What is a business war game & how do I organise one?

Introduction

A business War Game allows organisations to test their beliefs and assumptions about their business environment. The process allows organisations to build a better understanding of industry issues and helps them identify emerging opportunities and threats. It is a tool that is of particular use when the competitive environment is undergoing a process of change, as it allows decision makers to consider how different organisations can react to the change, and each other.

The objective of a War Game should be to improve corporate planning processes, and use the lessons learned from the War Game in business strategy.

War Games typically involve a number of teams with each representing different “players” operating in the industry environment. Generally, but depending on the actual purpose and scope of the game, these teams represent different competitors. However they can also include key customers, or other organisations such as regulatory bodies.

How to carry out a War Game

There are a number of ways of carrying out a war game – and different practitioners will suggest various approaches and methodologies. However generally, the actual War Game process involves a number of rounds. Each round represents a different time period, which depends on the exact focus for the game. The time period will usually be from several months to one to two years. Shorter periods are less common, as the decisions taken will become tactical, rather than strategic in nature. Longer periods are also uncommon, as the uncertainty factors mean that War Gaming gives less direction. For such longer-term cases scenario planning often provides a safer approach.

One approach to war gaming is to set up a computer simulation, mapping what is believed to be the business situation. At the end of each round, the computer scores each team giving financial and market share parameters for the following round. Although these programs allow participants to play out various scenarios, they are artificial as they do not allow participants to fully play out the real situation operating in the industry or to come up with innovative strategies outside the scope of the computer programme. As a result, using such simulations are unlikely to accurately reflect the real world and their main benefits are as training exercises in business strategy – allowing players to model the results of particular plans based on probabilities. Unfortunately, the real world doesn’t work according to simple probability – and often events and actions deemed unlikely do occur.

From a competitive intelligence perspective, computer simulations hold little value. Rather, a key requirement for a successful war game is information on the organisations being modelled. Prior to the start of the game each team should be thoroughly briefed on each organisation. Typically, teams will then meet independently, in workshop sessions and use the briefing information to plan what they would do during the first time period, playing the role of their chosen or allocated organisation.

Following the completion of the round, players then announce their strategies and plans, leading to the second round. During the second round the teams take on board the different organisations’ plans and modify their own for the following period. This process then continues for the agreed number of rounds. During each round, players need to anticipate the moves of other players, develop their own strategies, decide on what resources and funding are needed (and ensure that these exist and are allocated as necessary in their plans). Depending on the rules agreed prior to the start of the game, players may also communicate with other teams – for example to agree a joint-venture or merger. Following the actual game period, the participants then discuss the situation and the lessons learned.

Requirements for success

Successful War Games require a number of features:

• Considerable information on each of the organisations being examined.
• Teams with a wide perspective and members with a variety of experiences – sales, marketing, general management, operations, finance, etc. This is important as otherwise the War Game can be too narrow in focus – missing out key operational or financial considerations, etc. in the planning stages.
• A facilitator to ensure the smooth running of the event and to communicate information. The facilitator may also add additional information during a round that changes the business environment and forces the teams to modify their plans. An independent facilitator can, additionally act as an umpire to adjudicate in disputes between teams and suggest which strategies are most likely to win out in the given situations. There is sometimes also an “umpire team” that assesses each team’s moves and determines the probable real-life outcomes had the organisations acted as they did during the game rounds. An external facilitator is often used to ensure an objective, non-company perspective. Avoiding subjective company viewpoints is essential as otherwise the War Game could end up reinforcing, rather than removing, corporate blind spots.
• Adequate time and space for discussion – a minimum of one day would be required for a basic War Game – and more sophisticated and wide-reaching games require longer periods (of several days).

War game benefits

Depending on the purposes and scope of the War Game a number of benefits can be expected:

• A full understanding of the current situation, opportunities, threats and issues that may arise in the short-medium terms;
• Recommendations and suggestions for future actions – with these being tested during the game;
• The identification of corporate blind-spots – in both the organisation playing the game and those being examined: this can lead to the identification of particular vulnerabilities and proactive strategies that can protect or take advantage of the weaknesses;
• The identification of missing intelligence on the market and business environment;
• Improved teamwork and understanding between decision makers in different functional areas;
• Anticipation and awareness of how the market may change over the short-medium term – which can lead to major cost savings, through better planned responses to both threats and emerging opportunities.

AWARE's services include working with organisations to set-up and hold war games and strategy simulations, as well as longer-term scenario planning. Contact us (on the form below) to find out more about how we can help you plan and hold competitive war games within your organisation.