Business War Gaming: Key to Winning Business Strategy – is it the Future?

Business is about strategy – how to move from point-A to point-B. This is influenced by: Objectives: What the business is trying to achieve… Knowledge: What the business knows about its environment.. Assumptions: What the business assumes about itself and other players… Capability: Business’ ability to implement its strategy and therefore achieve its objectives…

Once a business is clear about its strategic direction, it’s able to develop activity plans to implement the strategy and therefore achieve its commercial objectives. Competitors also develop strategies based on these principles – so if you can understand the key influences on a competitor’s business, you can begin to understand its strategies and probable course of action and how this will affect your business.

War-gaming is an effective business tool which can help you understand your competitors and their likely reactions to different situations. It allows you to test different scenarios in a low-risk, realistic situation – as much as is possible. The end objective is to develop action plans before the scenario happens, so that you know in advance what you should do and what your competitor is likely to do.

Also, it’s an excellent way to fine-tune existing strategies.  War-gaming is not a brainstorming session: It’s a clearly defined activity that leads to clearly defined action plans to give you a genuine competitive advantage.

Business war-gaming is an adaptation of the art of simulating moves and counter-moves in a commercial setting. Unlike military war games, or fantasy war games which go back hundreds of years to the days of Prussia and H.G. Wells, business war-gaming is a relatively recent development, and the concept is growing rapidly.

Business war-gaming is of particular use when the competitive environment is undergoing a process of change and it helps decision-makers develop strategies on how their organization can react to specific change(s). Richard Clark, CEO of Merck and Co., discribed it this way:

“I am a strong believer in ‘business war-gaming’ if it develops a vision or a strategic plan for the future of a company and engages the organization in doing that…it can’t be just the CEO or top 10 executives sitting in a sterile conference room”

Business war-gaming uses state-of-the-art competitor analysis techniques and real life competitive intelligence to generate an in-depth profiling of competitors through role-playing. The goal is predicting most likely moves by the most significant competitor(s) or other third parties (i.e., customers, regulators,…) so that strategy can be pressure–tested in a most realistic setting.

Employing role-playing and analytical techniques are most effective for strategy at the business unit, markets, brands, product, and project levels. This method has been applied with great success to new product launches, offensive and defensive moves against specific competitors, organizational development (i.e., training the next generation executive cadre,…), assessing competitive-landscape, brand revival, and new market entry situations. According to participants, business war-gaming provides reality-based challenge to strategies and plans that help companies cope with uncertainty….

In the article “Securing Corporate Value–Business War-Gaming” by Daniel F. Oriesek and Jan Oliver Schwarz write: Business war-gaming is the kind of exercise in which you are asked to optimize the resources of a company; for example; deciding how much you want to invest in advertising vs. production capacity or whether you should produce widgets type-A instead of type-B and at what price you will sell them.

Business war-gaming, generates new knowledge through the social interaction of its participants (Fuller and Loogma 2007). Each simulation is put together around a specific set of questions to which the business is seeking answers, such as: “Our industry is consolidating — what should we do?” “Is the business model in our industry changing? Does this mean that we will lose control over our market?” “Should we embrace new models, or defend the status quo or both?”…

Prominent examples for these types of situations are; the airline industry in the early 1990s, which moved quite suddenly from a competition of national carriers to a competition of alliances, or the mega-mergers in the automotive industry, or the ongoing quest in many industries to find suitable acquisition targets that would ultimately create value… or the music industry and the threat from legal and illegal online models; the pharmaceutical industry and the threat from generic drugs; or incumbent telecommunications or energy providers in liberalized markets…

Other examples include more politically flavored simulations, such as; how shifts in global power will develop, the impact of terrorist actions on economies… All of these type situations are too complex to answer with conventional forms of analysis and war-gaming is a suitable means to explore them through the combined elements of human decision making and a set of quantitative measures that allow you to gauge “what happens if.”

The methodology allows managers to test existing or newly conceived strategies in a dynamic, yet safe, environment. In doing so, they can save time, money and grief, gaining confidence in their plans via a relatively inexpensive simulation when compared to the cost of executing a potentially flawed strategy in the real world…

In the article ‘‘Business War-Gaming Simulations Guide Crucial Strategy Decisions” by Jay Kurtz writes: Business has increasingly recognized that war-gaming can be a valuable process to support planning and decision making and to help top executive deal with a particularly difficult strategic situation. Business war-gaming is a role-playing simulation of a dynamic business issue and it involves assigning teams to assume the identity of an entity having a stake in the situation.

Typical war-gaming will usually involve several ‘‘rounds’’ that might represent different time periods, such as months, quarters or years. Or, they might represent different phases in the life of a product launch, a plan to make an acquisition, to win a major order, or some other venture. War-gaming involves intensive ‘‘competition’’ among teams, each representing distinct stakeholders such as, key customers, suppliers, strategic partners, different competitors, channels and regulators.

Team role-playing allows cultural issues, egos and other subjective factors to be reflected in the development and assessment of strategies. The war-gaming process forces a rigorous examination of a situation from several different perspectives, not just the view seen by the organization sponsoring it. By attending to alternative perspectives, some of them hostile, the company learns to recognize opportunities and threats that would never have been noticed using an ‘‘inside out’’ approach. Although business war-gaming may be computer-supported, they are not computer-driven…

In the article “War Gaming” by Richard Vanderveer, Ph.D., and James Heasley II, Ph.D., write:  Among the many harsh realities of today’s pharmaceutical environment is the fact that products have become increasingly commoditized. That is, in any given therapeutic area there is a glut of products with similar features and benefits. Under these circumstances, pharmaceutical marketers must now work harder and smarter than ever before to differentiate their products while actively remaining “on guard” against the competition.

Smart marketers who do not want to be “blindsided” are preparing for battle with competing products by leveraging a highly effective and strategic process called “war-gaming” to aid pharmaceutical marketers in better differentiating their products from those of the competition. There are three general reasons for a product team to consider deploying this methodology:

  • Launching a new product where there is a need to understand how the new brand’s positioning and messages will play within the current competitive marketplace.
  • Fundamental change in the market that may impact an “in-line” product.
  • Explore options for repositioning its brand where there is a need to understand current perceptions of the product within the overall competitive milieu.

The intended outcome of the war-gaming process varies by type, but ultimately it provides the marketing team with enough information to make decisions on how best to communicate the brand. This methodology is geared toward helping a brand team to both fully understand the competition and inculcate non-core team members with the realities of the marketplace. These sessions may or may not include testing the output with a target audience (i.e., physicians…).

The process is extremely useful when a brand team is struggling with the need to synchronize the views of all team members and can be especially helpful as companies go about “globalizing” their brands. It brings into focus both the advantages and challenges associated with selling the product, and it provides the overall team with an opportunity to consider a variety of selling strategies and tactics for the brand, along with a critical evaluation of their efforts.

In the article “Challenging Corporate Taboos Through War-Gaming” by outwardinsights write:  Effective war-gaming accomplish two things.  First, provide a structured approach to evaluating a company’s strengths and weaknesses compared to competitors and competitive positioning.  Second, role-playing the competitors with in-depth research of competitors’ capabilities, market positioning, and objectives; provides a better understanding of competitor behavior and intent, from the competitors’ prospective.

These two war-gaming characteristics help challenge what might be sacrosanct beliefs about an organization’s capabilities and advantages, and confront internal weaknesses that heretofore had gone unchallenged.  Participants in war-gaming use analytic methodologies to evaluate their company against the competition, and in some cases finds meaningful disadvantages that needed to be addressed. 

Instead of expressing opinions about how the company was inferior to its competitors, war-gaming participants are able to express stronger judgments backed by the rigor of the comparative competitor analysis they conduct.  What once were unsupported observations and opinions becomes well-founded judgments…

In the article “Corporate Game Theory” by Pete Swabey writes: Business is often compared to military warfare. Indeed, Sun Tzu’s 6th-century military strategy treatise “The Art of War” has for long been required reading for ambitious corporate executives.  War-gaming is a crucial tool for testing and evaluating new strategies that had mostly been made with a combination of historical data and gut feeling.

War-gaming methodology is applied to business strategies in order to test the validity of real stakeholders and all the various parties involved in a given business situation: internal departments, business partners, lawyers, even government.  Role-playing simulates unforeseen consequences, instead of having stakeholders just talked through all the possible implications of a given strategy. It’s the unpredictability that gives war-gaming its power.

Simply put, war-gaming is realistic role-playing simulation of a competitive business situation. It is designed to help uncover competing messages that could threaten your business’ strategic position and lessen the effectiveness of your tactical executions. It provides decision-makers with a clear understanding of offensive and defensive positioning by pitting their business issues against those of the competition.

It is essential for a business team to honestly evaluate their weaknesses (and strengths) and build credible defense against them (or an effective offense leveraging them), while proactively seeking ways to take advantage of the competition’s weaknesses and anticipate worst-case competitive attacks…