Platt Perspective on Business and Technology

Some thoughts concerning a general theory of business 13: considering first steps toward developing a general theory of business 5

Posted in blogs and marketing, reexamining the fundamentals by Timothy Platt on February 11, 2017

This is my 13th installment to a series on general theories of business, and on what general theory means as a matter of underlying principle and in this specific context (see Reexamining the Fundamentals directory, Section VI for Parts 1-12.)

I have been developing an approach in this series, to a general theory of business that is grounded in behavioral terms, and in terms of transaction processes as they are shaped by individual behavior and its expectations (see Parts 9-12.) Then in Part 12, I began discussing long-term sustainable business relationships and the flows of transactions that characterize them, in game theory terms, and more particularly in terms of win-win strategies and their execution (see this piece on game theory strategies per se as an orienting introduction to that topic area.)

Game theory strategies address a wide range of decision making options and their follow-throughs, that address and seek to encompass a wide range of behavioral patterns. And game theory per se addresses both time-limited games that would only continue for constrained periods of time until some specific end-point is reached, and more open-ended games that can at least in principle simply continue indefinitely. And of significant importance for this discussion, games and their strategies as encompassed here can be more fully determined with fixed rules for next steps, or they can be more stochastic and with a range of possible moves and types of move available, each with an at least roughly characterized probability of being pursued. Mixed strategy games fit that basic game paradigm.

Win-win games, as noted in Part 12, follow a strategy in which effort is made to ensure that both/all players involved gain measures of positive value from participating, even as individual participants seek to maximize their own personal gain in this. And I referred to that strategy in terms of “enlightened self-interest”, and certainly when there are potential opportunities for involved parties to continue gaining from this – if the others in these games are willing to keep playing too, and where a game can continue for open-ended durations. Fixed and limited duration games, in which participants can expect to in effect cash in their chips and walk away, cease to remain stably win-win as player-recognized end points for participation in them come close and enter into decision making processes. So I wrote Part 12, essentially entirely in terms of open-ended games as would be expected in the strategies and operational executions of long-term and open-ended continuing business ventures, where participants would see positive incentive to themselves to actively give other participants incentive to keep playing too.
Then at the end of Part 12, I stated that I would consider zero-sum (win-lose) games and other strategies. And I added that I would at least briefly discuss where win-win and zero-sum strategies would make sense and be likely to occur. I have in fact begun to do this already in this posting when I made note of time limited or other constrained game endings and how win-win strategies can break down, losing their perceived advantage for participating players who might be left at the end of a game with a value exchange deficit from that.

• Mixed strategies can include in them, combinations of more win-win play options and tactics, and win-lose play options and tactics, with the balance between them shifting over time, moving more towards win-win when a game seems more open ended, and moving towards win-lose when the game becomes more overtly end-point limited.
• One measure of business strategy effectiveness in this context, can be found in more accurately being able to predict when an explicitly more win-win approach should be followed tactically, to maintain stable competitive advantage as long and as effectively as possible
• And when a more win-lose tactical approach would make more sense (from a risk management perspective.) Change and uncertainty enter in there, as factors that can shift the strategically considered balance from a more win-win to a win-lose approach, or vice versa arise. And effective ongoing strategic planning facilitates and enables rapid reevaluation and pivoting in what types of tactical and operational approaches would best be followed in any given here and now.

To take that out of the abstract, let’s consider a second, also more generally stated working example. As just noted above, time and remaining duration of play – remaining duration of business activity opportunity here, can represent a largely non-renewable resource and certainly if a game need not be open ended. True, decision and actions can sometimes be taken to in effect give a time resource-limited business a new lease on life – and positive incentive to follow a win-win strategy with suppliers and supply chain partners, vendors and customers and more as initially expected end points approach – but in an avoidable manner. But time is only one possible limiting resource here that can define where and how a best strategy would shift between more win-win and win-lose options. So I framed the above bullet points in terms of just one possible decision shaping, limiting resource as a strategy defining factor. The example that I turn to next is a more widely considered resource-limited business, where in-house competition for access to what involved stakeholders need, can be driven in a largely win-lose direction by those resource constraints.

I am going to discuss that strategy shaping, resource limited scenario in a next installment to this series. And in anticipation of that, I would pose a basic question to you, the reader about your own business. What are your potentially critically limiting resources there, that would of necessity impact upon and shape your strategic planning and your tactical and operational follow-through on that?

To be more specific here, I am going to explore a specific business type and business model in my next series installment that would be expected to follow a more predominantly win-lose game theory approach than to follow a win-win one, and how even a business that might be expected to focus on a more win-lose approach might still find significant reason to pursue win-win opportunities too. And after delving into that scenario, I am going to look more fully into mixed strategies, and how business strategy and operations change and evolve in game theory terms. This addresses business theory at the organizational level. Looking further ahead, I am also going to step back from that and consider all of this from the individual employee and manager level too, with a scenario that begins with the individual career developer and the hiring and promotion-directed strategies that they follow, and ends with the approaches that those same individuals follow when actually working at a business. And as part of that, I will also consider the strategies and the tactics of others who work with them or who otherwise become stakeholders to these transaction flows (games.)

Meanwhile, you can find this and related material about what I am attempting to do here at About this Blog and at Blogs and Marketing. And I include this series in my Reexamining the Fundamentals directory, as topics section VI there, where I offer related material regarding theory-based systems.

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