an introduction to coopetition

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Contents

Definitions

Brandenberger and Nalebuff’s ‘Value Net’

Effective coopetition

Supply chain coopetition

Applying the Value Net

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Coopetition defined

Cooperation and competition.

Based on the theory that in addition to businesses that compete for suppliers and customers, there are providers of complementary products and services.

Relationships in business don’t have to be win-lose. Sometimes both parties can win.

Coopetition occurs when companies collaborate in areas of their business where they do not believe they have competitive advantage and where they believe they can share common costs.

Closely related to Game Theory.

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Coopetition

the ‘Value Net’

Brandenburger, A.M. & Nalebuff, B.J. (1996)Co-opetition. London: Profile Books capacify.wordpress.com

Definitions

A business is your complementor if customers value your product more when they have a product from the other business.

A business is your competitor of customers value your product less when they have a product from the other business.

Simple examples:

Computer hardware and software; if you update one, you will find you have an incentive to update the other.

Radios would be pointless without radio stations... and vice-versa.

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War and Peace...

Two airlines are rivals: they compete for the attention of customers, and they compete for ‘slots’ at busy airports.

When the same two airlines both order Boeing’s 787 ‘Dreamliner’ (or any other new aeroplane) they are complementors because they both pay towards Boeing’s development costs.

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Main principle

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Don’t just fight for a bigger slice of the pie.

Main principle

capacify.wordpress.comWork in partnership to make the pie bigger.

Main principle

Then fight for a bigger slice.capacify.wordpress.com

EffectiveCoopetition

Have a cooperative attitude.

Be careful who you cooperate with, and the information you provide.

Treat your partners like your customers.

Get creative: be prepared to work in new ways.

Be transparent: trust is a ‘two-way street’.

But, in the example... eat as much hay as you can.

Another airline example

Competition between airlines offering internal flights in the USA was intense. The normal response to having empty seats on a flight is to slash fares.

In a price war, everybody loses.

One operator decided to remove one row of seats instead. They compete on seat pitch (“leg room”) instead of price.

Their rivals saw this working, and did the same.

They ‘stole the idea’?

Yes... but by copying, excess capacity in theindustry is reduced. The price war ended, and everybody could make a profit again.

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Supply ChainCoopetition

Co-warehousing – make use of facilities that you share with another business.

Load consolidation – transport your goods together with those of another business:

Reduce costs for partial loads.

Increase power in negotiations.

Standardisation – make use of common components that you design in partnership with other businesses.

Shared Research & Development costs.

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Shared development cost

What do these cars have in common?

Quite a lot, actually.

Having common components in their ‘city cars’ allowed Toyota, Peugeot and Citroën to drive supply chain costs down, and the lower retail price expands their market...

...but they still compete for their share of that market.

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Applying the Value Net

Think about the context of your own business...

Who are yourcompetitors?

How might youturn them intocomplementors?

Think of potentialcompletementorsas the ‘6th force’in Porter’s FiveForces.

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