Game playing in market intelligence

December 12, 2017

Humans have an irresistible urge to play.

 

My inspiration for writing this blog, however, was not some football game: the Dutch won’t compete in the 2018 World Cup, so we don’t talk about soccer too much lately. The trigger was the fact that in February 2016 the USA announced it would quadruple its budget for defending the northeastern boundaries of the NATO territory.

 

The oddly named war games

Whatever you may think and feel about the military, it is hard to deny that military challenges have resulted in innovations that also had great civilian applications. Think of RADAR: would you cross the sea on your sailing boat without it? Another example is the computer. In the Second World War, the decryption of the Axis powers’ radio communication was a priority for the Allied forces. The Allies commissioned the best and the brightest minds – personalities like Alan M. Turing – with the task. The result was Colossus, quintessentially the first computer. Military endeavors also resulted in intangible innovations. One of those actually preceded RADAR: war-gaming is where the military intersects with gaming.

War games are oddly named. War games neither concern real war nor are they frivolous games. The US decision mentioned above can hardly be seen as inconsequential. Yet it was possibly partly based on the outcome of a war game. Apparently, war games are instruments to inform pretty serious decision making. The value of war-gaming has also been recognized outside the military, including in the world of business.

 

How to run a business war

In a nutshell, a common business war game I am used to running it in the company I serve consists of four steps:1

Step one is the market intelligence brief. A company’s market intelligence staff summarizes all relevant facts known about the adversary the business focuses its game on.

Step two appoints parallel teams to the task of playing the adversary’s decision-making hand now that they know their adversary’s cards through the intelligence brief.

An intermediate step evaluates the adversary’s most likely and most dangerous course of action.

Step three, in which we assume that the adversary’s course of action will become reality in the near future, requires that we stress-test our own company’s planned strategies and tactics. We then evaluate the key changes to our strategies that may seem needed in the light of our enriched competitive strategic insights.

Step four allows for the integration of any modified choices (budgets, resource allocations, de-prioritizations…) in our existing business strategic planning cycle.

 

When to play a war game?

As with any strategic decision support tool, it is the decision to be substantiated that determines the tool to be applied, not vice versa. Having designed and played over three dozen war games on four continents, I have seen business war games most successfully being applied at two particular occasions:

• Launch of a competitor initiative (new product launch, M&A transaction, market entry…), i.e. to stress-test and improve our current strategies

• Launch of a strategic initiative by our company, assessing likely competitive responses and in doing so upgrading our plans

 

Handle with care

War-gaming, however, is a delicate instrument. A war game is usually played in a high pressure setting. Prior beliefs of the players rarely change, regardless of contradictory evidence that may come up during the game. Views that do emerge in a war game easily become (perceived) facts. In the course of the game, many big ego personalities commit to choices on the spot. Decisions taken in a war game will not easily be revisited as the participants have all vividly experienced their making, in their minds giving them a disproportional weight compared to other choices or facts. So far so good, provided the war game outcome is correct. When it is not, the consequences are disproportional and usually nasty. This means that when playing a war game, it should be designed to avoid the traps discussed above.

Fortunately, several professional and experienced service companies offer war gaming facilitation. As with many things military, handle war games with care to get the best results. But do not try to use or apply this stuff thoughtlessly at home!

 

About the author

Erik ElgersmaErik Elgersma is author of The Strategic Analysis Cycle Toolbook and The Strategic Analysis Cycle Handbook. He is the director of Strategic Analysis at FrieslandCampina, one of the world’s largest dairy companies. He speaks and lectures frequently at universities and on business seminars on the topics of strategic analysis, competitive strategy and related data analysis and management. He holds a PhD from Delft University of Technology, The Netherlands, and is alumnus of the International Institute for Applied Systems Analysis in Vienna, Austria.

 

 

Notes

The author acknowledges war gaming thought-leader Dr. Peter Perla for his stimulating inputs that contributed to this essay.

1.      Elgersma, E. (2017), The Strategic Analysis Cycle, Toolbook, LID Publishing, London, pp. 90-127.

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