Value Net / Coopetition / PARTS

The Value Net or Coopetition framework is an alternative to Porter’s Five Forces framework. It was developed by Adam Brandenburger and Gary Nalebuff in 1996, combining strategy and game theory, in order to describe and analyze the behavior of multiple players within a given industry or market.
The authors’ fundamental idea is that cooperation and competition coexist. It is often necessary to do both at the same time, cooperate with other players in order to foster market growth, but also compete with the same players in order to maximize your market share. Grow the pie, vs. splitting up the pie. A bit of a “yin and yang” concept. Simple games, such as the prisoner’s dilemma, have shown that depending on how players look at the relative benefits of competing vs. cooperating, the outcomes can vary dramatically. Brandenburger and Nalebuff apply the same concept to a business setting. Their key message: You have the opportunity to shape the game, not just play the game. They identify four players in the Value Net:


Customers buy your company’s products and services, in exchange for money.
Suppliers provide resources to your company, in exchange for getting paid.
Competitors offer substitutes (direct or indirect) to your company’s products and services. Note that your company’s competitors compete both on the customer side (offering similar products and services) and on the supplier side (buying similar resources).
Complementors provide products or services that allow a customer to get more value out of your products or services if they buy both. Again, there is a similar dynamic at work on the supplier side.
It’s important to note that any given company can take on multiple roles, acting e.g. as both a supplier and competitor.


Brandenburger and Nalebuff suggest to define your business strategy based on five components, using the acronym PARTS:

Players: The obvious first task is to categorize who the relevant players are and what roles they play. In terms of shaping strategy, a company should think about whether bringing in additional players can work to its advantage (additional suppliers to decrease costs, additional complementors to increase the value of the product to consumers). Questions to ask in this context: What are the opportunities for cooperation and competition with each of the various players? Who else could / should join the industry? Who stands to gain/lose if they do join?

Added Value: Identify your company’s added value from the perspective of each of the market participants. What actions can be taken to increase this added value in order to maximize profitability? For example, how could the loyalty of customers and suppliers to your products and services be increased? What can one company do to limit the added value of another company?

Rules: Just as the prisoner’s dilemma has certain rules, each industry and market also has rules and regulations. Some are written and enforced by law, some unwritten but generally accepted practices. An example of that could be a “most favored nation” clause where a customer insists in a contract with a supplier to get the best price that any other customer might also get. Questions: Which rules are helping your company, which are hurting your company? What new rules would be in our favor? Who has the power to create, enforce and overturn rules?

Tactics: What actions can one player take to shape the strategies, actions and perceptions of other players in the market? How can you deliberately send signals and messages that influence the perception of other players, which in turn may influence their actions? (All of this obviously in the context of what is legal). There is an element here of figuring out to what extent it is in your company’s best interest to have the market rules be very transparent or rather opaque.

Scope: Often, a market is not isolated, but is linked to other markets. Plenty of recent examples have shown that software, hardware, media, e-commerce, advertising and telecommunications markets are either closely interlinked, or players in some markets have taken deliberate strategic moves to pro-actively link them. They key is to ask what markets could potentially be linked, how you as a company could create value added from linking your products and services to that market, and how that may affect the perceptions and actions of other players.