the right game: use game theory to shape strategy

The Right Game: The Right Game: Use Game Theory to Use Game Theory to

Shape StrategyShape Strategy

Adam M. Brandenburger, Barry J. Nalebuff

Harvard Business Review,

July-August, 1995

The Right Game: Use Game Theory to Shape Strategy

Adam M. Brandenburger, Barry J. NalebuffHarvard Business Review, July-August, 1995

“Successful business strategy is about actively shaping the game you play, not just playing the game you find.”

Lessons from Game Theory

Look at the situation from the perspective of all others’ involved

Look for win-win, not just win-lose opportunities

Look for opportunities to “change the game” for the better

“Co-opetition”

Businesses must both cooperate to create value, even while competing to divide this value among themselves

The Value Net

Company Customers Suppliers Substitutors

– Companies / products which could substitute for what you have to offer

Complementors– Companies / products which

complement what you have to offer

Competition and Cooperation

Elements of the Game

Players Added Values

– What each player adds to the value inherent in the total game

Rules Tactics (Perceptions) Scope

Changing the Players

Players are participants in the Value Net– The Company itself, and its Customers,

Suppliers, Substitutors, Complementors

– How does the game change as players come in or out?

• Canadian Airlines no longer exists in the Canadian airline industry.

Changing Added Value

What added value does each player bring to the game?– If a player were not participating at all,

how would the value of the overall game be affected?

• Bobby Hull joining the Jets gave the WHA instant credibility.

Changing the Rules

Rules determine how the game is played

– Can the rules be changed to make the game more favorable for one, or for all?

• Guarantees to match lowest price

• Funding rules for universities in Manitoba

Changing Perceptions

Players’ perceptions of the game influences the way they play it.

– Commitment strategies, (as ploys)• Publicly committing to something to make

others perceive you’re serious

Changing the Scope

Scope is the boundaries of the game

– Tying issues together in negotiations• Softwood lumber and energy?

– Opening a “second front” in competition• Hezbullah attacking Israel from Lebanon