Mapping the landscape to your advantage

1
Mapping the landscape to your advantage!

• Term 3, 2003
• Paul Kerin

2
In search of value

• Five Forces industry-centric approach to
  identifying value opportunities
• Identifies opportunities, but doesnt prescribe
  how to realise them
• PARTS and Value-Net frameworks complement the
  five forces help identify value opportunities
  and how to realise them from a firm-centric
  perspective

3
Defining the game of business PARTS

• Any game can be defined along 5 dimensions
• Players who is playing or may play the game?
• Added value a players unique contribution to
  the size of the pie
• Rules mutually agreed or imposed principles as
  to how the game must be played
• Tactics actions taken to influence the
  perceptions / behaviours of other players
• Scope the boundaries within which the game is
  played
• Key question how can we change or use the
  PARTS to our advantage? (today, well focus
  largely on P, A and T)

4
Players Value Net
Customers
Company
Competitors
Complementors
Suppliers
Source Brandenberger and Nalebuff,
Co-opetition, 1996
5
Players Value Net vs Five Forces
Customers
Five Forces
Company
Competitors
Complementors
Rivalry New entry Substitutes
6th force?
Suppliers
6
Players complementor examples -
demand-side

• Hardware and software
• Cars and auto loans
• Intel and ProShare

7
Players complementors vs competitors
demand-side

• A player is your complementor if customers value
  your product more when they have the other
  players product available than when they have
  your product alone
• A player is your competitor if customers value
  your product less when they have the other
  players product available than when they have
  your product alone

8
Players complementors vs competitors
supply-side

• A player is your complementor if it is more
  attractive for a supplier to provide resources to
  you when its also supplying the other player
  than when its supplying you alone
• A player is your competitor if its less
  attractive for a supplier to provide resources to
  you when its also supplying the other player
  than when its supplying you alone

9
Players complementor examples
supply-side

• Compaq Dell
• compete with each other for the latest Intel
  chip
• complement each other in defraying Intels RD
  costs
• Qantas Delta
• compete with each other for landing slots and
  gates
• complement each other in defraying Boeings RD
  costs

10
Players multiple roles

• Competitive threat or complementary opportunity?
• Movie theatres video rentals
• Traditional and internet booksellers
• ATM machines

11
Players multiple roles making
markets

• Lygon Street (Italian restaurants)
• Chinatown (Chinese restaurants)
• Broadway (theatre, music and dance)
• Silicon Valley (technology ventures
  supply-side)
• Complementors in making the market
• Competitors in dividing the market

12
Players friends or foes?

• Friends
• Customers, Suppliers, Complementors
• Foes
• Competitors

13
Players the competitive mindset

• The bias
• Customers and suppliers have to choose between
  opportunities with us and with others
• Were taught to think in terms of constraints,
  trade-offs, substitution
• To correct the bias
• Think complementor as well as competitor

14
Added value from creation to
division

• Objectives?
• Maximise size of pie?
• Maximise proportion of pie I get?
• Maximise size of my piece of pie?
• Need to be aware of the relative power of others
  in the game relative added values

15
Added value recap

• What you get is based on your relative added
  value
• Added value total value with you
• less
• total value without you
• It is what you bring to others

16
Added value vs what do you get?

• Egocentric vs. Allocentric
• Added values and BATNAs
• Examples cost sharing and a bankruptcy problem
  from the Talmud

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Allocentrism

• Added value
• Put yourself in the shoes of others to assess
  your added value
• Rules
• Put yourself in the shoes of others to anticipate
  reactions (attempts to change the game) in
  response to your actions
• Tactics/perceptions
• Put yourself in the shoes of others to see how
  they see the game and use tactics to change
  their perceptions

18
Tactics perception games

• Texas shoot-out
• One side states price
• Other side says buy or sell
• Shooter or Shootee?
• Different valuations

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Tactics Texas shoot-out

• If you know the other sides value, go first
• If you are uncertain, its better to go second

20
Tactics irrationality

• Profits are not the only objective
• Pride, jealousy, fairness matter
• If ignore these, you can both lose
• Even if you think others are misguided, dont
  impose your rationality on them
• Allocentrism

21
Changing the game

• From mapping the landscape to shaping it!
• The five levers PARTS
• Well examine these more closely in the Bitter
  Competition case