By Wedge Greene and Barbara Lancaster

Copying what others do.
Game Theory. It’s a bit dry and complex a topic for the water cooler; however, it is the subject of many engineering late-night beerfests. Altogether too often “game theory” is used by engineers to frighten management into reconsidering what the engineers consider to be a bad management choice. (By which we mean ignoring the well-reasoned conclusions of their engineers.) Wedge uses it this way, and I’ll admit I have to support his view… this time. But first, in fairness to all of my good friends in telecom management, we will attempt to demystify the concept, then put it into perspective, and lastly tell you how it can positively be used.

Game theory is about making choices. Options are presented and the player attempts to make those choices which result in an outcome the player wants. Usually the desired outcome is to win some resource or state. Game theory is interesting because the game is usually played with other players. These players desire either the same resource you want or a resource which prevents you from getting the resource you want. Games get very interesting because everybody has a plan or strategy and usually everybody gets to observe at least part of what everyone else is doing. Essentially, your strategy depends on the guesses you make about the strategies of those in the game with you. And vice versa.
So what players do in games is “determine a strategy”. The most practical outcome of game theory for non-mathematicians, is that mathematicians have identified types of games and effective strategies for winning those games. In the 1i970s and early 1980s, game theory was applied to evolutionary biology with remarkable results and insight into how and why animals act the way they do - within specific kinds of environments. But best of all, soon afterwards some bright guys realized the similarity of the bio-evolutionary games with modern business.

Each kind of ecology/environment and period of time had specific winning strategies, so to use this game theory, you just need to match the biological game conditions to a comparative economic environment and period. What are today’s winning strategies?
Remarkably enough, for most of evolutionary history, the best strategy is to keep doing what worked before: Follow proven success. Perhaps this is why so many people naturally think this way, including telecom managers. But for the game player, it is necessary to look at the overall wider game landscape, the playing field, and the other players, before picking a strategy. It turns out that ‘follow proven success’ strategy only wins in environments where conditions change very little year over year and competitive pressures are low. Doesn’t sound like a winning strategy