Friday, February 26, 2016


Throughout the semester, I emphasize the importance of outward thinking in identifying and anticipating the key levers available to rivals that might alter the business situation or opportunity. It is often said, mostly truthfully, that no plan survives contact with the enemy. In a business context, there are rarely enemies per se, but there are rivals seeking many of the same customers and opportunities. Thus, properly speaking, Uber and Lyft are not really enemies, but the plans and strategy of one do impinge on the opportunities and profits of the other.

Despite this interactive aspect to the outcomes of business strategy, the process producing that strategy is often mainly introspective rather than adversarial. Moreover, successful planning often requires a flexible approach by the most customer-facing elements of the business. Yet, too often, corporate roadmaps and designation of strategy is rigid, top-down, and its principles insufficiently precisely articulated up and down the hierarchy. The result is to make independent action, and retrenchment if the plan starts failing, difficult.

Such problems with the formulation and articulation of strategy are as old as time, though most often seen in a military context. What can be learned from these experiences?

In my view, one of the most noteworthy, and readily applicable, lessons in strategic planning and formulation that might be drawn from the military is the use of gaming applications. The Prussian General Staff first introduced Kriegspiel in the 19th. At least in part as a result of this, Prussia rapidly achieved rapid victories over Austria and France during this time. Prussia's success was especially surprising in light of its lack of materiel or manpower advantages, especially in relation to France.

While strategic planning using wargames is commonplace in military planning, it is unusual in corporate settings. Instead, most strategy departments create scenarios, explicitly announcing their assumptions. They assign probabilities to various sequences of events, but relying mainly on judgment for the generation of these probabilities.

What is missing from this analysis is human input on the part of the rival or rivals. Obviously, your rivals are not going to tell you their plans nor how they will react to your plans. But in most large firms, a substitute for these rivals is readily available--senior leaders who are ex-employees of your rivals. Wargames as the basis of strategy have two parties, your strategy group and your ersatz rivals, each making decisions and strategic choices that, together, determine outcomes.

A criticism of this type of strategy making approach centers on its practicality--how does one go about building a simulation engine capable of capturing the myriad possible strategies, countermoves, and consumer responses. Such an engine would, if fully fledged, be a daunting proposition. This, however, is to view the purpose of the exercise wrongly--wargaming is not full-fledged simulation. Rather, it is a much simplified model capturing the key big picture elements of the strategic landscape without trying to build from the ground up in capturing all of the particulars. An engineering mindset, strategy as simulation, represents a major hurdle, not logistically but conceptually.

So how do you make such a wargame? The key is the introduction of referees. Referees or umpires should be experts in the industry, possibly outside consultants, who view the strategies proposed by each side through the lens of their expertise and then make an assessment about the likely results. With such individuals in place, it becomes possible to create a rich space without restrictions on strategic options for either side without the impossibility of trying to build a reality engine.

Wargames also matter lower down the chain of leadership--they are central learning devices for developing independent action consistent with the overall plan but flexible enough to take advantage of unforeseen tactical possibilities. Turning back to Prussia, kriegspiel was not merely the province of generals planning campaigns but of sub-lieutenants developing instincts for the best action in the face of a given tactical situation in view of the overarching plans.

The same holds true in business. Wargames, and the umpiring framework, readily extend downstream to the level of product managers, brand managers, and the like. Part of the charge of the strategy group in any organization is in coordinating the actions of these parties in furtherance of the plan. By creating smaller scale wargaming sessions bringing together product managers, for example, there is a chance for spreading deep understanding of the overall strategy, and a manager's role small role in its execution, as well as a chance to infuse passion, and a spirit of friendly competition among these individuals in a way that is far more compelling, and leads to better retention, than the usual sorts of strategy briefs typical of corporate strategy. Returning to the military, the following article offers an interesting and important take on how the British military is using wargames to facilitate independent judgment and decision making prowess among NCO and lieutenants, military equivalents of product managers.

Wargaming: An Overlooked Educational Tool

The lightweight games used in game theory offer a taste for how wargaming can be used to develop outward thinking. But the serious challenge for firms seeking a competitive edge is in incorporating these techniques and ideas into what is, for the most part, an inwardly driven exercise.

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