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Strategic Decision Making

Rock Paper Scissors

Game Theory

I really enjoy movies which highlight the development of the protagonist through their ability to overcome seemingly overwhelming human flaws and achieve their life’s goals. One such movie which really moved me, “A Beautiful Mind” starred Russell Crowe is the story of John Nash who modernized the work of John von Neumann and Oskar Morgenstern’s 1944 published Theory of Games and Economic Behavior.

I won’t review either the movie, or the book in this posting. I merely wanted to make mention of how this movie popularized the concept of game theory – a concept which is also seen in the childhood game many of us have played – Rock-Paper-Scissors and how this is a very useful skill for executives and many others in business for strategic decision making.

Game theory is defined as the study of strategic decision making and how people interact and make their decisions. In essence, the decision maker considers the goal sought to be accomplished and reasons backwards to anticipate the decisions which need while factoring in the anticipated actions of competitors and in some capacity, the market. In a competitive business environment executives make business decisions on a regular basis which impacts their lives, the lives of their employees, and in some cases the market in which their business competes. I recommend the use of game theory as a way to optimize those decisions.

Rock-Paper-Scissors is a decision making game I played as a child which in my opinion, can contextually support executive’s with strategic decision making. The childhood game centers on the notion that each player has one of three choices–rock, paper, and scissors– and that no single choice wins indisputably over all the others. In my mind, each of the options from the game metaphorically translates into three types of strategic decision making options for the executive.

Rock

Rock is brawn, and represents strength and a mighty action. This type of strategic decision making is seen in the form of acquisitions of smaller competitors to gain the skills necessary to compete in the market. Other examples of the Rock strategic decision could be use of a low-cost price strategy to drive product sales and take customers from competitors.  Massive expense cuts and reductions in labor could also be seen as Rock. The objective of Rock strategic decision making is to get an immediate financial impact as a short term goal.

Paper

A much slower strategic decision making approach – focusing on implementing a strategy which may have longer timelines before benefits are realized. A Paper strategy may include strategic alignments with other corporations or pursuit of a customer intimacy strategy to gain competitive advantage. Additional Paper strategies are Blue Ocean and involve creating new markets with groundbreaking products as seen with companies like Facebook, Apple, and Google.

Scissors

A Scissors strategic decision making approach is composed of meticulous actions with surgical precision. Scissors strategies have more moving parts, highly involve the use of tools, require a great deal of planning, and in some instances once fully implemented, have the ability to provide longer term sustainable competitive advantage. Operational excellence, total quality, and brand superiority are some strategic approaches which I would categorize as a Scissors approach.

Like the game, no approach will always win over the other. The key is to use SWOT Analysis, Competitive Analysis, and Market Analysis as inputs into determining which approach is best given the available information.

Contact Coach Clinton to collaborate with you on selecting the strategic decision making approach to best solve to your business challenge.