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Building The Right Market Relationships
Building The Right Market Relationships
Building The Right Market Relationships
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The Value Net Model
Building the Right Market Relationships
Is your business an elephant or a tiger?
The tiger, with no natural predators, keeps the populations of deer, wild pig, sambar, and gaur in
check. But it hunts alone. To a tiger, everything else is either prey or something to be avoided.
The elephant also has no natural predators but it is a benign and sociable creature, which lives
happily with its own kind and acts as a "keystone species," contributing to the survival of other
species, too.
The elephant drinks from the same watering hole as all the other animals in the jungle but, rather
than being a competitor to them, it is a "co-opetitor." And when the tiger and the elephant meet,
it's the tiger that gives way to the mighty elephant.
This article looks at the Value Net Model, a tool that helps your business move away from a "kill or
be killed" ethic and achieve greater success by operating alongside, or even in association with,
other organizations.
A Spirit of Co-opetition
Co-opetition is a term used to describe co-operative competition. Here, businesses form mutually
beneficial partnerships that make both parties more competitive.
Business is full of examples of these "elephant" companies, especially in the automotive industry.
In 1991, for example, Ford® and Volkswagen® worked together to produce a single car body that
was used in the Volkswagen Sharan, Ford Galaxy and Seat®/VW Alhambra.
Although all three models of car would later compete with each other in the market place, both
companies benefited from one another's design and technology expertise, as well as saving money
by sharing production costs.
You don't need to be an industry giant to benefit, either. Co-opetition is a particularly useful
strategy for agile start-ups. Working co-opetitively with other companies creates mechanisms for
effective scaling, extends the influence of smaller companies, and helps to widen access to the
market.
In the words of Adventure Capital® founder and managing partner Stuart Richardson, "as big as
your dreams are, and as smart as you might think you are, you can't do it alone."
The model illustrates the interdependencies between yourself and the four other types of player in
your business:
Tip:
Make sure that you fully understand local competition law before working with competitors. In
particular, do not discuss pricing or customer contracting without having taken appropriate legal
advice beforehand, as you may be committing a criminal offense by doing so.
• Players.
• Added value.
• Rules.
• Tactics.
• Scope.
Let's look at these elements in greater detail, and discuss how you can apply each one with the
Value Net Model to think about the strategy of your organization.
• Your USP – how uniquely valuable is your product to the market, and how sustainable is
this?
• Supply and demand – can you expand to meet growing demand without creating excess,
unused capacity?
• Trade-ons and trade-offs – can you reduce costs in a way that delivers a better product, or
deliver a better product in a way that reduces costs? Can you raise costs to make a better
product without reducing the customer's willingness to pay?
• Rewards you offer (or could offer) as a "thank you" to customers or suppliers. (Be careful
not to contravene local or home country bribery laws when offering rewards.)
• Creating greater customer or supplier loyalty.
Also, think about what the added values are for the other players you identified in Step 1, and look
at ways that you can get a share of this for yourself.
Tip:
Michael Porter's Five Forces model is useful for evaluating the relative power of different
players in a market. If you haven't used it before, you'll learn a lot by using it to analyze your own
business.
• How have you established credibility in your market? Could you offer additional
guarantees, free trials or performance contracts to strengthen your credibility and add value?
• Are your organization's actions predictable or unpredictable? If a rival company wanted to
"take you on" by offering higher quality goods or services, or more competitive pricing, would
you be able to respond, or would you have something else up your sleeve?
• How do your customers perceive your organization? Use the Perceptual Mapping tool to
better understand their views.
• Is your product or service priced simply, or is pricing more complex? How would switching
from simple to complex, or complex to simple, change others' perceptions and benefit your
organization?
Another way to look at tactics is to analyze how much you're spending on branding and
advertising. Higher spending often signals that you have greater confidence in your product or
service. How might increased (or decreased) spending change perceptions in your market?
Key Points
Adam Brandenburger and Barry Nalebuff developed the Value Net Model and published it in their
1996 book, "Co-Opetition." The model helps you identify the key players among your customers,
suppliers, competitors, and complementors.
The model is unusual in that it encourages cooperation with other players in order to expand your
market and, ultimately, succeed.
When shaping your strategy around your key players, use the PARTS approach:
Step 1: Identify Players.
Step 2: Calculate Added value.
Step 3: Define Rules.
Step 4: Identify Tactics.
Step 5: Define Scope.
This helps you to define your business strategy and account for the key players you identified with
the Value Net Model.
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