A core challenge for all businesses is understanding, anticipating, and preparing for competitive activity in the marketplace. A powerful tool is business war games, which use war game strategy to arrive at unique perspectives on a business strategy. This unique strategic thinking method considers plan elements often missed in traditional strategic planning.
Many business plans contain a section on competition, but the level of detail is often woefully inadequate to arrive at any meaningful understanding of the competitive landscape. Business wargaming can be a powerful way to address this competitive landscape in your business strategy by leveraging asymmetric competition.
This involves unconventional business strategies that give one party a distinct advantage, such as identifying core advantages, finding new financial formulas, and keeping competitors off-balance. For example, Amazon’s business model, predicated on offering better terms and innovative strategies, has allowed it to disrupt traditional industries and outcompete old-line publishers. Amazon started as an online bookstore slightly ahead of the dot-com frenzy, which allowed it to disrupt traditional industries.
Business war games are designed to explore the competitive environment deeply and gain a robust understanding of how competitors may behave and what options are available. Additionally, war games usually consider “uncontrollable” elements such as regulation, economy, weather, market trends, and technology.
Understanding Asymmetric Competition
Asymmetric competition is a business strategy that disrupts traditional industries and creates new revenue streams by leveraging unique advantages. This approach is characterized by a distinct business model that turns competitive disadvantages into market advantages. For instance, asymmetric price competition occurs when a company offers lower prices to attract customers away from competitors. At the same time, asymmetric quality competition involves offering superior products or services to stand out in the market.
Asymmetric competition is particularly impactful in the realm of consumer research. Companies using this strategy often use consumer research to pinpoint areas ripe for disruption. For example, a company might identify a gap in the market for a new product or service that can be offered at a lower price or with higher quality than existing options. This strategic use of consumer insights allows businesses to innovate and capture market share effectively.
The Asymmetric Competition Business Wargaming Framework
The Asymmetric approach to business war games is to identify the primary competitors in a given marketplace—usually competing companies, brands, or products. We start by deep-diving into existing market research, including consumer research and competitive disadvantages, studies on consumer behavior, pricing, brand awareness, and any other insights that may be available.
We want to start business strategy sessions with a half-day session that covers concepts of conflict such as The Art of War and other principles of military strategy. An introduction to competitive strategies and frameworks, such as the Blue Ocean Strategy, Porter’s Five Forces, SWOT Analysis, and Strategic Group Analysis, is presented so the team can access similar tools and models during the war game process.
A team approach is ideal. War games are most effective when a cross-functional group of people from various levels of seniority is assembled into three to four teams of approximately six people each.
In war gaming, one team represents the “home team,” or the client company’s brand or product. Teams two and three each represent one of the most significant competitors in the marketplace. The fourth team represents “the market,” which includes elements such as regulation, government intervention, the economy, technology, etc.
After each break-out session of the war game, the teams come back together to present their findings - often in a highly energized, fun, and competitive environment. War gaming is a unique opportunity for team building in addition to its role as a strategy development process.
In the end, the work is condensed into a finding report that is then used by the company’s leadership and marketing teams to design strategies, plans, campaigns, and contingency plans—all designed to address the company's unique competitive situation.
The Importance of Consumer Research
Consumer research is a cornerstone of effective business strategy, especially in asymmetric competition. By delving into consumer behavior and preferences, companies can uncover opportunities to disrupt traditional industries and forge new revenue streams. This research is instrumental in developing marketing strategies that resonate with target audiences and identifying areas for innovation and growth.
In asymmetric competition, consumer research is even more crucial. Companies use these insights to leverage competitive disadvantages and gain a market edge. For instance, a business might discover through consumer research that there is a demand for a product that can be offered at a lower price or with enhanced features compared to current market offerings. This knowledge enables companies to position themselves to attract and retain customers strategically.
Business Strategy Thinking Frameworks
Amazon's strategy of selling physical books online allowed it to dominate the book retail sector and disrupt traditional bookstores.
Such asymmetric price competition influences consumer behavior and brand switching, as store-brand consumers are likelier to switch to discounted national brands. This dynamic, known as the national brands switch, has significant implications for competitive strategy, highlighting the need for strategic positioning to address consumer preferences.
Institutional and Organizational Implications
The implications of asymmetric competition and consumer research extend far beyond individual companies, affecting institutions and organizations at large. Companies that engage in asymmetric competition often need to adapt their business models and strategies to stay responsive to evolving market conditions. This adaptation may require significant investments in new technologies, processes, and skill sets.
Moreover, institutions and organizations may need to revise their policies and regulations to address the challenges and opportunities of asymmetric competition. For example, governments might need to develop new regulatory frameworks to mitigate the impact of asymmetric competition on traditional industries and businesses. Understanding these dynamics is essential for institutions and organizations aiming to stay ahead of the curve and effectively respond to the evolving business landscape.
Where do War Games Fit in the Planning Process?
Using a war game strategy to evaluate likely outcomes and actions by competitors, considering multiple mechanisms contributing to competitive asymmetries, is a powerful tool. But where do war games fit in the planning process?
The traditional strategic planning process seeks to gain a competitive advantage sequentially. This process includes:
- Assessment of Strategic Variables
- Strategy Development
- Choosing a Strategy
Business war games can add value by being placed at the end of this process to test the selected strategy to evaluate:
- (Re)Actions of Competitors
- Potential Surprises
- Discontinuities and Frictions
- Potential Regulatory Actions
The unique nature of business war games provides robust insights into the fundamental nature of the competition that are not possible from simple desktop analysis. Business strategy is a complex topic; a business war game can be another tool in your planning kit.
Scenario Planning
Scenario planning is very similar to a business war game. It seeks to assist decision-makers in identifying courses of action and estimated impacts, evaluating responses, and anticipating outcomes. This is similar to how a business model innovator like Jeff Bezos continuously changes the game by focusing on customer needs and redefining business models.
It is different primarily in the execution and approach. In the context of consumer behavior, discounted national brands can significantly influence price competition, as consumers are more likely to switch from store brands to discounted national brands. Additionally, discounted store brands play a crucial role in asymmetric price competition, where consumers of store brands are more inclined to switch to discounted national brands rather than vice versa.
Business war games use teams that role-play competitors or markets, considering business models predicated on offering better terms and innovative strategies. This role-playing methodology is key to actively considering key stakeholders' potential actions or reactions in a market.
There are five steps in the scenario planning process:
- Determine a Strategic Position
- Prioritize Objectives
- Develop a Strategic Plan
- Execute and Manage the Plan
- Review and Revise the Plan
The OODA Loop
The OODA Loop is the cycle of:
- Observe
- Orient
- Decide
- Act
Military strategist and United States Air Force Colonel John Boyd developed it. This approach explains how agility can overcome power, similar to how Amazon leverages its distribution centers to gain a competitive edge. It is frequently used in cyber security and cyber warfare applications.
Harry Hillaker, one of John Boyd’s colleagues, explains the OODA Loop:
The key is to obscure your intentions and make them unpredictable to your opponent while you simultaneously clarify his intentions. That is, operate faster to generate rapidly changing conditions that inhibit your opponent from adapting or reacting to those changes and that suppress or destroy his awareness. Thus, a hodgepodge of confusion and disorder occurs to cause him to over- or under-react to conditions or activities that appear uncertain, ambiguous, or incomprehensible.
Competitive Disadvantages and Dynamics
Companies often plan without considering competition. If they are considered at all, competitors are generally evaluated as a static threat to the plan. However, competitive dynamics call for evaluating competitors, considering factors such as a distinct business model and the dominance of an otherwise preferred brand as unpredictable variables.
For every move a company makes, one can assume that each of its competitors will act or react in a manner consistent with their objectives - often blunting or even destroying the capacity of a strategic plan to succeed.
A list of tools that can be used to evaluate the competitive dynamics of a market are:
- Competitive Intelligence
- SWOT Analysis
- Blue Ocean Strategy
- 5x5 Risk Matrix
Frequently Asked Questions (FAQ) About Business Wargaming
What is business wargaming?
Business wargaming is a strategic simulation exercise where companies play out different competitive scenarios to anticipate potential challenges and opportunities. It allows businesses to model competitors’ actions, market changes, and internal decision-making processes to prepare for various outcomes.
How does business wargaming benefit companies?
Business wargaming helps companies stress-test their strategies, improve decision-making, and identify vulnerabilities. It enhances strategic planning by allowing companies to see how competitors might react to new products, pricing changes, or market disruptions, enabling them to adjust their tactics accordingly.
Who should participate in a business wargame?
Key stakeholders across departments, including leadership teams, marketing, sales, and operations, should participate in a business wargame. Bringing together cross-functional teams ensures diverse perspectives and more comprehensive insights during the simulation.
How often should businesses conduct wargaming exercises?
The frequency of business wargaming depends on the industry and the level of market volatility. Businesses might benefit from wargaming exercises annually or during significant strategic changes in fast-moving sectors like tech or retail. Conducting them every few years or before major decisions can be enough for slower-moving industries.
What are the key steps to running an effective business wargame?
The essential steps to running an effective wargame include:
- Identifying the strategic issue or decision to be tested.
- Assembling a diverse team representing different roles (company, competitors, customers).
- Creating realistic scenarios based on market data and competitor analysis.
- Running the simulation, testing different actions, and observing outcomes.
- Analyzing the results and adjusting strategies based on insights gained.
Can small businesses benefit from business wargaming?
Absolutely. Business wargaming is not just for large corporations. Small businesses can use wargaming to understand competitive threats, market shifts, and customer behavior better. It can be a cost-effective way to prepare for challenges, test new ideas, and confidently make strategic decisions.
How does business wargaming differ from business simulations?
While business wargaming and business simulations involve strategic exercises, wargaming focuses explicitly on competitive dynamics and how external forces (competitors and market shifts) can impact your business. On the other hand, business simulations often focus more on internal processes and operations.
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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.