A detailed insight into how a corporation uses game theory to gain an advantage has been provided by Julie Woods-Moss, president, strategy, marketing and propositions at BT Global Services.

She says that as the company develops its strategy and moves towards operational tactics to win new contracts, she asks her teams: “Does this require a winner takes all approach, which might involve us in taking more risks to win the business, or are we more likely to win business by co-operating?”

She continues: “In certain markets where we have enjoyed outright success, such as providing services for local government, we will adopt the ‘winner takes all approach’ to new business - priming a contract because of good relationships with the client and because it's a home market with strong assets.”

But she says: “Our main modus operandi is to win games (contracts) through collaboration. In such a competitive market as financial services, where we are not the leader, we adopt a co-operative approach, seeking to partner with a company such as IBM or Accenture, according to the client’s preference and so that we compliment each other’s assets — or even to act as a sub-contractor. We would play on our softer skills, how we service clients, manage relationships and the strength of individual products.

“If we are seeking business from a contact centre, for example, we would be happy to provide two or three of the five products it wants. It would be rare to win them all.

“Children as young as seven learn that in some computer games if you engage with the enemy to do certain things it might help you get to the next level.

“When we talk about pricing strategies, we consider the prisoner’s dilemma in game theory. If any one player reduces prices and everybody follows suit, all you do is reset the market price. We must look at the alternatives. Our aspiration is always to sell on value because the quality of our services is worth a two-to-three points margin."

Woods-Moss says that a third aspect of game theory, farming versus hunting, is also relevant to her business. “If you are farming - in a long-term relationship with a client - you have to appreciate that in some cases you might not get the biggest share of the pie, but you must always continue to provide the client with the best possible services.”

Companies need to be wary of fellow suppliers seeking exclusivity in their dealings with the client which would lead to an imbalance in the supply chain and a loss of confidence in each other.

When companies are hunting a contract, they must consider whether the cost of winning the business outweighs potential profit. Woods-Moss says the questions to be asked include: “Is there a compelling reason for a customer to switch and what lever does the existing contractor have to protect its business?”