During and after the worst of the COVID-19 pandemic impact, businesses have more to lose and more to gain than ever before. If you’ve ever wondered what a truly VUCA environment (volatile, uncertain, complex and ambiguous) looks like, COVID-19 has given us a very clear and dangerously real lesson. Pretty much every business has faced a dramatic reduction in revenue. Many now face an uphill battle to regain revenue and rebuild their businesses to capitalise on the pending upswing. As a consequence, they are re-examining their business models and adjusting strategy settings. But how can they be sure they are making the right strategic choices?
A good strategy rarely survives contact with the enemy. The success of any strategy largely depends on the reactions of third parties (customers, competitors, stakeholders and sometimes regulators). Strategy Wargaming provides the clarity, objectivity and external reference to be confident in the strategy and build a strong internal coalition of support - critical for execution.
Selecting the right market | customer strategy is critical in optimising your revenue recovery trajectory and in setting the foundation for ongoing success. Wargaming is a technique developed by the military and often known as ‘Blue team - Red team’ exercises. It is a tried and trusted method to help organisations make better strategic decisions through a more insightful external perspective of markets and competitors.
So what exactly is strategy wargaming in a business environment and how does it work?
The success of any strategy largely depends on the reactions of third parties (customers, competitors, stakeholders and regulators). Strategy wargaming is a highly effective and fast way of considering, challenging and validating strategy options because it involves predictions about different moves competitors and other agents might make. The approach works even though you may not have direct knowledge of how other players will respond. Playing out possible moves in a wargame allows you to stress test your strategies prior to implementation. In other words, strategy wargaming both minimises risk and maximises confidence in strategy execution.
Strategy wargaming not only improves confidence in strategy selection, it also builds stronger buy-in through active participation, with role-playing a particularly effective technique to build ownership. It is as much psychological as it is rational - and that’s the secret to effective execution.
Business leaders form competing teams and play out each strategy option from their perspective with the aim of winning. At the start of a round, each team examines their current circumstances and works through their allocated tasks. The groups then take turns in playing back to the wider group, creating the opportunity for discussion and challenge from various perspectives. In the following rounds, each team tries to counteract the moves made in the previous round. A round normally represents a relevant time period (a month, a year or other specific timeline).
When is strategy wargaming most effective and for what type of strategic challenge?
Strategy wargaming is another step in the strategy development process and does require time and resources. Your business may be operating in higher levels of uncertainty or market change (like now). This makes it harder to predict third party responses to your actions. Or you may have determined some risk | reward outcomes are particularly significant to your current business situation. When things are more uncertain or you have more riding on the outcome of your strategy choice, strategy wargaming is a useful tool for understanding the possible consequences of longer-term decisions. We see strategy wargaming being used frequently as a core part of the strategy development process in a range of sectors. And it is useful for evaluating different types of strategy (including defensive, offensive, flanking and guerilla plays).
Perhaps unsurprisingly, the defence industry and related sectors like aerospace have been using this technique for decades - no doubt due to the high number of ex-military personnel who first used wargaming in battle planning. We also see strategy wargaming being used by leading organisations in the pharmaceutical, technology and financial services sectors.
As a last thought, after working via videoconferencing for many months, strategy wargaming is an ideal way to bring the team together, reactivate company culture and ‘stress-test’ the best way forward for revenue recovery.
Matt Stanton heads CapFeather in UK/EUR. He has over 20 years’ experience guiding international brands through complex strategic decisions across fast-moving consumer goods, pharmaceutical and biotechnology sectors. Matt specialises in stress-testing corporate strategy using war-gaming methodologies.