Coopetition

Especially in business environments, the terms cooperation and competition are considered antonyms, concepts that are mutually exclusive. However, that is not entirely true. In fact, if you combine the two words together and think a little outside of the box, you can come up with the approach called co-opetition. Although this word doesn’t roll off your tongue with ease, it is a valuable instrument that can help you build your business in today’s difficult marketplace.

If you are a part of a company as a customer, supplier, entrepreneur, competitor, or etc., you need to be knowledgeable of how business works and even more importantly, be able to change the rules a bit so that they are beneficial to your company. Barry J. Nalebuff and Adam M. Brandenburger will give you your first lesson in co-opetition which includes learning the various positions in the game of business as well as the many co-dependent positions of each player.

In the business world, two players can cooperate and compete at the same time

What do you think you need in order to prosper in the business world?

A few people believe that you just need to defeat your competition. In this case, business is synonymous to a race and as a result, all that you can do is pray to the heavens that your top competitors will stumble somewhere along the road. However, that analogy is not relevant to all businesses. Actually, it might be more beneficial for a couple of competitors to support one another instead of trying to beat one another.

Let’s break this down by separating the business players into four different groups. The first three are just as you’d think. There are the customers, the suppliers and the competitors. The fourth group, on the other hand, is less obvious. They are the complementors.

To summarize, complementors are items and services that, as the name suggests, complement your item to make it more profitable. A good example of this duo is hardware and software. If a person has a newer hardware, they need a quicker software. This also applies the other way around.

However, keep in mind that it’s not always that cut and dry when in comes to defining what is the complementor and what is the competitor. Even though we have defined specific business positions such as suppliers and consumers, players can also have several positions. As a result, you can collaborate with a player to increase the importance of your items while simultaneously, compete with them to figure out how to separate the profits between the two.

Take, for example, manufacturers and retailers in the cosmetics industry. They both have very important positions in giving consumers cosmetics. Nonetheless, consumers only want to pay a certain amount for lipstick, as an example, and thus, manufacturers and retailers need to go up against one another when dividing the total.

That is how the term co-opetition originated. It describes the process of two players cooperating and competing simultaneously.

Although these two positions may seem a little complicated, being exposed to them is crucial if you want to create a successful business strategy.

You can use game theory to navigate complex business relationships

Trying to operate inside of the business world and knowing about all of the various players that are a part of it can be difficult to put your head around. If you want to make things more simple, take advantage of game theory, which is a method that is used to create an efficient plan when your next step depends on the other players.

The first thing that you need to do is analyze each player’s respective location by unraveling the PARTS. This acronym stands for the five features of a business game:

Players
Added value
Rules
Tactics and
Scope

As described earlier, the four groups of players are customers, suppliers, competitors and complementors.

Not only does each individual player contribute value to the game, but some do more so than others. With this additional value, players now have the capacity to bargain and as a result, can be used as leverage to influence the game’s rules. For example, suppose in the cosmetics industry, retailers increase value by managing the circulation to customers. This could be used as leverage by the retailers to adjust the rules of how much they pay manufacturers for their items.

Additionally, the way a person sees the game establishes how they will act on their own and the way they see the game’s scope as a whole. Going back to our previous example, the cosmetics manufacturer’s scope of the game is only the cosmetics industry whereas for retailers, such as department stores, their scope may include a lot more industries.

Basically, the five features of PARTS decides which ties are powerful since each individual’s respective authority showcases their work.

At this point, things begin to become intriguing; you can adjust the features of the game to get a better position. However, the PARTS are not set in stone. On the contrary, they are flexible with every feature capable of being modified to your benefit.

Keep in mind, though, that any adjustment, regardless of the size, affects the entire game. As a result, you really need to analyze each feature if you want to create a solid business strategy.

Make sure that playing the game of business is worth your time

When a business player decides to enter the market, they usually don’t think about an essential part.

The game changes when the number of players change.

Your choice to embark on the game could possibly be beneficial to the players that are already a part of it. In fact, your entrance could even be more important to them than it is to you. This is actually really logical since if you become a competitor to a player, it will be profitable to another. Therefore, for instance, your customer will have a bigger selection to choose from should you decide to enter the market.

As a result, you need to make sure that you will get reimbursed for entering the game. Request your customers to pay off the opening price or get them to agree to continue working with you or in other words, make sure that you are insured.

This method is even more essential if you actually think about all that you had to pay initially to be a part of the game. When entering it, you need to use your time and funds to create an efficient plan and then an appealing proposal. When you venture into a new game, there are also risks involving losing the customers that you already have or bringing upon yourself some aggressive competition.

However, let’s assume that you make it through those beginning steps. At the next stage, it could be potentially good for you to bring in new players. As mentioned before, they include new customers and complementors which will help your current value grow. Likewise, new suppliers could offer you a better bargain. New competition is also important since for starters, it can help give you encouragement.

Therefore, don’t forget to try to find reasons to bring other people into the game with you.

Added value is a power level in the game of business

Try to recall what you had learned earlier. What does the A in PARTS stand for? If you thought Added value, then you’re correct. Added value is anything that a player brings into the game when they enter it. It is crucial to remember that added value is not constant, it is easily changed.

However, what’s the point of changing it?

Well, suppose you want to add value to it, you can increase your power be getting rid of the added value from the other players.

For instance, pretend that your company has a monopoly. Technically speaking, your added value makes up the entire game because you’re the only game. However, even in that situation, players such as suppliers and customers can contribute with their own added value and so you want that to be the smallest that it can be.

Since you are a manufacturer of a monopoly of products, you can accomplish this by making a supply deficiency. Therefore, your consumers won’t have much added value since there will always be another customer that will take their spot.

That was the method that Nintendo incorporated at the end of the 80s. This video game developer sought after not ever having enough games in the market which made customers crazy. Therefore, the main character of Nintendo’s best-seller, Mario, became more well-known than Mickey Mouse.

However, on the other hand, in a marketplace that is competitive, raising your added value while not messing around with anyone else’s is the most important thing. If you are competing with many companies, there could be the possibility that should you decide to leave the game, you would not have any effect on the market. As a result, that would mean that you never had any added value to begin with.

In order to keep this from happening, do trade-offs, which is when you lower the quality of your item so that your consumer price is lower. You could, even better, trade-on, which is when an item’s value is increased while its cost of production decreases and thus you have guaranteed added value. This, however, only works for a short time because the competition will catch up to you one day.

Strengthen your customer relationships if you want to have a more tenable plan. Even if your first items are only subpar, by getting a loyal customer base, you will be able to ensure added value.

Changing the rules of the game changes the balance of power between players

When we are young, our behavior is managed by the rules of others. Some include crossing the street when the light is green, going to bed when our parents tell us to and walking in a single-file line in elementary school. However, when we become adults, we have the luxury of making up some of our own rules. In the business world, those changes heavily impact the game. In this case, rules dictate how well you act towards your employees, your surroundings and your customers.

Certainly, lots of rules, such as the ones that are similar to the ones about pricing are made by laws. However, the details are more flexible than you’d expect. The government tracks business transactions and antitrust regulations are implemented so that the market is equal and so that the single player can individually set their own rules in the contracts with their consumers.

For example, in your contract with the consumer, they may want a most-favored-customer (MFC) clause, which says that you will give them the best price out of all of your other customers. You could also discuss a meet-the-competition (MCC) clause, which means that you are allowed to have the same price as any of your rivals have. As a result, customer’s can’t abandon you for a rival. Instead, you have the chance to hold onto them with a price cut.

If you incorporate rules like those, you will alter the balance of power amongst all of the players. The MFC and MCC serve as agreements with your customers. However, they can also alter the relationship that you have with the other players.

The MFC clause is mainly about making a bargain on the difficult prices with everybody because you can always tell the suppliers that you have to decrease your overhead costs so that you can make up for what you lost from you lower prices.

The MCC clause, on the other hand, is about choosing if you will hold onto a customer. You would also save the time that it would have taken you to make the proposition because the price that you need is automatically apparent.

As you can tell, these minor changes can greatly affect the entirety of the game.

Changing how other players perceive the game will influence their behavior

The brain of a human is very strong. In business, the way every player sees the game can, in reality, alter the game itself.

How so? Our thoughts about the way things work encourages the way we act. Therefore, if you want to alter the way players communicate with one another in the game, you need to begin by adjusting the way they see things.

Suppose that there is a person who thinks that they aren’t doing well in professional surroundings like negotiations. If they want to work better, they need to act in a more aggressive manor to combat their low confidence levels. However, this hardly ever works since people don’t want to be intimidated by hostile people.

Despite this, on the contrary, those who are confident are more comfortable and as a result can peacefully enforce their rules onto others. Thus, revealing, withholding or twisting information can alter the way people think which in turn, gives you strength over their actions.

One way that you can carefully choose to reveal information is by telegramming strength. For example, suppose you plan on investing in a good tuxedo and a haircut for a job interview. This will show the hiring staff that you were successful in the past, and that you are capable of doing so at their company in the future.

On the other hand, if you are jumping from one job to the next and aren’t financially stable, then you most likely wear an old, unkempt suit, which will give off the wrong message.

In some circumstances, it might be better to just keep some information a secret. For example, the president of Columbia Pictures, Frank Rice, sold the movie rights to ET for only $100,00 prior to when the movie actually moved on to make $400 million. That kind of misjudgement is likely not something you would want to say during an interview.

Lastly, you can alter the way people see things by giving them information in a complicated way. For example, you can hide how high your prices are by calculating them through a difficult method.

You can gain leverage by changing the scope of the game

If you were up for it, you could look at anything in life as a large game. However, there’s a catch. Every game is part of an even larger game. This minor fact that each game is connected suggests that your actions can create a ripple effect.

For example, whatever you do in the television industry today could affect what happens tomorrow in, for example, the political industry. Just one minor move can connect two, very different games.

People typically don’t look at reality like this. For example, they would prefer to look at the current years and the next years merchandise market as entirely separate fields, despite actually greatly affecting one another.

Making use of this information to alter the range of the game is the final part of PARTS. You just have to find the connections between unrelated games and use those connections to your benefit.

That’s precisely what Sega, the video game company did when they went into the market in the 90s. They didn’t go after Nintendo, which was based on an eight-bit system. On the contrary, they developed sixteen-bit games. Additionally, they set higher price points for their item, much more than Nintendo. Therefore, they essentially weren’t competing in the same market with that developed video game company.

It was in this manner that Sega successfully increased the range of the game by separating the market into eight and sixteen bit sections. This helped them stay away from the huge competitor and protected their own position as a valuable player.

Final Summary

The main idea:

In business, and in the game of it, players can both cooperate and compete simultaneously. The main goal is to advance to every crucial part of the game mindfully such as the players, added value, rules, methods and range. They are all valuable concepts that you can utilize to boost your standing.

Practical advice:

Showcase your confidence.

When you attempt to show your confidence as an employee, try to negotiate on a contract that puts together a somewhat small beginning salary but has a good performance benefit. Likewise, as a company, provide free trials or initiate really costly advertisement campaigns.

In other words, if you take on other risks, you’ll show how confident you are in being able to act on your promises. As a result, the others will be more likely create a business relationship with you.