Playing games teaches us about strategy
I am hopeless at chess. This isn’t false modesty. I am really bad. I was bad as a child and as an adult I keep coming back to it but have never been able to move beyond novice level. I can however easily diagnose my biggest problem. I forget I’m playing against someone else. If that sounds crazy, it happens to be exactly how most companies approach strategy: they forget there are other players in the game.
When playing chess I become so caught up in pursuing my own attack that I frequently forget to pay attention to the moves the other player is making. Frequently I will lose my queen because there is a bishop that has been lying in wait on the other side of the board on the opposite side to my attack that, until the moment my queen is taken, I had completely forgotten about. I might observe my opponents last move but give little thought to what that move tells me about his next move or indeed his long-term plan. I pay little attention to my defence.
Most companies’ strategies completely fail to anticipate how their competition will react. Their plans assume they will be given a free hand to make their moves while their competitors maintain a steady state. My experience is the opposite. Competitors not only react to your moves, but they normally react in a much more aggressive way than you anticipate.
In chess, this is the zwischenzug: an unexpected or surprising move. A zwischenzug creates a threat your opponent must address. It gives you the advantage by forcing your opponent to address the threat before you play the expected move. An example would be checking the opponent’s king or otherwise threatening a major piece before making the expected move.
Being surprised by your competition is nothing to be ashamed about. But it does suggest your strategy was too inward-looking or it was not scenario-tested sufficiently robustly. Or it could mean your ‘strategy’ paid no attention at all to what your competition might do, in which case it was merely a plan. What turns plans into strategies is calculation of what the other side will do.
Playing games can teach us a lot about business strategy. Game theory is all about finding winning strategies in which players can compete or co-operate to their advantage. It provides insights into the sort of win-lose (or zero sum games) such as tenders and negotiations that crop up all the time in business. But it also provides insights into strategies for co-operation in more complex situations (ie non zero sum games) which are the most common situation. For example, in trials where games such as the prisoners’ dilemma are run over many iterations, some interesting rules for co-operation emerge:
- Don’t be envious. It does not pay to get upset if someone gains a few points better than you in any single encounter.
- Don’t be the first to defect. Play nice.
- Punish defections. If a player defects, reciprocate in the next encounter but switch back if they resume playing nice.
- You don’t need to be too clever. A simple, clear strategy such as tit for tat can work well in many situations.
I recall a business simulation in a management training course where we were broken into 10 teams and went through a number of iterations of a business game simulation. The team that won did not have a particularly clever strategy; others had pursued the same strategy. What they had done is play many more iterations of the game compared with everyone else. All the other teams, like my own, had spent ages deliberating on what the best strategy was and how to change it after each iteration. The winning team had just cracked on. I remember thinking this was one of the best lessons I could ever have learned.