Game theory is a fascinating corner of mathematics that is used for everything from predicting social behavior to geopolitics and to, of course, business. It deals with the strategies and outcomes of individuals when faced with certain scenarios or dilemmas. As predicting outcomes and weighing risks are integral to economics, it’s no surprise that game theory plays a role in business and helps in decision making. We recently saw an example of how these mathematical scenarios affect people’s decisions while working on a survey for a benchmark report. Let’s dig into the findings and what they could mean for your business.
While researching for our benchmark report, we contacted and surveyed hundreds of businesses across a wide variety of industries. The biggest speed bump with surveys, of course, is getting people to actually respond.
The questionnaires are naturally anonymous, but we encountered some hesitation when it came to the idea of sharing best practices to be published. Why should you put your tricks of the trade out there for your competitors to see? There’s a good reason why you should, and it brings us to our theoretical game: the stag hunt.
The game starts with a simple choice for the two players: will you hunt for stag or hare? The two hunters have to work together to get a stag, but one hunter alone can get a hare. Neither hunter knows which the other will choose, so there is a risk of getting nothing if a player chooses stag and the other chooses hare. It seems obvious to protect your own interests and choose hare, but a small hare will yield much less meat than a stag. So which should you pick?
The stag in our situation is a comprehensive benchmark report with valuable data. If you’re familiar with the power of benchmarking, you know that loads of businesses use them to improve their practices and jumpstart innovation. The only way we can get a complete report here, though, is if the players cooperate. The act of choosing the stag is like agreeing to respond to a survey about best practices. The hare, for us, is not participating in benchmarking and going it alone to figure out the best way to do things. While it seems less risky, not participating decreases the potential reward from everyone.
As an exercise, this game is played with both hunters oblivious to the choice of the other. While an excellent demonstration, it doesn’t necessarily reflect how things work in the business world. We don’t operate in a closed system, and by forming relationships and acquiring knowledge, we literally change the game.
You may remember the film A Beautiful Mind in which Russell Crowe portrays brilliant mathematician John Forbes Nash Jr. In the Oscar-winning biopic, a young Nash finds himself in a juvenile barroom dilemma with his classmates: who gets to go for the prettiest girl? In a moment of dramatized inspiration, Nash realizes that by competing for just one girl the friends will block each other and scare off the rest of the girls.
It dawns on him that the best outcome will happen when each individual does what’s best for himself and the group. Not just himself. You may want to refresh yourself on the iconic scene for the full effect, but it lends itself to our benchmark situation. When we all consider the strategies of our opponents, collaborate, and act accordingly in an open system, we are much more likely to get the proverbial stag. Closed-mindedness and failure to consider others’ strategies will get only a hare or two if anything at all. It’s up to you to change the game.
As I mentioned above, we are working on a comprehensive benchmark about best practices in customer experience to be released this summer! It covers tons of industries and includes info from hundreds of businesses. Follow our blog and stay tuned to see how you can get your hands on the report. Reach out to us if you’d like to know more about best practices and strategizing for your customer experience.