The Ultimate Game of Strategy: Establish Your Personal Niche in the World of e-Commerce

Overview

"Using game theory and practical examples, Peter Small explains how, by building up a network of collaborative associations with the people who know about and use the technology, and with customers and clients, you can create e-business solutions that can readily adapt to customer needs, technological change or competitive moves. He provides a practical toolkit that will allow you to build the kind of personal communications networks that will enable you to establish you own niche in the world of e-business, and grow it successfully and
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Overview

"Using game theory and practical examples, Peter Small explains how, by building up a network of collaborative associations with the people who know about and use the technology, and with customers and clients, you can create e-business solutions that can readily adapt to customer needs, technological change or competitive moves. He provides a practical toolkit that will allow you to build the kind of personal communications networks that will enable you to establish you own niche in the world of e-business, and grow it successfully and profitably." "The Ultimate Game of Strategy is about understanding that the internet is a massive resource for making contacts with customers and collaborators in e-business. The game is to choose the most suitable contacts and to establish and maintain a trusting relationship with them - this is a game of vital strategic importance, and one that is not easy to play. If provides you with the understanding and practical knowledge that will allow you to play the game and win."--BOOK JACKET.
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Product Details

  • ISBN-13: 9780273649991
  • Publisher: Pearson Education
  • Publication date: 5/31/2001
  • Pages: 352
  • Product dimensions: 6.65 (w) x 8.29 (h) x 0.78 (d)

Table of Contents

I. BACKROUND TO GAME THEORY

1. Starting with the Basics
2. Through the Looking Glass
3. Choosing in Conditions of Uncertainty

II. DEALING WITH COMPLEXITY AND INFORMATION OVERLOAD

4. Should a Single Great Business Idea Head an E-Business Venture?
5. The Problem of Knowledge Gaps
6. Understanding and Coping with Knowledge Gaps

III. WHEN THE MANAGED TEAM DOESN'T WORK

7. A Cooperative Team versus a Collaborated Team
8. The Enigmatic Nature of Creativity and Success
9. A Collaborative Environment
10. Different Interpretations of Collaboration

IV. CREATING A GROUP OF CONTACTS

11. Introducing the Genetic Algorithm
12. A Question of Trust
13. Creating a Community Trust

V. COMMUNICATION STRATEGIES

14. The Information Ecosystem
15. Communication Strategy

VI. BRINGING IT ALL TOGETHER

16. The Cafi-a Case Study
17. Customers as Product Designers
Epilogue
Index
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Preface

IntroductionWhen there is too much you need to know

Only a couple of decades ago, everything that was known about communication technology was teachable. The subject area could be neatly divided into categories and teachers could define any section to build a course around. Such courses concentrated upon "need to know" concepts and methods, which provided students with enough knowledge and capability to get them immediately started on a career path.

This cozy state of affairs came to an end in the last decade of the twentieth century. The world of communication technology became increasingly complex and diverse. All knowledge and methodologies were continuously changing and evolving, taking the amount of "need to know" information beyond the capacity of any human mind even to be aware of, let alone learn.

It wasn't just the increasing amount of knowledge causing the problem, it was the rapidly changing boundaries into which knowledge could be organized. In short, the knowledge base became unstable. Educational courses, in the field of communication technology, have now become little more than lucky dips into a seething ocean of knowledge; very small samplings of a gigantic whole that is impossible for any mortal to understand in its entirety.

It was this problem—of a knowledge base expanding beyond our capacity to comprehend—that was the main theme of the forerunner to this book, The Entrepreneurial Web. It asked the question, "What do you do, when there is too much you need to know and whatever you learn is out of date even before you've finished learning?"

Only one satisfactory conclusion was reached: if it is impossible to know allthat is needed to be known, then it will be necessary to collaborate with other people: people who can fill in your knowledge gaps. In other words, success can only be achieved by people learning to communicate and collaborate.

The internet is the perfect environment to do just this, and game theory provides the most appropriate conceptual framework to make it happen.

A world of small niches

Somebody on an e-mail discussion forum once asked if it were possible to list all the niches involved in website design. Nobody could, there are too many angles, too many niches-it is impossible to grasp the full picture. As the Nobel prize-winning physicist, Richard P. Feynman, once famously remarked about quantum theory: "If anyone says they understand it all, it's a pretty good indication they don't."

Trying to look at niches in the world of the internet is like trying to look at shapes in a fractal. Each niche, upon closer investigation, expands into a plethora of new niches. Just like the knowledge base, the closer you look, the more you find—and the further the boundaries disappear over the horizon.

It hurts the brain to think about such staggering complexity. Even when you realize you have knowledge gaps and you need to collaborate with niche specialists, there is still the problem of which niche specialists to choose. It defies all logical thought processes. But this is where the game theory comes in handy; if everyone is in this same state of confusion, you can be a winner just by being less confused than anyone else.

The trick is not to try to learn everything. Instead, you employ a strategy where you allow for there being large knowledge gaps—not only in yourself, but in everyone else you deal with. It may mean you can't always get things right, but you'll do a lot better than those who think they know it all.

In a web designer's discussion forum, a poster wrote:

  1. "A good designer anticipates needs not expressed in the project's spec..."
  2. "A good designer anticipates the eventual needs of others"
  3. "A good designer finds ways to discover what people need..."
  4. "...the things that underlie what they think they need"
  5. "...the things that will eventually be needed by those in a relationship with the client"

These statements would seem to be truisms, but being in a position to know all these things isn't a practical reality. At best, any single designer will have only a partial picture. Any knowledge gaps will introduce bias. This is the problem. No single person, or even a group of people, can accurately predict what to design in volatile and highly competitive e-business environments. This causes the statements above, although appearing profound, to be a completely wrong way to look at the world of mass connectivity and rapid technological change. This advice handicaps designers, not helps them.

In the world of e-business, designs cannot be planned. Customer needs and expectations cannot be predicted. E-businesses have to take the form of flexible systems that can self-adapt to a rapidly changing marketplace. It is not the designers but the customers who drive this evolutionary process. The designers are no longer the seers and predictors. They do not calculate or decide what customers or clients want. Instead, they become initiators and responders: con clever options in response to customer feedback. Designers and customers combine into inseparable symbiotic relationships to form the basis of any realistically practical e-business model.

Overall design of an e-business than becomes a far more esoteric affair. It's not about designing a business or service, it's not about designing a website, it's not about smart marketing—it is about creating a system that is allowed to self-adapt to the unpredictable changes of the communication environment. This requires everyone involved to be dependent upon each other, yet paradoxically at the same time, confined to their own particular niches.

A list of starting assumptions

Whether it is creating an e-business, establishing a personal niche or setting out on a career path, there has to be a starting place. This is always a mystifying process. What do you do? Do you go out and create opportunity or do you let opportunity come to you?

The seemingly obvious approach is to start by making a plan, but in a world of constant and unpredictable change, plans have little practical value. So, what is there that can be put in place of a plan? The answer is a strategy. A strategy is a list of rules that guide actions. It doesn't require you to think ahead, because actions take place in the present.

Such a though would be anathema to the thinking of the conventional corporate world of the twentieth century. Action without planning or without thinking ahead would seem to be totally wrong. Yet, in the world of communication technology, where planning is unreliable, what choice have you got? This creates an enigma: how can you control your direction without a plan? This is where game theory is needed; it can provide a suitable framework whereby you can work with rules rather than plans.

Rules would seem to suggest a mechanical approach to problem solving, but, with game theory, the rules are not fixed or absolute. They can change and evolve in response to situations and the environment. This is a difficult conceptual hurdle to overcome: understanding that rules are flexible and can become adaptive as a result of experience. The obvious question to ask is: "Who sets or changes the rules?" Surprisingly, it is the environment that sets the rules and changes them when need be. The rules are a reflection of the environment and change when it changes.

This is a very big conceptual jump from thinking in terms of business plans. To make this jump, it is first necessary to appreciate what a business plan actually represents: it is a reasoned and calculated estimate of what is likely to happen during a future period of time. This estimate will take into consideration the past and the present and project these into the future with suitable allowances being made for uncertainties and errors of judgement.

As carefully as these business plans might be worked out, they can only be as accurate as the uncertainties inherent in the future period will allow. The more uncertainties there are, the less accurate becomes any model of the future (business plan). The problem with e-business is that it is conducted in such a new and fast-changing environment that estimates as to what will happen in any future period are likely to be widely inaccurate. The errors are unlikely to be covered by even the most cautious of projections or the most far-reaching contingency plans.

This was one of the conclusions reached in the book The Entrepreneurial Web. It highlighted the problem by listing a number of initial assumptions that any planner in the e-business environment would have to make before setting out the details of a business plan. These assumptions were:

  1. All potential clients or customers are constantly deluged and swamped with information.
  2. Nobody knows all the answers.
  3. The environment of the internet and the world wide web is beyond your or anyone else's ability to be able to understand completely.
  4. Everyone is occasionally unreliable.
  5. Everybody is mostly too busy for you to be able to get their attention.
  6. Most people haven't the time to listen to what you have to say.
  7. Whatever you know, there are many more important things that you ought to know but don't.
  8. Nobody is going to cooperate with you unless they see there is something worthwhile in it for them.
  9. Whatever you know, somebody knows it better.
  10. Anyone you want to establish a communication relationship with has only a very limited number of people they have time to deal with.
  11. Credibility and trust are very hard to come by.
  12. Whatever you do, there are thousands of others trying to do the same thing at the same time.
  13. Sudden and dramatic changes will occur constantly.
  14. Whatever you do will be rapidly outdated by new technological developments.
  15. Whatever you do or say will quickly be known to everyone else.
  16. Whatever you do will be copied or bettered by your competitors.
  17. increased competition reduces costs and increased efficiency brings prices and profits down to a minimum.
  18. Whatever you are offering, there will be a plethora of similar alternatives in the marketplace already.
  19. Nobody can have more than one area of real expertise.
  20. The solution you have to come up with is beyond your, or anyone else's, imagination.
  21. Whatever technology, program, tools, methods and techniques you use will rapidly become unsuitable or irrelevant
  22. Any final solution you come up with will have to be abandoned or radically altered within a very short period of time.
  23. Everyone is going to distrust you until you have built up a relationship of trust with them.
  24. Nothing is free, even if it seems to be.

These assumptions describe a situation of continuous and unpredictable change, rife with uncertainty, knowledge gaps and fierce competition. Even a flexible plan would be of little value under theses conditions. Thus, with conventional business thinking, progress becomes a lottery with the odds heavily stacked against the planner.

The alternative is to view the situation in a completely different light. If it is a game of guesses, the best guesser will win. Game theory is about making better guesses.

Super-charged game theory

The traditional way of creating a new business position is to carefully study case histories, look at past successes and emulate their strategies and techniques. Forward thinking would be based upon market research, which uncovers customer or client needs and expectations. However, in this fast-moving world of e-business, such a strategy is likely to be counter-p happening in the present or what has happened in the past may be totally irrelevant to what is going to happen in the future. How, then, can one try to create a business when there are no precedents, no historical guidance, no solid foundations to build a business plan upon?The only way out of this dilemma is to use a more appropriate conceptual framework. It stands to reason that most other people will be in this same situation, so, to be competitive, you don't have to know exactly what to do; you just have to have a better strategy for dealing with uncertainty than others.

Mathematicians and scientists have been dealing with the problems associated with conditions of uncertainty and competition for most of the twentieth century. The need for a solution has come from several main sources:

  1. Competitive pressures for governments in political maneuvering and warfare
  2. Business strategies
  3. Final decision making
  4. Trying to understand the mechanism of evolutionary biology

Most solutions for dealing with uncertainty have been based upon probability. Various forms of decision theory allowed us to choose the best from a number of uncertainties. Game theory allowed us to structure this decision making to enhance competitive play in an uncertain and competitive environment. When technological progress began to expand at an ever-increasingly fast rate, decision theory became too unreliable and even a game theory approach proved inadequate. It needed something else, and that something else was found from the enigmatic process of evolutionary biology.

It was realized that biological organisms encountering similar kinds of problems to peop to cope with the uncertain and unpredictable environment of e-business. They weren't using forward planning or predictive thinking to compete and survive, they were working blindly. Yet this blind process was achieving remarkable results as evidenced by the vast variety of life forms that we find on this planet. Mother Nature was working blindly, yet this blind process was solving all kinds of difficult problems.

The secret of this success was discovered in the 1980s by computer scientist John Holland, who took a radical new approach to artificial intelligence by copying some of nature's evolutionary techniques. What he found was that the whole complexity of the evolutionary process was being driven by a seemingly simple mathematical model: the genetic algorithm. This algorithm was giving Mother Nature the power to overcome seemingly insurmountable obstacles of uncertainty and competition. So powerful is this algorithm that it has been responsible for the design of not only the form of every individual and species on the planet, but also the human brain.

This book is about using this same power to enhance the advantages of using game theory to cope with competition and uncertainty in the world of e-business.

The creation of a conceptual tool-box

Dealing with a complex and volatile environment like the internet throws planning and management systems into total disarray. The procedures and methods of traditional business can't cope. In their place, we can use game theory and direct the strategy through the use of evolutionary processes.

In this context, game theory isn't used to deal with technology, or the details associated with the core business. It is used for something more fundamental: to deal with people—the people who know about the technology, the people who use the technology and most importantly the people who are the customers and clients.

Game theory can be used as a framework to build a network of collaborative associations. It can allow us to create systems of communication that link a variety of people together into self-organizing systems that solve problems. It can be used to create systems that adapt to and respond to customer needs, technological change or competitive moves.

Game theory; communicating with people; establishing collaborative associations-all require a special range of conceptual models: tools that can be used to build adaptive systems of mutual collaboration. This is what this book provides: conceptual tools that can be used to build the kind of personal communication networks that everyone must be able to construct if they are to successfully establish their own niche in the world of e-business.

The key to winning

The book is about establishing a personal niche in the world of e-business. Whatever niche this might be, it will involve contact with people. Contact with people will be needed for:

  1. Getting information to maintain proficiency in the selected niche
  2. Using the niche specialty to make a living.

The interent provides a massive resource for making contacts. The snag is there are over three hundred million people connected to the internet to decide between—and it is only physically possible to strike up relationships with a very small number of them. The game is to choose the most suitable contacts from this overwhelming choice, then establish and maintain a trusting relationship with them. It is a game of vital, strategic importance, but it isn't an easy game to play.

There is story about a man who spent his life searching for the perfect woman. When at last he found her, he wasn't her perfect man. This highlights an aspect of the problem that makes finding good contacts doubly difficult. You might find somebody who would make an extremely useful and valuable contact, but will they want you to be one of their special contacts?

How do you succeed in such a game? What is the measure of success? What are the goals? How do you win? Fortunately, everyone has a different idea as to what they consider to be success. Everybody has a different goal. This makes it possible for people to cooperate and collaborate because they needn't be in competition with each other to win. They can help each other if their goals are complementary.

The game, then, is not about competing with people to win money or rewards. It is a game about winning cooperation. This idea of mutual benefit holds the key to becoming a winner in this game.

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