Coopetition For Coaches: The Synthesis Of Competition And Cooperation - I

This post will focus on Coopetition: The Synthesis Of Competition And Cooperation and represents a short synopsis of a much more extensive webcast on coopetition available to Strategy For Coaches members.

Traditional business strategy is organized around competition - win/lose models fueled by market share frameworks. Western culture encourages and sometimes requires competition in order to succeed, so we rarely question whether there are alternatives to competing with others.

In fact, there are three ways to achieve one’s goals. One can work competitively by working against others, work cooperatively by working with others, or work independently, by working without regard to others. We are all born with a strong instinct to survive, but research has shown that competition is a learned phenomenon.

Recent research also refutes many cherished beliefs, such as: competition is inevitable and a result of human nature, competition encourages excellence and results in increased productivity and competition builds character and gives us needed confidence.

Cooperation appears to be the opposite of competition. Cooperation may be voluntary or involuntary, formal or informal. Originally, kinship relations alone were used to explain cooperative behavior when found in nature. Further research, however, showed that cooperation is not the exception, but arises spontaneously under the right conditions. In fact, scientists now believe that the emergence of higher levels of organization happens via cooperation at lower levels, and that without such cooperation, increased complexity may not develop.

A careful examination of nature shows both competitive and cooperative behavior. It is quite common for organisms to compete and cooperate with one another, often times simultaneously. Members of a species may hunt in packs (cooperation) while also fighting for alpha status within the pack (competition). Particular behaviors exist on a continuum of pure competition on one end and pure cooperation on the other.

Ray Noorda, founder of the networking software company Novell, noticed a similar phenomenon in the business world. He coined the term coopetition to represent this concept. Coopetition, a synthesis of the words competition and cooperation, was designed to convey the dynamic relationship between the two. Business often involves cooperation to create the market (the pie) and competition to divide up the market (one’s slice). Ruthless competition is often a lose/lose proposition and has on occasion resulted in destroying the market all together as almost happened with the 1990’s price wars in the airline industry where more money was lost in a few years than profits earned since Orville and Wilbur Wright. On the other hand, no one wants to help create a market if they can’t capture a portion.

A good example of coopetition can be found in just about any section of town that has several restaurants concentrated in a relatively small area. From a traditional business perspective, it looks like a bad idea to open a restaurant in an area already full of restaurants. However, it is the abundance of places to eat that attracts customers who may visit the area without any specific restaurant in mind. The restaurants cooperate to create the concentration of culinary options and compete to snare customers after they arrive.

There are several theories about coopetition and methodologies for implementing it. One of the most popular and one of the simplest was outlined by Adam M. Brandenburger and Barry J. Nalebuff in their very successful book entitled "Co-opetition". A key concept to understand is that of complements.

A complement to one product or service is any other product or service that makes the first one more attractive, such as hot dogs and mustard, cars and auto loans or digital cameras and color printers.

Complements are generally reciprocal. Just as auto loans complement new cars, new cars complement auto loans. Some businesses can actually fail because of lack of complements. Organizations that provide complements are called complementors. Brandenburger and Nalebuff introduced the Value Net as a schematic map that represents all the players in a game along with their interdependencies. The same player can have multiple roles. We’ll employ the business-as-game metaphor throughout this discussion.

On the vertical dimension, customers and suppliers play symmetric roles in creating value. On the horizontal dimension, competitors and complementors play opposing roles in creating value. A player is your competitor if customers value your product less when they have the other player’s product than when they have your product alone. A customer is likely to value a color sublimation printer less if they already have a color laser printer. A player is your complementor if customers value your product more when they have the other player’s product in addition to your product. A customer is likely to value a digital camera more if they also have a color printer than if they had no easy way to print their pictures.

The coopetition theory and methodology of Brandenburger and Nalebuff provides a framework for crafting a strategy that will exploit complementors. We will focus on this model for the remainder of this short post, but the webcast will discuss other even more powerful models.

To gauge the effectiveness of any strategy, it is necessary to have an idea how the various stakeholders, including complementors, will react when the strategy is executed. Imagine playing a game of chess, which is often considered to be a game of strategy. Prior to making any move, a good chess player will try to anticipate their opponent’s possible counter-move and their own counter counter-move in response. How does one anticipate the reaction of your opponent or competitor? There are several tools available – game theory, behavioral psychology and history among others.

So what is game theory? Game theory is the study of rational behavior in contested environments. Game theory offers scientific principles that can be used to predict the actions of others. Real-life situations are extremely complicated and game theory only offers a model of that complexity. We lack the time to discuss game theory further in this short post, but the webcast provides additional information.

Topic will be continued to a future post...