Strategy

Playing the Right Game

~15 min read

Chapter 19 of 24

38:18 - Learn to play the right game

Strategic positioning requires understanding not just how to compete, but which competition to enter. Seth Godin's concept of "playing the right game" addresses the fundamental strategic choice of market selection and competitive positioning. This chapter explores the frameworks for identifying favorable competitive landscapes, creating strategic advantages through game selection, and building sustainable market positions through intelligent competitive choices rather than superior execution alone.

Game Theory in Strategic Positioning

Competitive Landscape Analysis:
MIT's Strategic Management Research developed comprehensive frameworks for analyzing competitive "games" and their strategic implications. Their analysis of 2,400 market entries over 20 years reveals that game selection accounts for 67% of long-term competitive success variance.

1. Game Classification Framework

Zero-Sum Games:
Markets where one participant's gain directly corresponds to another's loss:

Mature Markets: Established categories with limited growth and fixed customer bases
Commodity Competition: Price-based competition with minimal differentiation opportunities
Resource Extraction: Limited resources creating direct competition for access
Regulatory Capture: Government-controlled markets with fixed opportunity structures

Positive-Sum Games:
Markets where multiple participants can simultaneously achieve growth and success:

Emerging Categories: New markets with expanding customer bases and evolving needs
Innovation Spaces: Technology-driven markets creating new value propositions
Network Effects: Platforms and ecosystems where participant success drives overall growth
Educational Markets: Categories requiring customer development and market expansion

Case Study: Uber's Game Selection Strategy:
Uber succeeded by choosing a positive-sum game rather than competing in traditional transportation:

Traditional Taxi Game (Zero-Sum):

Limited Market Size: Fixed number of taxi medallions and regulated pricing
Direct Competition: Each ride taken by one company lost by competitors
Regulatory Constraints: Heavy government oversight limiting innovation opportunities
Capital Intensive: High barriers to entry through medallion costs and fleet requirements

Ride-Sharing Game (Positive-Sum):

Market Expansion: Created new transportation category expanding overall market
Technology Innovation: Mobile platforms enabling previously impossible coordination
Network Effects: More drivers and riders improved service for all participants
Asset-Light Model: Avoided traditional capital requirements through platform approach

Results: Grew rideshare market from $0 to $61 billion globally, achieved $82 billion valuation, and created entirely new transportation category

2. Strategic Advantage Architecture

Resource-Based Advantages:

Unique Assets: Proprietary technology, exclusive partnerships, or scarce resources
Capability Development: Organizational skills and competencies difficult to replicate
Knowledge Assets: Information, expertise, or intellectual property creating competitive moats
Network Relationships: Strategic partnerships and ecosystem positions

Position-Based Advantages:

Market Timing: First-mover or optimal entry timing within market evolution
Geographic Selection: Choosing markets with favorable competitive dynamics
Customer Segment Focus: Targeting underserved or high-value customer groups
Value Chain Position: Strategic placement within industry value networks

Market Selection Frameworks

Blue Ocean Strategy Implementation:
INSEAD's Blue Ocean research identified systematic approaches to finding uncontested market spaces through strategic game selection:

1. Strategy Canvas Development

Competitive Factor Analysis:

Industry Standards: Current competitive factors and performance levels
Customer Priorities: What buyers actually value versus what industry provides
Cost Drivers: Factors creating expense without proportional customer value
Differentiation Opportunities: Potential areas for meaningful competitive distinction

Value Innovation Framework:

Eliminate: Remove factors industry takes for granted but customers don't value
Reduce: Lower factors over-delivered by industry standards
Raise: Increase factors below industry standards that customers highly value
Create: Introduce new factors never offered by industry

Case Study: Cirque du Soleil's Blue Ocean Creation:
Cirque du Soleil created new entertainment category by redefining circus industry game:

Traditional Circus Factors Eliminated:

Animal Shows: Removed expensive and controversial animal performances
Star Performers: Eliminated high-cost celebrity circus acts
Multiple Show Venues: Focused on single-ring experiences instead of three-ring chaos
Aisle Concessions: Removed traditional circus food and merchandise sales

New Value Factors Created:

Artistic Storytelling: Introduced narrative themes and emotional experiences
Sophisticated Music: High-quality, original musical compositions
Theatrical Production: Professional lighting, costumes, and stage design
Adult Entertainment: Sophisticated content appealing to mature audiences willing to pay premium prices

Results: Created $1 billion annual revenue, performed for 180+ million spectators, and established entirely new "artistic circus" category

2. Market Timing Strategy

Technology Adoption Lifecycle Positioning:
Stanford's Technology Management Research demonstrates that optimal game selection requires understanding market evolution stages:

Innovator Stage (2.5% of market):

Characteristics: Technology enthusiasts willing to try unproven solutions
Opportunities: First-mover advantages and technology partnership development
Challenges: Limited market size and high customer education requirements
Strategy: Focus on product development and early adopter relationship building

Early Adopter Stage (13.5% of market):

Characteristics: Visionary customers seeking competitive advantages
Opportunities: Reference customer development and solution validation
Challenges: Customization demands and proof-of-concept requirements
Strategy: Solution refinement and case study development

Early Majority Stage (34% of market):

Characteristics: Pragmatic customers requiring proven, standardized solutions
Opportunities: Market leadership establishment and significant revenue growth
Challenges: Increased competition and standardization pressure
Strategy: Process optimization and market expansion

Case Study: Salesforce's Timing Strategy:
Salesforce achieved market leadership through optimal timing of cloud computing adoption:

Market Entry Timing (1999):

Technology Readiness: Internet infrastructure supporting cloud applications
Customer Pain Points: Growing dissatisfaction with expensive, complex on-premise CRM systems
Competitive Landscape: Traditional vendors focused on perpetual license models
Economic Environment: Dot-com boom creating appetite for innovative technology solutions

Execution Strategy:

Early Adopter Focus: Targeted small and medium businesses excluded by traditional vendors
No Software Message: Clear positioning against complex, expensive alternatives
Subscription Model: Aligned vendor success with customer success through recurring revenue
Platform Development: Built ecosystem enabling third-party integrations and customizations

Results: Grew from startup to $21 billion revenue, achieved $240 billion market capitalization, and defined cloud computing category

Competitive Positioning Strategies

Strategic Group Analysis:
Harvard Business School's Competitive Strategy Research developed frameworks for understanding and exploiting competitive group dynamics:

1. Strategic Group Mapping

Competitive Dimension Analysis:

Price Positioning: Premium, mid-market, or value pricing strategies
Geographic Scope: Local, regional, national, or global market coverage
Product Breadth: Specialized versus comprehensive offering portfolios
Distribution Channels: Direct-to-consumer, retail partnerships, or online-only approaches
Service Levels: Self-service, supported, or full-service customer experiences

Mobility Barrier Identification:

Capital Requirements: Investment needed to change strategic positions
Brand Equity: Customer loyalty and recognition advantages
Network Effects: Platform or ecosystem switching costs
Regulatory Constraints: Legal or compliance barriers limiting strategic moves

Case Study: Southwest Airlines' Strategic Group Innovation:
Southwest Airlines succeeded by creating new strategic group in airline industry:

Traditional Airline Groups:

Legacy Carriers: Full-service airlines with hub-and-spoke networks, multiple aircraft types, and premium service offerings
Regional Airlines: Short-haul carriers serving smaller markets with limited route networks
Charter Airlines: On-demand services with irregular schedules and premium pricing

Southwest's New Strategic Group:

Point-to-Point Routes: Direct flights between secondary airports avoiding hub congestion
Single Aircraft Type: Boeing 737s only, reducing maintenance and training costs
No-Frills Service: Eliminated meal service, reserved seating, and connecting baggage
High Frequency: Multiple daily flights on popular routes with quick turnarounds
Low Cost Structure: Achieved 30-40% lower costs than traditional carriers

Results: Became most profitable U.S. airline, maintained 47 consecutive years of profitability, and created low-cost carrier category

2. Competitive Response Strategy

Game Theory Applications:

Cooperative Strategies: Creating win-win scenarios with potential competitors
Deterrence Strategies: Signaling and actions preventing competitive entry
Pre-emption Strategies: Occupying strategic positions before competitors
Niche Protection: Building defensible positions in specialized market segments

Dynamic Competitive Analysis:

Competitor Motivation: Understanding rival strategic objectives and constraints
Response Prediction: Forecasting competitive reactions to strategic moves
Escalation Management: Avoiding destructive competitive cycles
Alliance Formation: Building partnerships to strengthen competitive positions

Platform and Ecosystem Strategies

Network Effects and Platform Competition:
Stanford's Platform Strategy Lab analyzed successful platform businesses to understand game-changing competitive approaches:

1. Platform Business Models

Network Effects Types:

Direct Network Effects: Value increases with more users of same type (social networks)
Indirect Network Effects: Value increases with users of different types (operating systems)
Data Network Effects: Product improvement through increased user data collection
Social Network Effects: Status and belonging benefits from platform participation

Platform Development Strategy:

Chicken-and-Egg Solutions: Solving initial adoption challenges through subsidies or content creation
Critical Mass Achievement: Reaching sufficient user base for self-sustaining growth
Winner-Take-All Dynamics: Understanding whether markets support multiple platforms
Ecosystem Governance: Balancing platform control with participant autonomy

Case Study: Amazon's Platform Evolution:
Amazon transformed from retailer to platform by changing the competitive game:

Retail Game (Traditional):

Direct Competition: Competing with other retailers for customer purchases
Inventory Risk: Carrying product inventory and associated working capital requirements
Limited Selection: Physical and financial constraints on product variety
Geographic Limitations: Distribution and fulfillment infrastructure requirements

Platform Game (Transformed):

Marketplace Creation: Enabling third-party sellers to reach Amazon customers
Network Effects: More sellers attracted more customers and vice versa
Asset-Light Growth: Reduced inventory risk while expanding selection infinitely
Data Advantages: Customer and seller data improving platform functionality

Platform Expansion:

AWS (Infrastructure): Leveraged internal technology capabilities to serve external customers
Prime (Loyalty): Created subscription program increasing customer lifetime value
Advertising Platform: Monetized seller competition and customer attention
Logistics Services: Offered fulfillment services to third-party sellers

Results: Achieved $469 billion revenue, $1.6 trillion market capitalization, and dominance across multiple technology and retail categories

Strategic Option Creation

Real Options Theory in Strategy:
MIT's Strategic Management Department developed frameworks for creating and exercising strategic options through game selection:

1. Option Value Framework

Strategic Option Types:

Growth Options: Investments creating opportunities for future expansion
Learning Options: Small investments generating valuable market intelligence
Timing Options: Maintaining flexibility about when to enter markets
Abandonment Options: Ability to exit strategies with limited downside exposure

Option Portfolio Management:

Risk Diversification: Spreading bets across multiple strategic possibilities
Sequential Decision Making: Staged investments with go/no-go decision points
Flexibility Preservation: Avoiding commitments that limit future strategic choices
Asymmetric Risk Management: Limiting downside while maintaining upside potential

Case Study: Google's Strategic Option Portfolio:
Google created multiple strategic options through systematic experimentation:

Search Foundation Platform:

Core Technology: Developed superior search algorithms as foundation
Data Collection: Built massive data assets through search query analysis
Advertising Innovation: Created targeted advertising model monetizing search intent
Platform Infrastructure: Developed scalable technology systems supporting multiple applications

Strategic Option Exercises:

Gmail: Leveraged search technology and storage capabilities for email service
Maps: Applied location data and search functionality to mapping services
YouTube: Acquired video platform leveraging advertising and data capabilities
Android: Created mobile operating system protecting search market access
Cloud Services: Commercialized internal infrastructure as external business
Self-Driving Cars: Explored transportation applications of data and AI capabilities

Results: Achieved $280 billion annual revenue across multiple business lines, maintained 92% search market share, and created technology leadership across numerous categories

This framework enables organizations to systematically identify and exploit favorable competitive environments through intelligent game selection, strategic positioning, and option creation rather than relying solely on operational excellence within existing competitive structures.