Co-opetition Chapter 8

1. Co-opetitionChapter 8 Presented to you by: Katie Neville Matt Kyler

2. 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.

3. 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.

4. 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.

5. 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.

6. 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.

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

8. 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…

9. 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.

10. “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

11. 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.

12. 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.

13. 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.

14. 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.

15. 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.

16. 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

17. 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

18. 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

19. 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

20. 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

21. 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

22. 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

23. 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

24. 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