際際滷

際際滷Share a Scribd company logo

War games

Johnathan Bonnell
Johnathan Bonnell

1. War games can be a powerful business tool for companies to prepare for uncertainties, but the design must be done correctly. 2. A high-tech company ran a successful two-day war game simulation that prepared executives for an aggressive competitor and helped them avoid reactive decisions during an acquisition period. 3. For war games to be effective, companies should consider whether a moderate level of uncertainty exists, include relevant competitive dynamics and stakeholders, and design the appropriate type of game (tactical vs. strategic).

1 of 5
Downloaded 33 times
M A R C H 2 0 11 Bill Butcher S T R A T E G Y P R A C T I C E Playing war games to win John Horn They can be a powerful business toolbut only if you get the design right. As the global downturn kicked in, a been anticipating. Moreover, while high-tech companys senior there would probably be industry executives decided to run a war mergers and acquisitions, as the game to prepare themselves for the company had expected, the deals uncertainties of the post-crisis were unlikely to kick off a wave of landscape. After two days of M&A or to have a material impact on simulationswhen teams the companys share of any market. representing competitors and stakeholders role-played against a These insights made a difference. company teamthe executives When actual deal making began and understood that a strong competitor the player on the sidelines on the sidelines was likely to enter announced its intention to become a the market aggressively. The market leader, the high-tech executives also realized that the low company didnt leap into the M&A end of the product range would face fray or otherwise lose focus. Instead, more price pressure than they had it concentrated on protecting its
2 core business, minimizing low-end two or three outcomes seem losses, and investing in a major plausible along each of several growth opportunity that required dimensions. When no amount of new technology and a long analysis will provide the right incubation periodand has since answer, the results of gaming can proved valuable. shed valuable light on the range of possibilities that executives should For a variety of reasons, many be considering. companies dont learn as much from war games. Some misjudge when In addition, there must be some they are appropriate. Others foul up meaningful competitive dynamics the games design by not including between the company and various the right participants. Still others stakeholdersa game to be played, take a cookie-cutter approach and in other wordsand a clear way of rely on standardized game design representing the most relevant software or apply to operational players. Often this presents little problems the same approach they challenge: the high-tech company, previously used for strategic or for example, ran its game against organizational ones. current and potential competitors and included consumer teams in To avoid these pitfallsand the some rounds. But it can be tricky to wasted time, money, and poor portray certain stakeholders, such strategic decisions that go with as the US Congress, which one themCEOs and other senior aerospace and defense contractor executives should ask tough realized it had to include for its questions when contemplating war game to yield valuable insights. games or answering proposals to use them. Four questions, drawn Consider other approaches if the from our experience with more than level of uncertainty, competitive 100 war games at scores of dynamics, or stakeholder realities companies around the world, can seem problematic. Scenario greatly increase the chances that planning can help with decision your managers will use war gaming making if there is too much to make better decisions in the uncertainty. Cost curves, pro t pool real world. analyses, or other standard frameworks are effective when complex competitive dynamics Can a war game help are absent.2 with our problem? A nal word of caution: be wary of The sweet spot for games is some the argument that war games are moderate level of uncertainty.1 If the primarily about generating new uncertainty is too greatsay, the ideas. Companies following this impact of robotic nanotechnology approach often nd participants on manufacturing industriesgame taking an Im going to prove how planners cant offer enough clever I am posture, leading to guidance for the players to make unrealistic, impractical ideas. We reasoned decisions. More suitable is suggest conducting idea generation an industry environment where, say, workshops instead (for more, see
3 March 2011 our upcoming article Seven funding, moves by competitors, and steps to better brainstorming, outcomes of technology to be published in March, investmentswould not have on mckinseyquarterly.com). justi ed the executive time spent on the exercise. What kind of game Instead, the company designed a should we play? game to answer the more strategic question: how can we win market Lets say a consumer goods share given the budget pressures on company is considering a narrow the Department of Defense and the problemraise prices 5 percent or moves of competitors? The game keep them constantand wants to tested levers such as pricing, know how its biggest competitor contracting, operational might respond. Given the tactical improvements, and partnerships. objective, the consumer goods The outcome wasnt a tactical maker might run two separate playbooka list of things to execute games: one in which it raised prices and monitorbut rather strategic and one in which it didnt. guidance on the industrys direction, Alternatively, the company could the most promising types of moves, run a game in which it raised prices the companys competitive by 5 percent but made other strengths and weaknesses, and adjustments, sometimes boosting where to focus further analysis. marketing expenditures and sometimes offering retailers concessions. It could then compare Who will design and the result with the outcome of the play the game? game in which it didnt change prices. The key is running the gamut You have big personnel choices to of potential choices to make sure make or approvewho designs the each is tested. Such games are game and who plays. In both cases, most valuable when a company has deciding exactly how wide to cast very few but discrete choices to test, the net depends on whether the as well as a similarly small set of games objective is primarily tactical possible responses by competitors. or strategic or the creation of organizational alignment. Tactical games arent always practical, though. The aerospace Tactical games, with their detailed and defense company mentioned moves and evaluation criteria, are above originally considered running relatively straightforward: leaders a tactical game to better understand with deep expertise about and shifts in the US defense budget and responsibility for implementing the their impact on the business. But decisions are critical sources of the bene t of testing a very large input. The design of a strategic war number of scenarios for individual game requires much broader weapon systemsscenarios interaction. To ensure that the involving, for example, levels of defense contractors game wasnt
Playing war games to win 4 unduly in uenced by the customers. This shared experience, hypotheses of its designers, for which would have been impos- example, they asked all 40 sible with a smaller or more executives who would play it which homogenous group of participants, trends, scenarios, and decisions has continued to stimulate should be tested. discussions across the company as market conditions evolve. The selection of players is also critical. A tactical exercise, such as a pricing game, can have a relatively How often should small set of participants. You should we play? cast a wider net in a strategic game and a much wider one in an The one-off games described so far organizational game in which the are the most common type; its objective is to get people on board usually pointless to run a game for a strategic move. repeatedly to test the same uncertainties with the same In a game in which the goal is participants. Its often bene cial, organizational alignment around a however, to repeat a game for the strategic decision, for example, you sake of organizational alignment should include leaders of all when you want to bring along functions that will be involved in its people who didnt experience the execution. Often, its also worth rst gameusually, the wider group including frontline managers, of employees who will implement product designers, and account the decision. Most people learn reps, since they can raise different better by doing, and when they have viewpoints during the game and shared experiences, they are more disseminate the lessons to likely to embrace change. colleagues afterward. Repeating games also can be useful A more diverse set of participants when conditions are changing. If also creates valuable opportunities competitors or technologies have to broaden their understanding of evolved, for example, it may be time the industryfor instance, by to rerun a strategic game. Tactical assigning them to stakeholder games like those for pricing teams with roles that are less negotiations may bear repeating as familiar to them. In the debrie ng frequently as every three or four session after the high-tech months, with the same set of players companys game, the leader of a and slight modi cations to re ect business unit, who had paired up changes in the market. That helps with a salesperson on a customer salespeople re ne their pitches as team, remarked, Having played the customer needs, competitive customer, I now understand what offerings, regulations, and other the sales force means when they factors shift. say we get push-back on price. I am going to make sure we give You may, however, want to run the you the support you need to make same set of players through a game the value-based argument to the repeatedly and rapidly to practice
5 March 2011 for a critical upcoming test. The Well-designed war games, though negotiation team of a health insurer, not a panacea, can be powerful for example, was entering into a learning experiences that allow renegotiation with its key provider managers to make better decisions. partner and felt it had little room to By asking a few tough questions, maneuver. To explore its options, executives can help their the team played a war game in organizations be smarter about which it chose a negotiating when and how to play. approach, negotiated with the 1 provider team, huddled up to See the descriptions of Level 2 and Level 3 uncertainty in Hugh G. Courtney, Jane reformulate its strategy and tactics, Kirkland, and S. Patrick Viguerie, Strategy and then reentered negotiationsall under uncertainty, mckinseyquarterly.com, June 2000. in several quick rounds. 2 Kevin P. Coyne and John Horn, Predicting your competitors reaction, Harvard The participants replayed the game Business Review, April 2009, Volume 87, Number 4, pp. 9097. several times in one day (starting again with new tactics when they got bogged down), re ected on the The author wishes to acknowledge results, and repeated the exercise the contributions of Kevin Coyne, an the following week. The alumnus of McKinseys Atlanta improvement between the rst and of鍖ce, to the thinking behind this the last sessions was enormous: the article. players uncovered areas where they could stand rm and learned how to John Horn is a consultant in craft their message more adroitly to McKinseys Washington, DC, of ce. regain control of the situation. They also became more con dent and Copyright 息 2011 McKinsey & Company. ready to ex their muscles in real All rights reserved. We welcome your comments on this article. Please send them negotiations with the provider. to quarterly_comments@mckinsey.com.

More Related Content

War games

  • 1. M A R C H 2 0 11 Bill Butcher S T R A T E G Y P R A C T I C E Playing war games to win John Horn They can be a powerful business toolbut only if you get the design right. As the global downturn kicked in, a been anticipating. Moreover, while high-tech companys senior there would probably be industry executives decided to run a war mergers and acquisitions, as the game to prepare themselves for the company had expected, the deals uncertainties of the post-crisis were unlikely to kick off a wave of landscape. After two days of M&A or to have a material impact on simulationswhen teams the companys share of any market. representing competitors and stakeholders role-played against a These insights made a difference. company teamthe executives When actual deal making began and understood that a strong competitor the player on the sidelines on the sidelines was likely to enter announced its intention to become a the market aggressively. The market leader, the high-tech executives also realized that the low company didnt leap into the M&A end of the product range would face fray or otherwise lose focus. Instead, more price pressure than they had it concentrated on protecting its
  • 2. 2 core business, minimizing low-end two or three outcomes seem losses, and investing in a major plausible along each of several growth opportunity that required dimensions. When no amount of new technology and a long analysis will provide the right incubation periodand has since answer, the results of gaming can proved valuable. shed valuable light on the range of possibilities that executives should For a variety of reasons, many be considering. companies dont learn as much from war games. Some misjudge when In addition, there must be some they are appropriate. Others foul up meaningful competitive dynamics the games design by not including between the company and various the right participants. Still others stakeholdersa game to be played, take a cookie-cutter approach and in other wordsand a clear way of rely on standardized game design representing the most relevant software or apply to operational players. Often this presents little problems the same approach they challenge: the high-tech company, previously used for strategic or for example, ran its game against organizational ones. current and potential competitors and included consumer teams in To avoid these pitfallsand the some rounds. But it can be tricky to wasted time, money, and poor portray certain stakeholders, such strategic decisions that go with as the US Congress, which one themCEOs and other senior aerospace and defense contractor executives should ask tough realized it had to include for its questions when contemplating war game to yield valuable insights. games or answering proposals to use them. Four questions, drawn Consider other approaches if the from our experience with more than level of uncertainty, competitive 100 war games at scores of dynamics, or stakeholder realities companies around the world, can seem problematic. Scenario greatly increase the chances that planning can help with decision your managers will use war gaming making if there is too much to make better decisions in the uncertainty. Cost curves, pro t pool real world. analyses, or other standard frameworks are effective when complex competitive dynamics Can a war game help are absent.2 with our problem? A nal word of caution: be wary of The sweet spot for games is some the argument that war games are moderate level of uncertainty.1 If the primarily about generating new uncertainty is too greatsay, the ideas. Companies following this impact of robotic nanotechnology approach often nd participants on manufacturing industriesgame taking an Im going to prove how planners cant offer enough clever I am posture, leading to guidance for the players to make unrealistic, impractical ideas. We reasoned decisions. More suitable is suggest conducting idea generation an industry environment where, say, workshops instead (for more, see
  • 3. 3 March 2011 our upcoming article Seven funding, moves by competitors, and steps to better brainstorming, outcomes of technology to be published in March, investmentswould not have on mckinseyquarterly.com). justi ed the executive time spent on the exercise. What kind of game Instead, the company designed a should we play? game to answer the more strategic question: how can we win market Lets say a consumer goods share given the budget pressures on company is considering a narrow the Department of Defense and the problemraise prices 5 percent or moves of competitors? The game keep them constantand wants to tested levers such as pricing, know how its biggest competitor contracting, operational might respond. Given the tactical improvements, and partnerships. objective, the consumer goods The outcome wasnt a tactical maker might run two separate playbooka list of things to execute games: one in which it raised prices and monitorbut rather strategic and one in which it didnt. guidance on the industrys direction, Alternatively, the company could the most promising types of moves, run a game in which it raised prices the companys competitive by 5 percent but made other strengths and weaknesses, and adjustments, sometimes boosting where to focus further analysis. marketing expenditures and sometimes offering retailers concessions. It could then compare Who will design and the result with the outcome of the play the game? game in which it didnt change prices. The key is running the gamut You have big personnel choices to of potential choices to make sure make or approvewho designs the each is tested. Such games are game and who plays. In both cases, most valuable when a company has deciding exactly how wide to cast very few but discrete choices to test, the net depends on whether the as well as a similarly small set of games objective is primarily tactical possible responses by competitors. or strategic or the creation of organizational alignment. Tactical games arent always practical, though. The aerospace Tactical games, with their detailed and defense company mentioned moves and evaluation criteria, are above originally considered running relatively straightforward: leaders a tactical game to better understand with deep expertise about and shifts in the US defense budget and responsibility for implementing the their impact on the business. But decisions are critical sources of the bene t of testing a very large input. The design of a strategic war number of scenarios for individual game requires much broader weapon systemsscenarios interaction. To ensure that the involving, for example, levels of defense contractors game wasnt
  • 4. Playing war games to win 4 unduly in uenced by the customers. This shared experience, hypotheses of its designers, for which would have been impos- example, they asked all 40 sible with a smaller or more executives who would play it which homogenous group of participants, trends, scenarios, and decisions has continued to stimulate should be tested. discussions across the company as market conditions evolve. The selection of players is also critical. A tactical exercise, such as a pricing game, can have a relatively How often should small set of participants. You should we play? cast a wider net in a strategic game and a much wider one in an The one-off games described so far organizational game in which the are the most common type; its objective is to get people on board usually pointless to run a game for a strategic move. repeatedly to test the same uncertainties with the same In a game in which the goal is participants. Its often bene cial, organizational alignment around a however, to repeat a game for the strategic decision, for example, you sake of organizational alignment should include leaders of all when you want to bring along functions that will be involved in its people who didnt experience the execution. Often, its also worth rst gameusually, the wider group including frontline managers, of employees who will implement product designers, and account the decision. Most people learn reps, since they can raise different better by doing, and when they have viewpoints during the game and shared experiences, they are more disseminate the lessons to likely to embrace change. colleagues afterward. Repeating games also can be useful A more diverse set of participants when conditions are changing. If also creates valuable opportunities competitors or technologies have to broaden their understanding of evolved, for example, it may be time the industryfor instance, by to rerun a strategic game. Tactical assigning them to stakeholder games like those for pricing teams with roles that are less negotiations may bear repeating as familiar to them. In the debrie ng frequently as every three or four session after the high-tech months, with the same set of players companys game, the leader of a and slight modi cations to re ect business unit, who had paired up changes in the market. That helps with a salesperson on a customer salespeople re ne their pitches as team, remarked, Having played the customer needs, competitive customer, I now understand what offerings, regulations, and other the sales force means when they factors shift. say we get push-back on price. I am going to make sure we give You may, however, want to run the you the support you need to make same set of players through a game the value-based argument to the repeatedly and rapidly to practice
  • 5. 5 March 2011 for a critical upcoming test. The Well-designed war games, though negotiation team of a health insurer, not a panacea, can be powerful for example, was entering into a learning experiences that allow renegotiation with its key provider managers to make better decisions. partner and felt it had little room to By asking a few tough questions, maneuver. To explore its options, executives can help their the team played a war game in organizations be smarter about which it chose a negotiating when and how to play. approach, negotiated with the 1 provider team, huddled up to See the descriptions of Level 2 and Level 3 uncertainty in Hugh G. Courtney, Jane reformulate its strategy and tactics, Kirkland, and S. Patrick Viguerie, Strategy and then reentered negotiationsall under uncertainty, mckinseyquarterly.com, June 2000. in several quick rounds. 2 Kevin P. Coyne and John Horn, Predicting your competitors reaction, Harvard The participants replayed the game Business Review, April 2009, Volume 87, Number 4, pp. 9097. several times in one day (starting again with new tactics when they got bogged down), re ected on the The author wishes to acknowledge results, and repeated the exercise the contributions of Kevin Coyne, an the following week. The alumnus of McKinseys Atlanta improvement between the rst and of鍖ce, to the thinking behind this the last sessions was enormous: the article. players uncovered areas where they could stand rm and learned how to John Horn is a consultant in craft their message more adroitly to McKinseys Washington, DC, of ce. regain control of the situation. They also became more con dent and Copyright 息 2011 McKinsey & Company. ready to ex their muscles in real All rights reserved. We welcome your comments on this article. Please send them negotiations with the provider. to quarterly_comments@mckinsey.com.