speed. You never stand still; you’re a moving target.35
What if others copy your improvement process? They become as good as you at improving products. What then? You’ve already improved your improvement process. Now the game isn’t about how good your products are, or even how good you are at improving them. It’s about how good you are at improving your improvement process. It’s not about where you are or even how fast you’re moving. It’s how fast you can speed up. It’s not about position or speed. It’s about acceleration.36
And, in principle, there’s even improving how you improve your improvement process, and so on. Pretty rarefied stuff? Not to Individual, Inc.
What Makes Individual, Inc. Unique Individual, Inc., provides a high-tech clipping service to help people deal with the information explosion. Clients tell Individual, Inc. what topics they’re interested in. The company then uses computer searches to find all the relevant articles, ranks them, and makes them available via a personalized Web page, E-mail, or even old-fashioned fax. Clients get full text, abstracts, or headlines of articles, according to their priority ranking. The result is like getting your own private news briefing.
Individual’s problem is how to preserve its added value. What prevents other companies from copying this service? Although Individual’s SMART (System for Manipulation and Retrieval of Text) software is proprietary, its basic concept is not. But Individual, Inc. has gone the next step. It regularly asks clients to evaluate each story they’re sent on a “not relevant” to “somewhat relevant” to “very relevant” scale. This “relevance feedback” is fed into SMART, which uses it to improve the selection of stories delivered to each client. SMART also learns from watching what clients read, not just listening to what they say. Every time a client retrieves a full-text article from an abstract or headline, SMART records this fact and updates its user profile accordingly.
A typical client might start by evaluating 50 percent of the stories as very relevant. Individual, Inc. can get the score up to 90 percent within a month. Not only do clients get an improved