In another study, I seem to recall people asked about (then) Japan's economic growth. Given a choice to up the U.S. growth or slow Japan's, most opted to slow Japan's.

This offers a small glimse into why companies do stupid things in business. The priciple seems clear. It is not enough to win. Others must lose.

Posted by: (the other)JS on June 21, 2002 07:13 AM

 

Absolutely. A few years ago, the company I was working for sent me on a managament training course where we were divided into teams. Some of the people on the course were from the sharp end of the business, rather than back-room, like me.

In one particular exercise, we were told that a certain choice of action would mean that your team would win and the others would too. The alternative was to try and 'beat' the opposition, but if you both tried to do it, you both lost. The 'sharp end' lot insisted that we should try and beat the others, even though we were gradually losing money doing so. The lesson I learnt was that there are far too many people in business who want to compete at all costs, even if it's detrimental to their own cause.

Posted by: Alan Fisher on June 21, 2002 07:35 AM

 

Unfortunately, Alan, that exercise *doesn't* reflect business reality at all. If you make widgets and I make widgets, both of us cannot win. To increase my market share, your market share *must* go down. (I'm assuming that we're the only two companies competing.)

Yep, marketing is warfare. It would be nice for both sides to "win", but that doesn't happen now, does it?

Posted by: MadMan on June 21, 2002 08:37 AM

 

The Prisoners' Dilemma -- "Cooperation is usually analysed in game theory by means of a non-zero-sum game called the "Prisoner's Dilemma" (Axelrod, 1984). The two players in the game can choose between two moves, either "cooperate" or "defect". The idea is that each player gains when both cooperate, but if only one of them cooperates, the other one, who defects, will gain more. If both defect, both lose (or gain very little) but not as much as the "cheated" cooperator whose cooperation is not returned."

Strategy and Conflict: An Introductory Sketch of Game Theory -- "Game theory is a distinct and interdisciplinary approach to the study of human behavior. The disciplines most involved in game theory are mathematics, economics and the other social and behavioral sciences."

The Strategic Elements of Marketing Games (PDF file format) -- "Although it is popular to think of marketing as a zero or constant sum game of marketing warfare in which sellers compete for a share of a given market, the marketing game is, in fact, a non-zero sum or mixed motive game. That is to say, there are outcomes in the marketing game in which all the players can lose, all the players can win, or the conventional possibility of having some winners and some losers. One purpose of this book is to demonstrate and analyze some of the more important types of mixed motive structures found in marketing games."

Posted by: John S. Rhodes on June 21, 2002 09:14 AM

 

Thanks for the links, John. Let me be clear about something: when two or more companies are in the same market and targetting the same consumers, it is not cooperation; it is competition. So your first link isn't relevant.

There are situations in which both parties (two is a good number for simplicity) can appear to be winning. For example, let's say the market for notebook PCs was in a nascent stage (total sales: $1 million) today, and only Dell and Compaq were making them. Say Dell had 60% and Compaq had 40% market share. By selling the product category and its virtues (convenience, portability, etc.) instead of their individual models, they could otentially grow the total market to, say, $4 million. What happens? It looks like a win-win situation. Dell's revenues went from $600,000 to $2.4 million, and Compaq's revenues went up from $400,000 to $1.6 million.

But in fact, it's only a relative win. Is that the ideal scenario for Dell? No! A better scenario would be to increase the market to $4 million and bump their market share to 75%, hence making total sales of $3 million instead of $2.4 million. However, for this to happen, Compaq's market share would have to fall to 25%, and that's definitely a loss for Compaq. It's better to have a larger share of a smaller market than to have a tiny share of a large market. Leadership has many advantages, but I'm sure I don't need to get into them.

Marketing is competition, not cooperation.

That management training programme Alan attended (gosh, how I hate those programmes) was a good scenario for internal cooperation within a company. I agree: employees must work together for the benefit of the company, not compete with each other. That's the prime reason performance appraisals and incentive pay is harmful. Since the total money available for bonuses and raises is usually fixed, you are forced to compete with your colleagues for the booty, and that's one way to destroy teamwork within a company. But I digres...

Cooperation within the company, and competition without. Simple, really.

Posted by: MadMan on June 21, 2002 10:17 AM

 

Oops, I forgot to close the italics tag after "appear" (in "appear to be winning"). John, could you please do that and then delete this comment? Thanks

Posted by: MadMan on June 21, 2002 10:19 AM

 

If you're interested in how people are manipulated and persuaded (especially by slick con artists and salespeople), I recommend Influence: The Psychology of Persuasion by Cialdini. All the people I've lent the book to love it. :)

Posted by: MadMan on June 21, 2002 10:24 AM

 

MadMan, great comments. I removed the italics. I'm not going to delete the post that you want me to delete because I don't want to rebuild my pages -- I'm just too afraid of corruption of files!

Posted by: John S. Rhodes on June 21, 2002 10:38 AM

 

Actually marketing isn't competition, but simply a tool by which to compete.

And not all competition has to be defined as you win the other loses. Many companies have gone to ruin because of this mentality.

That is what the fast follower model of doing business kind of dictates. See what the competition is doing and then if it is successful, do it yourself but use marketing to position yourself as unique.

Posted by: JB on June 21, 2002 11:54 AM

 

One can choose how and where to compete, it needn't be on the most primitive way. 7up can compete in the small lemon-lime market, or as the Uncola, a much larger market space. Competition is different from monkey see, monkey do.

Posted by: (the other)JS on June 23, 2002 05:26 PM

 

Madman,

I wasn't equating the behaviour of my ex-colleagues to their business behaviour. What I was trying to say was that, even in a situation where competitive behaviour was not appropriate they couldn't resist trying to stab the other team in the back.

In a work situation there are often situations where it's appropriate to co-operate with other parts of your organisation, but many people can't differentiate between competing with their competitors (appropriate behaviour) and competing with their co-workers (not always appropriate).

Thanks John for reminding me that it's the prisoner's dilemma - I couldn't remember it for the life of me!

Posted by: Alan Fisher on June 24, 2002 12:21 PM