Game Theory

for everybody interested in Strategy
knowing about Game Theory is mandatory.
Game Theory is a mathematical approach to decision making and can help you make a lot better decisions.
Too often we think "oh it doesn't matter" or "well i don't have any influence on the outcome"
when it is simply not true. Most of the times we don't see the truth because it is covered in small distracting problems.
what math does is stripping a problem down to the essentials and helps seeing the obvious decision to make.
For starters i would recommend the TV show Numb3rs. It is one of those crime solving shows, but with the twist that a math professor is the driving force behind the team and provides the necessary evidence to solve the mysteries.
There are multiple books out there on the topic which can really help opening eyes to how often we give away advantages by not thinking through the problem on a more analytical/mathmatical level.

80:20

Especially Entrepreneurs start running into time constraints when trying to service all customers ion the market, but the same is true for mid size and companies and even humongous corporations.
The idea is that the more clients you can obtain the more money you will make.
Well if you think that i have to tell you that you are wrong in most cases. the truth is that the economic 80:20 rule holds true to almost all situations. It indicates that 20% of your clients will give you 80% of your profit.
The question than is why are you wasting 80% of your time with the remaining 20%???

For example assuming you are are sales person for IBM and you currently have 10 clients. The 80:20 rule indicates that your have 2 good customers that bring in the wide majority of your profits while the remaining 8 clients are essentially wasting your time.

what is the conclusion? Well I warn you it is a little bit scary but try to get rid of the 8 time wasting clients (sell them to co-workers or even competition) while focusing 80% of your time to find 1 or maybe 2 more clients like the 2 that previously made you 80% of your profit. It should not be too difficult to come up with one new client and guess what one new "good" client will make you twice as much profit as the 8 you had before while only needing an 1/8 of the time.

Try and follow that rule for a couple of month and watch your profit margin increase and your wasted time diminish.
For more information on this topic i would recommend the book: The 4 hour work week by Timothy Ferriss

Competition

Let me tell you a little bit about competition...
there is good and bad competition in perspective of the industry as a whole.
Good competition helps the industry grow and prosper,
while bad competition destroys the industry's margin and makes it unattractive.

What is considered bad competition? Well pretty much everything that is aiming
at gaining market share in the short run through price cuts that can be easily matched
by other companies in the industry. Often times company owners believe they can gain market share by giving a 5% discount for 30 days but guess what most of the time the competitor can do the same thing since the cost structure for both businesses are very similar.
Now do you believe that the challenged company will simply extend a 5% discount or will they counter your offer with a 7% discount????
This behavior will lead to spiral of destruction where competitors will try and gain market share through price cutting... who wins? the customer.. they get a great deal on the cost of the
industry margin.
For companies this means a loose-loose situation. Once they hit the price floor they will both remain with the same market share they had before the fight started.

So next time you consider cutting prices make sure you do not hurt the industry and yourself!
Rather try and find advantages that competitors can not so easily copy!