Recently I have been referencing the book Co-opetition by Adam Brandenburger and Barry Nalebuff a lot in my discussion of the Julie Roehm and Wal-Mart scandal so I thought it makes sense to tell you more about this book.
You see, on top of being a software engineer, I actually read this book in 1997 and reviewed it for Computing Devices Canada’s (now known as General Dynamics Canada) internal newsletter for fun. I re-read that book review and thought it is still a good read. So I updated it a tiny bit and added some new emphasis to share with you some of my 2 cents. Here you have it, enjoy.
Adam Brandenburger, Barry Nalebuff
1997, Currency Doubleday, 290 pages, C$34.95
Co-opetition introduces a new mindset that “goes beyond the old rules of cooperation and competition to combine the advantages of both“. It shows you how to make the pie bigger (cooperation) and get a bigger slice of the pie (competition). It provides new tools using game theory and the PARTS strategy (the elements of a game are: Players, Added values, Rules, Tactics, and Scope) to analyze business situations in a step by step manner. [K new note: I once used the PARTS strategy to analyze a business case for an MBA assignment *instead* of what the professor was teaching us. Ah, she was not amused. I maintain my grades suffered because of that (as oppose to my crappy work (smile)). But that was a good lesson for me on the power of the PARTS strategy.]
In Co-opetition , Brandenburger and Nalebuff not only clearly explain the PARTS strategy, they also apply the theories on real world situations. For example, in the Players chapter, Co-opetition explains how Holland Sweetener (competitor of NutraSweet) saved Coke and Pepsi $200 million annually without being paid a cent for its help. While BellSouth (one of the baby Bells in US) got paid $76.5 million to create competition in the bidding of LIN Broadcasting. This was a win-win deal as LIN managed to get $1 billion more from McCaw in the final price, not too bad for a cost of $76.5 million. The point is”Competition is valuable. Don’t give it away. Get paid to play.”
I have always been fascinated by Nintendo (Game Over by David Sheff will provide you an interesting look at Nintendo) and Co-opetition explains how Nintendo became so powerful in the video game business. In the Added Values chapter, Co-opetition explains that Nintendo is so powerful because of the extremely limited supply of its games and the way it control the productions of its games. Even powerful toy sellers like Toys-R-Us have little added values because if Toy-R-Us don’t want to sell Nintendo Games, there are many that will.
In the Rules chapter, Co-opetition explains the pros and cons of a most-favored-customer clause (MFC). On the surface MFC seems to be good for the customer as MFC guarantees the customer the best price the company gives to anyone. In fact, the MFC also makes the seller a tougher negotiator because discount for one customer will mean discount for every customers. And MFC also reduces the customers’ incentive to bargain.
Co-opetition will open your eyes to fresh ideas to look pass a simple win-lose game and explore a wider selection of strategies and make you more profitable.
New 2006 update: If you haven’t read Co-opetition already, please consider this my holiday gift to you. I am sure you and/or your boss will be happy with these new tools that you have. This book remains one of my most favourite business books in the last decade. It is so easy to read and yet contain some extremely powerful tools and a new mindset. As an aside, if you happen to sit across from me in a negotiation table, try not to kick my butt too hard. (smile) I will probably wish that I have never told you about this insightful book. (smile)
(C) 1997, 2006