The Right Game: Use Game Theory to Shape Strategy

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The Right Game: Use Game Theory to Shape Strategy

  1. 1. The Right Game: Use Game Theory to Shape Strategy Adam M. Brandenburger, Barry J. Nalebuff Harvard Business Review, July-August, 1995
  2. 2. The Right Game: Use Game Theory to Shape Strategy Adam M. Brandenburger, Barry J. Nalebuff Harvard Business Review, July-August, 1995 <ul><li>“ Successful business strategy is about actively shaping the game you play, not just playing the game you find.” </li></ul>
  3. 3. Lessons from Game Theory <ul><li>Look at the situation from the perspective of all others’ involved </li></ul><ul><li>Look for win-win, not just win-lose opportunities </li></ul><ul><li>Look for opportunities to “change the game” for the better </li></ul>
  4. 4. “ Co-opetition” <ul><li>Businesses must both cooperate to create value, even while competing to divide this value among themselves </li></ul>
  5. 5. The Value Net <ul><li>Company </li></ul><ul><li>Customers </li></ul><ul><li>Suppliers </li></ul><ul><li>Substitutors </li></ul><ul><ul><li>Companies / products which could substitute for what you have to offer </li></ul></ul><ul><li>Complementors </li></ul><ul><ul><li>Companies / products which complement what you have to offer </li></ul></ul>
  6. 6. Competition and Cooperation
  7. 7. Elements of the Game <ul><li>Players </li></ul><ul><li>Added Values </li></ul><ul><ul><li>What each player adds to the value inherent in the total game </li></ul></ul><ul><li>Rules </li></ul><ul><li>Tactics (Perceptions) </li></ul><ul><li>Scope </li></ul>
  8. 8. Changing the Players <ul><li>Players are participants in the Value Net </li></ul><ul><ul><li>The Company itself, and its Customers, Suppliers, Substitutors, Complementors </li></ul></ul><ul><ul><li>How does the game change as players come in or out? </li></ul></ul><ul><ul><ul><li>Canadian Airlines no longer exists in the Canadian airline industry. </li></ul></ul></ul>
  9. 9. Changing Added Value <ul><li>What added value does each player bring to the game? </li></ul><ul><ul><li>If a player were not participating at all, how would the value of the overall game be affected? </li></ul></ul><ul><ul><ul><li>Bobby Hull joining the Jets gave the WHA instant credibility. </li></ul></ul></ul>
  10. 10. Changing the Rules <ul><li>Rules determine how the game is played </li></ul><ul><ul><li>Can the rules be changed to make the game more favorable for one, or for all? </li></ul></ul><ul><ul><ul><li>Guarantees to match lowest price </li></ul></ul></ul><ul><ul><ul><li>Funding rules for universities in Manitoba </li></ul></ul></ul>
  11. 11. Changing Perceptions <ul><li>Players’ perceptions of the game influences the way they play it. </li></ul><ul><ul><li>Commitment strategies, (as ploys) </li></ul></ul><ul><ul><ul><li>Publicly committing to something to make others perceive you’re serious </li></ul></ul></ul>
  12. 12. Changing the Scope <ul><li>Scope is the boundaries of the game </li></ul><ul><ul><li>Tying issues together in negotiations </li></ul></ul><ul><ul><ul><li>Softwood lumber and energy? </li></ul></ul></ul><ul><ul><li>Opening a “second front” in competition </li></ul></ul><ul><ul><ul><li>Hezbullah attacking Israel from Lebanon </li></ul></ul></ul>

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