Homo ludens in market intelligence

Business strategy - M-Brain

This blog post is about the irresistible human urge to play. My trigger for writing this blog, however, was not some soccer game. As Dutch we don’t even compete for the European Championship this summer, so don’t expect me to talk soccer. The trigger was the fact that the US in February 2016 announced to 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: wargaming 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. As with radar and Colossus, the value of wargaming has been recognized also outside the military.

 

Business war games

 

In a nutshell, a common business war game consists of four steps. Step one is the intelligence brief. The market intelligence staff summarizes all relevant facts known about the adversary we focus the game on. The second step lets parallel teams of our company’s staff play out what they would do when handed the adversary’s cards. In a plenary talk, the adversary’s most likely and most dangerous course of action is subsequently evaluated. In the third step we assume our just discovered course of action of the adversary plays out for real. Based on that knowledge, 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. Finally, in the fourth step, we integrate any modified choices (budgets, resource allocations, de-prioritizations…) in our existing business strategic planning cycle.

 

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 two dozen war games on four continents, I have seen business war games most successfully applied at two particular occasions:

 

–               launch of a competitor initiative (new product launch, M&A transaction, market entry…), stress-testing and improving our current strategies

–               launch of a similar strategic move by our company, assessing likely competitive responses and in doing so upgrading our plans

 

Wargaming, 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 wargaming facilitation. As with many things military, handle war games with care for impressive results. But do not try to use or apply this stuff thoughtlessly at home!

 

The author acknowledges wargaming thought-leader Dr. Peter Perla for his stimulating inputs that contributed to this blog post

 

 

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