Business wargaming is a process used to simulate competitive situations. It can be used to plan business strategy, test business models, and make decisions.
Business wargaming can help organizations identify opportunities and threats and develop response plans. The process can also be used to train employees and develop their skills.
War Game History and Background
With its static armies and the emergence of nuclear weapons, the Cold War spawned new mathematical and game theory approaches to strategy development. Modern war games are a vital part of any military operation, and they draw on techniques and insights that have been refined over time.
Although much of this knowledge is not yet widely accepted by business sectors, companies are increasingly adopting wargaming techniques and looking for improved techniques for strategy and planning. War gaming as a strategic business tool involves simulating competitive scenarios to evaluate and refine business strategies.
Organizations have used some elements of business wargaming to improve their crisis management skills, such as handling civil emergencies. Private sector companies also use business war games to help them test their marketing strategies and train and develop managers.
War games test strategies, examine scenarios, and uncover unexpected weaknesses.
Shortcomings of Strategy Development
In his 1994 book The Rise and Fall of Strategic Planning (Free Press), Henry Mintzberg argues that current strategy creation methods—strategic Planning—do not work. He claims these methods fail because they assume that discontinuities are predictable, that strategists can be detached from operations, and that strategy-making can be formalized.
He believes traditional planning won't lead to quality strategy. Strategy development involves creating a synthesis that brings ideas together, while planning is the analysis that decomposes the ideas into their parts.
Mintzberg proposes a solution: to employ informal learning and personal vision in the strategy development process.
Strategic ideas should originate with the company's operations, those most familiar with the business, the competition, and the customer.
What is Strategic Wargaming?
Business wargaming is a simulation in which senior company managers play different roles. Some play their own company, while others play teams that play competitors. One or more teams play regulators, marketplace influencers, or other important stakeholders to round out the process.
The control team is responsible for all entities that impact the overall industry. The wargame exercise simulates business conditions and provides real-life lessons and guidance.
The game can last as little as one day or as long as several days. As the business wargame progresses, teams set out their objectives and strategies and decide on investments and product lines.
The market team evaluates the market reaction and awards market share to each participant. The financial consequences of each team’s actions can be viewed using a simple spreadsheet model that returns an assessment of their profits and losses.
Experiential vs. Conceptual
Instead of listening to PowerPoint presentations or other passive sessions, as is often done in traditional strategic planning, wargame participants participate in an experiential event that allows them to be the actors in their solutions.
Participants also get real-life experience, making decisions under the same pressures they would in life. Yet business wargaming is safe and allows participants to fail.
Many companies use the business wargaming process to attempt to "break" existing plans. They can identify potential failure points and assess their resilience to supply chains or program rollouts. This approach has the advantage that everyone involved feels free to share their opinions without fear of judgment.
Through business wargaming, participants can see the possible consequences of their choices. They can play a role in a real-life, interactive environment to gain insight into the thoughts of customers, regulators, patients, competitors, regulators, media, or other stakeholders. They can see the whole picture from both an outside-in and inside-out perspective.
This can be especially helpful for identifying unknowns, unintended outcomes, and false assumptions.
Scenario Planning for the Future
Businesses can use business wargaming to help them plan for the future, explore how they might be affected by that future, and prepare for the unexpected. Evaluating the competitive landscape is crucial for devising strategies that account for competing forces' complexities and potential outcomes within the marketplace.
Although it doesn’t give a clear picture of the future, it can help you make better decisions and plan for it.
The “back from the future” business wargaming method involves participants creating a future state and then working on plans to achieve that destination. This approach can address major planning issues such as sustainability, climate change, potential joint ventures, mergers and acquisitions, and digitalization impacts.
War games are either explicitly or implicitly oriented toward the future. The process seeks to harvest the predictive power of game theory. Corporate war games that simulate multiple actors in a market can provide great insight and increase organizational agility.
However, mathematics is not the only key to successful wargaming. Interaction is more important than algebra when trying to gain support for a new strategy.
For the same reason, game players must be senior - even though having senior management involvement can suppress feedback. Strategies must also capture the difficult-to-quantify corporate cultures of competitors, highlighting the importance of seeking out employees who have worked for them.
Perhaps war games have the greatest value because they challenge managers to consider the consequences of their actions. Sun Tzu said that to understand your enemy, one must first become him.
Types of Business Wargaming
New Entrant
Review the threats and opportunities posed by a new market participant or competitor's entrant. This utilizes strategic thinking and scenario planning to evaluate how the new entrant may interrupt existing plans and create new threats to the business.
Growth
A business war game can be used to model various potential outcomes driven by growth initiatives. These may include new product launches, organic growth opportunities, and the role of acquisitions in the growth strategy.
Production
This type of business war game seeks to identify optimization scenarios for a business's production and supply chain systems by modeling the impact of various product launches, production infrastructure changes, supply chain adjustments, inventory models, etc.
Innovation
Business wargaming works well in evaluating potential outcomes, unintended consequences, and alternative situations that may occur as innovative technology or other innovations take hold in the market. Modeling the potential disruption from such innovations is a valuable method to dimensionalize the potential impact on the business. A successful war game can enhance leadership decision-making by providing strategic insights and thorough preparation.
What is the Purpose of Wargaming?
Improving Collective Decision-Making
By focusing on human aspects of decision-making. Yale School of Management professor Paul Bracken wrote, "The problem with many strategy processes is that they're too cold and bloodless." They don't capture emotions, and people don't pay much attention because they are too rational. They are quickly forgotten. Wargaming is an incredibly valuable learning experience that will not soon be forgotten.
Puts Ideas Under Pressure
The business wargaming framework puts ideas, theories, and proposals under severe pressure. If necessary, they can even be broken. It takes place in a safe environment and with confidence. Improved business resilience, crisis management, and negotiation skills are open to a business war game's dynamic and progressive nature.
Improved Consequence Management
By better understanding potential unintended consequences and unexpected outcomes that can be incorporated into the gameplay, business war games also help overcome risk, safety, and optimism bias more effectively than traditional analysis.
Creating Ownership of Ideas
Business war games have an experiential effect that allows participants to take ownership of all decisions, strategies, and actions developed. Strategic thinking, central to business wargaming, is a key benefit. War games are also an effective tool for dispelling the conventional wisdom that often prevails in a corporate setting.
Teamwork and Team Building
A business war game can be fun, intellectually stimulating, and energizing. It brings people together in a way that is unique and completely different from the day-to-day work environment and relationships. War game workshops are essential for organizing and executing these events effectively.
The company team members have the opportunity to stress test plans and strategies central to the company’s objectives. The competitor teams are fierce adversaries since they know the strengths and weaknesses of the company’s plans firsthand. A good competitor team can create challenging competitive dynamics during the strategic game.
The control team provides inputs on events and externalities that are often neglected in the routine scenario planning process. The market team evaluates the give and take of market share as the various plans are revealed. A business wargame is a strategic tool, unlike tactical games or other planning methodologies.
Preparation for a Business Wargame
Participants in the war game need to be trained in how the process works. However, this can extend beyond the event and the organization to ensure all staff know the strategy and decision-making processes.
The military has made significant progress in this area, linking the tactical actions of junior officers with the strategic mission of commanders.
All market research, operating metrics, financial results, and other information relevant to the war game should be gathered and made available to the participants as they prepare for the session. Each participant must be able to build an understanding of the competitive environment through a review of these pre-work materials.
- Communicate the purpose and nature of the game.
- Playbooks should be published, and players should be asked to review them before the session.
- The logistics (venue, equipment, refreshments, analytical tools, etc.) should be organized.
- Issue team assignments. Limit the number of teams to a manageable amount (typically, no more than 4).
- Determine the number of rounds you want to play.
- Establish ground rules.
Decide on the Objective of the Business Wargaming Exercise
Not every situation or subject lends itself to a war game. Before planning a wargame, ensure that it is appropriate for the problem.
Determine each participant's requirements, timeline, and budget. The complexity of the topic and duration of a war game will determine the length of the game.
A 3-day business war game takes approximately one month to prepare. Additional costs are market research, outside consultants, purchasing additional tools, and setting up a simulation environment.
Select the Participants
The best business war game includes participants from various levels of seniority and departments. Members should include representatives from sales, marketing, operations, finance, legal, and any other department that can contribute or have insight into the subject. Cross-functional teams are the most effective.
If there is more than one subject, consider running separate games for each subject, topic, or problem.
The number of participants in a business war game depends on the number of teams necessary to assess the subject fully. Usually, there are three to four competitor teams representing competing companies.
Participants in war games are not restricted to company employees. Vendor partners are now key stakeholders in many business processes. They must be represented in the war game. You may also require the participation of outside parties as appropriate.
Execution
The group meets for an initial briefing to explain business wargaming, the purpose of the session, and the process to be followed. Ground rules and administrative instructions are also communicated before the session starts.
If the session uses technology to accommodate remote participants, guidance on the remote meeting tools, following processes if disconnected, and other information should be explained.
The teams are released to their breakout rooms for the first session. Each team works on the problem, considering how the other teams may be planning to gain a competitive advantage.
At the end of each breakout session, the company and competitor teams present their plans. The market and control teams score the plans and determine likely outcomes. Once all teams have presented and the outcomes are scored, the group does a "hot wash" to review the process and anything learned during the session.
The process continues, usually building on the results of the previous session. Ideally, the wargame lasts at least three moves to allow the plans to develop and important contingencies to fully present themselves.
If contingency planning is an objective of the wargame exercise, the final breakout session can be used to develop plans to address the most likely and most impactful contingencies. These contingency plans can be completely planned or set aside as an objective for a future session.
At the end of the wargame, the moderator wraps up and ends the session. Following the wargame, the control team and the moderator combine notes, plans, key observations, outcomes, and contingencies into a final report that is distributed to all participants for edits before it is forwarded to senior management for implementation.
In Summary
Business wargaming is a powerful and effective process with many desirable benefits. Companies that want to think ahead, plan for disruptive events, consider contingencies, overcome biases, and build a high-performing team should seriously consider using business wargaming in their portfolio of planning and strategy development tools.
Frequently Asked Questions About Business Wargaming
What is business wargaming?
Business wargaming is a strategic planning tool that simulates competitive scenarios. It allows businesses to test strategies, anticipate competitor moves, and assess potential risks. It involves role-playing different stakeholders and analyzing outcomes to refine decision-making.
How does business wargaming benefit my company?
Business wargaming helps companies identify vulnerabilities, improve strategic responses, and enhance their competitive edge. Businesses can develop more robust strategies, improve decision-making, and reduce risks by simulating real-world challenges.
What types of businesses can benefit from wargaming?
Businesses of all sizes and industries can benefit from wargaming. It is particularly useful for companies facing complex, competitive landscapes, undergoing significant change, or seeking to launch new products or enter new markets.
What are the key components of a business wargame?
A business wargame typically includes scenario planning, role-playing different stakeholders (e.g., competitors, customers, regulators), and analyzing the outcomes. It involves a structured process of hypothesis testing, strategic thinking, and feedback loops.
How often should a business conduct wargaming exercises?
The frequency depends on the business environment and specific needs. Companies facing rapid changes or high uncertainty may benefit from quarterly or semi-annual wargames, while others might conduct them annually or as needed for major strategic initiatives.
How do I prepare for a business wargame?
Preparation involves defining the objectives, gathering relevant data, selecting participants, and designing realistic scenarios. It's important to have a clear structure and methodology to guide the exercise and ensure meaningful outcomes.
What role do employees play in business wargaming?
Employees participate in role-playing different stakeholders and contribute their expertise and insights. Engaging cross-functional teams ensures diverse perspectives and enhances the accuracy and relevance of the simulation.
Can business wargaming be applied to non-competitive scenarios?
Yes, business wargaming can be applied to various scenarios, including crisis management, supply chain disruptions, regulatory changes, and internal process improvements. It helps businesses anticipate and prepare for various contingencies.
How can the results of a business wargame be implemented?
Results are used to refine strategies, improve decision-making processes, and enhance risk management plans. Businesses should develop actionable insights, prioritize key findings, and integrate them into their strategic planning and operations.
How can Asymmetric Marketing assist with business wargaming?
Asymmetric Marketing provides expertise in designing and facilitating business wargaming exercises. Our team helps identify objectives, create realistic scenarios, and analyze outcomes to deliver actionable insights that drive strategic success.
Ready to Take Action?
If you’re looking to integrate business wargaming into your strategic planning process, we’re here to help. Choose from one of our expert services:
- Schedule a Consultation: Book a meeting with us here.
- Contact Us: Reach out through our contact form.
- Send Us an Email: Email me directly at mark.hope@asymmetric.pro.
Don’t leave your business strategy to chance. Use the power of business wargaming to create a robust and resilient business plan. 🚀
Mark Hope
Partner, Asymmetric Marketing
📧 mark.hope@asymmetric.pro
📞 (608) 410-4450
About the author
Mark A. Hope is the co-founder and Partner at Asymmetric Marketing, an innovative agency dedicated to creating high-performance sales and marketing systems, campaigns, processes, and strategies tailored for small businesses. With extensive experience spanning various industries, Asymmetric Marketing excels in delivering customized solutions that drive growth and success. If you’re looking to implement the strategies discussed in this article or need expert guidance on enhancing your marketing efforts, Mark is here to help. Contact him at 608-410-4450 or via email at mark.hope@asymmetric.pro.