Using war games to drive corporate strategy in crises

IN my previous installment, I explored how the “art of war” can be applied in business management these days.

People management issues with Robert Mandeya

The current business challenges pose a real threat to growth, thus the need to approach the situation from a military-like strategy. Business war games represent an alternative approach to challenge organisations to uncover internal capabilities through competitive actions designed to counteract external threats and address strategic mismatches.

Internal capabilities uncovered as a result of actions taken during a competitive war game aim to replicate market conditions found in competitive industries. These outcomes are difficult to achieve using many popular strategy design methods. War game-style activities, if properly designed and conducted, would help in formulating corporate strategy that incorporate the natural behaviours of the leadership team in creating strategic plans.

The ever-changing business environment locally and globally requires business leadership to consider commercial war gaming in their leadership styles. This approach simulates a set of business conditions and challenges executives to design successful strategies that are able to evolve with the changing nature of the environment.

How to apply war games

War games should include a specific real business environment. For instance, what is obtaining in Zimbabwe currently, where the business environment has become overly unpredictable, would involve setting up teams within the organisation to strategise around given scenarios such as reacting to inflationary pressures. Another one could be a game structured to deal with unpredictability, illustrated by changing technologies and shifts in market demand.

A long-term perspective is also required, to show how decisions made now will affect profits later on. This includes, for instance, decisions made through monetary policy changes like Statutory Instrument 142 which banned the multi-currency basket in Zimbabwe. One important result that makes war games supremely worthwhile is that managers learn the importance of being absolutely clear in their communications with the market.

Fall of strategic planning

Given the volatility in economies, technology and markets, there is a real compelling need to reconsider the essence of the perennial strategic retreats that organisations often resort to at the beginning of every year.

Strategic planning has become a risk itself, since the two imperatives of “strategy” and “planning” are conceptually distinct yet they are overlapping constructs. There is therefore a tendency to confuse the application of these two in corporate strategy implementation. While strategy is about synthesis (bringing ideas together) planning is about analysis (decomposing ideas into their constituent parts).

Rise of war games

War games represent informal learning and personal vision in corporate operations. War simulations synthesise learning into a vision of the direction that the business should pursue. Furthermore, it acts as a catalyst, involves intuition and creativity and delivers an integrated perspective of the enterprise. Along the way, it builds the enthusiasm of both managers and planners for the journey they will ultimately take together.
Implications of war gaming

Commercial simulations grew out of military war gaming, which has been used to prepare military leaders for unforeseen circumstances on the battlefield since time immemorial. For instance, the US Naval War College started using war gaming in 1887 and, in the 1930s, Admiral Chester W. Nimitz was able to predict and play out virtually all the World War II battles of the Pacific. The same predictability can work out in corporate operations in today’s unpredictable business environment. In 2015, Bill Gates used war gaming to warn of a breakout of a pandemic (corona-like virus) and its impact. If he were in Africa he would have been taken as a great prophet and would be cashing in on that.

Playing war games at corporate level

In this case, teams of the senior managers of a company play their own company, a select group of their competitors play the marketplace. A control team plays all other entities that affect the industry. The exercise simulates a set of business conditions and offers lessons and guidance for the real thing.

During the game, which lasts several days, teams lay out objectives and strategies, decide on investments, product lines, etc. The market team assesses market reaction and awards shares. A simple spreadsheet model provides the financial implications of actions the teams take by returning to them an assessment of their profits and losses.

In war games there are no complicated or contrived rules. Anything that can happen in the real world is allowed, including deregulation/regulation, mergers and acquisitions, alliances and natural disasters like epidemics and pandemics.

Simulation both improves the strategic thinking capabilities of managers and disposes them to devote more time and resources to the task going forward.

A simulation will also give you a view of how markets and competitors might evolve and, more importantly, an understanding of the drivers of that evolution. Simulation is not meant to be predictive, although it has often been. Instead, it gives companies an opportunity to see “what would happen if we did X…” In view of the impending global recession instigated by the Covid-19, corporate leaders could as well use war games to predict impact and come up with mitigatory measures.

Mandeya is an executive leadership coach, trainer in human capital development and corporate education, a certified leadership and professional development practitioner and founder of LiRD. —robert@lird.co.zw/www.lird.co.zw.

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