New Thinking on the Game of Business

1
New Thinking on the Game of Business

• Ch. 1 War and Peace
• Ch. 2 Coopetition

2
Ch. 1 War and Peace

• Conventional Wisdom in Strategy Traditional
  mindset claimed there had to be a winner and a
  loser ? Live and Let Die!
• A Change in Mindset Win-Lose ? Win-Win ? Sounds
  great, but how?

3
Ch. 2 Coopetition

• A term coined by the authors of this text to
  describe simultaneous war and peace
• Competition and cooperation combined to form
  coopetition
• Example?

4
Game Theory

• One-sided View ? Interaction View
• A tool used to focus strategic priorities
• Helps form correct decisions
• Further discussed in later chapters

5
Complementor

• Defa complement to one product or service is
  any other product or service that makes the first
  one more attractive.
• Ex. Mustard and hotdogs GM and GMAC
• Change in mindset Fight for the pie! ? Make the
  pie bigger!

6
Value Net A New Picture of Game of Business

• Customers
• Complementors
• Suppliers
• Competitors
• Company

7
Symmetries of the Value Net

• Customers and Suppliers play symmetric roles (in
  value creation)
• Competitors and complementors play mirror-image
  roles value enhancer or value reducer

8
What I learned

• Competition or Cooperation ? Competition and
  Cooperation
• Value Net There is a duality in every
  relationship
• Look for Complementary Opportunities as well as
  Competitive Threats
• Ex) Stores locating next to one another

9
Two Questions

• Compare Competition, Cooperation, and Coopetition
• Describe the Value Net.

10
Ch. 5 - Added Values
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Added value is the primary source of power in a
game

• Ways to create added value
• Have a monopoly
• Improve quality or reduce costs
• Find Trade-Ons
• Create relationships with customers and suppliers
• Healthy imitation

12
Nintendos Strategy

• Had a monopoly coupled with a strategy of
  limiting the added value of each of the other
  players in the game
• Their strategy shows that a monopoly and a
  shortage is twice as nice

13
DeBeers Strategy

• Holds back supply and manages demand by making
  people believe that diamonds are scarce
• They have been unable to keep demand ahead of
  supply and has had to cut back on its own supply
• Not as successful as Nintendo in creating added
  value with a monopoly

14
Limiting Supply

• Pros
• Gets you a bigger slice of the pie
• May give you cachet
• May provide free publicity
• May lead customers to buy your slower-moving
  products while waiting for the shortage to end

15
Limiting Supply

• Cons
• Shrinks the pie costs you sales today
• May cost you a relationship and thereby future
  sales
• Creates ill will
• Leaves a hole in the market, inviting entry

So, what do you do?
16
Trade-Offs

• There is a trade off between improving quality or
  improving cost You can have higher quality or
  lower costs but not both
• Example TWA increased quality by providing more
  legroom but there were costs involved

17
Trade-Ons

• When you end up with higher quality and lower
  costs at the same time you have achieved a
  trade-on
• Example Club Med

18
Create relationships with your customers and
suppliers

• Example American Airline created the
  frequent-flyer program to attract loyalty
• A critical step in building a relationship is
  saying thank you to your loyal customers

19
Nine Tips on Saying Thank You

• Say thank you in kind, not cash
• Save the best thank-you for your best customers
• Say thank you in a way that builds your business
• Dont say thank you too quickly, or too slowly
• Say youre going to say thank you
• Recognize that you may have to compete for
  loyalty
• Allow your competitors to have loyal customers
  too
• Dont forget to say thank you even if you have a
  monopoly
• Say thank you to your suppliers as well as to
  your customers

20
Healthy Imitation

• Win-win win-win ? WIN-WIN
• When every airline has a frequent flyer program
  customers are more loyal. Price cuts are less
  effective and price rises less risky. Theres
  less incentive to compete on price ? greater
  price stability and loyalty

21
Unhealthy Imitation

• Unhealthy imitation can be dealt with by
  improving your products and your improvement
  processes, and by keeping ahead of the game
• Ways to avoid the threat of imitation
• Collect customer feedback to customize your
  product competitors cant copy you because they
  dont have the information
• Create a brand identity
• Build volume to move down the learning curve
• Compete aggressively for volume so that
  competitors cant follow you down the learning
  curve
• Pp. 154-155 IBM versus Apple

22
Questions

• What company successfully showed that the
  distinction between the added value of a company
  and a product is crucial?
• Nintendo
• Is it possible for competitors to imitate a
  strategy and both companies be successful?
• Yes!