Marketing Thought

Frequency Dependence And Strategy

Here I’ll highlight an idea from evolutionary biology that has profond implications for strategy. This is the idea of frequency dependence. I think people overlook thais concept, a lot. Whenever you see, “10 tips for success”, or even stronger claims like “the five things you must do” remember whoever is saying this is either a) an idiot or b) thinks you are an idiot. Whenever you are thinking of strategy think ‘Frequency dependence and strategy’. This helps you see why different firms, and people, can do very well. If we all did the same thing the world would be a very boring place but don’t worry it won’t happen and for very good reasons.

Evolutionary Thinking And Strategy

I have discussed the role of evolutionary thinking in strategy before, see here amongst other times. Ideas taken from evolution have great potential to aid our thinking. This is not to say we should expect 1 to 1 mappings from biology to business but evolutionary ideas can help stimulate thought.

Understanding Frequency Dependence And Strategy

At its heart frequency dependence is a simple idea. Basically how any strategy does will depend upon what everyone else is doing. I.e. your success is dependent on the frequency of other stratgies in the population. In many ways this is so obvious one should not have to mention it. Yet people often miss it. On a connected note this has crossovers with mixed strategies. When taking a penalty soccer if everyone always made the same shot, e.g., low to the left, then goalies would always try and stop that. Much success could be gained by going high, to the right or just down the middle. (See more on penalty kicks here).

Payoffs When All Adopt The Same Strategy

Think then what happens if you are in a population where there are two generic strategies. Dove which is placid and Hawk, which is agressive. The Hawks try and bully others. It is easy to see how this can be successful when everyone else is decent, a dove. Doves give Hawks what they want. Imagine this is a negotiation, the Hawk gets the best deal.

Yet what happens then. Some process, likely copying in business but reproduction in biology, means that more people start adopting the habits of Hawks. Hawks start meeting fellow Hawks in negotations. We start to see battles as the Hawks destroy each other, neither willing to give an inch. The few Doves left work well when they meet each other and Doves do better.

An Equilibrium Where No Strategy Triumphs

We expect to see an equilirbium emerge. This is where the Hawks are doing about as well as the Doves. If one where to start taking over the other strategy would start to re-emerge re-asserting the balance. The figure shows how this works with a generic Hawk/Dove game played amongst a population.

Frequency Dependence And Strategy: How You Do Depends Upon What Others Are Doing

Frequency Dependence And Strategy: The Implication

What does this mean? In such situations, and I would argue there are many, many business and general social situations like this, there can be no fixed rule to success. If someone is claiming to know the secret they may be just pretending to know and spouting nonsense. Still let’s be charitable and assume they are giving their genuine experience. What is it worth? Not much.

Situations change and what worked for one won’t necesarily work for another. It all depends upon what everyone else is doing. If the person sharing the secret is successful enough they make radically change the proportion of strategies in the popualtion. Maybe you should start doing the opposite of what they recommend. (Or in the case of Jack Welch’s advice just ignore him, I’m not sure he was that bright, see here).

Read: Mark Vandenbosch, Neil Bendle and Ranjan Banerjee (2019) Survival of the Best Fitted, Ivey Business Journal, March/April, https://iveybusinessjournal.com/survival-of-the-best-fitted/

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