In our new economy, the market is changing fast. Businesses that move first have an opportunity to capture more of the market as it shifts. To do this, they need to develop a better understanding of the risks and opportunities on the horizon. It is imperative for the next strategic move to succeed.

How can you stress-test your next strategic move?

Wargaming is used in highly competitive environments to 'stress-test' strategies prior to implementation and predict competitors’ most likely moves. The methodology guides organisations to make robust strategic decisions through researching, scenario planning and role playing key competitors within the external market context.

Wargaming has its roots in the military and can be traced as far back as ancient Greece. It helped design political, diplomatic and military moves through a clear understanding of the underlying dynamics and likely responses with the goal of answering: What will be my opponent’s likely move? And then, What is my response?

The principles of Wargaming lend themselves nicely to the business environment and can be applied across sectors. Over the last decade, it has been used inside pharmaceutical companies before launching valuable new products into the market.

CapFeather is now bringing this thinking to organisations that intend to capture or create market share in their sector.

The development of foresight is a crucial activity for any organisation, especially in times of increasing dynamism and complexity.

Wargaming, a role-playing simulation of a dynamic situation, has been used mainly by the military, but more recently, it has also been used in the context of competitive intelligence and strategy-testing in organisations. A business wargame typically evolves several years into the future, allowing the participants to ‘experience’ future dynamics in the organisational environment and, consequently, to develop foresight.

Because of its participative and dynamic nature, business wargaming can overcome cognitive barriers, challenge mental models, detect weak signals of change in an organisational environment, re-direct attention in an organisation, and assist an organisation in developing foresight.

Business wargaming: developing foresight within a strategic simulation [Schwarz 2009]

What is a Wargame?

A Wargame is a role-playing simulation that is designed to test potential strategies, normally conducted in a group workshop setting. Scenarios are developed prior to the workshop and are tested through participant teams who play the role of competitors. The success of any strategy largely depends on the reactions of third parties and the market. Without direct knowledge of possible reactions, role-playing allows us to predict competitor and market moves to develop a more robust strategy.

What are the benefits of a Wargame?

Organisations that undertake a Wargaming simulation can:

• Predict competitors’ likely moves

• Assess and anticipate future changes in the market

• Generate greater external focus and helps develop deeper competitor insight

• Help teams to share expertise across silos and uncover intelligence gaps

• Truly engage teams in the strategic development process because the process is dynamic, involving active participation and company buy-in

Wargaming in a defense and aerospace company

A defense and aerospace company decided to run a wargame to answer the more strategic question: how can we win market share given the budget pressures on the Department of Defense and the moves of competitors? The game tested levers such as pricing, contracting, operational improvements, and partnerships.

The design of a strategic war game requires interaction within the team. To ensure that the defense contractor’s game wasn’t unduly influenced by the hypotheses of its designers, for example, they asked all 40 executives who would play it which trends, scenarios, and decisions should be tested. The outcome for the company was strategic guidance on the industry’s direction, the most promising types of moves, the company’s competitive strengths and weaknesses, and where to focus further analysis.

Case shared from McKinsey Quarterly [3]

When is Wargaming used?

Wargaming is most effective during shifting market environments when uncertainty is high.

It's key strengths are in testing:    

Strategies prior to implementation

Future market changes   

Plans against new competitors

Defense against current or emerging threats  

Some of the questions that firms can develop answers to using Wargaming include [1]:

1. Which new competitors might be entering my industry in the future?

2. How will the boundaries of my industry change?

3. What actions might my current and future competitors utilize to gain a competitive advantage?

4. What kind of innovations are my competitors working on to gain a competitive advantage?

5. How do we capture and sustain a superior position in future markets?

I am a strong believer in if you’re going to develop a vision or a strategic plan for the future of a company that you have to engage the organization in doing that. It can’t be just the CEO or top 10 executives sitting in a sterile conference room.

Richard Clark, past CEO Merck & Co

Examine the competitive landscape or test the new strategy?

The first key step is defining the overall objective of the Wargame. This could be to examine the competitive landscape or stress-test a new company strategy.

Generally there are two types of Wargame: Landscape Games or Test Games [2].

CapFeather uses the Best Next Move [TM] framework, which is outlined in ‘The No-Regret Next Move’ paper.

Preparing for the game

Once the objective and the Wargame type is defined then the parameters around the workshop can be addressed, key competitors identified, number and composition of internal participants and any internal market research and data. A ‘Competitor Insight Dossier’ is produced for each of the competitor groups that contains key information allowing each group to effectively role-play their assigned competitor. A ‘Hypothesis Meeting’ helps identify and describe the key events that are likely to affect the competitive environment. These hypotheses or scenarios are used during the workshop. Pre-workshop activities can also include an internal survey help to engage, enthuse and encourage participants to think about competitive challenges and help prepare for the workshop.

The game begins

A Wargaming workshop is normally conducted over 2 days. Each round lasts approximately half a day with a final presentation round. It is designed within in a pre-specified future horizon allowing participants to gain insights through playing key competitors. The participants in a workshop normally cover a number of cross-functional roles from commercial, sales, market research, finance, manufacturing and R&D and can be represented by the major geo-markets. Participants are divided into competitor teams. One team represents the home team. Other stakeholders can be included, including customers. Workshops can be anywhere between 10 and 200 people, depending on the scope of the project. We have previously run Wargaming programs for up to 250 people.

Post game

After the workshop, the Wargaming Report is developed, summarising the event and includes actions and recommendations. It is presented at a 'Strategic Insights Meeting'. The next steps are determined after a review of the report.

Stress test your strategy and win

We help companies stress test strategic initiatives using the Wargaming methodology. Our background working in customer strategy for large corporates, privately held firms, start-ups and not-for-profits uniquely qualifies us to help you deliver your most robust competitive strategy.

The CapFeather difference is we offer more than just research and design. Our customer strategy and innovation frameworks help validate improvement initiatives by stress testing them to understand any issues prior to more expensive market testing. Then we build business cases proving their financial viability.

Wargaming can help your organisation develop a more insightful external perspective of your markets and a better understanding of the risks and uncertainties moving forward. It is an ideal strategic tool to test out global strategies prior to implementation and to enable the company's best position based on anticipated future market conditions.

As a dynamic role-playing simulation, it involves active participation with a focus on the market, the competitors, and the company itself. It is ideal to bring together a team to re-calibrate on the next strategic direction.

After working in isolation for many months, Wargaming is an ideal way to bring the team together, reactivate the company culture and design the best way forward.

Well-designed wargames can be powerful learning experiences that allow managers to make better decisions. By asking a few tough questions, executives can help their organizations be smarter about when and how to play.

Playing War Games to Win

McKinsey Quarterly, 2011

Find out how WarGaming can help test your strategy to win

Why CapFeather?

We help mature firms find new and sustainable opportunities by looking beyond the immediate horizon.

Ambidexterity is needed for exponential growth. While your team excels at business right now, we help you design the path for its future success.

CapFeather is the vanguard for strategic consulting in a volatile, uncertain, complex, ambiguous [VUCA] world. With presence in Australia, the United Kingdom and North America, we have global reach.

Over 20 years of senior advisory, our people have worked on more than 200 projects to deliver bottom line growth and new revenue through product and service innovation - achieved though compelling customer
relationships.

References

1] Jan Oliver Schwarz (2009) Business wargaming: developing foresight within a strategic simulation, Technology Analysis & Strategic Management, 21:3, 291-305

[2] Dr Benjamin Gilad (2008) Business Wargames

[3] John Horn (2011) Playing War Games to Win, McKinsey Quarterly