Telematics Competition Research: Business War Games
Donald E. Baul
The purpose of this article is to present an
experiential view of business war games that provides some insights
into their usefulness, and their application for businesses in todays
highly dynamic and competitive market environment.
My first experience with what is now known popularly as war games
occurred during a seminar on strategic planning a number of years ago.
An element of the seminar which was unique at the time was the use of
computer generated scenarios to model a dynamic business environment.
The participants were given a baseline business situation and
environment, and assigned the part of a player in that market. The
exercise required participants to make specific business decisions that
could be modeled and processed by the computer to simulate the actual
market impacts of those decisions. These decisions included areas such
as marketing expenditures, research and development, plant and
equipment investment, etc. The numerical values of these decisions were
then processed to yield changes in the market environment in terms of
product sales revenue, market share, etc., for each participant team,
and for the market as a whole. "Winning" the game was achieved by
realizing the greatest increase in revenue and market share by the end
of the time period. The period, in this case, was defined as two years,
or eight quarterly sub periods, with decision points occurring at the
beginning of each quarter.
The exercise also modeled the market place in terms of "surprises" such
as the entry of a new participant, or changes in the overall market
economic environment to better reflect the situations that could be
produced in the "real" market place.
Perhaps the greatest value of this exercise was to better enable
participants to think in terms of the "big picture" of a market, and to
improve their understanding of the implications of business decisions
on the participating market players and on the market as a whole. I
also came away with a much greater appreciation for the dynamic nature
of markets, and the complexities of the forces that move and motivate
participants in those markets.
The exercise I described above was more appropriate to what would today
be called a "business scenario." In fact, business war gaming from my
perspective is more of a subset of business scenarios, modeled more
closely on military concepts as applied to the business environment.
Later in my career I was fortunate to be able to experience war games
at the executive level of a Fortune 100 telecommunications provider, as
a member of a competitive intelligence (CI) group that served as
advisors and facilitators for the exercise.
It seems difficult today, looking at the telecommunications industry as
it now exists, to recall that in 1984 AT&T, the old "Ma Bell," was
mandated by the FCC to split into seven regional companies. As an
example of how things have changed, one of the resulting Regional Bell
Operating Companies (RBOCs), formerly Southwestern Bell, later acquired
several other of its sibling RBOCs. Eventually, Southwestern Bell
renamed itself SBC and purchased what remained of the "old" AT&T,
to become the "new" AT&T. During this period of telecommunications
upheaval, there was an interval of gut wrenching transition from the de
facto monopoly status of AT&T to the current hyper-competitive
environment which has become a virtual free-for-all between cable
companies, telephone carriers, satellite vendors, Internet providers
and a host of other players.
During this transition, I worked in the CI unit at a regional Bell
company, which I will refer to as RBOC X. The leadership team at RBOC X
had anticipated the need to develop a more competitively oriented
mindset. A CI organization had been formed at RBOC X that was well
funded, staffed and had the ear of senior management. It was not
unusual for the CI organization to receive a "back of the envelope"
question from the CEO who had seen a thought provoking article in that
days Wall Street Journal and wanted to know what the
implications of the activity described in the article were for our
business. We would respond by assembling a team of qualified experts to
develop a reply to the CEOs question that incorporated appropriate
recommendations for action.
Conceptually, business war games were a good fit for the culture and
mind set of RBOC X at this stage of its market evolution. After being
introduced to the benefits of war games, the CEO authorized an exercise
and required participation in the games by all of his direct reports.
Each direct report was assigned leadership of a team that was to
represent one of our major competitors in the telecommunications
industry. The CI group was designated as a support organization for the
overall war games process, and to act as a resource for participants.
The overall war games process and execution were conducted and
facilitated by a third party vendor who had extensive expertise in this
area and a strong track record of conducting this kind of business
One of the early and interesting developments for the exercise was the
sudden and unexpected involvement of our legal department. News of the
games had somehow reached the State Utilities Commission which took
exception to the concept of a dominant incumbent carrier such as ours
making "war" on our competitors. We were instructed to change all
documentation relating to the exercise from "war games" to "business
competition scenarios." RBOC X understood that its position as a public
utility required great sensitivity to the perceptions of all
stakeholder organizations as well as the public, and the requested
changes were promptly implemented.
Over the next several weeks the teams conducted the exercises and
produced their results, which were not shared outside the corporate
officer team. While we did not know the specifics of the outcomes in
terms of strategic changes, there was considerable feedback on the
change of mindset experienced by the officer team.
As in most large companies, the senior management team had been
operating under long held assumptions about the telecommunications
industry and our companys place in it which did not reflect the
rapidly changing market environment. All of them, to an individual,
expressed surprise and a certain level of discomfort from the
experience of viewing the business through the eyes of our competitors.
Having intimate knowledge of the businesss vulnerabilities, and then
being put into the position of a competitor intent on exploiting those
vulnerabilities, was an eye opener for all of them.
In my opinion, there could not be a more rewarding payoff for war games
than a change of attitude that more closely reflects the realities of a
dynamic market environment. This kind of enlightenment does come at a
cost. The expense and resources required to effectively implement a
business war games session are considerable. Involvement of high level
management potentially generates the greatest benefit, since these are
the people who are best positioned to implement the learning gained
from the war games experience. At the same time, games can be a major
distraction from normal business operations over a period of several
weeks or even months. The need to maintain a focus on core business
processes and issues must be actively managed, and included in war
It is critical that any business considering conducting a war games
exercise be absolutely clear on the objectives of the games, and
committed to developing plans and actions to implement the lessons
learned. Otherwise, considerable time and resources can be consumed
learning things that are, at best, just "nice to know."
There are a number of reputable, highly qualified third party vendors
that specialize in conducting business war games. These firms have
considerable expertise and experience gained from years of consulting
with highly complex and dynamic Fortune 500 corporations. The fact that
many of these Fortune 500 firms see value in conducting war games is a
testament to the effectiveness and utility of insights gained from
seeing your business and industry through the eyes of your competitors.
The Society of Competitive Intelligence Professionals (SCIP) can be a valuable resource in
helping companies to identify qualified firms who specialize in
conducting war games.
If your company is considering conducting war game exercises, due
diligence is a must in determining the benefits and trade-offs of such
commitments. If executed properly and implemented effectively, war
games can provide valuable insights that are difficult to replicate,
and can help the business to develop innovative approaches to todays
ultra-competitive and dynamic market environment.