Game Theory, Sensemaking, Innovation Diffusion - Assignment Example

Heading: Final exam Your name: Course name: Professors’ name: Date QUESTION 1 According to Brandenburger & Nalebuff (1995), the founders of the game theory John Von Neumann and Oskar Morgenstern achieved a major scientific discovery about the economic behavior of business in terms of conduction their business. In essence, game theory is not about playing the game well or not, it is about playing the right game. By acknowledging the complexity of business, the founders stated that there are two types of games, rule based and players interact. The rules in this case can come from loans, contracts and even terms of trade. In the second option, the players in the game interact without any influence from external forces. Notably the business environment is usually a mix of the two games and it is also imperative to note that the two interact differently according to different environment and situations (Marco 2002). The game theory is thus an essential tool of explaining strategic choice, for instance, in the 1990s, the U.S. automobile industry was locked on one mode of doing business where at the end of the year, rebates and dealer discounts were holding back the profits that major automobile companies such as Ford and GM could make. In the wake of 1992, General Motors and House-hold Bank launched credit cards that allowed card holders to apply 5 % of the charges to either lease or purchase a car in GM. This strategy allowed charges up to $500 a year and a maximum of $3,500. This GM strategy has been acknowledged as one of the best strategies in history. This was essentially because of how GM managed to change the game from a lose-lose situation to a win-lose situation. The fundamental concept of this strategy was to capture and retain clientele into buying a GM car, this also contributed to potential Ford buyers buying GM cars instead. The net effect in the market was the decrease of consumers who bought Ford cars and an increase on the number of consumers who bought GM cars. This strategy clearly re-orients us to how strategic choice through value addition to the market as GM did shaped the game and created a substantial competitive advantage. Strategic choices in game theory can also came in form of cooperation, in game theory the term coopetition is a strategic choice of finding ways to cooperate with other players (who are interdependent) or compete with them as GM did by changing the automobile game in 1992. Through coopetition, a win-win situation can be achieved or a lose-lose situation (Saloner 1991). As pointed out by Marco, AP (2002, p. 455), in the game there are complementors and competitors, as an example, physicians like surgeons and insurance companies are complementors. In another case, Dell Inc and Compaq are competitors because they both sell same products to the same target market. They are however both complemetors relative to Intel which mainly manufactures Processor chips that these companies need in their products. As it is evident, the business game has many players and their interaction determines the success or failure of these businesses. According to Marco (2002, p. 454) the modern business world requires a shift from the traditional game theory and seek to establish better and innovative ways of ensuring a different and improved outcome. This outcome creates competitive advantage meaning that despite the many players, the uniqueness of the game played by one player results in more customers and thus more sales as compared to the other players. As Marco (2002) and Saloner (1991) state, creation of value through innovation is essential to changing the game, in essence a payer should ask one foundational question about its business, what am I doing which is different from the other players? This can be in terms of the product price, quality of the product, peculiar features of the products, accessibility in terms of supply chain management or how easy is it to get the product. All these require that the player have an in-depth of the environment in which the game is being played and thus act effectively. Most companies have managed to achieve this in the past through aspects of coopetition, in the current times, the competition of smart phones can be felt everywhere, creativity in terms of the features and appearance is considered one of the most important competitive advantage tool (Song & Panayides 2009, 286). Apple Inc is one of the pioneers in this field, its unique products have become households’ names because of its difference from what other companies offer. This has therefore provided the company a major leverage as compared to its competitors. Notably in order to ensure sustainability, the ability to make strategic choices for changes in the market environment is essential (Miee 2004). QUESTION 2: According to Weick, Sutcliffe, and Obstfeld (2005), sensemaking entails the continuing retrospective growth of reasonable images that justifies what individuals do. Termed as an important process of arranging, sensemaking unfolds as a series in which individuals involved in identity within the social setting of others engaging in constant conditions from which they remove signs and create reasonable sense retrospectively whilst endorsing more or less organization into the continuing circumstance. It also entails a means position on the way to a consensually built, organized system of accomplishment. At the station, conditions are changed into a situation that is understood clearly in words and that acts as catalyst to achievement. These images mean three vital points concerning the issue of sense in organizational life. Firstly, sensemaking happens when a series of organizational conditions is changed into salient and word categories. Secondly, organizing is represented in spoken and written texts. Thirdly, writing, reading, editing, editing, and conversing is critical acts that act as the media via which the imperceptible institutions facilitate conduct (Hodckinson 1994). Sensemaking entails a process that is constant, subtle, instrumental, social, swift, and easily ignored. The apparently momentary sensemaking lies in its key responsibility in the establishment of human behavior. Sensemaking is vital because it is the basic site where meanings occur constrain identity and inform and action. Sensemaking is an important language used in talking into organizations, situations, and environments into existence (Weick, Sutcliffe & Obstfeld 2005). As Weick, Sutcliffe, and Obstfeld (2005) say, clear efforts at sensemaking seem to happen when the present state of the globe is seen to be distinct from the anticipated world’s state, or when there is no apparent means to involve the world. Here, there is a change from immersion experience in projects to logic that order of actions has become somehow incomprehensible. Normally, people first identify the reasons to allow them to recommence the undisrupted action, and remain on it in order to understand a disruption. The justifications are achieved from such frameworks as organizational premises, institutional constraints, plans, acceptable justifications, expectations, and customs inherited from early generations. If a recommencement of a particular project is challenging, sensemaking is skewed either towards the identification of alternative action, or deliberation. Furthermore, Chia and MacKay (2007) assert that sensemaking focuses more on interplay, instead of the effect of assessment on choice. Whenever action is a focus, interpretation, rather than choice, is critical. Focusing on sensemaking implies portraying organizing as the practice of getting in a constant, unforeseeable, unknowable flow of knowledge when looking of for solutions to ‘what’ questions. In fact, reasonable accounts gain and animate their soundness from resultant action. The sensemaking language take the realities of flow, agency, transience, equivocality, reaccomplishment, emergence, and unfolding realities that are obscured by language of nouns, variables, structures, and quantities. Scholars of sensemaking comprehend that the flow of organizational life originates from small, subtle, relational, particular, oral, and temporary, since it does from the large, conspicuous, substantive, general, written, and sustained. Working with the notion of sensemaking involves appreciating that smallness is not equivalent to irrelevance. Short moments and small structures may possess huge outcomes. It is worth noting that sensemaking helps in filling vital gaps in the theory of organization. This is possible through identifying its unique characteristics descriptively with an extensive instance of pediatric nursing (Weick, Sutcliffe, & Obstfeld 2005). When viewed descriptively, Chia & MacKay (2007) argue that organizational sensemaking concerns how events come to be, and what an event entails. Normally, when people face something incomprehensible, they inquire about it to understand, and acquire its meaning. Although these descriptions facilitate the delimitation of sensemaking, they explain little concerning what an organization entails. This means that organization and sensemaking comprise of one another. Organization is a bid to organize the human actions’ inherent flux in order to guide it towards particular ends. This helps in shaping it by generalizing and executing certain rules and meanings. The organization’s operative image concerns the image in which organization leads sensemaking or one in which association produces sensemaking. A common idea in sensemaking and organizing is that individuals organize in order to give meaning to ambiguous inputs and enforce the meaning back in the world in order to enhance the world’s order (Weick, Sutcliffe & Obstfeld 2005). In summary, sensemaking begins with chaos. It also concerns the labeling and classification in order to stabilize the flow of experience. Labeling occurs via a strategy of simple location and differentiation, recognizing and categorization, controlling and routinization of the obdurate or intractable to a more enforceable form to functional operation. It also begins with perceiving and bracketing, and is retrospective. Sensemaking also concerns presumption, systemic and social, concerns action, and organizing via communication. Therefore, sensemaking is critical in providing essential insights necessary in effective strategic management (Chia & MacKay 2007). QUESTION 3 Introduction Innovation diffusion theory explains the process in which innovation is communicated via different channels with time among members of a given social system. It is can thus be regarded as a unique type of communication because its concept is concerned with conveying new ideas and ensuring that these ideas yield to improved ways of doing things. The advantages and the disadvantages of this theory are explained in details as follows; Advantages of Roger"s innovation diffusion theory Since Roger"s innovation diffusion theory concern communication of new ideas of innovations, the effect of this new ideas is positive. In essence, it helps improve the way in which business is done or managed. It also helps in improving ways in which community services are managed, as an example, the innovation in Peru was aimed at improving the health of the inhabitants. In summary, new ideas or innovations improve our lives in many ways depending on the purpose of the new idea (Rogers 2005). New innovations and ideas are currently being adopted more faster as compared to the traditional business management where changes were not encourages since people in management level were very reluctant in accepting and implementing changes. The rationale for the current increased rate of new innovations and idea intake is because of increased competition in the market. Customers of today are more demanding and more selective in purchasing products, companies that are not innovating in adopting new ideas are quickly being kicked out of the market (Rogers 2005). New innovations are essential in creating competitive advantage in a business perspective, whether in management or product redesign, creativity is essential for the modern day business survival. New ideas have become part of our contemporary society; this is because of the readily available information to kick start the process. The internet is one of the most important sources of ideas for new innovations; new information and market needs as well as trends are all over the internet. By a click of a mouse, all these information can be acquired and thus jump starting new ideas through analysis of new market needs and gaps in the existing markets. Disadvantages of Roger"s innovation diffusion theory Innovations that demand a major change in the way people thinks and behave is difficult to implement even if the innovation benefits the people involved in the implementation process. This was evident in the way Peru attempted to initiate the health of its people by encouraging people to burn garbage, install latrines, boiling drinking water and control house flies among other initiatives. Boiling water was essentially the most important initiative as there were repeat illnesses from diseases caused by unclean water (Rogers 1995). This innovation however failed because of the rooted culture and way of doing things in the setting. Majority of the people therefore failed to see the purpose of the idea and hence making it unsuccessful in the long run. New innovations are usually taken or integrated into function more slowly; this is very disappointing considering the significant importance of the innovation in improving management or better ways of handling diseases. As evident in the ancient British Navy, the adaptation of taking lemon and other additives to cure scurvy was very slow despite the results that were achieved by the sailors who took lemon juice. This is one major disadvantage of innovations or new ideas in areas of management, people tend to take them in at a disappointingly slower rate. As noted by Rogers, E (1995) new innovations of ideas especially of management have a tendency of reducing the number of staffs needed to run an institution of a company. Automation of industry labor requirement is an example of such innovation that has seen people became jobless in the recent past. More so, more skilled laborers and workers are on high demand as opposed to the majority population which offers non-specialized labor. Another main disadvantage of innovations is imitation; this is specifically applicable in the business world. Imitation of common in all aspects ranging from product manufacture to management, considering that innovation in the modern world provides competitive advantage, imitation affects this core value of innovation (Ellsworth 2000). Copyright issues and Intellectual Property cases are as a result of imitations from other players in the market. More so, it is very difficult to have new ideas and implement them without leaking the same information to a competitor. New ideas and innovations are also hard to come by, innovation is a difficult task; poor leadership and pro-innovation bias also limit the process of developing new ideas. In order for innovation to be communicated as desired, four elements namely; innovation, channels of communication, time and the social system have to work together. This is not normally the case as there are many variables that hinder the process itself. Communication channel and the social system stand out as the greatest since these variables determine the rate of new idea intake and application. QUESTION 4 As Anderson (1999) says, the complex theory has complex adaptive system (CAS) models, which have various features. To start with, agents with schemata form one of the features of the CAS model. Most empirical and conceptual models that scientists use in studying firms employ independent variables in explaining variation in the dependent variables. Normally, the causal drivers at a similar analysis level may explain the results at a single analysis level. The CAS models take a distinct approach. The models inquire how modifications in the agents’ decision judgments, the interrelationships among agents, or suitability purpose that agents use in the production of various cumulative results. The models are intrinsically multilevel, as order is seen as developing property that relies on the way lower-level behaviors are combined. Consequently, they react well to the modern calls for more additional incorporative, cross-level study in association science (Anderson 1999). Both normal causal and CAS models are complements, rather than opponents. It is unnecessary for researchers to use either of the models as the most appropriate to examine firms. Causal tests and theories that associate variables on one level identify significant aggregate factors and regularities that enable form them. The models explain experimental regularities as an outcome of prearranged, developing contacts among the low-level components (Norberg & Cumming, 2008). Another feature of the complex theory is the ability for systems to have self-organization. Self-organization can emerge on itself as the outcome of the contact with environment and organism, and the latest structures appear that may not have been initially foreseen. The shift towards the higher levels of complexities, alteration, and flexibility for survival in the dynamic environments is a shift towards self-organized criticality. Here, systems develop via self-organization to the frame of chaos (Anderson 1999). Norberg and Cumming (2008) say that agents are partially interrelated for the state of a certain agent relies on the other agent’s state of some division of all components in the system. In a system, variables are linked to one another by response loops. In CAS models, components are linked to one another response loops. Each agent acts and observes on local information only, obtained from the components to which it is related. Maintaining a self-organized behavior needs introduction of energy in the system. According to Jenkins, Ambrosini, & Collier, N (2007), the third feature of complexity theory involves co-development into the edge of chaos. This implies that agents in a system co-evolve with each other. Every component acclimatizes to the environment by trying to enhance fitness or a payoff function with time. Every individual’s payoff purpose relies on options that other components make for every component’s adaptative setting is continually changing. The stability resulting from such co-development is dynamic, rather than static. Small alterations in state at time can give small, medium, or huge modifications at a time as per the power law. Unlike chaotic stability, where slight changes in state often lead to huge changes in results, power law stability rest at the rim of chaos. Fourthly, Anderson (1999) argues that complexity theory involves system and recombination evolution. CAS models develop with time via entry, exit, as well as transformation of components. New components can be created through a recombination of agents of formerly effective components. Moreover, the connections between the components can develop with time, changing the interconnection pattern, strength of every link, and its functional, or sign form (Norberg & Cumming, 2008). CAS models provide an appropriate way of turning a complexity to simplicity, especially in the encoding typical systems into official systems. CAS models naturally demonstrate the way the complex results run from easy schemata and rely on the manner in which components interrelate. They do not make non-linear systems good through turning them to an error term and causal variables. Instead of assuming that cumulative results demonstrate a homeostatic balance, they indicate the way the results develop from the agents’ efforts into obtaining higher suitability (Jenkins, Ambrosini, & Collier 2007). Moreover, Anderson (1999) they do not coerce researchers into understanding every part of a complex system wholly, but they enable them to emphasize on a component in its local setting. It makes it easy to understand complex state by diversifying assumptions concerning connections, schemata, fitness functions, and population dynamics, which are agents’ features (Jenkins, Ambrosini & Collier 2007). They also offer interesting new chances of analyzing complex systems without ignoring their interrelationships, as well as non-linear relationships. This also helps organizational researchers, as interrelationship is core to current conceptions of what an organization constitutes (Chia & MacKay 2007). References Anderson, P 1999, ‘Complexity Theory and Organization Science’, Organization Science, vol.10, No. 3, pp. 216-232 Brandenburger, AM & Nalebuff, BJ 1995, The Right Game: Use Game Theory to shape Strategy. Harvad Business Review(July-August 19995). Chia, R & MacKay, B 2007, ‘Post-processual challenges for the emerging strategy-as-practice perspective: Discovering strategy in the logic of practice’, Human Relations, vol. 60, no.1, pp. 217–242. DOI: 10.1177/0018726707075291 Ellsworth, JB 2000, Surviving changes: A survey of Educational change models, ERIC Clearinghouse, Syracuse, NY. Hodckinson, G 1994, ‘Exploring the mental models of competitive Strategists: the case for a processual approach’, Journal of Management Studies, vol. 31, no. 4 1994 Jenkins, M, Ambrosini, V, & Collier, N 2007, Advanced strategic management: a multi-perspective approach, Basingstoke, Palgrave Macmillan, Hampshire New York. Pp. 1-20. Marco, AP 2002, Game Theoretic Approach to Operating Room Management, The Americal Surgeon (May 2002) vol. 68, no.5, pp. 454-464. Miee, MH, 2004,Playing with the Big, Engineering management magazine (April-May) pp.15-17. Norberg, J & Cumming, GS 2008, Complexity theory for a sustainable future, Columbia University Press, New York. Pp. 1-30. Rogers, E 1995, Diffusion of Innovations, (4th ed.), The Free Press, New York. Rogers, E 2005, Diffusion of Innovations, (5th ed.), The Free Press, New York. Saloner, G 1991, Modeling, Game Theory, and Strategic Management, strategic management Journal vol. 12, pp. 119-136. Song, DW & Panayides, 2009, A conceptual application of cooperative game theory to liner shipping strategic alliances, Maritime Policy & Management, vol. 29, no. 3, 285-301 Weick, KE, Sutcliffe, KM, Obstfeld, D 2005, ‘Organizing and the Process of Sensemaking Organization Science’, Frontiers of Organization Science, vol. 16, no. 4, pp. 409-421. Read More