Finding Partnerships That Will Benefit Both Parties
Strategy frequently has a competitive foundation. What are they doing in opposition? What effects will it have on your company? How do you keep up with your competitors?
Cooperation, or rather “co-opetition,” is given far too little time. Alternatively, cooperative business relationships that can aid both you and your partners in achieving strategic success.
This article examines the Value Net Model, a device that can assist your company in shifting away from a “kill or be killed” mentality and toward a more collaborative and cooperative approach.
Co-opetition: What Is It?
Co-operative competition is referred to as co-opetition. Here, businesses collaborate in ways that boost their mutual competitiveness.
There are numerous instances of profitable “co-opetition” in business. For instance, in 2020, the pharmaceutical company Pfizer and the biotech business BioNTech teamed up to jointly develop a COVID-19 vaccine. The collaboration accelerated development and distribution, allowing the vaccine to successfully launch at the end of 2020. Additionally, they have expanded their collaboration to supply hundreds of millions of vaccines all across the world.
You do not, however, have to be a major player in the sector to profit. Additionally, co-opetition is a particularly effective tactic for agile start-ups. Working cooperatively with other businesses develops methods for efficient scaling, increases the power of smaller businesses, and facilitates broader market access.
The Value Net Model: What Is It?
Adam Brandenburger and Barry Nalebuff created the Value Net Model, which is seen in figure 1 below, and they later included it in their 1996 book Co-Opetition. [1]
The model aids in identifying the major players in your industry as well as the interdependencies you have with them.
The Value Net Model, Figure 1.
The model shows how your company is interdependent on four other major players, including: -Customers, or the people who use your product or service.
Suppliers are businesses or people who give you the materials you need to make a product that can be sold. Suppliers can be internal team members or external companies.
Competitors are other businesses who snag a piece of your target market by providing a comparable good or service.
-Complementors are other players who offer a good or service that you may link to your own to attract customers to both of your services.
The Value Net Model’s Advantages
The symmetries between these four important players can be brought to light using the Value Net Model.
For instance, the vertical dimension is where both customers and suppliers are located. Raw materials and labor move from the supplier to the business, where they are transformed into goods and services, then they move on to the client.
For the business to be successful, it needs both customers and suppliers. But while most businesses recognize the importance of hearing what customers have to say, they frequently undervalue the importance of hearing what suppliers have to say.
The horizontal dimension between rivals and complementors holds true in a similar way. Frequently, businesses base their strategy solely on what their rivals are doing, but they pass up important chances to network and develop with possible complementors. Your strategic decisions will be improved by eliminating these blindspots.
You may better grasp each player’s distinct viewpoints by using the Value Net Model. For instance, when you create the Value Net Model for your own business, you center yourself. You might, alternatively, create the model with your clients at the middle. This type of perspective change can assist you in identifying fresh chances for development.
Additionally, you can discover that some players play multiple roles on the web. By negotiating large reductions with a crucial supplier or client, for instance, you and your biggest rival, who are currently competitors, could transform into complementors. Cooperatives, for example, engage in this kind of activity.
Application of the Value Net Model
Brandenburger and Nalebuff advise combining their PARTS method with the Value Net Model to design your plan. Players is what PARTS stands for:
– Added benefit.
– Rules.
– Tactics.
– Scope.
Let’s examine each of these components in more detail and talk about how you may use it in your own organizational plan.
Step 1: Determine the Players
The Value Net Model should be used to identify the major figures who have an impact on your company. List the individuals and groups that make up each of the groups the model has detected.
Examine the players you’ve named. Remember that you are a player in the market because of your own involvement, and think about the following:
– Are there any chances for cooperation or rivalry in any of these connections?
– Would adding more participants (such extra suppliers or new clients) result in greater advantages?
– Who would profit from a strategic alliance with you? If their gain was substantial enough, would any of these players offer you money to join them?
Who is the loser? If their loss was significant enough, would any of these players offer you money to prevent them from banding together?
Step 2: Calculate Added Value
The contribution that each employee makes in each function is measured by added value. This makes it easier for you to recognize those in positions of authority and inspires ideas for how you may improve the value you offer other people.
Determine the areas where your firm adds value to determine how much.
How distinctively useful is your product to the market, and how sustainable is this? That is, what is your USP?
Supply and demand: Is it possible to grow without adding more or unneeded capacity in order to satisfy rising demand?
Can you cut expenses in a way that produces a better product, or can you produce a better product in a way that lowers costs? Is it possible to increase costs without lowering customer willingness to pay in order to produce a superior product?
– Gifts you give (or could provide) to suppliers or customers as a “thank you.” When presenting prizes, (take care not to break local or national bribery laws.)
– Increasing supplier or consumer loyalty.
Consider the increased benefits that the other participants that you mentioned in Step 1 will receive as well, and consider how you might partake in these benefits.
Step 3: Establishing Rules
There are established and unwritten “rules” that must be obeyed in every sector. When formulating your plan, consider which of the following:
– Assist your company.
– Limit what your company can accomplish.
– Could be modified to benefit clients and customers.
– Changes that would benefit both parties could be made to your supplier agreement.
It is obvious that some laws cannot be altered. But if it helps you better define your plan, it can make sense to alter others. The competitive game can be drastically altered by even minor adjustments to specific rules.
Step 4: Determine the tactic
Each participant in the Value Net Model has a unique perception of your company. Your business techniques are built on how you mold and control these impressions. Consider these inquiries to learn more about how people view you:
How do you feel you’ve built a solid reputation in your industry? To increase your credibility and add value, may you provide more assurances, risk-free trials, or performance contracts?
– Are the acts of your company predictable or unpredictable? Would you be able to respond if a rival business decided to “take you on” by providing better products or services or more affordable prices, or would you have a backup plan?
– How do your customers view your business? For a deeper understanding of their perspectives, use the Perceptual Mapping tool.
– Is the price of your good or service straightforward, or is it more complicated? How might changing from simple to complex, or from complex to simple, affect how other people perceive you and your company?
Analyzing how much you’re spending on branding and advertising is another method to look at techniques. Spending more frequently indicates that you are more confident in your good or service. What opinions in your market may change if expenditure rose (or fell)?
Step 5: Define the scope.
The boundaries of your business or market are likely the best way to define scope, although these can be expanded by connecting to other markets or engaging in “co-opetition.”
The objective of the final phase is to locate those interconnections and determine whether expanding the scope would be advantageous or if you should cut off current connections to redraw your borders.
Major Points
The Value Net Model was created by Adam Brandenburger and Barry Nalebuff and published in their 1996 book “Co-Opetition.” The approach aids in locating the main figures among your suppliers, rivals, complementors, and clients.
The approach is unique in that it promotes collaboration with other participants to increase your market and, eventually, achieve strategic success through relationships that are win-win for both parties.
The PARTS technique can be used to implement the Value Net Model.
1. Identify Players is what PARTS stands for.
2. Determine the added value.
3. Establish Rules.
4. Recognize the tactic.
5. Define the scope.
If you found this article insightful, you might also be interested in exploring these topics further. Here are five articles that could capture your attention:
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- Essential Competencies for Managing a Team – Understand the key skills and competencies required for effective team management.
- Providing for Your People – Explore strategies to support and nurture your team members’ development.
- Mentoring – Gain insights into the art of mentoring and how it can benefit both mentors and mentees.