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Co-Opetition : A Revolution Mindset That Combines Competition and Cooperation : The Game Theory Strategy That's Changing the Game of Business (Paperback)
by Adam M. Brandenburger, Barry J. Nalebuff
| Category:
Strategy, Competition, Cooperation, Game Theory |
| Market price: ¥ 228.00
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¥ 208.00
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| MSL Pointer Review:
A great companion to Thinking Strategically : The Competitive Edge in Business, Politics, and Everyday Life by Nalebuff, this great book that shows how to get paid to play the game by using game theory. |
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Author: Adam M. Brandenburger, Barry J. Nalebuff
Publisher: Currency
Pub. in: December, 1997
ISBN: 0385479506
Pages: 304
Measurements: 9 x 6.1 x 0.9 inches
Origin of product: USA
Order code: BA00988
Other information: ISBN-13: 978-0385479509
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- Awards & Credential -
One of our top recommendations on the practice of Game Theory. |
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- MSL Picks -
The book starts showing that business is not always the adversarial relationship that is usually presented in many strategy books. The authors contend that business is war and peace at the same time, hence the name: cooperation and competition contract to co-opetition.
The book develops further the well known five-forces analysis to create the value net, and show that a company is interested in the well-being of some of the other market participants -a typical example is the DVD player makers and the movie producers, the more records are on offer the more DVD players are available, which makes more interesting to keep publishing records. Game theory is introduced as the method to link competition and cooperation opening the second part of the book, which shows a structured method how to approach and improve your position in negotiations.
The method follows the acronym PARTS, which stands for:
- Players, who profits from taking part in a negotiation.
- Added-values, what are you and other players bringing to the negotiation.
- Rules, how can you improve contracts.
- Tactics, how perceptions influence the results and how you can change it.
- Scope, are there other issues or negotiations that can be linked to the negotiation.
Every point is well developed linking it to the points mentioned earlier, or the idea of the value net, and with plenty of examples from real life.
If you want to read a basic book on negotiation this is a great choice.
(From quoting Miquel Tintore Rebholz, USA)
Target readers:
Senior executives, sales and marketing directors and managers, general managers, corporate strategists, government leaders and MBAs.
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Adam M Brandenburger graduated from Cambridge and is a professor at the Harvard Business School. He is the author of many of Harvard’s bestselling strategy cases. He has worked with Ciba-Geigy, Fidelity Investments, Honeywell, KPMG Peat Marwick, Merck, and Northwestern Life Insurance.
Barry J Nalebuff graduated from Oxford and is a professor at Yale Management School. He is co-author of Thinking Strategically. He has consulted for American Express, Citibank, General Re, IC-O, Merck, McKinsey, Proctor & Gamble, and RTZ, and is a principal of the Law and Economics Consulting Group.
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From Publisher
The game of business changes constantly. So should your business strategy.
When a business strategy is so new in design, a new word must be coined to capture its value. Such is the case with co-opetition, a method that goes beyond the old rules of competition and cooperation to combine the advantages of both. Co-opetition is a pioneering, high-profit means of leveraging business relationships.
The Harvard Business School's Adam M. Brandenburger and the Yale School of Management's Barry J. Nalebuff, scholars and consultants, have developed a five-part business strategy that shows how to do more than play the game of business. It shows how you can change the game of business for maximum benefit.
Though often compared to games like chess and poker, business is different. To win at chess or poker, someone has to lose. In business, long-term profitability doesn't require others to fail. And in business, people are free to change the rules, the players, the boundaries, the game itself. Intel, Nintendo, American Express, NutraSweet, American Airlines and dozens of other companies have been using the strategies of co-opetition to change the game of business to their benefit. By telling stories of these companies, and formulating strategies based on the science of game theory, Brandenburger and Nalebuff have created a book that's insightful and instructive for managers eager to move their companies into a new mindset.
Co-opetition will revolutionize the way you play the game of business.
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How much can you hope to get in a game? As we'll see, the answer doesn't depend just on the size of the pie to be divided, or notions of fairness. Nor does it depend just on how well you play. What you get depends on your power in the game as well as on the power of others who have competing claims on the pie.
Power - yours and others' - is determined by the structure of the game. Game theory shows how to quantify this power.
Game theory began as a branch of applied mathematics. It could be called the science of strategy. It analyzes situations in which people's fortunes are interdependent. Game theory provides a systematic way to develop strategies when one person's fate depends on what other people do.
Game threory sounds tailor-made for the world of business strategy. But historically, there's been an obstacle preventing the world of business from embracing game theory. The problem is that academics and businesspeople speak two different languages: equations versus experience. Many businesspeople have heard of game theory and suspect that it's a potentially powerful tool. But all the mathematics can be baffling and stops people from connecting the theory to practice. At the same time, game theorists are often unfamiliar with business practice, and some of their theories don't capture reality. Our experiences in teaching, research, and consulting suggest that communication between the worlds of game theory and business practice is both possible and valuable. This book brings theory and practice together.
In this chapter, we explain the fundamental ideas of game theory. In the rest of the book, we'll focus on the application of game theory to business strategy. Here, we're laying the foundations, trying to develop a new way of thinking. To do that, we use some deliberately simple and stylized games designed to illustrate the basic concepts of game theory. We've left out the mathematics, but the reasoning still requires close attention. If you, the reader, invest some time in this chapter, we promise you a big payoff in the chapters that follow, in which we apply these concepts to analyze and develop a wide variety of business strategies.
It's All in the Cards
To see how game theory works, we'll start with a deceptively simple game. It's a slow day at Harvard, and Adam and twenty-six of his M.B.A. students are playing a card game. Adam keeps the twenty-six black cards and distributes one red card to each of the students. The dean is feeling generous and agrees to put up $2,600 in prize money. He offers to pay $100 to anyone - either Adam or a student - who turns in a pair of cards, one black and one red.
That's the game. It's a free-form negotiation between Adam and the students. The only stipulation is that the students can't get together and bargain as a group with Adam. They have to bargain on an individual basis. Where would you expect the negotiations to end up?
We've played this game many times - with students, managers, executives, marketers, labor negotiators, and lawyers. People's first reactions are almost always the same: Adam is in the stronger position. From the students' perspective, Adam is literally holding all the cards. If they want to make a deal, they have to go to Adam. He has a monopoly on the black cards. Thus, Adam should do extremely well in the bargaining.
Are you ready now to take Adam's offer of $20?
Not so fast. Your position is more powerful than it may at first appear, so go ahead and turn down Adam's $20 offer. Perhaps you counter with a demand of $90. Don't worry if Adam rejects your counteroffer. Sit tight. Even if you and Adam can't agree on a deal right now, the game's not over.
Adam negotiates deals with each of the other twenty-five students. What happens next? Adam still has one black card left, and there is still one red card out there. It belongs to you. To make that last deal, Adam needs you just as much as you need Adam. With you and Adam now in completely symmetric positions, neither of you has an edge in this one-on-one bargaining. A 50/50 split is the most likely outcome.
By waiting, you can get $50 for your red card. Since the eventual deal will be 50/50, Adam and you might as well agree to a 50/50 deal up front. And since any student can play your strategy, the outcome is likely to be 50/ 50 all around. The game really comes down to twenty-six separate bilateral negotiations. To accomplish each deal, Adam needs the student just as much as the student needs Adam.
Barry then decides to try the same game back in New Haven. But as he stands in front of the class, it becomes apparent that Barry is not playing with a full deck: he's missing three of the black cards. An unfortunate accident, it seems. Barry plays the game with twenty-three black cards and distributes the twenty-six red cards to his students. As before, a black card and a red card together are worth $100. Where will the bargaining between Barry and his students end up? With a smaller pie to go around, will Barry and his students end up worse off than Adam and his students?
Once again, put yourself in the class. Barry offers you $20 for your red card. Would you take it, or would you hold out for more?
If you try your previous bargaining strategy, you'll be in for a surprise This time, holding out is a bad idea. Because Adam had twenty-six cards, he needed all twenty-six students in order to make all the matches. If you turned down Adam's initial offer, you could count on his coming back. But with only twenty-three cards, Barry is playing a game of musical chairs, and three students will be left out. Should you turn down the $20 and counter with $90, Barry might walk away and never come back to you. You'd end up with a red card and no cash.
What holds for you holds for everyone else. Any student who doesn't agree to Barry's terms faces the prospect of being left out. So, one at a time, the students give in. Twenty-three "lucky" students get $20 and three end up with nothing. If Barry offers you $20, take it.
Indeed, Barry could even propose a 90/10 split. There are three students who face the prospect of ending up with nothing. They'd be happy to undercut those who hold out for $20. Anyone who ends up with $10 is still lucky. For Barry, 90 percent of $2,300 is a lot better than half of $2,600.
Losing three cards was no accident. Barry was a little Machiavellian. True, he made the pie a little smaller, but he understood very well how losing three cards would change the division of the pie. He knew that getting a sufficiently large slice would more than compensate for the reduction in the size of the pie.
Just a card game? No, a strategy employed by video game giant Nintendo, which, it just so happens, was originally a manufacturer of playing cards. In 1988-89 there was a shortage of Nintendo's video game cartridges. Nintendo chose to play Barry's version of the Card Game rather than Adam's, but with one big difference - it made a lot more money than either Adam or Barry. More on the story of Nintendo in the Added Values chapter.
Sacking the Cities The National Football League (NFL) scores big by playing Barry's version of the Card Game. By deliberately restricting the number of teams in the league, the NFL ensures that there are always more cities wanting football teams than there are teams. In 1988 the St. Louis Cardinals moved to Phoenix, leaving St. Louis with a football stadium but no team. In its bid to attract a replacements, St. Louis made several overtures to teams. It didn't have much success; all it accomplished was to force cities with teams to match its generous offers. Finally, in 1995, St. Louis persuaded the Rams to move from Anaheim to St. Louis. Now Los Angeles has two empty stadiums, having previously lost the Raiders to Oakland. When the Baltimore Colts bucked Maryland and moved to Indianapolis, that left Baltimore eager to find a replacement. It took a new, publicly financed $200 million stadium and a $75-million up-front payment before the Cleveland Browns decided to make the greener pastures of Baltimore their new home. Where does that leave Cleveland? With an empty stadium.
More and more teams are now acting as free agents. With the lure of a $300-million state-of-the-art stadium and a $28-million relocation fee, the Houston Oilers want to move to Nashville. Then Houston will have - guess what - an empty stadium. Meanwhile, the Chicago Bears are thinking of moving to Gary, Indiana. The Tampa Bay Buccaneers may take a hike to Orlando. The Seattle Seahawks are considering flying the coop, as are the Phoenix Cardinals, yet again.
There are many cities chasing after not-so-many teams. That's why the teams do such a remarkably good job of negotiating stadium deals with municipalities. The teams have all the power; cities that want teams have comparatively little. As a result, even cities with teams don't see most of the benefits. A 1992 estimate put state and local government subsidies to team owners at $500 million annually. And that was when the competition for teams was only just beginning.
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Roman Rytov (MSL quoted), USA
<2007-09-14 00:00>
I took Co-opetition with me to a coast-to-coast flight hoping to start practicing a fast reading method. Brad Feld explained on his blog how he succeeds to read 8(!) books a week: "(a) no TV, (b) no kids, (c) four to six hours a night of reading, and (d) the willingness / ability to skim when things are dull". So I thought to try the method with Co-opetition and to complete it on my way from Atlanta to Palo Alto. From all the requirements only the willingness/ability to skim wasn't provided upfront. After the first dozen of pages I understood that that's not a skim-through book.
Adam and Barry made a book sharing principles of strategy, tactics, and planning carrying away your attention by clear reasoning, crystal logic, plain English, and bright examples. The book can takes it place on one's shelf next to "Good to great", "Marketing warfare", and the books of Jeoffrey Moore but unlike the latter doesn't goo too far in the academic direction. Quite the contrary, it oozes real, top brand examples, spending 90% of the text describing the stories of failure and success and only 10% devoting to formulating principles and recapping the arguments.
The book consists of two parts: the game of business and the PARTS of strategy.
The first part (about 1/3 of the book) introduces the concept of the value net reminding in a certain way Porter's five forces. The authors present a square graph with the business placed in the crossing of the diagonals and customers/suppliers and competitors/complementers taking the opposite corners of the square. The book explains the theory of balanced forces and promotes principles and approaches symmetrically applicable to the corners of the net.
The war/piece preamble breaks the concept of known in advance friends and foes. Introducing multiple perspectives the authors claim that in the modern business world everything should be viewed through the prism of the net and simple definitions don't work anymore.
The PARTS (Players, Added value, Rules, Tactics, and Scope) are the components describing the game and depending on particular circumstances and targets the components have to be re-evaluated and re-mapped.
After introducing the concept the authors in the rest of the book religiously describe each of the components bringing tens of examples following and breaking the principles (and leading to success or failure correspondingly. Bright and bold marketing strategies of great companies leading to win-win situations with competitors, customers, suppliers, and complementers captivate you and don't let skim over. For every case of success the book brings a counter-example of failure as well cementing the principle and equally teaching and convincing the reader.
Among many other topics particular attention is devoted to such as how to manage negotiations, how to deal with perceptions, how to plan prices and avoid wars, how to establish and change rules, which tactics to apply, and how to analyze scopes.
Many new ideas flooded by almost detective business examples preclude me from skimming a paragraph in the book. A great pace with which the book expounding the matter, vivid examples, clear language, and strong (at times shocking) ideas make this book a solid must for everybody who deals with building, positioning, and rolling out products or services. Highly recommended! |
David Rouse (Booklist, MSL quote), USA
<2007-09-14 00:00>
Management and organizational theorists are continually investigating new models to explain organizational behavior. Traditionally, competition has often been a component of those models, but now researchers are looking at other behaviors and using theories from other fields of study. James Moore recently proclaimed The Death of Competition (1996) and put forth a complex model based on natural ecosystems that emphasizes symbiotic, cooperative relationships. Now Brandenburger and Nalebuff, academics from the Harvard Business School and the Yale School of Management, respectively, also suggest that business strategy in today's global environment must combine competition and cooperation, but they employ mathematical game theory to make their argument. |
Library Journal (MSL quote), USA
<2007-09-14 00:00>
Losing and winning are two extremes by which businesses are often measured. Brandenburger (Harvard Business Sch.) and Nalebuff (Yale Sch. of Management) argue that most businesses and their transactions lie somewhere between the two poles. Their liberating message is that your competitor does not have to fail for you to win. Conversely, you don't have to fail either. Your failure, in fact, can hurt your competitor. It is better, the authors assert, to have both cooperation and competition. Game theory requires drawing a representation of one's customers, suppliers, competitors, and complementers. In this strategy of business as a game, the rules, players, tactics, and scope can be changed to the individual's advantage. The authors present complicated cases to illustrate their points. The writing is usually solid, but the authors went to the well too many times with some of their examples. A little variety in illustrating their ideas would have been welcome. |
An American reader (MSL quote), USA
<2007-09-14 00:00>
First of all I should state that this book is the kind that will make you ask yourself "Why have I not read it before?"! I strongly recommend it and shortly I will try to explain whom I recommend it and why.
In fact, we are not talking about some recent business book, and therefore the potential reader should not expect to see very recent cases as support to arguments discussed. But still, the issues are very systematically, clearly and simply explained, although the examples that are used to support the arguments are "old".
I met this "potential classic business book" (or maybe already a "classic business book") as I began to be interested in game theory. Therefore I can easily declare that "Co-opetition" is very appropriate for a person who would like to see solid, practical and especially business-oriented application areas of game theory. With this book, a "101 game theorist" can try and improve herself easily. But on the other hand, this doesn't mean that the only target readers of the book are the ones that are interested in game theory. The authors have achieved to develop and illustrate practical recommendations for business world by utilizing game theory concepts. So anyone who is business life will benefit from the concepts for sure.
The language and the methods of explanation are very clear, far from being complicated and straightforward. The authors have supported all the major concepts and conclusions by using real-life examples. This way, the reader has more "reasons" to learn and remember the arguments discussed throughout the book. The logical order and the simple modular approach used to lead the discussions also help the reader understand everything explained easily. Although the book is in fact a "strategy book", the reader does not have to be someone with background information on strategy. But still, if the reader already has some background in strategic analysis, then the book offers a much more beneficial and enjoyable read. On top of everything, the nice but "not-so-difficult-to-handle complexity" of game theory itself is the real pleasure of the book.
I recommend this book to college students who are to enter business life shortly, to people with active roles in strategic decision making processes of their corporations and to people who are interested in game theory but who don't want to cope with the mathematical models of it. Have a nice read. |
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