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Cooperation

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					Cooperation
By Terrance Power
Number of Words (838)
There are some things in life that go together – they complement each other. To have one
without the other is simply a travesty. It can be much the same in business.

Business language is full of military metaphors and clichés, such as “capturing” the market or
making a “killing.”

Cooperation is a term not usually associated with commerce. However, the changing nature of
business has forced entrepreneurs to recognize the need for a balance between competition and
cooperation.

There are two approaches we can consider as illustrative of a cooperative approach: Co-opetition
and Partnerships.

Adam Brandenburger and Barry Nalebuff clearly describe the concept of cooperation or co-
opetition between businesses in their book Co-optetition.

According to Brandenburger and Nalebuff, in the new business model of cooperation, co-
optetition seeks to provide complementary products and services - that is a good or service that
makes other goods or services more attractive to the consumer. Computer hardware and software
products are complements as are hot dogs and mustard, cars and car loans, cable television and
the TV Guide, the Internet and high-capacity digital phone lines. These are products and services
that complement one another.

When businesses enter new markets, attention to complementary firms and organizations is
critical. Without key complements, the market may never take off. In established markets,
attention to complements is less dramatic but can still provide your business with increased value
if you can make your complementary product or service more attractive to the consumer.

Old mental model business strategies largely focus on the competition - the ongoing battle
between Coke and Pepsi is a classic example. This undermines the notion of the complement.
There isn‟t even a word to describe providers of complementary products. So Brandenburger and
Nalebuff have created one - complementor - the natural counterpart to competitor.

You probably know a lot about your competition. What do you know about your complementors?
Do you even know who your complementors are? Even a great product can sit on the shelf unless
key complements are accessible to the consumer. Consumers may not see the value of a product
that meets one aspect of their need, without the availability of complements to ensure that all
aspects of the need are met. You have to work co-operatively with others to ensure that
complements exist in a way that best addresses consumer need – or create a complement
yourself.

The high tech sector is by necessity co-operative in developing complementary products and
services. Intel, one of the world‟s leading computer chip manufacturers, understands this and
sets an example for every business. The company's engineers continually develop more powerful
computer chips. The computer chip is a very small but critical part of a larger system. Staying
ahead of the competition is not enough. Intel must stay in sync with advances made by the


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producers of the larger systems and their other components in order to ensure market demand for
its next-generation computer chips. Similarly, they are quick to recognize opportunities in the
technology that drives the industry. So, Intel is constantly on the lookout for complementors. For
example, it has developed a partnership with MCI to provide increased bandwidth for networks,
ensuring a stage on which its powerful chips can perform. It is also working with computer game
developers to create complex interactive web-based games that will require computers containing
the latest Intel computer chip to operate.

Intel is even venturing beyond the computer industry to ensure that other complementors such as
Proshare, a company that develops videophone products, are successful. Intel has invested over
$100 million in Proshare. Why? As desktop video conferencing grows, upgrading to Intel's latest
chip becomes a necessity, not a luxury.

Let‟s look at the automobile industry for moment. At the turn of the century, the car was a
technological revolution. The value of a car and the demand for its use was severely limited by
the lack of essential complementary products such as roads, gas stations and mechanics. The
fledgling automakers did not leave the development of these markets to chance. They worked
with complementors such as the Canadian Automobile Association in promoting highway
construction.

Some complementors to the automobile, such as banks and financial institutions, already existed
and provided car loans. The dealership credit managers could arrange for your bank financing
when you bought your car – i.e. they work directly with the banks.

When you become a complementary business you must consider return on investment from a
different point of view. The profitability of two complementors cannot be viewed in isolation.
Nor can you expect only one complementor to be profitable.

The question you should ask yourself is whether or not you are maximizing the combined
profitability of the two complementary businesses. For example, subsidizing Proshare makes
sense for Intel because future increased sales of Intel computer chips will more than make up for
any losses associated with Proshare.

Starbucks located in bookstores. WhiteSpot Triple „O‟ at gas stations. Managing complements
is a part of the new smart way of doing business, one with endless possibilities.



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posted:9/17/2011
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