Wargames are an effective way to make use of business intelligence and anticipate your competitors’ next moves.
Business intelligence is often the unloved stepchild in a company. Data is collected but rarely pulled together to build a picture of the world around the company. Even less often are the insights gathered and spread back to those on the front line, or made usable as part of daily business. Frequently, the information gathered stays as data and is barely converted into knowledge.
It does not have to be that way. Business wargames are a valuable methodological approach to making sense of the data collected by business intelligence teams and others in a company. The wargame allows an organization to translate raw information into a compelling story of how others might behave and why, and to gain additional insights by putting a team into the shoes of competitors, suppliers, customers, or regulators.
If this team is well chosen, it allows those who most need these insights to take them away and test or use them on the ground. Used well, the business wargame is not a short-lived intervention – but something goes far beyond. “In our case, after the event, participants took over the responsibility to be knowledge carriers for the role they played,” explains one business unit manager of a large multinational company.
Team members maintained a focus on understanding and influencing a particular stakeholder, whether a specific competitor, supplier, customer, or regulator. “They have been approached by the whole organization as the focal point and are receiving as well as sharing information on an ongoing basis,” adds the manager. Wargames have the potential to transform how a company sees its strategic environment.
What are business wargames?
What precisely is a business wargame? There is not a easy answer to this question, as there is not one commonly accepted definition. But in essence, it is the creation of a dynamic strategic situation in which different teams play the role of key stakeholders across your strategic landscape, pursuing their own goals and outcomes as a situation unfolds. The best way of understanding it is to look at the five most common goals of playing a business wargame and its benefits for organizations.
1. Better understand competitors, suppliers, customers and regulators
A wargame allows organizations to get a clearer picture of why other stakeholders behave as they do, revealing their constraints and options. What are the motivators and drivers of their behaviours and strategic choices? What limits or boundaries are they working within?
2. Anticipate what competitors, suppliers, customers and regulators may do next
During the wargame, the players live through future scenarios and imagine stakeholders’ strategic responses. The scenario may include such things as a player’s own organization making a planned strategic move, like bringing a new product onto the market. Then it is possible to role-play how the competition would likely respond. The group gets to understand the interactions between different stakeholders, and thus understands the market landscape better.
3. Reflect on the existing or future strategy
By rehearsing the future in advance and identifying how others think and act, leaders are better placed to meet the challenges that arise in the real world. It helps to reflect on options for a key decision, for a strategy, and enhances the decision-making process.
4. Make proper use of business intelligence
In everyday business meetings, issues are mainly discussed orally, and information is spread in writing. These methods can make it difficult for our brains to incorporate the information, learn new things and have new ideas. Scientists have demonstrated that story-living and visualizing results gives a little ‘twist’ to our brain that makes it easier to learn new things. It allows us to think differently and lets us discover aspects of a situation that we might not normally pay attention to.
5. Exchange knowledge across the organization
An important side effect of wargaming is improving the diffusion of knowledge about the market across the whole unit or organization. In a wargame, business intelligence material is used, but tacit knowledge held by the team is also an important factor: the game can make this tacit knowledge explicit. The process makes it easier for the whole team to distinguish between facts and rumours in the market.
Implementing wargaming effectively
The extent to which wargaming is currently used in business is difficult to assess, given that most of it happens behind closed doors. Yet the small amount of scientific research available shows that does not have a lot of attention yet, in contrast to scenario planning, which has become a well-established, almost mainstream method for strategy development. The unforeseen disruption created by Covid-19, and the emergence of relatively unexpected threats thanks to the growing climate crisis, has given scenario-planning a new appeal.
Yet wargaming can bring strategic scenarios to life in a way that goes beyond regular scenario planning. In some regards it is part of the seemingly unstoppable trend for gamification found across many areas of business. Despite the benefits, there are challenges associated with using wargaming effectively.
There are four important lessons to bear in mind to implement business wargaming successfully.
Embedding
A wargame adds particular value when it is embedded in a system of other business and strategic planning methods. A first requirement is a solid basis of business intelligence, including horizon scanning, and a wargame only reaches its full potential when the results are used to devise or refine a strategy. For instance, one business unit in the specialty chemicals segment used a business wargame to think through how its competitors might react to a strategic move that they planned to implement. As a result of the wargame, the unit was able to devise effective counter-measures to the rivals’ anticipated reactions.
Although it is not essential, it can also be very useful to combine wargaming with the creation of an ‘early-warning system’ that allows monitoring and detection of so-called ‘weak signals’. This stimulates a regular, systematic reflection and verification of assumptions and anticipated behaviours, and the early detection of new developments in the market. The wargame usually generates insights as to the likely next moves that a competitor could be expected to take, and it is therefore possible to plan countermeasures – but only if there is sufficient advanced warning. Simply put, tracking indicators that show up in the game can serve as a litmus test for possible future trends or events that may come to pass.
Guidance
The most difficult, but at the same time the most valuable, thing about business wargames is their complexity. There are almost no fixed procedures, no clear guidelines for the preparation, and not a one-fits-all set of methods. Instead, for each situation or business, a wargame is designed and developed in a way that fits the specific needs of the organization – and each company has a different set of competitors, market conditions and regulatory framework.
First of all, many parameters in a wargame are not predictable, as the players shape the story that develops during the game. Business intelligence is the wargame’s foundation: an experienced facilitator can guide the group to put themselves in other stakeholders’ shoes and can set tasks which are designed to enhance the team’s imagination. For example, the players imagine competitors’ strategies, and then see how those strategies hold up when they come together: what happens if all competitors ramp up capacity at the same time? What might happen if there are major market changes, such as the economy taking a nose-dive?
Changing macro-economic indicators and shifts in key business metrics can be useful inputs (see graphic, above), but it is the players’ subsequent decisions that define the story and dynamic of the game. That makes the facilitator’s role challenging: they need to be prepared for the players’ potential decisions and able to lead the game into its next phase by integrating those decisions. The input of business intelligence is crucial for creating a storyline that is both plausible and probable.
Experience
A big challenge when playing a wargame is the persuasive work at the outset, since wargames are not a well-established approach in many companies. For a wargame to be successful, all participants need to agree to be involved in the game and committed. The initiator needs to convince not only the leadership hierarchy but sometimes also the business intelligence unit of the added value. Some may ask: “What does the approach bring us? Isn’t it just making us work more?” These questions and concerns need to be addressed, but practical experience shows that the level of acceptance within an organization increases steeply after the first time a business wargame is played. For the business unit leader of one large company, a convincing argument was the potential for anticipating competitive moves – and indeed, the result of the wargame was the identification of a possible move by the competition that hadn’t previously been on the company’s radar screen. After the wargame, the corresponding strategic steps were prepared and initiated. As the move turned into reality, it was detected at a very early stage thanks to the company’s early warning system, and appropriate measures were implemented immediately.
Go virtual
Last but not least, running a wargame has become more challenging because of the Covid-19 crisis. A traditional wargame requires the participants to be in one location and to interact intensely with each other in a room – and even as the threat of the virus recedes, the availability of people in one location is not guaranteed. However, repeated lockdowns have given impetus to the development of online alternatives in virtual spaces. Rapid technology development and new software solutions, including those using metaverse platforms, are opening new doors.
Half the battle
Business wargames are structured role-plays, letting participants live through different scenarios based on business intelligence. They are particularly useful to companies that wish to work on their strategy, test their readiness for the future, use their existing foresight mechanisms – or create them, and develop situational awareness across the organization. It is a valuable way of anticipating threats and opportunities, understanding different stakeholders, and developing preparedness for seizing new opportunities and obviating the associated menaces. They are especially useful in complex and challenging conditions – such as those that many companies and organizations finding themselves in today.
At the end of the day, the outcome of the game depends on the players’ capability to get involved in the game and to express explicit and tacit knowledge. The results of a wargame are also only as good as the input of the players. However, with well-prepared business intelligence and experienced facilitators, a well-implemented wargame could mean half of your next strategic battle is won before it even begins.
Ralf Tatas is a former managing director in the chemicals industry. Petra Wiesbrock is a foresight to strategy consultant with 4sing.