It’s 3 am, and Doyle is still in the laundry’s basement located on Rodeo Street in Amarillo, Texas. Dark room filled with gray and shiny smoke sliding to the beat of the cards. Cheap whiskey glasses perched on a green mat surrounded by plastic chips of different colors that cover dozens of bills. This is the weekly game played by judges, lawyers and some other friends.
Surely, this script will sound familiar from countless movies. Indeed, it is an illegal poker game. Fortunately, the stereotype of poker games has changed dramatically, thanks to the boom experienced in 2003 with the well-known story of Chris Moneymaker, the accountant for a small company who invested 39$ in a satellite tournament for the WSOP (World Series of Poker) and ended up winning for 2.500.000$.
Since then, the paradigm of poker conceived as dark, dangerous and mafia related, has been sharply redirected, being considered a sport based on the mind, strategy and statistics, and players have become Celebrities who appear regularly on TV or movies. The game has changed its course, demystifying the play by intuition and bluffs like in ancient Western, to focus on the professionalization, the study of the rivals, the image and the player’s own game, the application of economic theories, probabilities and investment analysis.
For this reason, we want to bring the approach of making poker decisions with how we make decisions in business.
In poker, the decision to contribute a chip or more to the pot, is based on 3 parameters called REM, which appears for the first time published in the book Professional No Limit Hold’em Volume I (Flynn, Metha & Miller ). REM is an abbreviation for Range, Equity, and Maximize.
Range is the estimate set of possible hands your opponent can be holding. Applied to the business world, in any market, my company will always have to be aware of its competition. Let’s say, what products / services are my competitors selling? What products are they researching or developing? How are they focusing on customer attraction strategies? How do they use social media? Knowing the range of action of my competition will help my company determine viable and feasible strategies to gain competitive advantage when launching a new product, negotiating strategic alliances or designing marketing campaigns.
Equity (Value of my hand) once the range is set, we compare it to the hand we are holding and evaluate the way it plays against my opponent’s range. I will be able to determine a % of times my hand will win against a specific range. In the same way, what is my current market share? What products / services is my company offering? How many human and financial resources does my company have to compete? Basically, I need to know in deep my weaknesses, threats, strengths and opportunities (SWOT) which define my company.
Maximize the Expected Value (Maximize) known the range of my opponent, and my chances of winning, all that remains is to decide the best action/move. Applied to business, I know my competition’s offer and their strategies; even I have analyzed what products they are trying to develop and their market share. Deepen in the study of their balance sheets and then it is just an exercise of comparing this information with the one I have from my company. This exercise will help me design the strategies for the future both short and long term. I will be able to discern where to invest, how to attract more customers, what products investigate or how to position my brand on the market in order to differentiate from my competition.
At the end of the day, this process will get a direct and profound knowledge of my company’s SWOT and will help create and implement competitive advantages that will translate into sales increase, costs saving or brand awareness improvement.