The Innovator's Solution: Creating and Sustaining Successful Growth (Creating and Sustainability Successful Growth)

by Clayton

In many ways, the situation in a value network corresponds to a “Nash equilibrium,” developed by Nobel laureate John Nash (who became even more renowned through the movie A Beautiful Mind). In a Nash equilibrium, given Company A’s understanding of the optimal, self-interested (maximum-profit) strategy of each of the other companies in the system, Company A cannot see any better strategy for itself than the one it presently is pursuing. The same holds true for all other companies in the system. Hence, none of the companies is motivated to change course, and the entire system therefore is relatively inert to change. Insofar as the companies within a value network are in a Nash equilibrium, it creates a drag that constrains how fast customers can begin utilizing new innovations.