Game Theory: Your Strategic Secret Weapon
Principal Game Theory Consultant
From the time that Microsoft announced plans to acquire Yahoo, industry insiders marveled at the deftness displayed by the software giant in countering every move by Yahoo executives to prevent the takeover.
- When Yahoo turned to competitor Google for help, Microsoft had the government's anti-trust watchdogs on the case.
- When Yahoo put out feelers to News Corp (MySpace) as an alternate buyer, Microsoft announced that it was already in discussions with News Corp about a joint takeover of Yahoo.
- When Yahoo executives decided to dig in their heels and ride it out, Microsoft sweetened the deal for Yahoo investors raising the threat of a stockholder revolt.
From the outset, Microsoft's acquisition team was two steps ahead in the game — not merely reacting to, but anticipating Yahoo's every move.
Yahoo executives may have thought this was supernatural foresight on the part of Microsoft. Instead, it was the practical application of game theory. With game theory, a method of more accurately predicting the probable outcomes of strategic decisions, Microsoft was able to map every possible twist and turn in the process months before it announced its intention to acquire Yahoo.
More companies — perhaps even your competitors — are tapping into the power of game theory. Frank Koch, an analyst for oil giant Chevron, calls game theory the company's "secret strategic weapon."
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