Winning the Hardware-Software Game: Using Game Theory to Optimize the Pace of New Technology Adoption
- ISBN13: 9780137002825
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“Many books discuss high-tech decision making, but this is the only book I know of that provides a systematic approach based on objective analysis.” –Matthew Scarpino, author of Programming the Cell Processor “This book offers a unique approach to analyzing business strategy that changes the focus and attitude to a lively and fun exercise of treating business strategy as a game.” –Dave Hendricksen, Architect, Thomson-Reuters USE GAME THEORY TO SOLVE THE #1 PROBLEM THAT CAUSES NEW TECHNOLOGIES TO FAIL IN THE MARKETPLACE: LACK OF COORDINATION Too many advanced technologies fail the test of adoption, at immense cost to their creators and investors. Why? Many new technologies are launched into complex ecosystems where hardware, software, and/or connectivity components must work together–for instance, next-generation gaming and video platforms that can only succeed if they offer attractive, compatible content. Often, users aren’t ready to give up existing … More >>
Tagged with: Adoption • Game • HardwareSoftware • Optimize • Pace • Technology • Theory • Using • Winning
A well written and insightful analysis of a common problem among manufacturers and users of technology
The author is perhaps the first person to broadly describe to an audience of non-economists the use of game theory to model a 3 party game of hardware and software vendors and the end user. Accordingly, while the book uses equations from game theory, these are relegated to the appendix and you don’t have to sit through how they are derived. If you are not an economist and have no inclination or time to study that field, then having derivations in the book, even in the appendix, would likely be a waste of paper.
Rather, the book’s merit is in extensively describing in words different scenarios, where hardware and software vendors each try to optimise its profits, in a game where there is feedback. Another factor which figures prominently is where the gadget has some amount of network effect, be this direct or indirect. These network effects can crucially affect the uptake of the device in the marketplace, as different types of users will be attracted to it at different times.
The outcomes of several scenarios are graphed and the implications described.
The appendix is useful if you want to start tweaking the scenarios for your situation, where you could be either a hardware or software provider. While the equations might look formidable, they are explicitly given and converting these to code shouldn’t be too hard. Basically, you take a black box approach, since you don’t know how they are derived.
Keep in mind these caveats, which apply to the numerical results and graphs in the text and to any that you might get if you run the equations. There are two possible sources of error. One is the parameters that you put into this engine. The author chooses some plausible values for her narrative. But as to the accuracy of your values, that depends on your expert knowledge. Though varying these can let you estimate the sensitivity.
More importantly, how accurate are those equations as a model of the multiplayer phenomena? Since they are not derived in situ, and the book says little or nothing about the assumptions that were made, this is a much harder problem. To go into this, you’d have to chase down some of the game theory references in the text and learn something more about the field. Perhaps a pragmatic approach is to regard the simulations you get as advisory, as qualitative predictions and not quantitative.
Note that the book’s focus is on cases where a hardware vendor makes a piece of hardware that has a significant software component. Where in general the latter comes from another vendor. The book does not concern itself with the case of negligible third party software.