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The Advantages of Using Wargaming to Create Business Strategy

The Advantages of Using Wargaming to Create Business Strategy

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By Dr. Cynthia Silvia, DHA
Faculty Member, School of Business, American Public University

Lt. William McCarty Little introduced the concept of wargaming in 1886. He created visual representations of historic naval battles as a simulation tool for military officers to build analytical, strategic and decision-making skills in preparation for war.

Wargaming has played a key role in the training of naval officers at the Newport Naval War College ever since. The College uses this exercise an integral part of maritime leadership development. It helps potential leaders study and simulate complex war situations ranging from sea and space scenarios to cybersecurity.

Wargaming exercises shape analytical and strategic skills, aid in building defense plans and policies, and foster good decision making in wartime. Also, wargaming provides insights and builds analytical and risk assessment skills. The simulations prepare military leaders for natural disasters and humanitarian relief efforts.

Wargaming Has Been Adapted for Use as a Business Tool

More recently, wargaming has been adapted for use as a business tool for strategic planning and decision making. Business executives can use wargaming during a meeting to form groups, study problems and go through team-building exercises. These exercises can be performed over the Internet or incorporated into conferences, meetings or seminars.

What Is Business Wargaming?

Business wargaming provides an opportunity for executives to vicariously experience future events in the present. Before wargaming, most businesses held annual or biannual meetings to discuss business opportunities, project results and prepare new business plans. But these efforts often led to hit-or-miss results.

When wargaming entered the picture, businesses began to project and think about planning from a new perspective. Through strategic thinking and analysis, executives were able to consider the reactions and responses of their competitors.

Unlike strategic planning that involves managers gathering for an eight-hour meeting, wargaming puts the players into a simulated market environment with groups of eight to 10 people as the principal actors. The participants then start a wargame that gives them an understanding of their company and their competitive strengths and weaknesses.

Ultimately, the wargame provides a better understanding of how competitive strategy options work. Managers can see results that would normally take years to reach in real time.

Business wargaming is also an effective way to plan new initiatives and seasonal strategies and to determine how competitors will react to new technologies and plans. Wargames also provide an opportunity to spur corporate growth and estimate how new products might fit into today’s marketplace.

How Business Wargaming Works

A typical wargame takes place over a two- to three-day period. Company executives are assigned to teams that represent their own company, the competition and the vendors.

First, the teams study their assigned positions and roles, including corporate capabilities, strategies and philosophies. Second, they develop strategies and initiate new ideas, such as market expansion, mergers and acquisitions.

As the teams engage in role-playing, they react to market and environmental threats, as well as technological advances in the industry, regulatory changes and any natural disasters that might affect the company. This allows the players to experiment with new ideas and strategies while experiencing the effects of new market conditions.

For example, let’s say that Company A plans to expand into a new region in which a competitor (Company B) already has a presence. Company A may want to gain a better understanding of its competitor’s growth strategy and what their reaction will be when they learn that Company B has plans to locate its stores into the same region.

Company A may also take specific actions towards the reaction of its competitors. For instance, Team A may move through different phases or rounds of actions while exploring different perspectives, factors, or courses of actions.

Prior to engaging in each round of the wargame, each team is briefed as to the nature and purpose of the game and its rules, as well as each member’s role and assignment. Each team is also provided with sufficient research and analysis that will inform their roles.

In addition, each team is provided with company, management, and market profiles; any recent actions that have been taken; external factors of influence; and other pertinent information. After that, the wargame begins.

At the end of each round, the participants present and analyze their findings and identify strategies and actions, taking into account all the information that they were provided. The end product of the wargame should inform any strategy, plans, or courses of actions.

At the end of each team’s turn, everyone is given the opportunity to decide what did and did not work well. Each team has the opportunity to challenge the other teams’ sales, profit and marketing strategy.

Players discuss their strategies and plans, which leads to a second round. In round two, players try to defeat the strategies of the opposition. The players gain a better understanding of their own company and how competitive strategies work.

They see results that in practice would normally take many years to see. The results are then shared with all participants to discuss the most optimal strategy.

Through these wargames, wargaming results in improved business strategies and novel proposals. Wargaming is a form of accelerated learning.

Wargames Are Worth the Investment

ConAgra Inc., a leading manufacturer of food products, is a perfect example of a company that used wargaming. Their wargame helped them to expand their management’s competitive decision-making skills and make adjustments to key strategies.

ConAgra paid $1 million to conduct a wargame for 60 of its managers. Chief Executive Phil Fletcher lauded the advantages of strategic wargaming.

He said that wargaming shaped his managers’ strategic planning skills and allowed ConAgra to see its competitors more clearly. Wargaming also improved the strategic planning process by redefining the company’s key strategies. The exercise supported ConAgra’s emphasis on enhancing its information systems as well as its leadership.

Competitive wargaming can reveal any vulnerable areas in a company’s business model and eliminate any false assumptions. Participants return to their work with new ideas, new products and new business strategies. Players also have a better understanding of the effects of innovative technologies, policies and regulatory changes.

Business wargaming is an ideal way for companies to test new strategies and key assumptions about their business. A wargame exercise assists in understanding key factors and helps to identify opportunities, weaknesses, strengths and threats that might be encountered in a typical business environment. Wargaming also can improve a company’s planning process and help it create a winning strategy.

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About the Author

Cynthia Silvia, DHA, is a faculty member for the School of Business at APU. She is also a member of the faculty at Sacred Heart University in Connecticut. Dr. Silvia received a Master of Healthcare Administration and a Doctorate in Healthcare Administration from the University of Phoenix and a Bachelor of Arts and Master of Arts in Elementary Education from the University of Rhode Island. She has been teaching at the university level both online and on campus for the past three years.

Additionally, Dr. Silvia has held various retail management positions over the past 36 years for F.W.Woolworth/Woolco, Bradlees, Ames, Sears, Toys “R” Us and Babies “R” Us. She currently works for CVS Pharmacy.