Co-Opetition - Adam M. Brandenburger [8]
Our account of game theory identifies five basic elements of any game: Players, Added values, Rules, Tactics, and Scope—PARTS, for short. These become our touchstones for the rest of the book. Along with the Value Net, they provide the central conceptual scheme for applying game theory to business.
Part II, the remainder of the book, consists of separate chapters on each of the five elements of a game. We describe each element in detail and what significance each has for your business. Archimedes said that given a proper lever, he could move the world. These are the five levers for moving the world of business.
Changing the Game
This is where the biggest payoff comes. We said business is different from other games because it allows more than one winner. But business is also different in another fundamental way: the game doesn’t stand still. All the elements in the game of business are constantly changing; nothing is fixed. This is not just by chance. While football, poker, and chess have ultimate ruling bodies—the NFL or FIFA, Hoyle, and the Chess Federation—business doesn’t.7 People are free to change the game of business to their benefit. And they do.
Why change the game? An old Chinese proverb explains: if you continue on the course you’re headed, that’s where you’ll end up. Sometimes that’s good, sometimes not. You can play the game extremely well, and still fare terribly. That’s because you’re playing the wrong game: you need to change it. Even a good game can be made into a better one. Real success comes from actively shaping the game you play—from making the game you want, not taking the game you find.
How do you change the game? You may well have been doing this instinctively. But game theory provides a systematic method. To change the game, you have to change one or more of the five elements: you change the PARTS. Each component we discuss is a powerful tool for transforming the game into a different one. This is where game theory finds its greatest opportunities: in changing the game. Changing not just the way you play, but the game you play.
2. Co-opetition
If business is a game, who are the players and what are their roles? There are customers and suppliers, of course; you wouldn’t be in business without them. And, naturally, there are competitors. Is that it? No, not quite. There’s one more, often overlooked but equally important group of players—those who provide complementary rather than competing products and services. That’s where we’ll begin this chapter. We’ll see how complements can make the difference between business success and failure.
1. Thinking Complements
The classic example of complements is computer hardware and software. Faster hardware prompts people to upgrade to more powerful software, and more powerful software motivates people to buy faster hardware. For example, Windows 95 is far more valuable on a Pentium-powered machine than on a 486 machine. Likewise, a Pentium chip is far more valuable to someone who has Windows 95 than to someone who doesn’t.
Though the idea of complements may be most apparent in the context of hardware and software, the principle is universal. A complement to one product or service is any other product or service that makes the first one more attractive. Hot dogs and mustard, cars and auto loans, televisions and videocassette recorders, television shows and TV Guide, fax machines and phone lines, digital cameras and color printers, catalogs and overnight delivery services, red wine and dry cleaners, Siskel and Ebert. These are just some of the many, many examples of complementary products and services.
Let’s take a closer look at the complements to cars. An obvious one is paved roads. Having built a better mousetrap, the fledgling auto industry didn’t