When you are playing poker, you need to be thinking about three things: The size of the pot, the quality of your hand relative to the hands held by the other players, and how many chips you have in your stack. It’s the same in business—the size of the “pot” is determined by things like size of market, market growth rate, etc. The strength of your “hand” is determined by any advantages your firm or competitors may enjoy, and the size of your “chip stack” refers to the resources you can bring to bear to pursue a bet.
This tool is designed to stimulate thinking and discussion in an organization about the kinds of bets a company might make. It does NOT provide a comprehensive analysis of a product or market opportunity. (Bets in the real world are far too complex and multifaceted to be represented by such a simple metaphor.) The tool can, however, be used to sharpen the quality of discourse in a company when it comes to strategy.
Note, there are some situations that are so unique that they simply defy the predictions of any model. New products or product categories are examples of situations where a company believes it can dramatically alter consumer behavior in some way. Most importantly, entrepreneurs are famous for doing things through sheer force of will that seem highly improbable before they are accomplished. Don’t discard your intuitive sense of a market or of customers as you think about these decisions. Rather, use this tool to play with the possibilities. Compare several potential bets. Run optimistic and pessimistic versions of the same bet. Use the tool not so much to guide your decision-making, but rather to stretch and test your thinking.
Developed by Luther Nussbaum and Bill Aho of McFarland Strategy Partners.