Class 1: VALUE-BASED BUSINESS STRATEGY — Brandenburger & Stuart (1996)

Overview
This paper explains how rms create and capture value through their relationships with suppliers and buyers. It
introduces the concept of added value, which measures a rm’s unique contribution to total value creation, and
outlines four strategic ways rms can increase the share of value they appropriate.
The analysis uses cooperative game theory, which focuses on how groups divide the bene ts from working together.

1. What Is Value?
In this model, value is created jointly by suppliers → rm → buyers.
Formal De nition
Value Created = Buyer’s Willingness-to-Pay (WTP) − Supplier’s Opportunity Cost (OC)
• Willingness-to-Pay (WTP):
The maximum amount a buyer is willing to pay before they would rather not buy.
• Opportunity Cost (OC):
The value of the supplier’s best alternative use of the same resources.
Example:
If WTP = $100,000 and OC = $70,000 → Value created = $30,000.
Value is created together by all three players, not by the rm alone.

2. Value Appropriation (Who Gets What?)

After value is created, it is divided through bargaining among players.
• Buyer captures: WTP − price paid
• Firm captures: price from buyer − cost of resources
• Supplier captures: price received − opportunity cost
Bargaining power determines who captures the larger share.

3. Added Value — A Firm’s Unique Contribution

De nition
Added Value = Value created by all players − Value created by all players except the rm
Added value measures how indispensable the rm is.
• If a rm has positive added value, it contributes something unique.
• If added value = 0, the rm is replaceable and cannot capture pro t.
Key Rule
Under unrestricted bargaining:
A rm cannot capture more value than its added value.
Added value is therefore the upper limit on pro t.

4. Asymmetry — The Source of Advantage

Asymmetry means any meaningful di erence between your rm and competitors that makes buyers or suppliers
prefer you.
Examples of asymmetry:
• Higher quality
• Better brand
• Lower costs
• Stronger supplier relationships
If all rms are identical, added value = 0 → no pro ts can be captured.
To capture value, the rm must be di erent from competitors in a way that matters.

5. Four Value-Based Strategies

Firms can raise their added value through four possible routes. These are the value-based strategies.
1. Raise WTP for your product (Di erentiation)
• Better quality
• Strong branding
• Superior performance or service
• Innovation
2. Lower suppliers’ OC for serving you
• Build strong partnerships
fi
fi
fi
fi
fi
fi
fi
fi
fi
ff
ff
ff
fi
fi
fi
fi
fi
fi
fi
fi
fi
fi
 • Share information better
• O er reliability and long-term stability
• Provide bene ts that other rms cannot match
3. Lower buyer WTP for competitors (Create switching costs)
• Loyalty programs
• Bundled ecosystems
• Data lock-in
• Compatibility bene ts
If switching becomes costly or inconvenient, buyers value competitors less.
4. Raise suppliers’ OC for serving competitors
• Exclusive contracts
• O er specialized tools or training
• Build trust and long-term relationships
• Become their preferred partner
This makes it more costly for suppliers to work with your rivals.

6. Market Frictions
Real markets sometimes prevent “unrestricted bargaining.”
Examples:
• Regulations
• Contracts
• Capacity limits
• High switching costs
In such cases, rms might capture more than their added value (temporarily).

7. Key Takeaways
• Pro t requires positive added value.
• Value is co-created by suppliers, the rm, and buyers.
• Strategy is about increasing your added value relative to competitors.
• Suppliers matter just as much as buyers.
• Use the four strategic levers:
◦ Increase your WTP
◦ Decrease your OC
◦ Decrease competitors’ WTP
◦ Increase competitors’ OC
ff
ff
fi
fi
fi
fi
fi
fi
 Makadok & Ross (2013) – Di erentiation Summary
Overview
This paper explains how rms can use product di erentiation to shape industry competition and improve pro ts. It
focuses on how horizontal (di erences in style/variety) and vertical (di erences in quality) di erentiation a ect rivalry,
competitive advantage, market share, and industry structure. It shows how di erentiation can legally “soften” rivalry
and increase margins without collusion.

Key Concepts
Horizontal Di erentiation
• Products di er in type, not quality.
• No universally “better” product; customers just have di erent tastes.
• Examples: Coke vs Pepsi, east-side vs west-side restaurant.
Vertical Di erentiation
• Products di er in quality; higher quality is preferred by everyone if price is equal.
• But higher quality costs more to produce.
• Examples: Walmart vs Target; economy vs premium hotel.
Customer Heterogeneity
• Customers di er in either:
◦ their taste/preferences (horizontal), or
◦ their willingness-to-pay for quality (vertical).
• More heterogeneity → more opportunities to di erentiate pro tably.
Two E ects of Di erentiation
1. Rivalry restraint
◦ Di erentiation makes products less substitutable.
◦ Price competition softens and margins rise.
◦ Helps both rms.
2. Competitive advantage
◦ A rm creates more economic value (WTP − cost) than rivals.
◦ Helps the advantaged rm but hurts the other.
Horizontal Di erentiation – Main Insights
E ects of moving away from your rival
• Positive e ect: Softens price rivalry → margins increase.
• Negative e ect: You move away from where most customers are → average “ t” worsens → competitive
position weakens.
Result
• Pro t follows an inverted-U pattern:
◦ A little di erentiation is good.
◦ Too much di erentiation hurts you more than it helps.
Market Share
• Usually declines when moving outward (away from center).
• Exception: If your rival is more e cient, moving away can reduce how badly you are hurt.
Role of customer heterogeneity
• More heterogeneity makes horizontal di erentiation more pro table:
◦ Bigger niches exist.
◦ Rivalry softens more.
◦ The optimal distance between rms increases.
Externalities
• Moving away helps your rival (positive externality).
• Improving e ciency hurts your rival (negative externality).
Competitive vs cooperative positioning
• Competitive:
◦ Firms under-di erentiate and over-invest in e ciency.
◦ Outcome may be duopoly or one rm may become a monopolist.
• Cooperative (“smart competitors”):
◦ Firms di erentiate more and invest less in e ciency.
◦ Industry pro ts increase.
◦ Can resemble legal, tacit market splitting.
ff
ff
fi
fi
ff
ff
ff
ff
ff
ff
ff
ff
fi
ffi
fi
ff
ff
ff
ff
ff
ff
fi
fi
ff
ff
fi
ffi
fi
ff
ffi
ffi
ff
ff
ff
fi
fi
ff
ff
fi
ff
ff
fi
 Vertical Di erentiation – Main Insights
E ects of changing quality
High-end rm (H):
• Increasing quality both:
◦ strengthens competitive advantage (to a point), and
◦ increases rivalry restraint by moving farther from L.
• Pro t e ect is inverted-U: too low is bad, too high is too costly.
Low-end rm (L):
• Increasing quality helps via competitive advantage but hurts rivalry restraint (moves it closer to H).
• If customer heterogeneity is high, upgrading quality becomes unpro table.
Market Share
• Moving toward rival’s quality increases share.
• Moving away decreases share but softens rivalry.
Customer heterogeneity
• High heterogeneity:
◦ H moves upmarket; L moves downmarket.
◦ Both earn higher margins.
◦ Extreme case: L becomes minimal-quality, high share; H becomes niche premium.
Cooperative quality choices
• Best joint outcome is “cooperative monopoly”:
◦ L chooses intermediate quality and serves the entire market.
◦ H moves so far upscale that no customers buy it.
◦ Joint pro ts can be very high.

Managerial Takeaways
• Di erentiation a ects both rivalry and competitive advantage.
• Horizontal & vertical di erentiation can structure the industry in pro table ways.
• Firms may rationally under-di erentiate because they ignore positive externalities on rivals.
• Customer heterogeneity determines how much di erentiation makes sense.
• Cooperative or tacitly aligned di erentiation leads to higher margins and less need for e ciency arms races.
• Di erentiation ≠ Di erentiation Advantage — being di erent is not enough; it must also increase (WTP − cost).
ff
ff
ff
fi
ff
fi
fi
fi
ff
ff
ff
ff
ff
ff
ff
ff
fi
fi
ffi
 Collusion and Price Wars — Summary Notes
1. What Is Collusion?
Collusion occurs when rms coordinate actions—usually prices or output—to raise pro ts above competitive levels.
• Explicit collusion: direct agreements (cartels). Illegal in most countries.
• Tacit collusion: indirect coordination (no explicit agreement), often through focal prices or repeated
interactions.

2. Why Firms Want to Collude

Under Cournot or Bertrand competition, industry pro ts are lower than monopoly pro ts.
Firms therefore seek ways to jointly increase market power and avoid price wars.

3. Collusion in Repeated Games (Key Theory)

A single-period (one-shot) Bertrand game leads to price = marginal cost → zero pro t.
In a repeated game, rms can sustain collusion using trigger strategies:
Strategy:
• Charge monopoly price Pᴹ as long as rivals do.
• If someone deviates (undercuts), punish by charging P = MC forever.

4. Discount Factor δ and Collusion Condition

The discount factor δ measures how much rms value the future.
Collusion is sustainable if:
δ ≥ 1/2
Meaning: rms must care enough about the future that losing future pro ts is worse than the short-run gain from
cheating.
δ increases when:
• Firms interact frequently
• Demand is growing
• Industry is stable (low chance of collapse)
• Interest rates are low
δ decreases when:
• Industry turnover is high
• There is nancial distress
• The future is uncertain

5. Why Collusion Is Rare in Practice

Even though δ ≥ 1/2 is often satis ed in theory, real collusion is di cult because of:
1. Antitrust enforcement
Explicit collusion is illegal; even tacit collusion is monitored.
2. Demand uctuations
Low sales may be misinterpreted as cheating → unintended price wars.
3. Imperfect observability
Firms can secretly cut prices (e.g., negotiated contracts), making cheating detection hard.
4. Firm asymmetry
Di erent costs or market shares make it harder to agree on prices and pro t splits.
5. Short-term pressure
Managers may prioritize immediate gains → increases incentive to cheat.

6. Price Wars
Price wars happen even with collusive incentives.
Causes:
• Demand volatility ( rms can’t tell if rival cheated or demand just fell)
• Strategic pricing by stronger rm (e.g., Murdoch cutting Times prices; Google cloud price cuts)
• Financially weak rm initiates a price war due to low δ
• Punishments inside collusion (to re-establish discipline)
Price wars are sometimes necessary to maintain collusion when monitoring is imperfect.

7. Factors That Facilitate Collusion

ff
fi
fi
fl
fi
fi
fi
fi
fi
fi
fi
fi
ffi
fi
fi
fi
fi
fi
1. Market Structure
• Few rms → easier coordination
• Similar rms (symmetry) → easier agreement
• Frequent repeated interaction → easier monitoring
2. Multimarket Contact
When rms meet each other in several markets, incentives to cheat shrink because cheating in one market can be
punished in others.
Examples:
• US airlines overlapping on many routes
• Dog food industry (Quaker vs Ralston Purina)
3. Institutional Factors
Most-Favored-Customer (MFC) clauses
• Firm promises not to o er lower prices to others
• Makes price cuts costly (must match discount for all customers)
• Supports collusion by reducing incentive to undercut
Price transparency
Publishing prices can increase collusion, not reduce it, because monitoring becomes easier.
Example:
Danish ready-mixed concrete market—price publication → easier coordination → higher prices.

8. Key Examples from the Chapter

• De Beers diamond cartel (stockpiling, marketing control)
• Railroad Joint Executive Committee (1880–1886)—price wars triggered by demand shocks
• Large turbine generators (GE & Westinghouse)—MFC clauses supported stable high prices
• Danish ready-mix concrete—public price posting helped collusion
• Dog food industry multimarket rivalry—aggressive attacks across product segments

9. Final Takeaways
• Collusion is theoretically easy to sustain but practically hard due to monitoring issues, asymmetry, and legal
barriers.
• δ ≥ 1/2 is the fundamental requirement.
• Price wars may occur within collusive frameworks as part of punishment or due to misinterpreted signals.
• Collusion is easier when there are few rms, similar rms, multimarket contact, and institutional
mechanismsthat reduce incentives to undercut.
• Transparency (public price posting) can strengthen collusion by improving monitoring.
fi
fi
fi
ff
fi
fi
The Rules of Co-opetition — Summary Notes Brandenburger & Nalebu (HBR 2021)

1. What Is Co-opetition?
Co-opetition = a strategy where rms compete and cooperate at the same time.
Rivals work together where it expands the pie, and compete where they can win share.
Examples:
• Apple & Samsung
• UPS & DHL
• Ford & GM
• Apple & Google (Covid contact-tracing API)
Cooperation can help rms:
• Share costs,
• Spread risk,
• Access each other’s strengths,
• Build bigger markets.
Before cooperating, rms must analyze:
1. What happens if we don’t cooperate?
2. Will we be giving away our secret sauce?
3. Are there antitrust risks?
4. How should we structure the deal?
5. Do we have the right mindset and organization for co-opetition?

2. Step 1 — What If We Don’t Cooperate? (The Outside Option)

Honest Tea & Safeway (Yes)
• Safeway wanted an organic private-label line.
• If Honest Tea refused, Safeway could ask Tazo instead.
• Honest chose to cooperate but shaped the private-label avors so they competed with Tazo, not Honest.
Honest Tea & Whole Foods (No)
• Whole Foods wanted a clone of Honest’s top avor (Moroccan Mint).
• Honest believed rivals couldn’t easily copy that avor.
• Cooperation would damage Honest’s core brand → Honest declined.
UPS & DHL
• DHL wanted UPS to y its US packages.
• If UPS refused, DHL might go to FedEx.
• UPS cooperated because it used spare capacity and avoided strengthening FedEx.
Samsung & Apple
• Samsung debated selling its best OLED screens to Apple.
• If it said no, Apple might help LG/BOE improve.
• Samsung said yes → earned ~$110 per iPhone X screen + gained scale.
Key rule:
Don’t compare cooperate vs do nothing — compare cooperate vs rival cooperates with someone else.

3. Step 2 — Will You Give Away Your “Secret Sauce”?

Your “secret sauce” = your special advantage (tech, IP, manufacturing know-how, data).
Four Categories:
1. Neither side risks secret sauce
Cooperation increases the size of the pie without shifting power.
Example: Apple & Google’s Covid exposure-noti cation standard.
2. Both have secret sauce; sharing helps both vs other rivals
• Ford & GM transmission cooperation
• Ford & VW in Argo AI
Each contributes something strong; both strengthen themselves against external competitors.
3. One strong platform + many weaker partners
Example: Amazon Marketplace
• Merchants join because they need access to customers.
• But collectively they strengthen Amazon as a competitor.
• Creates a collective action problem + antitrust attention.
4. Renting out secret sauce to reach another’s customers
Example: Google supplying search ads to Yahoo (blocked by DOJ).
• Can be pro table but risky (dependency, antitrust, strategic leakage).
fi
fi
fl
fi
fi
fl
fl
fi
fl
ff
 • Extreme case: space cooperation between nations risks security spillovers.

4. Step 3 — Check Antitrust Risk (Is It Good for Consumers?)

Regulators accept cooperation that clearly helps customers:
• Lower prices,
• Better quality,
• More innovation,
• Bigger markets (e.g., EV charging stations).
They block deals that:
• Reduce competition in core markets,
• Create dependency that weakens long-run consumer choice.

5. Step 4 — Structuring the Partnership

Scope & Control
• Best when cooperation is limited to a speci c function or area.
• Avoid giving control of mission-critical operations to a rival.
• Use contingent contracts to protect against failure or underperformance.
Dividing Bene ts and Costs
Cooperation is win-win overall, but splitting gains is zero-sum.
Examples:
• Airline IROP agreements broke down because one airline received much more help than it gave.
• Ionity EV charging network (BMW, Daimler, Ford, Hyundai, Kia, VW):
Costs split in proportion to unit sales — simple and workable even if imperfect.
Principle: Use simple, transparent rules to get deals done.

6. Step 5 — Mindset and Organizational Challenges

Overcoming Zero-Sum Thinking
Managers often think: “If my rival wins, I lose.”
Co-opetition requires pie-expanding thinking.
Example:
• Steve Jobs restored cooperation with Microsoft in 1997 → helped save Apple.
Avoiding Resistance from Smaller Players
If cooperation bene ts big players but hurts small ones, small players can block change.
Example:
• Large US banks wanted digital check clearing; small banks resisted.
• After 9/11, they found a solution bene ting both sides → Check 21 Act.
Structuring Around Rivalry
Sometimes keeping units separate helps:
• Apple could sue one Samsung division while buying screens from another.
• Ford kept Argo AI separate so VW would be comfortable investing.
Choose the Right People
Need managers who can hold two ideas at once:
• Compete ercely,
• Cooperate rationally where it makes sense.

7. Final Takeaways — The Rules of Co-opetition

1. Analyze all outside options — especially what happens if your rival partners with someone else.
2. Map out secret sauces — know what each side contributes and what risks sharing creates.
3. Check antitrust — is the cooperation clearly good for customers?
4. Design scope & control wisely — limit dependence, use contingent contracts.
5. Split gains simply and fairly — perfection slows progress.
6. Address mindset & internal resistance — cooperation must feel safe.
7. Think strategically — co-opetition can solve big problems and create new markets.
fi
fi
fi
fi
fi
Why Some Platforms Thrive and Others Don’t — Summary Notes Zhu & Iansiti (HBR 2019)

1. Big Idea
Not all platforms with “network e ects” become pro table or dominant. Some scale massively (Uber, Didi, Meituan)
but still lose money, while others (Taobao, Amazon, Airbnb) thrive.
Zhu & Iansiti argue that platform success depends on ve network properties:
1. Strength of network e ects
2. Network clustering
3. Risk of disintermediation
4. Vulnerability to multi-homing
5. Ability to bridge across multiple networks

2. Property 1 — Strength of Network E ects

Network e ects = platform becomes more valuable as more users join.
Not all network e ects are equal
• Strong e ects: Facebook
◦ More users → more content → more engagement → more advertisers.
• Weak e ects: Video game consoles
◦ Players only need a few hit games.
◦ A new console with technical advantages and a few top titles can win market share.
Network e ects can weaken over time
• Windows example:
◦ 1990s: strong due to millions of Windows-only apps.
◦ Web apps reduced dependence on Windows → weaker e ects → allowed iOS, Android, Mac to grow.
Platforms can engineer stronger e ects
• Amazon:
◦ Reviews (same-side e ects)
◦ Third-party sellers (cross-side e ects)
◦ Recommendation algorithms (learning e ects)

3. Property 2 — Network Clustering

A network is clustered if users mostly interact in local or isolated groups.
Ride-hailing = highly clustered
• Users in Boston only care about drivers in Boston.
• Local clusters → easy for competitors to enter city by city.
• Result: intense, local battles (e.g., Uber, Didi, Lyft, local entrants).
Airbnb = more global network
• Travelers search globally, not locally.
• Hosts attract travelers from everywhere.
• More integrated → harder for rivals to compete.
Strengthening global links
Platforms can reduce clustering by adding global layers:
• WeChat/Facebook adding public accounts
• Craigslist integrating search across cities

4. Property 3 — Risk of Disintermediation

Disintermediation = buyers and sellers meet on the platform, then transact o -platform, bypassing fees.
High-risk example: Homejoy
• Cleaners + homeowners often reconnected directly.
• Platform lost repeat revenue → shut down in 2015.
Platform strategies to address disintermediation
A. Restrict communication
• Airbnb hides exact address and contact info until after booking.
B. Add value beyond matching
• Insurance, dispute resolution, payments, escrow, reputation.
• But increased trust can also accelerate o -platform connections.
C. Change revenue model
• Thumbtack: charges for leads, not completed jobs.
• Taobao: no transaction fees; earns through ads and seller services.
ff
ff
ff
ff
ff
ff
ff
ff
ff
ff
ff
ff
ff
fi
fi
ff
ff
 ◦ Allowed faster growth and crushed eBay in China.
• ZBJ: shifted from commissions to high-value complementary services like trademark registration.
Key point:
When disintermediation risk is high, charging fees per transaction is risky. Monetize complements instead.

5. Property 4 — Vulnerability to Multi-Homing

Multi-homing = users participate on multiple platforms simultaneously.
Examples
• Drivers use Uber + Lyft.
• Merchants use multiple group-buying or food-delivery sites.
• App developers build for both iOS + Android.
Consequences
• Hard to lock in users or providers.
• Platforms must o er subsidies, incentives, and discounts.
• Pro ts drop.
Platform responses
• Uber/Lyft: bonuses for completing rides without logging o .
• Groupon: blurred merchant performance numbers to reduce merchant multi-homing (but increased consumer
multi-homing).
• Video game consoles: exclusive games + high switching costs reduce multi-homing.
• Amazon: ful llment and Prime bene ts reduce multi-homing on both sides.

6. Property 5 — Ability to Bridge Multiple Networks

Platforms thrive when they connect multiple networks and reuse data, users, and infrastructure.
Alibaba example
• Alipay integrated with Taobao/Tmall → trusted payments
• Alipay data fed into Ant Financial → credit scoring + loans
• Loans → higher spending and more merchant inventory
• Networks reinforce each other
Amazon example
• Retail → Prime → AWS → devices → logistics
• Shared data + infrastructure increases resilience and power.
Key insight:
Platforms that bridge multiple networks create stronger defensibility and higher pro t potential.

7. Final Takeaways
A platform’s success depends on more than size. Managers must analyze:
• How strong are our network e ects?
• Is our network global or fragmented?
• Will buyers and sellers bypass us once they meet?
• Can users multi-home easily?
• Can we leverage our users/data to expand into new networks?
Platforms like Uber, Didi, and Meituan face:
• Highly local networks,
• High multi-homing,
• Disintermediation risks,
• Limited successful network-bridging (so far).
Platforms like Amazon, Alibaba, Airbnb succeed because they build:
• Stronger network e ects,
• More integrated networks,
• Sticky value-added services,
• Cross-market advantages.
fi
fi
ff
ff
ff
fi
ff
fi
Co-opetition — Chapter 2 Summary

1. Main Idea
This chapter introduces complements and the Value Net.
Key message:
Companies should not focus only on ghting competitors—working with complementors is often the best way to
grow the total market (“expand the pie”).
Complements are powerful because they increase the value of your product and boost demand for everyone in the
system.

2. What Is a Complement?
A complement is something customers use with your product that makes your product more valuable.
Examples:
• Chips software (Intel & Microsoft)
• Cars roads, loans, insurance
• Tires Michelin travel guidebooks
• VCRs movie rentals
• Fax machines phone lines
• Movie theaters video rentals
• Wine dry cleaners
Complements create more customer value and increase industry demand.

3. Complements in the Auto Industry

The chapter uses the auto industry to show how complements determine success:
Roads
Early automakers helped fund the Lincoln Highway.
More paved roads → more car sales.
Loans (GMAC, Ford Credit)
Cars are expensive. Financing is a complement that increases car demand.
For decades Ford earned more pro t from nancing than from selling cars.
Insurance
Essential complement—people won’t buy cars without it.
Michelin Guides
Michelin created travel guidebooks to encourage people to drive more → more driving → more tire wear → higher tire
sales.
Used-Car Market (La Centrale)
Added complementary services (insurance, nancing, warranties, data).
Bundling complements strengthened the entire ecosystem.
Missing Complements cause failure
No parts or service → Alfa Romeo & Fiat failed in the US.
Betamax had fewer rental movies → VHS won.
Downtown retail lacked parking → malls dominated.

4. Intel’s Complement Strategy

Intel invests heavily in creating complements (e.g., ProShare video conferencing) to increase demand for faster chips.
Intel coordinated with:
• Phone companies (to promote ISDN lines),
• PC makers like Compaq (to package the system).
Complementors helped Intel drive new demand for high-performance processors.

Continued Below………
fi
fi
fi
fi
5. The Value Net Framework
A Value Net maps all key players:

Customers
▲
│
Competitors ◄── Company ── Complementors
│
▼
Suppliers

De nitions
• Complementor: A player whose product makes your product more valuable.
• Competitor: A player whose product makes your product less valuable.
This perspective is customer-centric, not based on traditional industry lines.

6. Competition Is Broader Than Industry Lines

Firms compete across industries whenever they solve similar customer problems.
Examples:
• Videoconferencing vs airlines (substitutes for business travel)
• Microsoft e-money vs banks
• Telecom providers vs cable networks
• Banks vs insurance rms in Europe
Competition is not limited to your industry.

7. Suppliers Can Be Complementors Too

Suppliers may strengthen or weaken your position.
Examples:
• Compaq and Dell compete for customers but are both complementors for Intel (they both increase demand for
Intel chips).
• Airlines compete for passengers but are complementors for Boeing.
• US defense programs complement each other by sharing avionics costs. Cutting one program increases costs
for others.
In industries with high xed R&D costs (drugs, software, planes), supplier-side complementors are even more
important.

8. Two Important Symmetries

1. Customers Suppliers
Both help create value. “Customer is always right” is incomplete—employees matter equally.
2. Competitors Complementors
They are mirror opposites: one decreases your value, one increases it.
Understanding these symmetries prevents strategic blind spots.

9. Universities Example (Mapping a Value Net)

Customers
Students, parents, donors, companies, governments.
Suppliers
Faculty, sta , administrators, publishers.
Competitors
Other universities, nonpro ts competing for donors.
Complementors
K-12 schools, computers, housing, airlines, local employers, restaurants, cultural institutions.
Universities succeed when their complement network (housing, transportation, local businesses, culture) is strong.

10. Players Can Have Multiple Roles

Players can be customers, suppliers, competitors, and complementors at the same time.
Examples:
• AT&T & Motorola: buy from each other, sell to each other, compete in phones.
fi
ff
fi
fi
fi
►
 • Museums (MoMA & Guggenheim): compete for visitors but lend each other art.
• Government: acts as customer, supplier, regulator, complementor, competitor.

11. The Jekyll & Hyde Mistake (Bias Toward Seeing Threats)
Firms often misidentify complementors as competitors.
Examples:
• VCR → studios feared piracy → but rental market increased pro ts.
• Computers → expected to reduce paper → increased paper demand.
• Bookstores feared online sales → online reviews increased book demand.
• Citibank refused ATM network participation → lost share.
Lesson:
Don’t mistake a complementor for a competitor. Look at how the product a ects customer value.

12. Why Competitors Cluster Together

Competitors cluster because together they attract more customers:
Examples:
• Diamond districts
• Car dealership clusters
• Broadway theaters
• Art districts
Clusters make markets bigger. Competitors are often mutual complementors in bringing tra c.

13. Final Message — Co-opetition

Every business relationship includes:
• Cooperation (peace) → creating the pie
• Competition (war) → dividing the pie
Success requires balancing both.
This chapter sets up the mindset needed to apply the full Co-opetition framework.
fi
ff
ffi