Uniting C-Level Requirements for Program Success using Game Theory Concepts

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Let's say the CEO (or it could be the CTO, CDO, CISO) wants aggressive spending related to digital transformation initiative (high risk, high reward), while the CFO prefers a cautious approach (low risk, low reward).

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My attempt is to represent the strategies and payoffs in a matrix. Due to lack of precise numerical values for the payoffs (the value of aggressive expansion vs. cautious approach varies with initiatives, market conditions, risk appetite, etc.), we shall use ordinal rankings to represent the preferences.

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? CEO: Aggressive Expansion (AE), Moderate Expansion (ME), Cautious Expansion (CE)

? CFO: Aggressive Budget (AB), Moderate Budget (MB), Cautious Budget (CB)

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? (????, ????): Both are taking high risks; the CEO gets a decent payoff, but the CFO is unhappy.

? (????, ????): The CFO moderates the risk associated with aggressive expansion, leading to improved payoffs for both.

? (????, ????): The CFO severely restricts the expansion, making it less effective and frustrating the CEO.

? (????, ????): This is a potential Pareto-optimal solution; a balanced approach where both parties achieve a relatively high payoff. Neither can improve their outcome without negatively impacting the other.

? (????, ????): The safest but least rewarding option for both.

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? ?????????????????????? ?????? ????????????????????: The "ME, MB" outcome represents a likely outcome through negotiation. Both parties improve their position compared to the extreme strategies. This requires communication and finding a mutually acceptable risk level and budget.

? ???????????? ????????????????????: The "ME, MB" cell is Pareto-optimal. It's a point where no one can improve their payoff without harming the other. Other cells might be Pareto-optimal depending on the precise numerical payoffs, but this is a clear candidate given the ordinal ranking.

? ?????????? ????????????????????: It's also possible to consider mixed strategies (probabilistic choices). However, given the potential for negotiation and the clear preference for the "ME, MB" area, mixed strategies are less likely to be the actual outcome.

Presenting the Solution (Moderate Expansion, Moderate Risk):

1. Show Visual:?Present a chart comparing options (Aggressive Expansion, Moderate Expansion, Conservative Expansion) showing growth potential vs. risk. Highlight Moderate Expansion as superior.
2. Quantify:?"Moderate expansion offers [X]% growth with [Y]% risk. Aggressive expansion offers [Z]% growth, but a significantly higher risk of [W], potentially jeopardizing [A] and [B]."
3. Highlight Risk Mitigation:?"Moderate expansion addresses the CFO's concerns about financial risk while still delivering substantial growth, meeting the CEO's ambitions."
4. Emphasize Flexibility:?"This is a flexible starting point; we can adjust based on the feedback."

Have fun trying it out!