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The words we use influence how we think. For example, when we think about business, most of us would probably say "Business is War." A company has to capture the market, beat the competition, make a killing, bury the competition. Using this metaphor, we have a whole vocabulary of winners and losers. Yet, in reality, that's often misleading. We may think there will be victors and vanquished in a price war, but in the end, no one wins.
At the other extreme, when we consider the importance of partnerships, alliances, working together, listening to the customer, and working with suppliers, it would seem that a more appropriate metaphor might be "Business is Peace." But that can't be right either, because we know there is conflict with rivals over market share, conflict with customers over price, and conflict with suppliers over cost.
If "business-as-war" is wrong, and "business-as-peace" is too simplistic, what's the right mindset? It's War and Peace - simultaneously. Creating value, a bigger pie, is fundamentally a cooperative activity involving customers and suppliers that a company can't accomplish alone. On the other hand, the act of dividing up the pie is fundamentally competitive.
A company has to keep its eye on both balls, creating and capturing, at the same time. We have chosen to call this "co-opetition," because it combines competition and cooperation.1
For example, in Columbia, S.C., the local newspaper, The State, has lost market share to (USA Today. The State tried cutting prices, adding more color, including more local news-all in an effort to keep its share of the pie. What the paper's executives really needed to do was find ways of creating more pie and getting a slice of that bigger pie. The State's large Sunday edition requires 50 percent greater printing capacity than its weekday edition. Thus, some of its presses sat idle for most of the week. USA Today doesn't have a weekend edition. The co-opetition solution: The State now prints USA Today during the week using its Sunday printing presses. While the two papers compete for customers and advertisers, they have found a way to cooperate in creating a larger pie.
Using Game Theory as a Tool
In traditional economics, markets are fixed; companies set prices, and customers...