Zero Sum Games and simulations
Submitted by jpark on Mon, 11/22/2004 - 17:18
This is a long rant. So I’ll chop it up into a few posts.
1. Business is not a zero sum game.
Carnegie Mellon University was one of the first educational systems to have a business simulation – Management Game. Having gone through this experience twice as a student, and many more times as a board member, there was one secret I would tell my companies (after I figured it out myself). Business is not a zero sum game, and positioning yourself correctly in the market place means everyone could win.
I saw a lot of egos and cowards reduce themselves and their markets to rubble. One ‘company’ would always start a price war. It was amazing how consistent it was over the years. This company was usually run by an ego driven leader who wanted greater marketshare. So prices were slashed, and everyone else would tremble. Then the rest of the field ended up fighting down stream, lowering prices, and quickly creating a commodity market war.
These teams ended up with high stress, little sleep and a lot of angst. Some of the more successful teams I worked with, recognized two aspects. 1. this was a simulation, and 2. the game was not set up as a zero sum. Therefore, you could make money, your competitors could make money, and everyone could be happy working on their own niche. The designers probably needed to do this, in order for companies that were engaged in a price war to not destroy themselves.
Every year, an exogenous event was scheduled to shake things up. More than once, the instructor of the simulation had to soften the blows, because even a simple preventable event, like a tornado hitting your manufacturing plant (buy insurance), would have devastated over half the class. So the government would step in, and allow those groups to continue.
As an entrepreneur, you are not involved in a zero sum game. Correct, and lucky planning and positioning will allow your company to succeed in the market place. This is true creation of wealth. You create a brand new service (product) for a brand new market, to address an ESTABLISHED and KNOWN NEED.
Please, please, don’t waste your time, or mine, by trying to create a brand new need. The myth of marketers creating a need is just that. A myth.
This is a long rant. So I’ll chop it up into a few posts.
1. Business is not a zero sum game.
Carnegie Mellon University was one of the first educational systems to have a business simulation – Management Game. Having gone through this experience twice as a student, and many more times as a board member, there was one secret I would tell my companies (after I figured it out myself). Business is not a zero sum game, and positioning yourself correctly in the market place means everyone could win.
I saw a lot of egos and cowards reduce themselves and their markets to rubble. One ‘company’ would always start a price war. It was amazing how consistent it was over the years. This company was usually run by an ego driven leader who wanted greater marketshare. So prices were slashed, and everyone else would tremble. Then the rest of the field ended up fighting down stream, lowering prices, and quickly creating a commodity market war.
These teams ended up with high stress, little sleep and a lot of angst. Some of the more successful teams I worked with, recognized two aspects. 1. this was a simulation, and 2. the game was not set up as a zero sum. Therefore, you could make money, your competitors could make money, and everyone could be happy working on their own niche. The designers probably needed to do this, in order for companies that were engaged in a price war to not destroy themselves.
Every year, an exogenous event was scheduled to shake things up. More than once, the instructor of the simulation had to soften the blows, because even a simple preventable event, like a tornado hitting your manufacturing plant (buy insurance), would have devastated over half the class. So the government would step in, and allow those groups to continue.
As an entrepreneur, you are not involved in a zero sum game. Correct, and lucky planning and positioning will allow your company to succeed in the market place. This is true creation of wealth. You create a brand new service (product) for a brand new market, to address an ESTABLISHED and KNOWN NEED.
Please, please, don’t waste your time, or mine, by trying to create a brand new need. The myth of marketers creating a need is just that. A myth.
- jpark's blog
- Login to post comments