Co-Opetition - Adam M. Brandenburger [80]
Competitors play the same game. They work to make similarly smart trade-offs and trade-ons. This dynamic erodes your added value. To protect your added value, you need to create relationships with your customers and suppliers. Without a relationship, you could be selling a commodity. With a relationship, you’re sure to be selling something unique—part of the package is you. The relationship provides a boost to your added value. In the presence of competition, it’s often the key to making money.
American’s AAdvantage frequent-flyer program is the model example of engineering a relationship. It creates loyalty by rewarding it. We suggested that every business should have a loyalty program and gave nine tips on how to be most effective at saying thank you to your customers.
Loyalty programs are an example of a strategy that continues to work even when imitated. Contrary to conventional wisdom, imitation can sometimes be healthy rather than harmful. The reason is that when strategies have a win-win component, that component gets amplified by imitation. More examples of healthy imitation are coming up.
Added value is the primary source of power in a game, but it’s not the only source. Rules can alter the balance of power between the players. How rules do this is the subject of our next chapter.
6. Rules
When the rules of the game prove
unsuitable for victory,
the gentlemen of England
change the rules.
—Harold Laski1
When we talk about changing the game, the first thing people usually think of is changing the rules. But if we ask what rules you might change or how you might go about changing them, the question often seems perplexing. After all, most of the rules businesspeople play by are well-established laws and customs. They have evolved to help ensure that trading practices are fair, that markets keep operating, and that contracts are honored. To step outside these rules would be to risk legal penalties or exclusion from the market.
But there are other rules of the game that it can make sense to change. Many of these rules are the ones found in contracts. Your contracts with customers and suppliers shape your transactions with those players in ways that extend far into the future. A single clause can tilt the balance of power heavily toward you or against you. By shaping your relations with customers and suppliers, these same contracts will also shape your relations with competitors. To be sure you’re in a game where you’ll make money, you have to make sure you’ve got the right rules in your contracts.
What all these more negotiable rules have in common is that they involve “details.” Compared with changes in players or in added values, the possible changes in rules can seem like a small-scale matter. This makes them easy to ignore:
I want to know God’s thoughts; the rest are details.
—Albert Einstein
But there’s another way of looking at it:
God is in the details.
—Ludwig Mies van der Rohe
As we’ll show in this chapter, relatively small changes in the rules of business can produce enormous changes in the outcomes. In other words, where business rules are concerned, the details are everything.
To illustrate how this works, we’ll look at a variety of rules and analyze how each one affects the game. This requires imagining that a given rule is in effect, putting yourself in the other players’ shoes, and playing out the game from all the different perspectives. With a better understanding of the rule’s consequences, you can then decide whether you want to employ that rule or, if it’s a rule that’s already there, whether you want to change it.
There is no mechanism, or algorithm, for generating rules. It’s a creative act. Still, you can get ideas for new rules from a number