Game Theory, CRNAs and Health Care Reform - Part I

I recognize that the majority of CRNAs do not consider themselves in "business". We typically practice our profession and leave the business side to others. I hope to change some of your perceptions.

Although it may not be practical for each of us to form a "business" in the traditional sense, try shifting your mindset and begin considering your clinical practice as your "business of one". This change in mindset may help you recognize opportunities within your practice enabling you to build the type of practice that best suits your goals.

Most of what follows is based on the book Co-opetition by Adam M. Brandenburger of the Harvard Business School and Barry J. Nalebuff of the Yale School of Management. Originally published by Currency Doubleday in 1996, it is available at Amazon. I encourage each of you to purchase their book to better understand Game Theory from their unique perspective.

Business as War or Business as Peace ?

Under the business as war mindset, there are victors and there are vanquished. Author Gore Vidal wrote "It is not enough to succeed. Others must fail.". Financier and Presidential advisor Bernard Baruch, wrote "You don't have to blow out the other fellow's light to let your own shine." If business isn't war and it isn't peace, what is it ?

A New Mindset

Business is cooperation when it comes to creating a pie and competition when it comes to dividing it up. Ray Noorda, the founder of software comapany Novell explains: "You have to compete and cooperate at the same time". The combination makes for a more dynamic relationship than the words "competition" and "cooperation" suggest individually and resulted in Mr. Noorda coining the term "co-opetition".

You can compete without having to kill the opposition. If fighting to the death destroys the pie, there will be nothing left to slice up, a lose-lose situation. You can cooperate without ignoring your self-interest, why create a pie that you can't have a piece of ? That's lose-win.

In business, your success doesn't require that others fail - there can be multiple winners. (And you get to define winning) Putting co-opetition into practice requires hardheaded thinking. It's not enough to be sensitized to the possibilities of cooperation and win-win strategies. You need a framework to think through the dollars and cents consequences of cooperation and competition.

Game Theory

The field of game theory dates back to the early days of World War II, when British Naval Forces playing cat and mouse with German Submarines needed to understand the game better so they could win more often. They discovered that the right moves weren't the ones pilots and sea captains were making intuitively. By applying concepts later known as game theory, the British improved their hit rate enormously. Their success against submarines led them to apply game theory to other war activities.

The image game theory often conjures up is business as war, not surprising since the field was born during World War II and grew up during the Cold War. The mentality was one of winners and losers - zero sum game, even the zero-sum society. But that is only half the subject. Contemporary game theory applies just as well to positive-sum or win-win games. The real value of game theory for business comes when the full theory is put into practice - when the game theory is applied to the interplay between competition and cooperation.

What Game Theory Has to Offer

Game theory focuses directly on the most pressing issue of all - finding the right strategies and making the right decisions. Game theory is particularly effective when there are many interdependent factors and no decision can be made in isolation from a host of other decisions. Factors you might not even think to ask about can determine your success or failure. Even if you identify all the relevant factors, anything that changes one is likely to affect many others. Amid all this complexity, game theory breaks down the game into its key components. It helps you see what's going on and what to do about it.

Game theory is an especially valuable tool to share with others in your organization. The clear and explicit principles of game theory make it easier to explain the reasoning behind a proposed strategy. It gives you and your colleagues a common language for discussing alternatives. By letting others in on the process you've used to reach a strategic decision, game theory helps you build a consensus.

Game theory is an approach you can expand and build on. It's a way of thinking that survives changing business environments. In many cases, game theory can suggest options that otherwise might never have been considered. This is a consequence of game theory's systematic approach. By presenting a more complete picture of each business situation, game theory makes it possible to see aspects of the situation that would otherwise have been ignored. In these neglected aspects, some of the greatest opportunies for business strategy are to be found.

Changing the Game

This is where the biggest payoff comes. Business is different from other games because it allows more than one winner. But business is also different in another fundamental way - the game doesn't stand still. All the elements in the game of business are constantly changing - nothing is fixed. This is not just by chance. Football, poker and chess have ultimate ruling bodies - business doesn't. People are free to change the game of business to their benefit - and they do.

Why change the game ? An old Chinese proverb explains - "If you continue on the course you are headed, that is where you will end up". Sometimes that's good, sometimes not. You can play the game extremely well and still fare terribly. That's because you are playing the wrong game - you need to change it. Even a good game can be made a better one. Real success comes from actively shaping the game you play - from making it the game you want, not taking the game you find.

How do you change the game ? You may well have been doing this instinctively. But game theory provides a systematic method. To change the game - you have to change one or more of the five elements: Players, Added values, Rules, Tactics and  Scope = PARTS for short. Each component is a powerful tool for transforming the game into a different one. This is where game theory finds its greatest opportunities in changing the game. Changing not just the way you play - but also the game you play.

Next - Describing Co-opetiton