Co-opetition Chapter 8 Presented to you by: Katie Neville Matt Kyler

What is this chapter all about? The problem is that mental boundaries aren’t real boundaries – there are no real boundaries. Every game is linked to other games.

Links between Games The mythical big game is a game without boundaries, without a defined scope. P.A.R.T. – Describes all the elements of the mythical big game. P.A.R.T. then, is the way to classify the links between games.

P.A.R.T.S. Players – Anytime there’s a player in your game who’s also a player in another game, the two games are potentially linked. Added Value – This can arise whenever your customers or suppliers participate in more than one market.

P.A.R.T.S. Rules – These constraints can link what would otherwise be separate games. Tactics – By changing perceptions, you can change the links between games. Scope – It’s to complicated to think of everything as one large game.

Links Through Added Value Newcomers experience a lot of disadvantages: Proven Products Brands Loyal customers Manufacturing experience Relationships with suppliers As a challenger, if you go head-to- head with an established opponent, you’re likely to lose.

Playing Judo The Japanese art of judo teaches how to use an opponent’s weight against him, to turn his strength into weakness.

The Super Sonic: Sonic was created by Sega, a rival 8-bit video game manufacturer. Sega soon created a 16-bit system and it took Nintendo 2 years to respond with it’s own 16-bit system. READY… FIGHT…

Judo…CHOP! The new 16-bit system and the old 8-bit system were closely linked. When Sega launched the 16-bit system, Nintendo’s 8-bit franchise was at the height of it’s value. That gave Sega a judo opportunity to use Nintendo’s strength against itself.

“Genesis does what Nintendon’t” In 1991 the Genesis, together with Sonic became the cool system to have and software developers rushed to turn out games for the system. The system went on sale for $150

Super NES Nintendo had been developing a 16-bit system since the late 80’s, but Nintendo was content to grow the 8-bit market and grow it’s customer base for it’s future 16- bit system. If Nintendo jumped too quickly into the 16-bit game, there was even a risk that software retailers would abandon the 8- bit market.

The Battle Begins Once Nintendo jumped into the game, there was competition and much lower 16-bit prices. That shrunk the 8-bit pie and Nintendo’s added value in the 8-bit game. Nintendo made a trade off, give up a piece of the 16-bit pie in order to extend the life of the 8-bit game.

Nintendo’s Criticism Many people criticized Nintendo for the delay. It’s better to eat your own lunch than to have someone else eat it for you. Cannibalize yourself rather than let someone else eat you alive.

Judo in Action Once you jump into the new technology, you force the opponent to compete with you head-to-head with you. The price of the new technology will fall and, along with it, the added value of our old product. The judo strategy is based on the idea that an opponent has nothing to gain if the opponent has nothing to lose.

Recommendations So, when you do bring out a new product, the challenge is to prevent the loss of added value that results from competing with your old product. To protect your added value, do what you can to sever the links between yesterday’s and today’s games.

Links through Rules Rules are a direct lever for changing the scope of the game In business-to-business dealings, you can control the game by the length of the contracts you write with your customers and suppliers If you have the power, you can choose the length of the game you and others play

The Long and Short of It One-year contracts create a series of one year games A five year contract turns five one year games into one five year game The longer the contract you offer, the more the suppliers will treat the game as a once-and-for-all competition

Going Long If you have the power, use it to require your suppliers or customers to compete for long-term contracts with you Pros Since they only have one chance suppliers or customers will compete more aggressively You have the power- this is the time to use it and lock them in Cons Long-term contracts can be hard to write and hard to enforce

Discounted Values Increase sales without giving up as much margin by offering package discounts There need not be any connection between the two products or the two companies selling them

Links through Tactics Two games are linked anytime someone perceives them to be linked The key ingredient for linkage is contingency: another player must believe that what you will do in one game depends on what happens in another The game is all about perceptions

Cable Retransmission Dissent Broadcasting companies in Corpus Christi refused to allow their channels to be on Cable if they were not paid TCI linked the game in Corpus Christi to the one in Beaumont by not re- contracting KBMT which was also owned by one of the broadcasting companies in Corpus Christi until they solved their issue

Sweet Temptations NutraSweet and Holland Sweetener had a price war in the European Market NutraSweet drastically cut prices to limit Holland’s market share Looking only at the European Market is too narrow a scope NutraSweet was looking ahead to the US market

Expansion NutraSweet was setting a precedent on what would come if they entered the US market The price war worked and Holland had a hard time justifying expansion into the US When you enter the market with only a small capacity, you run the risk that the incumbent will try to bump you out of the game Instead if you plan to get big, start out big

The Larger Game Most important lesson is that every game takes place in a larger context This is what allows a game’s boundary to expand or simply move You may think you know what game you are playing, but that game is invariably part of a larger game