Co-Opetition - Adam M. Brandenburger [35]
When Barry and John found another cab, the driver turned on his meter, and 2,200 shekels later they were home. Certainly the extra time was not worth the 300 shekels. But, in the end, the trip was worthwhile. After all, it’s a great story.
What went wrong? Perhaps it was a case of wounded pride. In retrospect, Barry and John might have paid more attention to the fact that the driver’s girlfriend was sitting next to him in the front seat. Or perhaps the driver was simply crazy. Either way, Barry and John didn’t push their game theory analysis quite far enough: next time, they’ll get out of the taxi before discussing price.
6. The Elements of a Game
We’ve now introduced all the building blocks of game theory. Is that it? Well, yes and no. The concepts of game theory are simple, but deceptively so. Just knowing what these concepts are isn’t enough. The trick is to apply the concepts creatively to a wide variety of real-world situations. To do this, we will need to use them to analyze much more complicated games than ones we’ve discussed in this chapter. The real power of game theory comes from taking this next step.
But first, it seems a good idea to recap briefly.
In the opening chapter, we pointed out how business isn’t exclusively war; nor is it exclusively peace. We then described how game theory helps us get beyond those oversimplified outlooks. This gave us a new mindset and a jumping-off point for the material to follow.
The Co-opetition chapter identified the first and most fundamental element of the game of business: the Players. We used the Value Net to describe the cast of players and to diagram their relationships to each other. The complete list of players consisted of customers, suppliers, competitors, and complementors. We saw how useful it is for any business to identify all the players and their relationships, employing the Value Net.
This present chapter introduced the concept of Added values. These measure what each player contributes to the game by joining it. Added values can sound abstract, but they don’t stay abstract for long. The added values determine who has power in a game and who will get the big payoffs.
After added values, we went on to discuss Rules. These structure the way the game is played. In business, there is no universal set of rules; they can come from custom, contracts, or law. Sometimes the most important rules are the ones taken almost for granted. We demonstrated how putting in a rule can produce a big difference in the way a game is played out.
Next we talked about perceptions. We showed how greatly any game is affected by the different ways different people perceive the situation. These differing perceptions are not just some subtle influence on the way the game is played. They are a fundamental part of the game itself. Equally important are perceptions of perceptions, perceptions of perceptions of perceptions, and so on. By altering players’ perceptions, you can alter the moves they make. The devices used to shape perceptions are what we call Tactics.
Our discussion of perceptions led us into a discussion of the boundaries, or Scope, of the game. The issue here is the limits people implicitly place on games when they define them. Although people often analyze games in isolation, each game is invariably linked to others. To understand what’s going on, you need to be sure to consider these links.
These, then, are the five elements of any game: Players, Added values, Rules, Tactics, and Scope.