Using game theory for making high impact business decisions
Game theory is all about make smart decisions towards achieving a certain outcome. Often times in business, there are so many challenging problems that come in front of you wherein you really have no clue what is the best way to move forward. Being a startup CEO myself, sometimes the problems can be so emotionally daunting that you really don’t want to wake up from bed and go to work. I am sure you must have faced similar such problems in various areas of personal life or business — like in marketing, finance, technology, sales etc. I will not try to dive into too many details here but I would like to bring this unique advantage to the table which is an outcome of Game Theory.
Again, in this post, I will not go into romantic details about Game Theory, it’s mass popularity after the movie Beautiful Mind or it’s historic details starting from the famous Nash Equilibrium. Rather, in the most simple way possible, I would like to highlight that — Game Theory helps you make “accurate decisions” for your business that can give you the “best possible results” after considering all the “complex factors” that are impacting your given business problem. Ex:- Your business is not able to get product-market fit, a game theory exercise will spit out what is missing in your approach and build a product that gives you very good traction OR Your negotiating an agreement with your investor — game theory helps you achieve the best possible outcome for you OR your sales process doesn’t seem to be getting good conversions — game theory helps you create an optimal sales process. While we are here, I will also be a bit cheeky and tell you that — Game theory can even help you in dating if you are a single man (or woman). This is something I have personally applied and got SMASHING RESULTS!!! (I will write about this soon, for now if you are a single man and looking to date beautiful women — I am available for you to recruit as your dating coach). 🙂
So, coming back to our subject, this post is about highlighting the Game Theory process of solving the complex business problem wherein you are stuck. Following are the steps that are necessary to approach and solve the complex problem
- Problem modelling
- Recognizing all the sub-games (problems) affecting the problem
- Recognizing the players
- Recognizing the action sets for each player
- Recognizing the pay-offs for each player
- Recognizing the support (or beliefs) about each player
- Graphing the strategic scenario
- Apply backward induction — Eliminating dominated strategies
- Recognizing the action moves (rationalizable strategies) to take.
- Test your solution
Following is a quick video on how to go about executing the above steps. Write to me if you have further questions, will be happy to give you free consultation over any problem that you are trying to crack.