How Can Business Wargaming Overcome New Risk and Apprehension Right Now?

Business wargaming is a process used to simulate competitive situations. It can be used to plan strategy, test business models, and make decisions.

Business wargaming can help organizations identify opportunities and threats and develop plans to respond. 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, there is increasing adoption of wargaming techniques by companies looking for improved techniques for strategy and planning.

Some elements of business wargaming have been used by organizations 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 for the training and development of managers.

War games are used to test strategies, examine scenarios and uncover unexpected weaknesses.

Business Wargaming

Shortcomings of Strategy Development

Henry Mintzberg, in his 1994 book "The Rise and Fall of Strategic Planning" (Free Press), 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 the creation of 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 where senior managers of the company play different roles. Some play their own company, while others play competitors.  To round out the process, one or more teams play regulators, marketplace influencers, or other important stakeholders.

The control team is responsible for all entities that impact the overall industry. The wargame exercise simulates business conditions and provides lessons and guidance for real life.

The game can run as short as one day, or it can go on for several days. As the business wargame progresses, teams set out their objectives and strategies. They also 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.

Strategy Development

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 the potential failure points and assess their resilience to their supply chains or program roll-outs. This approach has the advantage that everyone involved feels free to share their opinions without fear of judgment.

Participants can see the possible consequences of their choices through business wargaming. 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.

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.

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. 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 is where participants create a future state and then work 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 oriented toward the future explicitly or implicitly. 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.

The Future

Types of Business Wargaming

New Entrant

Review the threats and opportunities posed by the entrant of a new market participant or competitor. It 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

Modeling the impact of various product launches, production infrastructure changes, supply chain adjustments, inventory models, etc. This type of business war game seeks to identify optimization scenarios for the production and supply chain systems of a business.

Innovation

Business wargaming works very well in the evaluation of potential outcomes, unintended consequences, and alternative situations which 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.

What is the Purpose of Wargaming?

Improving Collective Decision-Making

By focusing on human aspects of decision-making. Paul Bracken, a Yale School of Management professor, wrote that "The problem is 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 all very open to the dynamic and progressive nature of a business war game.

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 and 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, which is 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 a fun, intellectually stimulating, and energizing event. It puts people together in a way that is unique and completely different than the day-to-day work environment and relationships.

Members of the company team have the opportunity to stress test plans and strategies that are central to the company's objectives. The competitor teams are fierce adversaries since they know the strengths and weaknesses of the company's plans first-hand. A good competitor team can make for 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 members know the strategy and decision-making processes.

This is where the military has made significant progress, 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 subject of 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 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.
Preparation

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 the requirements of each participant, their timeline, and their budget. The complexity of the topic and duration of a war game will determine how long it takes.

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 various 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 employees of the company. 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 comes together for an initial briefing to explain what business wargaming is, 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 will use technology to accommodate remote participants, guidance on the remote meeting tools, processes to follow 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 with an eye toward how the other teams may be planning to gain a competitive advantage.

At the end of each breakout session, the company team and the competitor teams present their plans. The market team and the control team 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 goes on for at least three moves to allow the plans to develop and for important contingencies to fully present.

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 they can be 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 distributed to all participants for edits before the report 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.

Use Busines Wargaming in Your Business

Asymmetric, led by former Army Delta Force operator and corporate executive Mark Hope, can help you implement these ideas in your business. You can contact Mark by email at mark.hope@asymmetric.pro or by telephone at +1 608-410-4450, or you can schedule a complimentary strategy discussion by clicking here.  You can read all of his articles on Medium.

Asymmetric Applications Group
Mark Hope - Asymmetric

Mark Hope

Mark A. Hope is the founder and CEO of Asymmetric Marketing – a unique agency specializing in building high-performing sales and marketing systems, campaigns, processes, and strategies for small businesses. Asymmetric has extensive experience with organizations across many industry segments. If you would like some help in implementing ideas like these in this article, feel free to give Mark a call at 866-607-3593 or by email at mark.hope@asymmetric.pro.

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