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Is Poker a Good Metaphor for Business?

When it comes to management, can the principles of poker be applied successfully? Beware the metaphor's blind spots.
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Poker has gone from smoke filled backrooms to high stakes television shows in recent years.  It has drawn the interest of scholars at Harvard to better understand the mind, and educators use it as a way to teach critical thinking and prepare students better for life.

Tom Peters and Bob Waterman praised poker in their classic book In Search of Excellence as an apt metaphor for new product development.

They wrote:

“Experimentation ... resembles nothing so much as a game of stud poker. With each card, the stakes get higher and with each card, you know more, but you never really know enough until the last card has been played. The most important ability in the game is knowing when to fold.”

When we share this analogy with managers, they agree that it is a good metaphor. After all, with most development projects, you never know for sure until after the fact whether it has been worthwhile. And, as the project gets rolling, each major step becomes much more expensive than the last – making it harder to quit psychologically. The crucial management decision is whether—and when—to fold and to cut your losses.

Knowing how to revise the odds in light of new information is crucial as well. Just as in poker, players possess both private and public information, with the latter increasing over time (like new cards being turned.) Finally, you need the poker player’s mental toughness to fold quickly and start over again whenever the current hand stops looking promising.

Here's where the problem is...

Managers have a much harder time, however, identifying what is not captured well by the poker metaphor (i.e., what’s left in the shadows). And this is the main problem with metaphors; people rarely notice where they are incomplete. As our executive education students ponder what aspects of new product development are concealed by the stud poker metaphor, they usually point out that:

New product development is not necessarily a zero-sum game. Many players might win or lose due to regulatory action (as in biotechnology) or wide market acceptance (as with personal computers and i-phones).

Players do not receive a new hand each round, nor ones that are entirely dictated by chance in cases where cards can be traded or bought.

Collaboration is encouraged in new product development (through strategic alliances and JVs), but would be considered cheating in poker.

Unlike poker, the rules of the game are not fixed in business.

To counter the seductive appeal of any single metaphor, we always challenge managers to consider others as well.

It is difficult to “see” what lies outside one metaphor, so we ask, “What other metaphors could provide insight into the problems of new product development?”  Typical answers include gardening, oil drilling, and biological evolution. In gardening, for example, you need to sow, irrigate and prune, and you might even consider cross-breeding or genetic engineering. 

Seeing new angles

These alternative metaphors usually trigger different imagery and suggest useful analogies for product development.  For example, sowing naturally conjures up having a portfolio of development options; irrigation suggest adding money, patents or other resources; pruning legitimates pulling the plug early on losing projects, and genetic manipulation points to strategic alliances, bringing in new blood or even training.   Oil drilling or biological evolution present similarly rich analogies that can help trigger new ideas about how to tackle tough business problems. 

With multiple metaphors in mind, you will be better positioned to get to the crux of the problem you face and generate innovative solutions, as highlighted in my earlier column about how metaphors and analogies influence our thinking.  So, whether poker is a good metaphor for product development, business or life in general depends much on the specific context you face and whether other good metaphors are available for the problem at hand.  

The key lesson is to be careful not to become the prisoner of any single metaphor and always try to be a master of many.

 This post is co-authored with J. Edward Russo, business professor at Cornell University and co-author with Schoemaker of Winning Decisions.

 

 

 

Last updated: Nov 29, 2012

PAUL SCHOEMAKER | Research Director, Wharton School

Paul J. H. Schoemaker is the founder and chairman of Decision Strategies International. A speaker, professor, and entrepreneur, Schoemaker is research director at the Mack Institute for Innovation Management at Wharton, where he teaches strategic decision making. His latest book is Winning the Long Game: How Strategic Leaders Shape the Future.




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