Why a spirit of cooperation will take you further than a competitive one.

Business is a team sport

If we think of business as a game, how do we know how best to win? We’re used to competition—from the sports we play as kids to competition in the marketplace. At the risk of offending all of you who keep a copy of The Art of War in your back pocket, science now tells us that fighting and competing for business don’t always work to our advantage. When we use only that mode of thinking, we’re cheating ourselves of some excellent opportunities to innovate, collaborate and focus not on who we need to beat, but on our own unique value to our consumers.

The traditional view of business is that our competition is everywhere—we compete for rank inside of our organization, and we compete in the marketplace with other providers of the same product or service. We are at war. That idea is changing.
We need to start focusing less on fighting for the small slice, and more on creating a bigger pie. In this new era of shared information, running an organization is about collaboration, cooperation and “co-opetition.”

There are some great thinkers out there coming up with new ways to play the game of business, and their ideas are firmly linked to a new branch of mathematics: game theory.

Game Theory

Game theory is a branch of mathematics with direct applications in psychology, economics and sociology. The theory was first developed by mathematician John von Neumann. Later contributions were made by John Nash (of A Beautiful Mind fame), A. W. Tucker and others.

Game-theory research involves studies of the interactions among people or groups of people. Because people make use of an ever increasing number and variety of technologies to achieve desired ends, game theory can be indirectly applied in practical pursuits such as engineering, information technology and computer science.

Game theory enables us to model complex social interactions—like markets and capitalist-based businesses—through computer simulation. What game theorists have found about behavior is that cooperation is often the backbone of a well-played game.

Here’s an example. In a tournament, computer programs were allowed to “interact” with each other as a simulated society. Upon each interaction, the programs would “decide” whether to cheat or cooperate. Each program would then get a score. The winning program was called “Tit for Tat,” and its strategy was very simple. On its first encounter with any program, it would cooperate. On any subsequent encounters, it would replicate what the other program had done on the previous occasion. Tit for Tat would reward cooperative behavior with its own cooperation, and would punish cheating with cheating. Finally, after many iterations of the game, Tit for Tat ended up creating the most stable, cooperative relationships in the computer “society.”[1]



Adam Brandenburger and Barry Nalebuff’s bestseller, Co-Opetition, takes recent developments in game theory and applies the thinking to business. The key takeaway? That business is not as simple as the old war metaphors we tend to use. There are new ways of thinking about the marketplace—particularly as an opportunity to cooperate, even with our competition. This doesn’t mean that we lose our competitive genes along the way—just that we collaborate to acquire resources (capital, customers, employees, etc.) and compete when we divide them up. Test out their thinking with your own game play at their companion site to their book.

A good example? Your basic strategic alliance between a real-estate broker and a mortgage broker is one. Another is an industry consortium that lobbies on behalf of the interests of all involved stakeholders. Yet another might be the mutual dependence of Apple and Microsoft—each using technology from the other to build their own market share.



The most successful team game-players are the ones who do not steal/cheat/exploit, but those who inspire others through positive example, rather than force; and who collaborate effectively, particularly inside their own affinity group. In evolutionary terms, the strategy of cheating, exploiting others and resources, and not transcending our selfishness, is a losing game.

Robert Wright’s books on evolutionary psychology, Nonzero and The Moral Animal, demonstrate that in ecosystems, collaboration is what assists species to survive rather than become extinct. In a biological sphere, man to man, ape to ape, that behavior will lead to its extinction. The group ends up eradicating the bad behavior. For example, take a chimpanzee who eats too much food, picks fights, hoards and ignores the needs of the group. The next time that chimp is starving or hurt, the group will deny it access to food and help. It’s a biological way to stave off chaos and disruption in a society.



How does this relate to business? Easy—we need to stop believing that every person works for himself, and we have to start looking at our organizations as webs of collaborative activity, all designed to create bigger and better opportunities. Consider the following example.

Creating uncontested market space:

Blue Ocean Strategy
W. Chan Kim and Renée Mauborgne suggest in the October 2004 issue of Harvard Business Review that rather than competing within the confines of your existing industry, or by trying to steal customers from rival organizations (Red Ocean Strategy), it’s creating new market space that makes competition unimportant (Blue Ocean Strategy).

The bloody battlefield of the Red Ocean is overcrowded and isn’t a great place to sustain high performance. The real opportunity is to create Blue Oceans—great seas of opportunity.

In Blue Oceans, demand is created. For example, eBay created a whole new industry out of online auctions. Another Blue Ocean Strategy is to expand one’s existing market into a new area.

Red Ocean Strategy	Blue Ocean Strategy
Compete in existing market space	Create uncontested market space
Beat the competition	Make the competition irrelevant
Exploit existing demand	Create and capture new demand
Make the value/cost trade-off	Break the value/cost trade-off
Align the whole system of a company’s activities with its strategic choice of differentiation or low cost	Align the whole system of a company’s activities in pursuit of differentiation and low cost

Think about your organization for a moment. Do you spend more time thinking about your competitors or your own company? Do you play a fiercely competitive game, or are you focused more on outcomes than crushing your opponents? Are you in a Red Ocean or a Blue Ocean? How can you define a new, uncontested market space? Now that you’ve got a taste for game theory—read on, there’s a new world of strategy to ponder.

Paraphrased from Robert Wright’s book Nonzero: The Logic of Human Destiny (Pantheon, 1999)

Resources

Blue Ocean Strategy:
How to Create Uncontested Market Space and Make Competition Irrelevant
W. Chan Kim and Renée Mauborgne

Co-opetition:
A Revolution Mindset That Combines Competition and Cooperation: The Game Theory Strategy That’s Changing the Game of Business
Adam M. Brandenburger and Barry J. Nalebuff

Nonzero:
The Logic of Human Destiny, Robert Wright