When advising a client on any strategic matter, it is extremely important that the client is aware of not only all possible options, but also all implications related to the industry as a whole and possible reactions from competitors as well. Game Theory is a perfect tool for consultants to utilize the prior mentioned belief and it also supports the hierarchy of consulting that we discussed the first day of class.
The first step in the hierarchy of consulting purposes is Providing Information to a Client. Game Theory does this perfectly because it assesses all possible options that the client can do, and then goes even further as to provide all the possible reactions competitors will make in regards to the initial action of the client. Through problem formulation and model building, this provides an ample amount of information to the client.
Moving forward, the next step in the hierarchy of consulting is Solving a Client’s Problems, which is much easier said than done. When game theorists provide intuition for the likely outcome of strategic exchanges, they make sure that all possible payoffs and interactions are properly accounted for. This analysis is the basis for giving the client tangible strategies with expected values of each listed decision.
The next six objectives in the hierarchy of consulting (Making a diagnosis, Making recommendations based off the diagnosis, Assisting with implementation, Building a consensus and commitment around corrective actions, facilitating client learning, permanently improving organizational effectiveness) are all interconnected to the discussed related theories above. Although consulting can at times seem like a bunch of suggestions that aren’t necessarily feasible, game theory assists with the hierarchy of consulting purposes by proposing any and all actions (even if they seem outrageous) and then labeling these actions