Winning the Uncertainty Game: Turning Strategic Intent into Results with Wargaming 0367418525, 9780367418526

Table of contents :
Cover
Half Title
Title Page
Copyright Page
Contents
List of Figures
List of Tables
List of Abbreviations
Introduction
Part 1: Challenges of a VUCA World and the Need for a New Approach
1. VUCA as a Driver for Change
2. Strategy as a Tool to Deal with Uncertainty
3. The Essence of a “Joint Approach”: Lessons from Military Planning
4. . The “Joint Approach” in a Civilian Context
Part 2: Background to Wargaming
5. The History of Wargaming
6. Business Wargaming Methodology
Part 3: Wargaming in Practice
7. Tactical Wargaming
8. Operational Wargaming
9. Strategic Wargaming
10. Hindsight: How Well Does Business Wargaming Work? And Why Does Business Wargaming Work?
Part 4: Business Wargaming in Teaching
11. Challenges in Teaching in a VUCA World
12. Reflection on Applying Business Wargaming in the Classroom: Critical Success Factors
Part 5: How to Get Started
13. Design, Execution and Evaluation
Outlook and Conclusion
References
Index

Citation preview

WINNING THE UNCERTAINTY GAME

This book is about the challenges that emerge for organizations from an ever faster changing world. While useful at their time, several management tools, including classic strategic planning processes, will no longer suffice to address these challenges in a timely and comprehensive fashion. While individual management tools are still valid to solve specific problems, they need to be employed based on a clear understanding of what the greater challenge is and how they need to be combined and prioritized with other approaches. In order to do so, companies can apply the clarity of thinking from the military with regard to which leadership level is responsible for what and how these levels need to interact in order to produce a single aligned response to an outside opportunity or threat. Finally, the tool of business wargaming, while known for some time, proves to be an ideal approach to quickly and effectively bring all leadership levels together, align them around a common objective and lay the groundwork for effective implementation of targeted responses that will keep the organization competitive and in the game for the long run. The book offers a comprehensive introduction to business wargaming, including a historical account, a classification of different types of games and a number of specific real-world examples. This book is targeted at practicing managers dealing with the aforementioned challenges, as well as for students of business and strategy at every level. Daniel F. Oriesek is a Swiss general staff officer, civil servant and entrepreneur. After many years in banking and strategy consulting, while pursuing his military career as a reserve officer, he served two tours in the Balkans and in 2014 became a full-time employee of the Swiss Department of Defense. He serves on the board of a real estate company co-founded by him and has participated, designed and conducted numerous business and military wargames. Jan Oliver Schwarz is a professor of strategic management and leadership at the ESB Business School, Reutlingen University, Germany and a senior advisor at the Institute for Innovation and Change Methodologies (IICM), Munich, Germany. His academic and consulting work specializes in future-oriented strategy development, which includes implementing corporate foresight processes and applying approaches such as scenario planning and business wargaming.

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WINNING THE UNCERTAINTY GAME

Turning Strategic Intent into Results with Wargaming Daniel F. Oriesek and Jan Oliver Schwarz

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First published 2021 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN and by Routledge 52 Vanderbilt Avenue, New York, NY 10017 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2021 Daniel F. Oriesek and Jan Oliver Schwarz The right of Daniel F. Oriesek and Jan Oliver Schwarz to be identified as authors of this work has been asserted by them in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data Names: Schwarz, Jan Oliver author. | Oriesek, Daniel F., author. Title: Winning the uncertainty game : turning strategic intent into results with wargaming / Jan Oliver Schwarz and Daniel Oriesek. Description: Milton Park, Abingdon, Oxon ; New York, NY : Routledge, 2021. | Includes bibliographical references and index. | Identifiers: LCCN 2020031724 (print) | LCCN 2020031725 (ebook) | ISBN 9780367418526 (hardback) | ISBN 9780367853594 (ebook) Subjects: LCSH: Management games. | Strategic planning--Simulation games. | War games. Classification: LCC HD30.26 .O75 2008 (print) | LCC HD30.26 (ebook) | DDC 658.4/012--dc23 LC record available at https://lccn.loc.gov/2020031724 LC ebook record available at https://lccn.loc.gov/2020031725 ISBN: 978-0-367-41852-6 (hbk) ISBN: 978-0-367-85359-4 (ebk) Typeset in Times New Roman by KnowledgeWorks Global Ltd.

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CONTENTS

List of figures List of tables List of abbreviations

vii ix x

Introduction 1 Part 1  Challenges of a VUCA world and the need for a new approach

13

1 VUCA as a driver for change

15

2 Strategy as a tool to deal with uncertainty

24

3 The essence of a “joint approach”: Lessons from military planning 32 4 The “joint approach” in a civilian context

41

Part 2  Background to wargaming

47

5 The history of wargaming

49

6 Business wargaming methodology

65

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vi

CO N T EN T S

Part 3  Wargaming in practice

73

7 Tactical wargaming

75

8 Operational wargaming

96

9 Strategic wargaming

118

10 Hindsight: How well does business wargaming work? And why does business wargaming work?

126

Part 4  Business wargaming in teaching

135

11 Challenges in teaching in a VUCA world

137

12 Reflection on applying business wargaming in the classroom: Critical success factors

152

Part 5  How to get started

159

13 Design, execution and evaluation

161

Outlook and conclusion 174 References 179 Index 186

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FIGURES

0.1 Our perspective on wargaming. 7 1.1 VUCA examples and approaches as defined by Bennett and Lemoine (2014). 16 1.2 Mobile cellular subscriptions (per 100 people). 18 1.3 Switzerland’s annual defense expenditures as percentage of GDP from 1989 to 2017. 22 2.1 Prospective competitive strategy process. 27 2.2 Reaching the desired end state in a VUCA environment. 29 3.1 Generic operational design. 35 3.2 Identifying the center of gravity. 36 3.3 Illustrative list of envisioned actions based on a fictious example of a mechanized brigade. 40 6.1 Basic elements of the design of a business wargame. 68 7.1 Game design: “Key account strategy for entry into an international retail market”. 79 7.2 Game design: “Defense against patent expiry and new entrants”.87 7.3 Illustrative mission with five intermediate targets and one final target. 92 7.4 Illustrative and simplified matrix of synchronization. 92

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FI G U R E S

7.5 Illustrative “belt move”. 93 7.6 Illustrative “alley move”. 93 7.7 Illustrative “box move”. 94 8.1 Game design: “How to deal with HIV/AIDS in India”. 106 8.2 Game design: “How to defend against a bioterrorism attack”.112 9.1 Game design: “Alliance strategy for an airline”. 122 10.1 Two angles for exploring the inner workings of a business wargame. 127 13.1 Steps in designing a business wargame. 162 13.2 Flow-state perspective on designing business wargames.165

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TABLES

3.1 Moving from critical capabilities via critical requirements to critical vulnerabilities (nonexhaustive selection) 3.2 Illustrative substantiation of decisive point 1 13.1 SIC structure for analysis example

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37 39 171

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ABBREVIATIONS

2G 3G AI AIDS AMA BC CEO CFO CII CoG COVID-19 CTO DSL e.g. etc. GBC GSM HIV HMO IFPI

second generation third generation artificial intelligence acquired immune deficiency syndrome American Management Association before Christ chief executive officer chief financial officer Confederation of Indian Industry center of gravity corona virus disease chief technological officer Digital subscriber line for example etcetera Global Business Coalition on HIV/AIDS Global System for Mobile Communications human immunodeficiency virus health maintenance organization International Federation of the Phonographic Industry

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abbreviations

IT KPIs MBA Mbit/s MDMP MMS MNOs NGOs PDA R&D SDI SIC SOF TUs TUNA UMTS US USP USSR vs. VUCA WLAN

xi

information technology key performance indicators Master of Business Administration megabit per second Military Decision-Making Process Multimedia Messaging Service mobile network operators nongovernmental organizations personal digital assistant research and development Strategic Defense Initiative Statement–Insight–Consequence special operations forces task units Turbulence Uncertainty Novelty Ambiguity Universal Mobile Telecommunication System United States unique selling proposition Union of Soviet Socialist Republics versus Volatility, Uncertainty, Complexity and Ambiguity wireless local area network

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INTRODUCTION

“The only constant is change, continuing change, inevitable change, that is the dominant factor in society today. No sensible decision can be made any longer without taking into account not only the world as it is, but the world as it will be”. This quote by science fiction author Isaac Asimov (Hartung 2004) precisely captures the challenge decision makers are increasingly facing, namely having to take decisions in ever more complex and instable environments, while the magnitude of the consequences triggered by their decisions are, for the most part, ever increasing. Some of the decisions made today are literally “bet your company” types of decisions—the decision to opt for a particular technology, which may generate significant revenue or may be obsolete before you have even completed its implementation. Today, we still firmly believe that in situations too complex for conventional (i.e. mostly linear) forms of analysis, wargaming—a

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methodology originally developed in the military context—offers top decision makers a way if not to eliminate, then at least to significantly reduce the uncertainty they face when taking decisions. Since the publication of our book Business Wargaming – Securing Corporate Value in 2008, the tool of wargaming has gained wider acceptance not only among military but also among business leaders. Augier et al. (2018) recently argued in the journal Long Range Planning that wargaming is among the oldest tools aiding strategy formulation and planning, has been in use for almost 200 years and has enjoyed an increase of interest in academia over the last decade. From our own experience, working on wargames during the last ten years, we find that the willingness to engage leadership teams by employing more dynamic and innovative formats such as wargaming has increased, in part based on the common perception that the world has become more uncertain, complex and that the environment changes more quickly. Winning the Uncertainty Game: Turning Strategic Intent into Results with Wargaming is not only a second edition of our 2008 book Business Wargaming but goes a step further. On the one hand, the book reflects on the general developments and personal experiences of the authors with respect to the application of wargaming in the different contexts of business, military and classroom—in this sense it is the logical sequel of the first book. On the other hand, this book positions wargaming in the broader context of a world characterized by increasing volatility, uncertainty, complexity and ambiguity (VUCA), and how organizations need to rethink how they gain anticipatory skills, conduct strategic planning, sense what is going on around them and analyze and distinguish the critical from the irrelevant to mobilize their organizations in order to fend-off threats and seize opportunities accordingly. For quite some time, the dynamic capability theory (Schwarz, Rohrbeck, and Wach 2019) has argued that sensing, sizing and transforming are central for organizations to stay on top of their game in changing environments. In recent years, the acronym VUCA (Volatility, Uncertainty, Complexity and Ambiguity) has been used to frame the myriad of challenges organizations are facing. Ramirez and Wilkinson (2016) have framed the term TUNA (Turbulence,

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Uncertainty, Novelty and Ambiguity), suggesting that we have already moved beyond VUCA in terms of increasing uncertainty and dynamics in the business environment. While being confronted with the frictions of war and the “fog of war”, military leader Carl von Clausewitz (1780–1831) is credited with rejecting the postulate of general calculability (von Hilgers 2012). Although von Clausewitz’s insight is some 200 years old, it appears only in the past decade that a majority of business leaders have finally accepted that they are surrounded by constant uncertainty, which cannot simply be “managed” (i.e. by elaborate calculations) and that the trend of uncertainty is to increase without any reversal in sight. Therefore, dealing with uncertainty in its various forms is a key challenge and core competency for any leader going forward. Although uncertainty is not only about risks but also about opportunities (Schoemaker 2012), we advocate that organizations, unless they already have, need to better understand and begin to play the uncertainty game and look for ways how to win it. This will require a change of mind-set (e.g. embracing rather than fearing uncertainty), a change of how an organization thinks about strategy, strategy planning and, most importantly, strategy execution. The latter requires adaptive ways on how to work in parallel with existing hierarchical structures to address the organization’s most pressing challenges. While we do not claim that wargaming per se is the “magic bullet” that will solve all these challenges, we see it as the essential tool, which in combination with other approaches, will enable organizations to deal with and triumph in a VUCA, TUNA or simply more uncertain world. The term wargame is the translation of the German Kriegsspiel. Since many people in the military feel uncomfortable with using the term game (because of the gravity of war), wargames have been called many things, including map maneuvers, field maneuvers, exercises or, increasingly, modeling and simulations. So, when we published our book on business wargaming in 2008, we were not only careful in using the term war but also the term game. However, concerning the term game, much has changed in the past decade. Not only has the gaming industry grown dramatically but games are being applied for many different purposes outside

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entertainment, being labeled games for personal change, positive impact games, social reality games, serious games or leveraging the play of the planet (McGonigal 2012). As in the business environment, some discomfort exists with the term war and (still) game alike; wargames therefore have also been described as dynamic strategic simulations or simply strategy simulations. Throughout this book, we will use the general term “wargaming” to subsume all types of wargaming regardless of the context in which it is applied unless we need to be more specific. To that end, we will later provide our perspective on the wargaming terminology and propose a classification, which we will use throughout this book. We highly encourage readers to use this terminology as a common standard throughout the wargaming community. A business wargame is a role-playing simulation of a dynamic business situation (Kurtz 2003). It involves several teams, each assigned to play a different stakeholder (competitor, customer, governing bodies) in a particular business situation. Typically, a business wargame evolves over several moves. Each move represents a defined period of time and/or a scenario. A business wargame should always be prefaced by extensive research and include a review of trends and hypotheses for the particular industry in which the wargame is taking place. In contrast to “red team” approaches, where one team assumes the position of one competitor or other relevant stakeholder to better understand interests, intentions and capabilities (Zenko 2015), a business wargame is much more complex in nature, which also suggests that business wargames are suitable for more complex and networked challenges. Back in 2008, the application of business wargaming focused on answering questions related to market entry (a form of attack) or defense strategies (to keep one’s position in a contested market), as well as how impeding disruptions, such as technological innovations or regulatory changes, would affect existing business models and industries. In a 2010 study conducted by A. T. Kearney examining the state of strategic planning processes in large corporations in Switzerland (A. T. Kearney 2010), 17% of the respondents claimed to be working with advanced tools such as business wargaming,

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INTRODUC TION

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although only occasionally. This said, even for those companies using business wargaming, the method is not an integral part of their strategic planning process. We think that organizations that do not wargame strategic plans, or at least major decisions, miss a great opportunity for two main reasons: •

•

First, because organizations do not fully reflect on and validate the underlying assumptions and associated consequences of their decisions and strategic planning, respectively. In extreme cases, major investment decisions are made on purely financial considerations and under the assumption that operationally and tactically (we will explain the different levels shortly), the concepts can be executed as envisioned on paper. In reality, however, there are many stakeholders involved and internal and external barriers that need to be understood, accounted for and overcome in order for a successful implementation of the strategic intent. Second and closely related to the first point, organizations do miss the opportunity to educate and synchronize the strategic, operational and tactical levels within their organization. This synchronization may go beyond the organizational boundaries and include existing and/or potential future business partners and suppliers. Beyond just education and synchronization, organizations also miss the opportunity to energize key people across hierarchical silos and give them a clear sense of purpose to collaborate effectively toward vital objectives for the firm.

Within this context, we need to rethink the way we look at strategy and especially strategic planning. Traditional strategy processes typically assume a “quasi-time stop” at the time they are conducted, include a full assessment of an organization’s environment, identify currently visible changes in the environment and formulate necessary adjustments for the organization going forward. Most of the time such adjustments are not radical, and the result of the strategy process is usually minor-to-medium changes in the way an organization goes about doing its business as usual. In past years and based on the specific industry, organizations could fare quite well with such

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an approach as the environment stayed relatively stable; barriers for new entrants were generally high or major changes unfolded within a considerable timeframe. However, in today’s fast-changing environment with strategic decision cycles of months, weeks or less depending on the industry, the traditional approach will no longer work. To wait for the next evolution of the strategic planning process, which may be a year from now, to address all changes that happened in the meantime will only assure one thing: you will be too late and in the worst case you will be obsolete before the next planning cycle. This calls for fundamentally changing the way of strategy development. Going forward—and increasingly happening—strategy development/refinement has to turn into a continuous effort, triggering necessary organizational adjustments almost the instant a relevant development has been identified. This requires augmented sensing capabilities, highly efficient analytics and the capability to identify the necessary consequences and set in motion the organization to implement the necessary adjustments. Harvard Business School Professor Emeritus John P. Kotter argues: “Number crunching will continue to be important, but in a rapidly changing and turbulent world numerical data become more fluid and ambiguous. More eyes and ears and hearts need to be in the strategy game, not just a limited number of senior managers” (Kotter 2014: 178). Being able to recognize opportunities and disruptions, analyze and act quickly is the ability to mobilize a flexible network out of the existing hierarchy. Kotter (2014) refers to this as a dual operating system, and the military—special operations forces (SOF) in particular—employ such an approach when they create tailormade task units (TUs) coming out of a standard organization for training and readiness to fulfil highly specialized missions. For the mission, the chain of command and support relationships may change, but once completed, the TUs are dissolved and go back to their place in the organizational hierarchy they came from. For this approach to work, every member of the SOF needs to understand the existence of these two organizational forms and be flexible to collaborate in any way necessary toward the accomplishment of the mission.

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Transferred into a business context, this means that employees still have their place within the organizational hierarchy, which is designed for efficiency, control and management. But at the same time they must be flexible in their thinking and understanding of their role, in the sense that it can mean that they will become part of a networked organization, which is flexible and thinks holistically across organizational silos to recognize, analyze and address major issues on behalf of the entire organization. Although the latter can be supported by consultants, it can never be entirely done by consultants or other external experts. It is the double-hatted exponents from within the organization that can move about both operating systems, obtain access to resources from the hierarchy, etc. From this point of view, business wargaming can be a key asset in establishing and supporting the work of such a dual operating system. Another central perspective of our book is the differentiation of different decision or leadership levels in an organization. We utilize and adopt these levels from the military, which distinguishes strategic, operational and tactical levels. We will introduce these levels in more detail. Furthermore, in Figure 0.1, we illustrate how we will use the term wargaming and business wargaming throughout this book and from which perspectives we will look at wargaming and its applications. ENVIRONMENTAL UNCERTAINTY STRATEGY (= approach to deal with uncertainty) WARGAMING (= strategy tool)

MILITARY WARGAMING

BUSINESS WARGAMING* (= NON-MILITARY WARGAMING)

Operational-Level Wargaming

Tactical-Level Wargaming

Specific Context**

Specific Context**

Strategic-Level Wargaming

* = includes public and private companies, non-government organizations, other non-military organizations ** = i.e. Strategy Testing, Foresight, Crisis Management, Training

Figure 0.1  Our perspective on wargaming.

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This book recognizes that there is uncertainty coming from the environment, which requires an adequate response by organizations. This approach to deal with the uncertainty we call strategy, and within the many tools for strategy formulation and planning, we see wargaming as an essential tool. The umbrella term “wargaming” can be broken down by application into military wargaming and business wargaming. To keep things simple, we enlarge the meaning of business wargaming to include all nonmilitary applications and thus subsume not only wargaming for public and private corporations but also for nongovernment and other nonmilitary organizations. Both military wargaming and business wargaming can be conducted at the strategic, operational and tactical leadership levels and address questions within a specific context such as strategy testing, foresight, crisis management or training, just to name a few. In Part Three of this book (Wargaming in Practice), we will provide examples for tactical, operational and strategic wargames, both from a military wargaming as well as from business wargaming perspective. Besides this general breakdown, we will describe within the leadership levels applications of wargaming for several purposes. Bracken (2001) highlights, for instance, three types of wargames: technology integration games, path games and shadow games. The purpose of the technology integration game is to find out in advance which obstacles may hinder the deployment of new IT systems, while the path game simulates a long period of time. The involved teams assess the moves of other teams, and play restarts for another period. The objective is that the teams cannot start with a clean slate; rather, they are exposed to their earlier decisions. Shadow games allow a senior executive to play out highly sensitive strategies without being involved himself, participating in the wargame indirectly through an agent. While we find other applications described (e.g. Watman 2003; Vanderveer and Heasley II 2005), we have found the following cluster of applications useful: • • •

Strategy testing, developing foresight, change management Crisis response preparation Education, training and recruiting

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Strategy testing has been described as the primary application of business wargaming, allowing leaders to test a strategy prior to its implementation, in particular in assessing how it works in the competitive landscape (Schwarz 2011). Alongside the pure strategy testing comes the exploration of future industry developments and therefore the development of foresight. And as we will argue in more detail later, allowing a group of managers to experience the future dynamics of an industry will lead to creating a sense of urgency for action, which is absolutely critical for any change effort (Kotter 2012). A second common application of wargaming is crisis response preparation. In particular in post-9/11 times, wargaming was applied in the context of US government agencies to anticipate and simulate how to best react to crises such as attacks with biological weapons and others, all in light of how to improve the collaboration among several agencies and other key actors. A third application is to use wargames in the context of education and training, which can range anywhere from introducing students at different levels to strategy, over-familiarizing newly hired managers with a company and an industry to brainstorming future developments in an educational setting. We are convinced that military leaders can benefit from learning about cases of business wargaming, as can business leaders, from the cases of military wargaming and other nonmilitary applications.

Outline of the book Part One of the book looks at the challenges of a VUCA world and how strategy development, planning and execution are a way for organizations to deal with such increased uncertainty. We then look at why traditional strategy processes will no longer work and what constitutes the essence of a so-called “joint” approach by looking at lessons from military operational planning. In doing so, we take a close look at the role wargaming plays within the operational planning process and how it serves to link together the intent of the strategic level with the specific actions of the tactical level, so every contributing party of the overall effort is united behind the common

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objective. We then look at how the lessons from military thinking and planning would translate into what a “joint” approach could look like in the nonmilitary business world. Part Two summarizes the history and the background of wargaming and how it evolved from early military planning into a strategy tool for business leaders. To this end we will examine the history of military wargaming, starting with the earliest applications, highlighting the development of modern military wargaming during the Prussian era and subsequently, after World War II, in the US military. From there we will look at the rise and transition of wargaming into the nonmilitary sector and gaming sector, which was mainly driven by individuals taking their knowledge from the military and applying it to the design of board games and the solution of business problems. This includes a generic explanation of the workings of a typical business wargame. Part Three focuses on the many applications of wargaming and to this end will examine several cases. We have selected the cases to offer the reader a cross-section of military wargames and business wargames at different leadership levels and within differing contexts. This should help readers better understand the more theoretical sections of the book. Some of the cases have been well published, while others are in part still confidential. We therefore have sanitized the cases where necessary and do not include any information about specific people or organizations involved. Due to confidentiality, not all case studies can be analyzed and discussed with the same degree of detail and, of course, there are more published cases out there. We have structured the discussion of each of the selected cases in the following order: • • • •

Point of departure Objectives and key questions Game setup Lessons learned

To conclude Part Three, we will offer a reflection, based on our own experience, as to why wargaming works and what some of the critical success factors are.

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Part Four focuses on the application of wargaming in teaching environments. This includes understanding the challenges for teaching management students in a VUCA world, as well as the provision of practical tips and tricks on how business wargaming can be taught and applied in the classroom. Here we will also provide some representative cases and a reflection on the critical success factors. Part Five will look at a number of issues regarding the design, execution and postgame evaluation of a wargame. This is not intended to be a “how to” guide, but should rather provide you with food for thought when thinking creatively how wargaming could be applied to help your organization to win the uncertainty game.

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Part One CHALLENGES OF A VUCA WORLD AND THE NEED FOR A NEW APPROACH

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1 VUCA AS A DRIVER FOR CHANGE

Nathan Bennett and G. James Lemoine (2014) in their Harvard Business Review article “What VUCA Really Means for You”, dissected the elements of VUCA (Volatility, Uncertainty, Complexity, Ambiguity) and offered ideas on how to approach each of the VUCA elements individually (see Figure 1.1). However, from Bennett and Lemoine’s overview, one may get the impression that each of the elements of VUCA can be addressed individually and that by doing so in sum VUCA can be effectively managed. While their observations and proposed approach are valid individually, looking at solutions to VUCA this way is more a theoretical exercise than a practical approach. Addressing VUCA in our view and from our observations and experience needs to be done holistically. In order to do so, many individuals from the hierarchical organization and possibly from outside an organization need to understand the big picture, what the departments and people involved are currently doing, what their needs are and how they should all

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Figure 1.1  VUCA examples and approaches as defined by Bennett and Lemoine (2014).

work together effectively along some structured process to reach a common objective. Today’s environment is more VUCA than ever, partly driven by the magnitude and nature of global challenges, such as geopolitical developments and insecurity, environmental challenges, as well as general challenges posed by the highly networked global economy. Geopolitically, we are moving from a unipolar (USA) post–Cold War world toward a multipolar (USA, China, Russia, as well as a number of major regional powers) power system, characterized by a combination of regional and global challenges, which are linked. For

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example, low economic development, coupled with natural disaster can lead to migration streams toward more wealthy regions of the world. This can lead to significant security challenges along migration routes or within entire regions. In today’s security environment, it is not only (nuclear) military power but to an ever greater extent economic power that defines a country’s role on the global stage. The recent COVID-19 crisis has the potential to dramatically affect economic power and thus political constellations within countries and beyond. The geopolitical constellation and the respective alliances have a great influence on global trade, the flow of people, the dissemination of ideology and culture, the flow and sharing of information, the protection of intellectual property and the protection of assets and investments in different parts of the world. Environmentally, and as the COVID-19 crisis has taught us recently, we are facing situations where failure to effectively work together across national boundaries on issues like global warming, pandemics or the general overuse of nature’s resources will have severe negative effects on the global population, although the effects may appear sequentially and will not affect us all with the same severity at the same time. This said, we will with high probability see more local or regional conflicts over resources like water, key medical supplies, arable farmland, meadowland, fishing grounds, etc., and as a consequence thereof, a fierce competition for resources. This competition, unless resolved diplomatically and via mutually beneficial sharing agreements, will lead to more conflict at various levels of intensity, as well as internal displacements or major migration streams. Such conflicts, the challenges from displacement and migration of people, as well as the likely interruption of local production processes will not only affect local economic development but because trade routes may be affected and potential shortages of key supplies (i.e. rare earths) ensue, the economies of more developed parts of the world will be affected as well. So not only environmentally but also economically we operate in a highly fragile system, which is global, highly networked and specialized. With the advent of globalization, countries are more and more forced to contribute based on their absolute or at least comparative advantage (Gupta 2015). Absolute advantage refers to what a country

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can produce better than any other country, and comparative advantage refers to what a country can produce best of all goods and services it could produce. While this is good from the perspective of global efficiency and output, it leads to more specialized local economies and is highly dependent on a functioning trade system, which includes the free flow of goods, capital and talent. This specialization and the need for low transportation costs as an enabling factor, makes the global economy as a whole more vulnerable and sensitive to any kind of influence or disruption. Beyond the aforementioned global challenges, society at large has become more networked as well. Figure 1.2, using the example of mobile subscriptions per 100 people worldwide, illustrates how the dissemination of devices and connections has increased exponentially, almost doubling in the time since the publication of our book in 2008. Plenty of other graphs could be used to illustrate this development, but for the moment it should suffice to say that the degree to which we are all networked and interact via digital channels has grown dramatically. By 2025, at the current speed of development, computers will have reached the processing capacity of the human brain. Subsequently

Figure 1.2 Mobile cellular subscriptions (per 100 people). Source:  World Bank.

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the possibilities of Artificial Intelligence (AI)1 are also progressing at an impressive speed and we are beginning to approach the phase, where AI can not only solve narrow problems, such as beating a world champion at chess2, but increasingly can take on broader, holistic and networked issues, previously reserved for human agents3. While such development may bring better, previously unrecognized solutions to complex problems, we are not there yet. Furthermore, we must keep in mind that the eventual replacing of human knowledge workers in more and more areas, will pose tremendous challenges to current systems, such as income tax, social security, education, just to name a few. The access to and the speed of how information is disseminated today across multiple platforms are mind-boggling. While technology allows more people access to information than ever, at the same time it also allows for the systematic capture of data relating to individual interactions of all sorts. Today, data is captured more quickly and in gigantic quantities, while elaborate algorithms help us in mining, structuring and preparing this data for on-the-spot decision-making. At least in the developed world, we now all have access to the same open-source information. This changes the value of the former source of competitive advantage, which came from exclusive access to information by only a selected group of people, i.e. via education, membership or simply access to organizations in possession of that information. It still holds true that competitive advantage can be sustained by supplementing open-source information with proprietary information, i.e. through active legal and possibly illegal intelligence collection, from funding and/or conducting primary research or applying superb analysis. The ability to take available information from public and possibly other sources and turn it, faster than anyone else, into a reliable, actionable basis for good decision-making is the real competitive advantage going forward. The rise of machine learning and artificial intelligence (AI), at least with respect to routine decision-making by humans, will play a significant role in this development. Organizations today operate in an increasingly complex, networked and thus vulnerable environment. At the same time, they

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operate in an ecosystem of numerous stakeholders within partly diverging interests. In sum, this makes it very difficult, if not impossible, to consider, respect let alone bring in line, all these interests and allocate management attention and resources accordingly. There is plenty of literature on conflicting stakeholder interests, so, for example, financial short-term investors think from quarter to quarter and expect profit growth (Moura and Teixeira 2009). If they are not happy with the earnings, they will simply sell the stock and invest somewhere else. From this perspective of “make money quick”, they, by definition, do not really care about how this money is made or if short-term profits will hurt the company in the long term. In this quest for quick profit by short-term investors, management— unless they are significant shareholders—is the short-term investors’ most important ally because if they make sure the quarterly numbers are good, they will be rewarded in the end with handsome bonuses or stock options. However, when incentivize like that, top management may take major risks and run cost-cutting and sales promotion programs to drive short-term profitability in order to please the stock market, while ruining the company long-term. This is because they tend to neglect important investments (PWC 2016) or ignore necessary adjustments today, which may have no immediate payoff but are essential for the survival and continued success of the organization. To illustrate this point, we can look at a comparison of privately held companies with less exposure to short-term thinking vs. public companies. The privately held companies tend to significantly outperform their counterparts on the stock market (Winfrey 2014). According to data from Sageworks, now part of Abrigo, collected between 2010 and 2014, privately held companies in the United States with more than $500 million in annual revenues outperformed public companies on the S&P 500 by more than 8 percentage points in sales growth (approximately 11% for private companies vs. approximately 3.5% for public companies). This same group of private businesses has also generated slightly higher net profit margins every year since 2010. “Being private allows [us] to cut through the noise and focus on what matters”, Sageworks chairman Brian Hamilton is quoted as saying in a statement. Furthermore, the extra 8 percentage points of

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sales growth mean a lot to the owners of those private companies and to their ability to reinvest for further growth. However, conflicting interests of stakeholders are just one aspect of the problem. Another challenge is the complexity from a combination of outside environmental factors, as well as coming from the internal structure and the way organizations typically operate. While traditional forms of organizational models optimize the organization for efficiency, accountability and specialization, they make the organization at the same time inert to capitalize on new opportunities or very slow and ineffective when it comes to recognizing and fending off threats early. While traditional management tools, such as financial management, operations management, marketing management, management by objectives, etc., are still valid and offer solutions to partial problems in the organizational context, none of them can grasp the complexity and interdependencies at play. They simply do not provide enough understanding, i.e. when making changes in one part of the organization, as to how this will affect other parts of the organization or outside partners and customers. So, rather than managing and optimizing individual parts of the hierarchical organization, we need an approach that allows the organization to take on a holistic view, prioritize initiatives and resources within the whole context of possible consequences and thus overcome blockades from the otherwise useful hierarchy. Once this has been done and the areas needing attention have been identified and prioritized, the traditional tools can be used for the optimization of the individual areas. Ultimately, it comes down to the complexity from the sum of the challenges, which has by now reached a level where traditional methods of analysis, including big data, in isolation can only offer partial solutions to the problem. In order to stay successful in the long run, corporations and nonstate as well as state organizations need to transform themselves in a way where they begin to cooperate in a permanent way, less confined by organizational boundaries, as a “Team of Teams” (McChrystal et al. 2015). But before we get into the details of what such an approach could look like for organizations and business in particular, we should take

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a look at what another, by definition probably the “most hierarchical” organization, does in order to work across silos and prioritize its limited resources to maximum effect toward a desired end state. We are talking about the military. Until recently, driven by the downfall of the Cold War setup, armed forces around the world were facing immense political pressure to adjust to the new realities, i.e. the dissolution of the Soviet Union as a military opponent. For countries like Switzerland, it became increasingly difficult to justify to the public why it still needed a conscript army of nearly 600,000 as well as a large number of costly bunkers, equipment and standing infrastructure. So gradually troop strength was significantly reduced down to about 100,000 today (Swiss Federal Department of Defence, Civil Protection and Sport 2019) and in line with this, equipment and infrastructure were reduced as well. The overall defense expenditures fell approximately 28% from 1.5% of gross domestic product (GDP) in 1989 (equaling USD6.5 billion in 2017 inflation-adjusted dollars) to about 0.7% of GDP in 2017, equaling USD4.7 billion. Only recently, driven by the realization that important systems need to be replaced, the budget was slightly increased back to about USD5.0 billion.

Figure 1.3 Switzerland’s annual defense expenditures as percentage of GDP from 1989 to 2017.

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Faced with these realities and the shortage of financial and personnel resources, the question was, how can a part of the lacking resources and subsequently the gap in performance of the armed forces be compensated for by finding ways to deploy what is available in more efficient ways? While a part of this problem can be addressed by substituting manpower and outdated equipment with new technology and new doctrines for its effective employment, more was needed. While by far not all could be compensated for, one important answer to the challenge was to reorganize and focus on an improved “joint approach” by using tools, including wargaming to exercise, experiment with scenarios and educate officers and their civilian counterparts in applying such a “joint approach”. In Chapters 3 and 4 of this part of the book, we discuss this joint approach in more detail.

Notes 1. The Encyclopedia Britannica defines AI as “The ability of a digital computer or computer-controlled robot to perform tasks commonly associated with intelligent beings. The term is frequently applied to the project of developing systems endowed with the intellectual processes characteristic of humans, such as the ability to reason, discover meaning, generalize, or learn from past experience”. 2. Mark Robert Anderson. Twenty Years on from Deep Blue vs Kasparov: How a Chess Match Started the Big Data Revolution. https://theconversation. com/twenty-years-on-from-deep-blue-vs-kasparov-how-a-chess-matchstarted-the-big-data-revolution-76882. Retrieved September 17, 2020. 3. Vernor Vinge. The Coming Technological Singularity: How to Survive in the Post-Human Era. https://edoras.sdsu.edu/~vinge/misc/singularity. html. Retrieved September 15, 2020.

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2 STRATEGY AS A TOOL TO DEAL WITH UNCERTAINTY1

“There is a slightly odd notion in business today that things are moving so fast that strategy has become an obsolete idea… that all you need is to be flexible or adaptable… but if you do not develop a strategy of your own you become part of someone else’s!” This quotation from famous futurist and trend researcher Alvin Toffler (2000) captures some interesting aspects about strategy in today’s context. The first half of the quotation reflects the general assumption that strategic planning is a long and inflexible process unable to cope with fast-changing environments, and in the second part Toffler points to the fact that your ability to control your own future is entirely dependent on the quality of your strategy. So, on one hand the world has become so complex that we are tempted to shift into a reactive mode, yet there is a desire for “hard data” and clear direction, and therefore a multitude of management tools for dealing with complex and dynamic environments have been developed.

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While we do not attempt in this section to review the entire history of strategic management or the research in this field, we want to discuss the following: what are the challenges of strategic management and how can wargaming help to address these challenges. This allows us, on the one hand, to discuss how wargaming is adding a competitive perspective to strategic management (and foresight) and, on the other hand, how wargaming supports the transition from strategy development to strategy execution in terms of alignment of an organization and creating a sense of urgency to act. In emphasizing that strategic management consisting of strategy development and strategy execution (Johnson et al. 2008), we highlight how wargaming helps to build the bridge between strategic intent and results. Although competitive advantage is often examined, there has been little discussion of how to address competition. Supporters of the resource-based view of strategy argue that organizations should look within the company to find the sources of competitive advantage (Barney 1991). However, to comprehensively assess whether resources are valuable, rare, and costly to imitate (Rothaermel 2012; Barney 1991), the competitive dimension should be considered. This is particularly relevant in a situation where competitors might be faster in adapting to a changing environment or may anticipate the response of our focal firm and take counteractive measures (Helfat et al. 2007). One of the five forces that drive industry competition are “new entrants” (Porter 1980). Porter (1980: 7) has noted that “the threat of entry into an industry depends on the barriers to entry that are present, coupled with the reaction from existing competitors that the entrant can expect. If barriers are high and/or the newcomer can expect sharp retaliation from entrenched competitors, the threat of entry is low”. Porter underlines the relevance of not only analyzing existing competitors but also analyzing potential ones. While he admits that forecasting potential competitors is a difficult task, he suggests that these potential competitors can be identified from the following groups: “firms not in the industry but who could overcome entry barriers particular cheaply; firms for whom there is obvious synergy from being in the industry; firms for whom competing in the industry

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is an obvious extension for the corporate strategy; and customers or suppliers who may integrate backward or forward” (Porter 1980: 50). While Porter argues that predicting the future goals of competitors will also add to assessing how competitors might change their strategy, it appears that he is arguing from the point of view of rather stable industries. The erosion of advantage today occurs routinely as a result of dynamic and interactive rivalry (Sirmon et al. 2010). New competitors either might find the industry interesting to enter (lowentry barriers) or might already be part of the value chain (expansion of value chain). However, what appears to be missing in the debate on competitive strategy is the time perspective. Future changes in the industry can in many cases have the power to fundamentally alter the competitive landscape, for example, through the convergence of industries, creation of new business models or technological disruptions that enable a new type of firm to enter the industry (Gassmann 2006). Paul Geroski (1999), former professor from the London Business School, captures these ideas in his call for new approaches for the early warning of new rivals. “New entrants act like other firms: they observe events in the market, develop new ideas, and decide to enter markets using rationale similar to that of incumbents. This is why companies can spot new competitors. They are not aliens from Mars acting in bizarre and unpredictable ways” (Geroski 1999: 108). He goes on to argue that a central skill in identifying new rivals is assessing the effects of innovations in their own industry. These imply that new competitors might come from firms operating from within or areas adjacent to the particular industry (Geroski 1999). These discussions, however, trigger the crucial question of how to assess future competitors’ actions and reactions, including the understanding as to who these competitors actually might be. Schwarz et al. (2018) have argued for combining scenario planning with business wargaming, thereby creating what they have labeled a prospective competitive strategy process (see Figure 2.1). This process, based on a foresight process (Højland and Rohrbeck 2017; Rohrbeck and Kum 2018), allows for integrating the competitor perspectives into strategic management.

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Figure 2.1  Prospective competitive strategy process.

The prospective competitive strategy process comprises three main phases: • •

Phase I—Perceiving: Activities designed to create awareness about the environment and factors that have and will influence the focal market. Phase II—Prospecting: Activities designed to uncover systemic effects and project developments in order to define and describe plausible future states and how they affect the focal firm.

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Phase III—Probing: Activities designed to provide tangible experiences about future developments, in particular, the competitive strategic moves from the focal firm and other plausible participants in future value chains.

Kotter (2014) has argued that confronted with the drastic changes in the environment, new ways of strategic management need to be developed. While the prospective competitive strategy process could be such a new approach to strategic management, it does not go far enough. Kotter (2014) underlines that it is vital that organizations make sure that its employees understand what is going on in their business environment and that this is the prerequisite to creating a sense of urgency and eventually triggers real change. In the context of the more recently developed concept of open strategy (Seidl, von Krogh, and Whittington 2019), it is argued that strategy should not be reserved for a select group of senior managers, but that it should open itself to broader groups, cross-hierarchical and cross-functional, drawing on the knowledge and ideas of many in an organization. Further, this idea of open strategy also bridges strategic intent with results by making sure that larger parts of the organization are involved in the process of strategizing, for example, through business wargaming; understand the sense of urgency to act; and eventually are engaged and empowered to act. Business wargaming provides an opportunity to include larger groups of people and thus should certainly have a place in the toolbox of strategy. While the value of strategic planning in times of virtually on-thespot decision-making can be debated (Caligiuri 2018; Caret 2011; Wells 2019; O’Donovan and Rimland Flower 2013), we should not go as far as some proponents of abandoning strategic planning all together. Key aspects of strategic planning, such as envisioning and formulating a desired end state, as well as the need to operationalize how to reach it, will remain unchanged. However, other aspects of strategic planning, such as the approach to sensing, analyzing, drawing the right consequences and turning insights into action, need to change. This said, organizations need to rethink how they scan the environment for potential changes effectively, the tools for assessing the consequences of such changes on their ability to reach the desired

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Figure 2.2  Reaching the desired end state in a VUCA environment.

end state, and how they can address the potential threat or opportunity by setting the relevant parts of the organization in motion quickly. Figure 2.2 illustrates the key elements of such an approach. The “today” icon symbolizes where the organization stands today, and on the far right is the desired end state, which lies in the future. The desired end state is defined following a comprehensive analysis of the environment, assumed long-term developments, and the organization’s capabilities today. The arrow between today and the desired end state symbolizes the original strategic plan, which, ceteris paribus, would allow to achieve the end state in a linear fashion because all parameters are known and do not change over time. However, as opposed to the common practice of past decades, the original strategic plan may only serve as the “read thread”, the “baseline” or the “guidance tool” (Kenny 2016). In reality, the journey toward the desired end state is never linear but resembles a squiggle of twists and turns ultimately leading to the desired end state. With this in mind, organizations should start thinking about the journey not as a line, but rather as a highway within an acceptable relevant range for strategy implementation.

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As time progresses from today toward the date when the organization wants to have reached the desired end state, events and developments will take place that are either disruptions or opportunities from the point of view of how the organization will be able to reach the defined desired end state. The black circles symbolize perceived opportunities that lie outside the acceptable relevant range for strategy implementation. They represent what may seem to be an opportunity, but do not contribute to reaching the desired end state. Such perceived opportunities are mere distractions, and as they are not related to reaching the desired end state, do not pose a direct threat for execution of the strategic plan either. An example for such a black circle could be an emerging business opportunity in an unrelated industry that is tempting because of its promise of large potential profits. This could, for example, be a company aspiring to be a leader in the real estate industry, which requires substantial funds to get there. If that company were all of a sudden to engage in electromobility solutions, in which it could eventually become successful and make money, the opportunity cost would be a lack of funds needed to reach the desired end state in real estate. We are not saying that such a scenario is impossible, but unless the opportunity is already an integral part of the desired end state, such opportunities should be consciously ignored. If not, then the organization should ask itself whether it still wants to be in and execute a real estate strategy or whether it wants to switch into the electromobility industry or a combination of both real estate and electromobility. In either case, this would require a change in the formulation of the desired end state and thus the strategy as a whole. The gray circles stand for opportunities or disruptions within the acceptable relevant range for strategy implementation. As opposed to the black circles, these should not be ignored. Gray opportunities or threats develop vectors that will be either positive or negative and thus distract from or contribute to the original plan on how to reach the desired end state. In order to capitalize on gray opportunities or fend of gray potential disruptions, the organization needs to recognize such events, analyze them holistically and draw the necessary consequences for its strategy execution. This is what we refer to as the window for strategic

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action. For example, an automotive manufacturer striving for leadership in the conventional drive train, large body, luxury segment (desired end state) is all of a sudden confronted with a major shift in consumer preferences toward smaller vehicles with electrical or more ecological drive trains. The company must recognize this shift in time, assess the implications quickly and draw the conclusions for what this means for their strategy. It would probably reach the conclusion that it has to do something in relation to future model development, market positioning and technology investments. Having said this, the company may still aim for market leadership in the broadest sense of the desired end state but has to pivot with respect on how to get there. Failure to recognize this development and act swiftly may eventually render the company obsolete. This will not happen from one day to the other but could happen within a few years. Prominent examples of such missed gray circles are companies like Polaroid or Kodak missing the implications of digital photography. They half-heartedly addressed the emerging technology, but in essence continued to conduct business as usual until their solution for instant photography and chemical development of pictures was no longer needed in the broad market. Successfully recognizing, analyzing and addressing relevant opportunities and threats require organizations to find a form of collaboration that transcends the boundaries of functions and hierarchies. One proven way to foster cross-hierarchical and crossfunctional collaboration is to adopt a so-called “joint approach”, which we will cover in the following chapters.

Note 1. Partly based on Schwarz, Ram and Rohrbeck (2018).

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3 THE ESSENCE OF A “JOINT APPROACH” LESSONS FROM MILITARY PLANNING

The military has been using what is referred to as a “joint approach” for many decades. Without such an approach, major coordinated operations, like D-Day or Desert Storm just to name a few, would not have been possible and the joint, coordinated power of air, sea and land assets would not have had the same effect. At the core of designing joint operations lies the very clear distinction into different levels of leadership in the armed forces and their respective roles. The three levels are the “strategic level”, the “operational level” and the “tactical level”. The latter can be further distinguished into the “higher tactical” and “lower tactical” levels. From the military perspective, the strategic level is typically executed at the political level and in free democracies involves the legislative body providing the guardrails in terms of budget, mission, manpower limits, etc., for the running and further developing of the armed forces. In times of crisis, the role of the strategic level is also to assess the situation of national interest from a wide range of not

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only military angles and define the desired end state, which must be achieved by intervening with various political instruments, including the military. Through the development of options, the military can contribute to achieving the envisioned desired end state by the political level. While the management of the armed forces in peacetime is typically run by an administration of military and civilian employees under the guidance of the executive branch and accountable to the legislative branch, this will change in a crisis, where a president or another designated individual takes full control of the role of commanderin-chief of the armed forces. In Switzerland, for example, during times of intense crisis, the leadership of the armed forces is transferred from the executive branch (the Bundesrat) to a commanderin-chief, an appointed general, who will have wide-ranging authority when it comes to deploying the armed forces. The last appointed commander-in-chief of the Swiss Armed Forces was General Henri Guisan during World War II. In a scenario where an opposing force occupies parts of another country for various reasons, including political ransom, and effectively denies the government of the occupied country the ability to execute its powers in parts or all of the country, the definition of a desired end state could look as follows: “The territorial integrity has been restored, opposing forces have either been destroyed or evicted for good and the daily functioning of the state and society at large has been retransferred into the hands of the respective local authorities”. The statement of the desired end state doesn’t say anything about what needs to be done in detail, nor how it will be done. The WHAT NEEDS TO BE DONE is the role of the operational level. The operational level plays a key role in understanding what the strategic level wants to achieve (desired end state), while also understanding what the tactical level could actually do (individual capabilities and missions) to reach that end. In its work, the operational level should follow four key principles. First, it should assure that the people planning an operation are also the people leading the operation at the operational level and that the same people also perform the after-action review. This way the knowledge is constantly maintained in the leadership team in charge

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and disruptions from changing leadership throughout the process are minimized. Second, it should utilize an integrated overview of the situation. This means that all information concerning activities and intentions by opponents, as well as one’s own assets, come together in one spot and are shared among all levels and partners involved. This assures a unity of understanding of the situation (common ground, common data) and from there derives what needs to be done next. Third, it should ensure a timely and ongoing vertical synchronization between the strategic, operational and tactical leadership levels. This way the operational level ensures that what is being done at the tactical level effectively contributes to the objectives of the strategic level and that the tactical level understands its role in the larger context. Fourth, it should pursue a “joint” approach, meaning the coordinated interplay between all subordinated commands to maximize the overall impact. This is, in essence, the ultimate form of silobridging, by taking tailored-to-the-mission elements out of the different silos (i.e. the air force, the ground forces, the special forces) of the organization. To better understand the notion of “joint”, look at it this way: The air elements are a team, the tank units are a team, the infantry is a team, the military police is a team and the special forces are a team. However, each of these teams on its own is only as good as it can be at the maximum performance within its particular specialization. However, if it is possible to link and coordinate the individual contributions of these teams in terms of information to be shared, amount of force applied and space and time in light of an operational objective, then the joint effect can far outweigh the sum of the individual efforts of all teams. To give an example: A special reconnaissance team of the special forces is an excellent means to identify key weapons and other installations of the enemy behind enemy lines. A fighter jet of the air force is an excellent choice when it comes to covering far distances fast and providing a platform for heavy ordonnance. However, the same fighter jet, due to its speed and distance to target, has great difficulty identifying protected and well-camouflaged enemy ground positions. If the operational command can manage to use the results

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from electronic reconnaissance efforts to infiltrate a special operations team in the right area, then the special operators will shortly after find the enemy’s key system (i.e. a well-hidden long-range rocket artillery system, which can attack targets at great distances), report its location and be on standby to designate the target with a laser beam. Once the special operations team is ready, operational command will dispatch a properly armed jet in order to destroy the precisely pinpointed target. The joint effect (the target is eliminated) is therefore much greater than if the special forces only report the position or if the fighter jet is in the area but unable to precisely hit what it cannot see. This should illustrate the role of the operational level to decide WHAT NEEDS TO BE DONE, when and by whom. In order to translate WHAT NEEDS TO BE DONE by the tactical level and in which sequence to reach the desired end state as defined by the strategic level, the operational level conducts a series of analysis and planning steps following an elaborate planning process to come up with an operational design. Figure 3.1 shows such a generic operational design. The operational design has on the far right the desired end state as formulated by the strategic level. The desired end state can be further broken down into strategic objectives. In the earlier example, those could be: 1. All enemies have either left the country, have been destroyed or have been detained

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Figure 3.1  Generic operational design.

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2. The transfer of authority back from the military to the civil authorities has been successfully concluded and state institutions are fully working again 3. The majority of the armed forces have been demobilized and the men and women under arms have returned to base or their civilian roles. Another important concept from the operational design is what is referred to as a center of gravity (CoG). There are at least two—the one on the far left is one’s own and the one on the right are the CoGs of one or more opponents/competitors. Figure 3.2 shows a generic approach on how to identify the CoG. This example stands for one’s own CoG. The approach is the same for the CoG of any one opponent, only that in order to do this, one would have to think from the perspective of the opponent/competitor and how he wants to beat you. Starting from the desired end state and strategic objectives, first the critical capabilities need to be identified. These allow us to reach the desired end state. In our example, this could be the capabilities to: 1. Reconnoiter where the enemy is at, what his capabilities and intentions are and infer his next move 2. Control the air space to reconnoiter and strike at enemy troops and systems, as well as to protect our own forces on the ground 3. Protect critical infrastructures to assure the functioning of society and mobilization of additional forces 4. Bring into action the right ground forces to deal the enemy a decisive blow and deter it from further action 5. Maintain information superiority to keep the trust of the population

Figure 3.2  Identifying the center of gravity.

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In Table 3.1 we have taken the critical capabilities and derived from them the generic critical requirements and then identified where the critical vulnerabilities (highlighted in bold type) lie. In a last step, looking at all of the earlier steps, the CoG for the armed forces in this operation could be defined as: The ability to maintain the trust and support of the population in order to man and mobilize the necessary forces to effectively oppose the aggressor. Table 3.1  Moving from critical capabilities via critical requirements to critical vulnerabilities (nonexhaustive selection) Critical Capability

Critical Requirements

1. Reconnoiter where the enemy is at, • Aerial Reconnaissance what his capabilities and inten• Ground Reconnaissance Teams tions are and infer his next move • Electronic Reconnaissance • . . . • Recognized Air Picture 2. Control the air space to reconnoiter and strike at enemy troops • Operational Fleet of Aircraft and systems as well as to protect • Operational Air Defense Systems our own forces on the ground • Communication Between Systems • Availability of Suitable Munitions, Fuel, Spare Parts, Pilots, etc. • . . . 3. Protect critical infrastructures to • Enough forces to safeguard critical assure the functioning of society military infrastructure and mobilizaand mobilization of additional tion sites forces • Close cooperation with civilian counterparts and private protection companies to prioritize where the armed forces are deployed to reinforce the protection of critical infrastructures important to the armed forces and society at large • . . . 4. Bring into action the right ground • Special Forces forces to deal the enemy a decisive • Armored Divisions blow and deter it from further • Availability of Suitable Munitions, action Fuel, Spare Parts, etc. • . . . 5. Maintain information superiority • Control over state media outlets to keep the trust of the population • Redundant broadcasting systems • Media monitoring inside and outside the country • . . .

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The operational objectives are to be understood as the impact (effects) to be achieved in order to reach the desired end state. They are important in order to define the lines of operation, which will eventually lead to reaching the operational objectives. The choice of the lines of operation has to contribute to the simplicity and unity of the operation. The decisive points are defined based on the consequences for one’s own troops and resources, as identified during various analytical steps prior to assembling the operational design. The consequences are the prerequisites that need to be met in order to hit or influence the opponent’s CoG. The decisive points are directly related to the operational objectives. Once defined, the decisive points are positioned from left to right along the phases and lines of operation, according to the order in which they must be achieved. This way the planning and execution of the action can be conducted in a coherent way. The decision points have to be identified at the same time as the decisive points and are positioned along the timeline. They can profoundly change the course of the action, i.e. via triggering contingency plans. In planning all major decisions these need to be anticipated and planned for as much as possible. Once the operational design is assembled, the decisive points must be substantiated with the following elements: 1. Impact/effects to be achieved in order to reach the respective decisive point 2. Measurement criteria, which allow one to evaluate the achievement of the desired impact/effects 3. Specific actions needed to achieve the needed impact The specific actions will then be attributed to one or more subordinated commands of the operational level and the decisive points numbered and individually substantiated, as illustrated in Table 3.2. Once the operational design has been laid out by the operational level, the tactical level needs to be involved in consolidating and validating the operational design. In order to do so, the tactical commands need to be physically present for the consolidation of the operational design. The list of envisioned actions by the subordinated

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Table 3.2  Illustrative substantiation of decisive point 1 Nr Decisive Point Desired Impact 1

Link up between military, civilian and partner intelligence sensors and agencies

• Information is shared effectively and timely among all actors • The opponent’s intent can be anticipated in a timely manner

Measurement

Actions

• Subordinated • Speed and Command 1: a) liaison flow of officers to. . ., interface information to system . . ., setting • Quality of up joint situation room actionable information • Subordinated Command 2: a) . . . shared • Subordinated • . . . Command n: a) . . . • . . .

commands and phases helps to visualize the beginning and the end of expected efforts provided by the respective tactical commands. This list is assembled and scrutinized in order to reach a first answer to the question if the envisioned actions are feasible (CAN IT BE DONE) at the tactical level. The list of envisioned actions furthermore allows for a preliminary evaluation of the needed amount of forces, which will trigger the time and amount of mobilization necessary. For each decision point, the forces necessary to achieve the desired impact need to be identified. This also includes the forces that will be bound based on the area to be covered and time factors (i.e. relief forces after a predetermined timeframe). Once the operational design has been consolidated and its feasibility has been established, the subordinated tactical commands go about detailing the tactical actions (HOW TO DO IT). Once this is done and after continuous coordination between the operational and tactical levels, as well as developing and assessing different variants on how to reach the operational objectives, the tactical commands and the operational level get together once more in order to wargame the entire operation, phase by phase. It is during this wargaming that the synchronization, interdependencies, critical command information and contingency plans are identified and the operational plan is subsequently finalized. From this point on, the plan is ready for execution, however, with built-in

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PHASES OF THE OPERATION Decisive Point

1. Deployment

2. Counter Concentration

3a. Defense

3b. Defense

4. Stabilization

…

Permanently ensures own CC capability in light of defensive actions.

…

Be ready to inform the population directly and in a timely manner about objectives of the operation when taking up defensive positions.

…

Ensures the technical performance of subordinated units starting in Phase 2 in the entire area of operation. Ensures the mission of troops in the area of operation despite attacks by irregular forces, indirect fire or chemical agents.

…

Be ready to participate and train with one brigade with friendly neighboring forces.

…

Contributes to deterrence by exercises in parts of the area of operation according to orders by the operational level.

Takes up all prepared positions and areas within the area of operation.

Be prepared to take over command of static infantry units in border areas.

…

Contribute to intelligence collection by monitoring border area permanently. Be prepared to hold area from border, close border, fight opponent forces in the area.

…

Be prepared for a counter-attack with a mechised reserve.

…

Be prepared to use 1 br to neutralize isolated opponent on national territory.

…

Be prepared to dismantle obstacles and redeploy own forces.

Figure 3.3 Illustrative list of envisioned actions based on a fictious example of territorial divisions and a mechanized reserve.

flexibility in the form of contingency plans and a general understanding of all parties involved, which allows one to react to and preempt the most likely actions by the opponent. The latest task at this point, a step called “force generation”, is performed, in which the units out of the basic hierarchical structure are transferred and reassembled under a task group or task force command for the purpose of the operation. Once the operation has been completed, the respective units will be retransferred into their basic hierarchical structure. One very important aspect in order to be able to mix and deploy forces effectively is a high degree of interoperability, first and foremost, in the way command structures cooperate and have a common understanding but also on the ground, where details like system compatibility link-up procedures, etc., are essential for effective “joint” cooperation.

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4 THE “JOINT APPROACH” IN A CIVILIAN CONTEXT

So, what does this all mean, and how can the business world benefit from what the military is doing? Isn’t this too specific and too far removed from the realities of the business world to be of any value? The content, the environmental factors and the types of mission and engagement with an opponent, although this could be debated with respect to attack and defense, may be different, but the essence and the methodology work in a business setting as well. Unfortunately, in business today, we often see that everything is labeled “strategy” or “strategic” without a proper definition what really constitutes strategic vs. operational vs. tactical levels of leadership. Here, we see a first major opportunity to benefit from the clarity of military thinking. If we break down the levels of hierarchy and leadership in a typical corporation, then the board of directors, as elected representatives of the shareholders, represents the “strategic level” and thus should determine where the corporation should go in the long run (desired

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end state). Therefore, the board of directors should comprise senior members with a broad range of experience in the primary or related industries of the corporation, but as well some additional expertise, which could be functional (finance, HR, IT, etc.) or more general (methodologies, market psychology, digitalization, AI, etc.). Here we currently experience a major shift in that, at least in relation to the specific expertise pertaining to the possibilities of digitalization and changing generations of customers, simply electing experienced former managers will no longer work. Here boards need new young blood that truly understands the possibilities of the new technologies and how to address the new generations of customers, which could involve major shifts in business models or how the company defines itself. Failure to do so can lead to doing “more of the same that has always worked”, which worked in the past, but which is, in light of the radical disruptions, no longer good enough. Of course, boards can commission smart consultants to help them with identifying, quantifying and formulating desired end states, but this task can never be delegated, and to that end the board still needs the expertise to scrutinize and adjust such “consulting products” to make them work within their specific organizational context. The CEO and his executive board represent the “operational level”, which determines with which combination of effects/achievements (i.e. an operational design), using which intermediate steps (i.e. decisive points and decision points) the corporation is going about reaching the operational objectives and ultimately the desired end state. Putting the operational design together will, of course, involve in-depth analysis (i.e. industry analysis, market analysis, competitor analysis, trend analysis, etc.), which can either be done in-house or with support from outside consultants. But again, it is the executive board, not an outside party that needs to scrutinize and validate the conclusions drawn and determine which operational objectives and lines of operation are to be used. This because it is the executive board and not the consultants that will be leading the implementation, and therefore the executive board must fully understand and support the plan. But putting together an operational design and plan for execution by the executive board does not suffice, unless the third principle of vertical synchronization is applied as well. What this means

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is that the business units and individual teams within them, representing the “higher tactical level” and the “lower tactical levels”, respectively, need to be involved early on as well. They are concerned with the question of how to achieve the effects/achievements defined by the executive board. A “team of teams” (McChrystal et al. 2015) approach is needed for the evaluation of the feasibility by the lower hierarchical levels because if the tactical levels are simply led, i.e. with financial targets, each of them will try to achieve the targets and strive to get as many of the resources available to the corporation as possible. This can lead to a situation where the one yelling the loudest ends up getting the most resources regardless of the greater context. In the worst case, this can lead to overinvesting in short-term, highrisk areas while neglecting or significantly underfunding other areas that are essential for the long-term well-being of the company. A case in point here are banks, which prior to the financial crisis in 2008, all began investing in mortgage-backed securities of questionable quality for the expected profits without questioning, let alone accounting for, the associated risks. Some institutions went belly up, while others had to be saved with public funds. With this case in mind, it should become clear why the dispatching and prioritization of resources must happen at the operational level and under consideration of all consequences for the organization and its ability to reach the desired end state. If the board of directors, after defining the end state (and it should be more than just “let’s make a lot of money”), should feel an urge to override the executive board’s operational plan, then either the end state was ill-defined or the executive board was not or was inadequately involved in the process of defining the end state. The same holds true for the tactical level, which after providing its input related to the feasibility as part of the operational plan, should not come around later and claim that the plan is not achievable. In any case, evaluating potential opportunities and threats holistically across all three levels of the organization should also help boards of directors and CEOs justify why they are taking certain decisions and help counter oversimplified and often over-powerful short-term profit thinking, which is driven by overrepresented and powerful short-term investors.

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Because of the necessity to synchronize the three levels and scrutinize the plan with respect to the consequences it may have in other areas of the organization, there is clear need to design formats in which these joint discussions can take place. In this respect we see a clear benefit to using business wargaming on a regular basis in order for the participants not only to better understand one’s own role at the respective level but also to improve the interplay between all levels of leadership. The most prominent application of business wargaming to date, clearly rooted in its primary military application, has been in the field of strategy testing. The idea is to take an existing strategic plan and test it in a competitive environment in order to discover weaknesses, explore assumptions or simply find out whether it works or not (Schwarz 2011). This may be projected into the future by simulating two to three strategic moves. Depending on the industry, this may represent only a few months (technology-driven companies) or up to several years (more traditional process industries). To ensure that a strategy is indeed robust, it should best be tested against a number of possible futures and include a number of options, which should mirror the context in which the organization is currently and will likely be operating going forward. Depending on the investment at stake (i.e. major technology investment, new production sites, distribution channels, markets, etc.) it is worthwhile testing the strategy and underlying assumptions before spending large sums of money. While Gilad (2004) states that business wargaming is the most effective managerial tool for assessing competitors’ response to a changing industry, we see one additional and most-beneficial value added, namely the education of and the initiation to implementing an actual joint approach. Further, wargames can help managers anticipate their competitors’ most likely moves. In this sense business wargames allow for experimentation and learning with different strategies, without the risks of the significant cost of failure in the real world. By framing the scope and focus of the wargame early in the design phase, more or less emphasis can be placed on specific competitors, customers or other stakeholders. The trick is to narrow the focus down to a manageable set of constituents, which are then examined in detail rather than trying to simulate everything.

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Done well, a wargame can offer invaluable insights into customer and competitor behaviors and other relevant developments, which would otherwise go unnoticed. The inclusive experience, which offers a CEO or a company the opportunity for many top managers to learn the lessons for themselves, is of significant benefit. After all, insight gained via personal experience far outweighs prepackaged conventional wisdom, whether presented in a business book, an educational course format or through persuasion by a consultant. The most obvious benefits of testing a strategy in a dynamic team approach, including experts and decision makers and challenging original assumptions can be summarized as follows: • • • • • •

Uncovers weaknesses in the original strategic plan Better understanding of competitors and their possible actions Participants think creatively about the future and thus may overcome organizational blindness and revitalize the thinking about their own business Clear understanding of the roles of the strategic, operational and tactical levels and thus where participants themselves contribute Participants learn to trust their own strategy, because they have seen what works and what doesn’t Sharper awareness among participants of the wider environment, team dynamics and the issues critical to the success of their own business

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Part Two BACKGROUND TO WARGAMING

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5 THE HISTORY OF WARGAMING

It has been argued that the cultural history of the game tends to generally exclude two spheres: the battlefield and mathematics (von Hilgers 2012). In particular referring to the relevance of wargaming in the military is for us, however, of relevance, as it not only describes the routes of business wargaming but also underlying principles and the raison d’étre for applying this type of simulation. The development and employment of wargaming reach far back in time and are probably as old as war itself (Perla 1990). Wargaming most likely grew out of a military necessity, namely to better prepare military leaders and their officers for unforeseen developments on the battlefield. The ability to better understand what hostile reactions to one’s own planned course of action would likely evoke and how to best counter these reactions constitutes a source of competitive advantage, because such knowledge helps the commander avoid fatal decisions that would result in unnecessary losses of soldiers, equipment and territory. This in turn allows for a more “economic”

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way of warfare, which would significantly raise the sustainability of any military campaign, in essence ensuring that an army does not only “win the battle” but ultimately “wins the war”. Another likely driver for the proliferation of wargaming was the opportunity to test new doctrines and tactics without actually engaging in combat. This proved especially valuable in refining the art of warfare during peacetime and training thousands of new officers in a uniform way of thinking. Of course, there are more advantages to wargaming, but these are the most significant ones to date. The existing literature on wargaming (Brewer and Shubik 1979; Perla 1990; Hofmann 2015; Treat, Thibault, and Asin 1996; Dunnigan 2000; Rowe 1991; Caffrey M. 2000; Oriesek and Friedrich 2003) focuses on three fields: first, the application of wargaming in the US military, in particular at the Naval War College; second the development of wargaming in Prussian Germany; and third, the use of wargaming by civilians as a hobby. The application of wargaming in a business context, also called business wargaming is, in comparison to the overall evolution of the methodology, a recent development, which is also reflected in the fact that currently only little literature is available on the subject. This assessment holds true also with respect to more recent publications on wargaming (von Hilgers 2012; O’Gorman 2017; Harrigan and Kirschenbaum 2016). We will start with the earliest accounts of wargaming and highlight its development over time up to the current day.

Wei-Hai and Go in ancient China Perla (1990) credits the Chinese general and military philosopher Sun Tzu for developing the first wargame about 5,000 years ago, called “Wei-Hai”, meaning encirclement. “Wei-Hai” used an abstract playing surface on which each of the contestants maneuvered their armies of colored stones. Reflecting on Sun Tzu’s philosophy of resorting to the chances of battle only as a last resort, victory went not to the player who could bludgeon his opponent head-on, but to the first player who could outflank his enemy (Perla 1990). While no pictures or artifacts are available of this particular game, it appears that this game is quite similar to the game of “Go” which we still know

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today and which was developed around 2200 BC. Go is an abstract strategy game which is played on a wooden board consisting of a 19 × 19 matrix using black and white stones. It spread throughout the Orient and underwent further extensive developments in both Japan, where it is known as I-Go or simply Go (the name is now universally applied), and Korea where it is known as Baduk. The objective of Go is to obtain as much territory as possible on the game board.

From Chaturanga in India to chess Around 500 BC a game by the name of “Chaturanga” appeared in India. Like “Go”, the game consisted of a board on which colored stones had to be moved around according to specific rules, but unlike “Go” the stones were more differentiated, representing different foot soldiers, chariots, elephants and cavalry. Between two and four players moved four peasants, one king, one elephant, a horse and a chariot over the game board with the objective being to capture the hostile figures, not to gain as much space on the board as possible. With the help of a dice-like device, the outcome of the moves and encounters of different figures (e.g. chariot beats foot soldier or vice-versa) were determined. The interesting aspect of Chaturanga is that now not only stones or figures with different value were introduced but that with the use of a dice, an element of randomness or uncertainty was introduced as well. This game made its way to Persia, and most writers agree that Chaturanga is the forerunner of what we today know as “chess”.

Chess and further developments The modern game of chess was mentioned for the first time in the 13th century in Southern Europe. It is believed that Arabs, known as Moors, learned chess from the Persians when they invaded Persia in the 8th century and later brought the game to Europe when they invaded Spain. From Spain chess quickly spread across Europe. The Europeans gave chess pieces the names we know today, in part because they had a hard time pronouncing and spelling the Persian names, but also to reflect the world and the hierarchy in which they lived. The pawns on the chessboard represent serfs, or laborers. There are more of them than any other piece on the board, and often they

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are sacrificed to save the more valuable pieces. In medieval times, serfs were considered no more than the property of landowners, or chattel. Life was brutally hard for serfs during this era of history. They worked hard and died young. They were often left unprotected while wars raged around them. They could be traded, used as a diversion or even sacrificed to allow the landowners to escape harm. The castle signifies the home, or the refuge, just as it was a home in medieval times. The knight represents the professional soldier of medieval times whose job it was to protect persons of rank—they are more important than pawns, but less important than bishops, kings or queens. Their purpose in the game is to protect the more important pieces, and they can be sacrificed to save those pieces. There are two bishops in the game, who represent the church. The church was a rich and powerful force in medieval times, and religion played a large part in every person’s life. The queen is the only piece on the board that represents a woman, and she is the most powerful piece of the game. There is only one queen for each side. The king is the most important, but not the most powerful, piece in chess. He is as well defended on the chessboard as in medieval life. In medieval times, the surrender of the king would mean the loss of the kingdom to invading armies and that could mean change for the worse. It was to everyone’s advantage, from the lowest serf to the highest-ranking official, to keep the king safe from harm. Although chess is characterized by a high degree of abstraction, it contains the typical elements of contemporary warfare. However, with the introduction of firearms in the 17th century, chess lost its value for military simulations, as was quickly recognized by the leading military strategists, and so new forms of wargaming had to be developed. In 1664 Christopher Weikhmann developed an advanced chess game that reflected more military details in Ulm, Germany. His game was called “Königsspiel”, or “King’s Game”, and compared with ordinary chess, this game was played on a larger board and comprised more figures. The King’s Game, as well as other more militaryoriented versions of chess, also known as “Military Chess” or “War Chess”, represented more complex versions of the traditional chess game. Weikhmann intended his game not only for entertainment purposes but foremost as a tool for those who were interested and wanted to study military as well as political structures and workings.

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However, it remains doubtful that the complex and abstract King’s Game was ever employed by the military for training purposes. Although the King’s Game and other games belonging to the group of war chess were of little practical use to the military and constituted rudimentary simulations at best, the elements used to play them led to the introduction of three principles, which up to this day are considered of vital importance to any wargaming simulation. Although it is not possible to trace back when the different elements were exactly introduced for the first time, all three of them could be found in a new game, developed by the German Dr. C. L. Helwig, intended to introduce more realism into the game. These three principles were first, the change that now a game figure represented a larger contingent of soldiers and no longer individuals; second, replacing the two-colored game board with a multicolored game board, representing different terrains; and third, a referee was installed to run the game and watch over its proper execution. As a teacher and educator at the court of the Count of Braunschweig, Helwig used his game to educate his entrusted students in military thinking and decision-making. Although his game represented a major innovation, it was still strongly influenced by chess, but was successful in as far as it was copied beyond the borders of Germany and played by noblemen in France, Italy and Austria alike.

Games for military use Around approximately the same time as Dr. C. L. Helwig developed his game, the Scotsman John Clerk invented a method to simulate ship battles, which was effectively the first naval wargame. Clerk’s aim was to analyze the moves and tactics of battle ships in more detail, and thus he not only studied their tactics but also performed mathematical calculations in order to determine the firepower of the ship-guns and the possible damage they could cause. John Clerk’s conclusions were published in 1790, under the title: “An Essay on Naval Tactics, Systematic and Historic”. One simple advantage of his game setup was that no model of the terrain was needed. In fact, a simple table would suffice to simulate the surface of the ocean. Copies of Clerk’s work were distributed to influential naval decision

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makers, including Admiral Sir George Rodney. Later Rodney credited Clerk’s tactics as one of the causes for British success against the French fleet in the West Indies. It is reported that Lord Nelson employed variations of Clerk’s tactics in 1797 off Cape St. Vincent and also in his victory at Trafalgar in 1805. At the end of the 18th century, the Schleswig-born scholar and military author Georg Venturini set out to develop a new wargame. In 1796 he published the book “Regeln für ein Neues Kriegsspiel für den Gebrauch an Militärlehranstalten” or “Rules for a New Wargame for Use at Military Educational Institutions”. Venturini, like Helwig, also used a game board consisting of quadrants, but in comparison to Helwig and others, his game board was significantly larger, consisting of 3,600 fields, each representing one square mile and in total representing a chosen terrain, namely the border between Belgium and France. In his game, the players could not only simulate various troops but also the use of equipment, strongholds, bridges and depots. Unlike in a chess game, where figures could easily move from one field to another, Venturini applied a high degree of realism with respect to how fast and easily elements could be moved from one field to another, contingent on the underlying territory. Venturini’s game was used in particular for military education at various military academies. Due to its size and complexity, it could not be played outside of military settings. The 19th century was characterized by a growth in troop sizes, which made real-life exercises and relocations more difficult, as well as by a number of industrial developments, which made fighting more complex. On one hand, the weapons of the infantry and the guns of the artillery had ever longer firing ranges, precision and firing cadences, and on the other hand, the introduction of the machine gun in the late 19th century offered a totally new form of fire power, which significantly changed the game for attackers and defenders alike. Furthermore, the construction of a dense railway infrastructure now offered ways to more quickly move and concentrate entire armies. At the same time contemporary societies, first and foremost in Prussian Germany, became increasingly “militarized”, and the study of military affairs was perceived to be “chic”, especially among the commoners of the time. The rise in popularity of wargaming in the 19th century can be credited especially to the Baron von Reisswitz,

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not a soldier but a civilian war counselor. He replaced the centerpiece of many games thus far, the two-dimensional game board, with a sandbox, in which three-dimensional models of the terrain could be replicated. Von Reisswitz further introduced wooden game pieces, which represented the actual size of military formations to scale. In doing so, the simulations gained additional realism. Furthermore, von Reisswitz introduced the use of scenarios, situating the players in a particular situation at the outset of the game. Through a lucky coincidence, von Reisswitz introduced the two sons of the Prussian King Friedrich Wilhelm II, Friedrich and Wilhelm, who later became Kaiser Wilhelm I, to his wargame and in 1811 and 1812 von Reisswitz even had the opportunity to demonstrate his wargame to King Friedrich Wilhelm II personally, who was impressed. However, von Reisswitz’s game never became widely popular because it was simply too bulky and difficult to move to different locations. The original “von Reisswitz” wargame was significantly enhanced when his son, Georg Heinrich Rudolf Johann von Reisswitz, replaced the bulky sandbox with a topographical map modeled to a 1:1800 scale. Georg, who had served as a first lieutenant in the Prussian artillery, attempted to codify actual military experience and introduced the details of real-life military operations into the game, a factor missing in his father’s version. The rulebook for the game now included all imaginable military operations, starting at the company level all the way up to the division and corps level. This rulebook was published in 1824 under the title “Anleitung zur Darstellung militärischer Manöver mit dem Apparat des Kriegsspiels”, or “Instructions for the Representation of Military Maneuvers by Use of Wargaming”. It is at this point that the term wargaming came into existence, and there was a decisive breakthrough in its application when von Reisswitz was given the opportunity to present his game to the chief of the general staff of the Prussian Army, von Müffling. Historians record that on observing the demonstration von Müffling shouted: “This is not a game! This is a preparation for war! I need to recommend this to be rolled out to the whole army” (Perla 1990: 26). He then published a very favorable article in the Berlin Military Week, a highly regarded publication. The “Kriegsspiel”, or wargame, was played on a topographical map with little metal figures that could be moved, representing

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military formations. The rules of the game included details on exactly how these figures could be moved, details on how battles would be carried out and in addition a referee was appointed to watch over these rules and resolve any issues. Over the course of the following years the “Kriegsspiel” gained popularity, yet it was criticized for allowing junior officers a simulated taste of commanding forces well beyond their rank, which, in turn would cause them to lose a sense of reality and be less ambitious in performing their assigned tasks. Over time, with the introduction of new and more complex weapon systems, the rules for the game grew so complex that it could only be executed with the help of wargaming experts. Although on one hand, great progress was made in trying to simulate ever more details of the actual realities of war, on the other hand, the system of increasing detail and pseudo-exactitude detracted from the very realism that the game had hoped to improve (Perla 1990). Nevertheless, wargaming became popular beyond Prussia in countries such as the United States, Great Britain, Italy, France, Russia and Japan. This popularity was to a large extent driven by the fact that the chief of the Prussian general staff under the high command of General Gebhard Blücher, Gerhard von Scharnhorst, made extensive use of wargaming to simulate the moves of his own troops and the likely reactions of Napoleon as a way of preparing his very modest resources for battle. Ironically, von Scharnhorst died before Napoleon and his troops were finally defeated, but the success of the Prussians is in no small part attributed to his preparations using wargaming. However, the complexity in the Prussian “Kriegsspiel” led in 1876 to Prussian Colonel Jules von Verdy du Vernois to point out that the reason for the lack of popularity of wargaming was due to the numerous difficulties that beginners encountered when handling tables, calculating losses and so forth. In contrast to von Reisswitz’s “Kriegsspiel”, he proposed the “Free Kriegsspiel”, characterized by replacing many of the rigid rules by a regulator who would explain his actions and assessments after the game. Although enthusiastically accepted and applied by those who found the rigid games too complex and boring, “Free Kriegsspiel” had its own problems. The connection between the proponents of rigid and free “Kriegsspiel” brought into sharper focus the tension between realism and playability. More important, it revealed

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the fact that the lack of realism could result in a lack of playability, just as lack of playability could lead to a shortage of realism. The late 19th and early 20th centuries thus began to see increased efforts to achieve some sort of balance between the false realism of “Rigid Kriegsspiel” and the false playability of “Free Kriegsspiel” (Perla 1990). Up to this point in history, the wargaming used in the military was primarily focused on training and educating its participants, be it in specific military tactics, educating them about a doctrine for using new weapon systems or simply fostering an understanding for military matters. With the ongoing “industrialization” of warfare came the recognition in the late 19th and early 20th century that successful warfare no longer was a simple matter of superior tactics, but increasingly of superior logistics. What really mattered now was who could mobilize and deploy his troops faster than the enemy and thus have them on time, in the right location and with the right equipment. The emphasis on wargaming to test mobilization scenarios increased, for one because it was indeed a key success factor to successful engagement of the enemy, but also because the size of armies was ever growing, and thus full-scale mobilization exercises just weren’t a viable way to practice. Mobilization wargaming could be considered the first shift away from pure training and education games toward games with the purpose of analyzing and studying specific problems of military operations (Perla 1990). This development was mainly driven by the German army, which recognized early on that wargaming was in fact far more broadly applicable than just for educating and training tactics. This recognition also led the Germans to elevate the simulation approach to the operative, even strategic, level by pioneering a new form of gaming, known as political-military wargames. In those games political factors were built into the game, which could very well influence the outcome of a campaign. In 1879 when Germany was at the height of its application of wargaming, W. R. Livermore introduced a German style of wargaming to the United States with his publication “The American Kriegsspiel”. Livermore’s system was a derivative of the “Rigid Kriegsspiel” and was clearly indebted to the German school. In the opinion of some American soldiers it was not appropriate to the unique conditions of the United States. One of the most outspoken critics was Lieutenant

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Charles A. L. Totten, who in 1880 published his own book on wargaming techniques, “Strategos: A Series of American Games of War Based upon Military Principles”. There is little evidence that wargaming was used in the United States at the time apart from for training and education purposes. Perla (1990) concludes that neither the British nor the Americans ever quite accepted the full range of wargaming potential value prior to the end of World War II. The only notable exception in the United States is the Naval War College in Rhode Island. The Naval War College was established in 1884 with the aim of transforming the navy into a true profession and turning the navy’s officers into well-educated, well-rounded masters of the tools and techniques of the unique naval art. Because of a lack of funds, the Naval War College encountered difficulties executing training maneuvers and therefore had to resort to wargaming in order to train its naval officers. In 1887 McCarthy Little, who had been influenced by Livermore’s “The American Kriegsspiel”, expanded his single lecturers of the previous year into a series of six presentations and conducted the first actual wargame at the Naval War College. Wargaming became part of the regular curriculum at the college and experienced a rise in popularity and prominence due to wide media coverage. Following World War I, the wargaming activities at the Naval War College were faced with the challenge of the increasing complexity of naval warfare due to the rising prominence of submarines and aircraft in battles at sea. Up to this point in time, naval wargames assumed that all ships had similar characteristics for the purpose of damage assessment in the game. This assumption had to be modified to reflect the recent developments in naval warfare, and the repertoire of resources had to be enriched by adding submarines and aircraft. Yet the main purpose of the wargames which followed these modifications at the college was still education, providing the players with decision-making experiences. After World War II, the number of wargames conducted at the Naval War College was reduced, but wargaming remained an important element of the curriculum. Over the years, the strict rules of the initial wargames were relaxed or replaced by less rigid ones. Increasingly the games became tailored to the objectives, the level

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and the scope of each separate scenario. Emerging computer technology in the 1950s revolutionized wargaming at the college. In 1958 the Navy Electronic Warfare Simulator was introduced, becoming the post–World War II successor to the game board and chart maneuvers introduced by McCarty Little in the 1880s. The system was built around a large-screen display that dominated the bottom floor of the facility and served as the principal tool by which the control team kept track of the action. The second floor contained shops and air-conditioned equipment, but also had a balcony overlooking the “game floor” and a small conference room. The third floor was the player area, composed of the various command centers. In the following years interest in the wargaming of the Naval War College grew consistently, particularly with the introduction of the Navy Electronic Warfare Simulator, which was further improved by advances in computer technology. In addition to purely educational purposes, wargaming was now increasingly used for other reasons too. Wargames were used to familiarize participating staff members with an operation prior to an at-sea exercise or deployment on a mission. It was also found most useful as a means by which to experiment with new tactics, combat formations, testing command-and-control structures and exploring possible effects of enemy counteractions to planned courses of action. Alongside the broadening applications, wargaming was increasingly integrated with other forms of research at the Naval War College. Driven by new technological developments such as increased processor speed, parallel processing, visual interfaces, and networking capabilities, the wargames have become ever more refined up to the present day.

Nonmilitary wargaming Although most of the history of wargaming is centered on military applications, it is worthwhile spending a few lines on the history of wargaming outside the military context. Even in Prussian times, wargames caught the attention of nonmilitary personnel, and elsewhere in Europe interest groups emerged, such as the first wargaming club in England, founded by Spenser Wilkinson at the end of the 19th century. It is further reported that a member of Parliament stated “wargaming”

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as one of his hobbies in 1900 (Caffrey 2000). However, hobby wargaming did not take off until H. G. Wells published “Floor Games” in 1912 and soon after “Little Wars” in 1913. The latter described a system using toy soldiers made of lead and a spring-loaded cannon that fired a wooden projectile capable of knocking the men over. The battlefield consisted of a model house, miniature trees and various other elements. Due to the popularity of his amateur games, Wells is widely perceived as the father of modern miniature wargaming. With the exception of the Naval War College, armed forces around the world seemed to lose interest in wargaming. In the post–World War II era military research was dominated by civilians focusing on operations research and system analysis, and so with a few exceptions the traditional discipline of wargaming lost more and more ground and supporters. Wargaming in the military context experienced yet another decline in interest during the Vietnam War, largely due to wargames, which were notoriously flawed and misleading, further shaking the trust in the usefulness of the methodology (Perla 1990). While military application of wargaming was on the decline, academic strategists and political scientists started to apply wargaming to what was more obviously a less-than-quantifiable subject—political issues and behaviour (Perla 1990), leading to the political-military games in the United States, which Germany and Japan had already pioneered during the 1930s. In parallel to an increasing shift away from pure military wargaming toward political-military games, several hobby wargames began to appear in the United States, most prominent of which was “Tactics” developed in 1953 by Charles S. Roberts from Baltimore. “Tactics” uses a map on which two hypothetical states are battling for supremacy. The troops are represented by printed card pallets, and each troop has a value assigned to it, representing fighting power and action radius. The results of the individual battles, i.e. when troops of one state collided with the troops of another state, could be calculated by using the Combat Result Table and by tossing dice for random events. Triggered by the success of “Tactics”, Roberts founded The Avalon Hill Company and produced a total of 18 games up until 1963. Six years later, in 1969, another dominant company in the gaming space was founded in New York, Simulations

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Publications, Inc. The company produced a wide array of games and published as many as 30 new games per year. A major contribution by Simulations Publications, Inc., to hobby games was to add more “realism” to the games by considering factors such as the firepower of weapons, morale and military training levels. The recreational market for simulations grew to over 2.2 million games sold in 1980. After its peak in 1980 the number of manual wargames sold consistently declined. Dunnigan (2000) states that with the proliferation of manual games in the 1980s, computer wargames began to take over, selling five to ten times as many copies. Overall, it has become increasingly difficult to differentiate between simulations, models and games (Bracken and Shubik 2001), making it increasingly difficult to assess the number of wargames sold. The success of these hobby wargames did not go unnoticed by the US military, which in 1976 contracted Simulations Publication, Inc., to produce a game for the US Army Infantry School in Fort Benning by the name of “Firefight”. This was later also released to the public. Over the course of the 1990s, hobby wargaming struggled with the declining demand for printed wargames, recovering by switching to software-based versions, adding high levels of realism and experience to various forms of simulations from theater-level campaigns to straightforward infantry tactics simulators. While recreational wargaming was experiencing a boom, military wargaming advanced far more slowly in the 1970s. Perla (1990) states that ever since the introduction in the late 19th century the United States had become the leading nation in deploying defense analysis and wargaming. Nevertheless, several other nations have and still are using wargaming, especially Japan, the former Soviet Union and Germany. In particular, the wargaming tradition of the former Soviet Union has influenced wargames conducted by the communist North Vietnamese regime during the Vietnam War and by the Iraqis during the Iraq-Iran War. Following the example and contributions of the Naval War College, other military branches in the United States began to use wargaming. The US Air Force and the Army started applying wargaming techniques after World War II, and the Marine Corps established a series of wargames dealing with landing a force ashore in 1958. Wargaming

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after World War II in the military has been largely influenced by operations research and systems analysis, neglecting the study of history, which had formed the basis of earlier wargames. Dunnigan (2000) points out that the military is now playing wargames that cater to their specific requirements. During the 1980s the Army and the Air Force established training centers for conducting wargames. Since the 1960s, the US military has made an increased effort to bring together the various branches of the armed forces in joint wargames. In 1961 a formal wargaming operation was established at the Joint Chiefs of Staff level. Following the fiasco at the Bay of Pigs, President John F. Kennedy complained that his military advisors did not understand the political implications of their recommendations. This encouraged the use of political-military wargames at the Pentagon and at professional military education schools (Caffrey 2000). Currently the US military still uses wargaming as a means of validating its military strategies and force structure in an often-uncertain future (Haffa and Patton 1999). For example, the National Strategic Gaming Centre, located within the Institute for National Strategic Studies at the National Defense University in Washington, DC, designs and conducts wargames for diverse audiences (McCown 2005). While the military continues to use wargaming (e.g. Selva 2015; Jensen 2019; Lacey 2019) and it has been argued that it is actually increasingly being used (Barzashka 2019), we also find evidence of very recent topics being explored in wargames, such as cybersecurity. The Center for Long-Term Cybersecurity at UC Berkeley, for instance, published a report on assessing how diverse actors (e.g. including nation-states, nonstate organizations like ISIS and cyberactivist groups such as Wikileaks) could use cyber-operations in the context of an escalating conflict (Jensen and Banks 2018).

The evolution of business wargaming Following the evolution of wargaming in the military and political context, it seems obvious that after a certain period, the business world would discover this tool, particularly as many of the elements of classical military wargames seem transferable. Instead of enemy armies, a company faces competitors; instead of territory, companies

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battle over market share and profits; instead of artillery and other weapon systems, companies use people, finance, facilities, raw materials, know-how, marketing tools, production processes and innovation, just to name a few of the resources; and in the place of a referee judging individual military actions, a market component will be the ultimate judge of the success or failure of the individual offerings. One of the first mentions of the application of wargaming methodology in a business context appeared 1958 in an article in the Harvard Business Review (Andlinger 1958). The terms used at the time were business gaming and management simulation, and these tools were primarily used for training and education purposes, building on the experiences gained from the military in wargaming. Andlinger (1958) broadly classifies wargames in two categories: “general” and “functional” games. General games aim to look at the company as a whole and focus on top management decisions determining the course of the enterprise (strategic and operational levels), while functional games, as their name suggests, focus on particular functional areas of a company. Driven by specific questions from an operations research perspective, functional business wargames explore topics such as optimizing production, finance or marketing efforts and thus are mostly tactical in nature. A year prior to the Harvard Business Review article, in 1957, the American Management Association (AMA) was credited with the development of the first widely known business game, called “The AMA Top Management Decision Simulation” (Kalman and Rhenman 1975). The AMA game involved teams of players, representing the officers of different firms, making business decisions for their respective firm. Typically five teams, composed of three to five players each, had to decide on the production of a single product, which had to be sold in a competitive environment against the offerings of the other four teams. The simulation covered a time span of five to ten years of actual company operation, and in order to make the computational burden for the participants bearable, the AMA game allowed each company team only a limited number of decision alternatives. A mathematical model, supported by limited computing power, was used to evaluate and calculate how the teams performed in relation to one another and what the likely outcome in

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the marketplace would be. Based on the success of the AMA game, a number of corporations and educational institutions in the United States used the game, and several new games were developed. The main focus of these early business games was on providing a learning experience, better preparing existing and potential managers for running a company. During the next 20 or so years this focus did not really change until in the mid-1980s when wargaming was adapted toward business requirements in a more strategic context (Ginter and Rucks 1984; Treat, Thibault, and Asin 1996). Initially used for education and training, business wargaming now focused on providing competitive intelligence, an activity primarily concerned with analyzing the competitors of a company, by better understanding the competition and their likely response to certain actions or inactions of a company in the market. More recently, the application of business wargaming has been expanded and now covers such areas as strategy formulation or validation of existing strategies (Kurtz 2003). The consulting firm Booz Allen Hamilton was the first to establish a full-scale wargaming team, consisting of several ex-military experts, who systematically developed the scope of possible business applications. The firm has conducted numerous simulations both in the United States and around the globe not only for businesses but also for numerous governmental and nonprofit organizations. The scope of their applications ranges from strategy formulation and validation, crisis response and enterprise resilience, visioning, change management and the traditional education, training and even recruiting at top-tier universities and business schools. Since then other consulting firms have offered variants of business wargaming, although none of them are at the same scale or breadth and typically are without a fully dedicated team. In the following chapter, we will take a closer look at the anatomy of a typical business wargame and highlight some of the key success factors for the successful setup of games, as well as the extraction of the critical lessons learned to help significantly improve the way companies think about their markets, their competitors, their current and future success factors and ultimately themselves.

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6 BUSINESS WARGAMING METHODOLOGY

It is very important to be very clear and focused about what a wargame is set up for in the first place. The amount of preparatory work going into the development of a wargame depends on the type of simulation and the complexity of the questions to be answered. Among other factors, the amount of research, gamebook preparation, model development, duration of the simulation and need for professional coaching and moderation ultimately drive the overall cost of developing and running a wargame. In the following chapter, we will look at the mechanics of a typical wargame for strategy validation purposes. We are referring here to a business wargaming design that appears to be most commonly applied (Treat, Thibault, and Asin 1996; Kurtz and West 2002; Kurtz 2003).

What is business wargaming? Before getting into the inner workings of a business wargame, we should spend some time discussing what business wargaming is and what it is not. Many types of “games” exist, and consequently there are a number of misconceptions about the process.

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Let us start with what a business wargame is not. Business wargames are not your typical business school games—the kind of exercise in which you are asked to optimize the resources of a company by deciding how much you want to invest in advertising vs. production capacity or whether you should produce widgets type A instead of type B and at which price you will sell them. Such business school games, while admittedly useful in educational settings, are usually based on computer simulations with a set number of parameters, interlinked with preset sensitivities. Everyone who has ever participated in such a game will probably admit that after playing two to three iterations, they gathered a good sense of the sensitivities and an understanding on which parameters to focus on in order to maximize the results. The bottom line is that such games only have a finite number of lessons, and in the case of computer-based simulations, the answers are often built into the system. Their value for a top management team facing a difficult or disruptive situation or wanting to gain new insights into their business is virtually nonexistent. Rubel (2006) points out that computer simulations per se are not wargames; wargames require human players, maybe assisted by a computer, and it can be argued that the kind of knowledge produced in a computer simulation and a business wargame are different in nature. While a computer simulation appears not to produce new knowledge or insight, maybe the designing phase does. A role­ playing simulation, like a business wargame, generates new knowledge through the social interaction of its participants (Fuller and Loogma 2009). However, with the further advancement of artificial intelligence (AI), computer simulations may take on a more dynamic and human-like nature going forward. When we talk about business wargaming, we refer to a tailormade simulation, which always starts with a blank sheet of paper—­ something that is entirely specific to a single organization that cannot be taken from firm to firm or sold over and over again. Each simulation is put together around a specific set of questions to which the business is seeking answers, such as: •

Our industry is consolidating. Following several moves by competitors, there seem to be no good partners left. What should we do?

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• • • •

•

•

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Is the business model in our industry changing? Does this mean that we will lose control over our market? Should we embrace new models, defend the status quo or both? Is our industry/product becoming increasingly commoditized? If and how can we still make money? Should we close down and focus on alternative business opportunities? How resilient is our business? What happens if…? Where is the next threat coming from? How much should we invest in countermeasures and redundancies? Are there any factors affecting revenue or profitability that is outside the ordinary fluctuations of the business (i.e. change in customer preferences, change in customer demographics, change in regulation, change in business model, new technology, etc.)? Are there any actual or potential new entrants into my industry? (This can be new competitors using a similar business model, but also competitors using radically new approaches serving the needs of my industry.) Is my organization too compartmentalized and not flexible enough to recognize, anticipate and react to opportunities and threats (i.e. lack of cooperation across organizational silos)?

These are some of the main questions that can be addressed with wargaming. All of these situations are too complex to answer with conventional forms of analysis alone. Business wargaming is a suitable means to explore them because it combines elements of human decision-making (and the inherent level of uncertainty) with a set of quantitative measures that allow you to gauge “what happens if”. The methodology allows managers to test existing or newly conceived strategic plans in a dynamic, yet safe, environment. In doing so, they can save time, money and grief, gaining confidence in their plan via a relatively inexpensive simulation when compared to the cost of executing a potentially flawed strategy in the real world.

How does business wargaming work? – Teams Any business wargame contains at least four elements: the company team, the competitor teams, the market team and the control team

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Figure 6.1  Basic elements of the design of a business wargame.

(Figure 6.1). The size of the teams may vary anywhere from two to about eight participants, and in many instances the market team and the control team are put together. An advantage of larger teams is the fact that more views, i.e. from different functional experts, can be combined at the expense that they need closer coaching in order to organize themselves and deliver constructive output. To that end, we advise the use of coaches to make sure the teams get organized and deliver what they have been asked to. If not, it may happen that due to lengthy discussions, the synchronization of the overall wargaming effort may suffer. The company team The company team represents the company conducting the wargame and aiming to answer the key strategic questions. The team is made up of senior managers from within the company and typically starts the game by executing its current strategic plan. In some instances, where a company deliberately wants to test alternative courses of action, the team may execute another hypothetical strategy or test an alternative business plan. In executing its strategic plan, the team has all the liberty that it would have in the real world. It can form or dissolve alliances, conduct mergers and acquisitions or do anything else as long as it is within the boundaries of reality and within their resources.

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The competitor teams Like the company team, the competitor teams are staffed with senior managers from within the company. One interesting aspect is that these managers are forced to adopt the role of their own competitors and view their own company from this perspective. In order to facilitate the transition into their new role, they receive a copy of the so-called “gamebook”, which gives them the most important facts about the company they are required to play, as well as publicly available information on any other team. Coupled with the knowledge of their own company’s weaknesses, they become formidable adversaries to the company team. Typically, only the most significant competitors are represented by individual competitor teams. Smaller competitors are either consolidated into a group of competitors or represented by the control team. The market team The market team represents the market participants and assumes the role of judging the relative attractiveness of all of the companies’ offerings. This team is typically made up of market experts, who can either come from within the client organization, external experts or, as is most often the case, a combination of the two. The market team forms a focus group that uses research, experience and intuition ultimately to award market shares. The team makes its call based on hard data, which is delivered by the competitor teams at specified times during the simulation, but also on the understanding of how well the message is communicated—the unique selling proposition (USP) of the respective teams in relation to one another and the rest of the market. The control team The control team “runs” the show. It is made up of wargaming experts, industry experts and typically the chief executive officer (CEO) or other senior executives from the company. Its first role is to structure and run the simulation, i.e. make sure that the schedule is adhered to, that the rules are observed and that presentations and feedback are given in the appropriate fashion and level of detail/structure. The team also calculates the quantitative variables based on the feedback from

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the market team and provides the company and competitor teams with the outcome, which typically includes the major positions of an income statement or cash flow. In some instances, the control team will also introduce so-called “shocks”, which are interventions to force the teams to address certain topics or go down a certain direction. In a product launch setting, this could be the announcement of a product defect calling for a recall or concerns that emerge about the safety of a product requiring some special approach to communication. Another very important function of the control team is to adopt the role of all other stakeholders not explicitly played in the simulation. Such stakeholders can be smaller competitors, regulators or interest groups. The experts of the control team, faced with a proposed deal for an acquisition, will take the role of the board of directors of the target company and decide whether they would accept the deal or not.

How does business wargaming work?—Interaction We just discussed the basic elements of a wargame; now let us take a closer look at how these teams interact and how the simulation is actually played out. A business wargame typically evolves over three moves, simulating a certain timeframe in real life. This timeframe can vary from a few weeks to several decades. The first move usually starts in the present and is based on all the available data at that time (e.g. now or any other determined point in time). A move is a decision cycle, which begins with the competing teams reviewing their strategy and taking their first actions toward an outcome. Such actions can be anything from launching new products or services out into the market, forging alliances, investing in capacity or new markets, as well as running communication campaigns, such as communicating with the customer or lobbying other stakeholder groups. The decisions taken are documented in templates and provided to the market and control teams as hard data on which to base their decisions. In addition to this “input”, the teams have the opportunity to present their offering in front of the market team (and everyone else in the market, e.g. competitor teams and the control team representing all other market participants as well). In this way—as in the real world—at certain

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points of the simulation, all parties involved have the same level of information on which they base their next steps. The customers, played by the market team, will provide feedback and gauge the relative attractiveness of the various offerings by the company and competitor teams and award market shares. The control team then consolidates the hard data (such as price points, investments, etc.) and the soft data—in essence the perception of the market team/­ customers—in terms of what this would mean in numbers. The team calculates the overall size of the market, segment sizes, segment shares, profit margins, etc. Due to the limited time and resources to run all the details, quantitative feedback will only include some key figures, e.g. of a profit and loss statement, capital expense calculations or other key performance indicators (KPIs). The feedback from the control team represents the starting point for each team in the subsequent move. If, for example, one team “buys” market share by dumping its products on the market for free, they most likely will make a major share gain in terms of new customers but completely lose out on profitability. In this example, the team may find their choice of actions curtailed at the beginning of the second move as a result of lacking funds. Another approach to designing a business wargame is to use the moves to play out different scenarios (Schwarz, Ram, and Rohrbeck 2018). This can mean using existing scenarios with respect to how the business environment might change but also considering how the entrance of different new competitors will change the competitive dynamics in an industry.

How does business wargaming work? – Moves A single move may take from a few hours to as long as a whole day; this depends largely on the available time for the simulation and, of course, on the level of detail of the simulation. Typically, a business wargame starts with the company and competitor teams analyzing the data and additional information available, preparing their offerings, striking deals, filling out templates and preparing their presentations for the plenary sessions. Market and control teams get to work and calculate the market shares and quantitative impact, while the company and competitor teams are already

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working on their preparation for the next move and continue to do so after they get the results from the market and control teams and will adjust their preparation if necessary. In some cases, detailed results in the form of profit and loss statements and key data are calculated and reports are prepared as a starting point for the next move. It is important that the teams, with exception of the plenary sessions, are separated and do not have any direct exchange with each other, e.g. by walking the hallways or visiting each other in their breakout rooms. All communication with competitors, alliance partners, acquisition targets, etc., during the preparation phases must be channeled via email and by default always gets copied to the control team. The latter, as in the real world, will disseminate certain information, such as an agreed alliance between two competitors, to the other participants in order to make sure information equality is maintained. After all, such information would be disseminated via the media once a deal has been agreed upon. What may happen, however, is that the control team chooses to pose some restrictions on a deal, for example when antitrust regulations would be violated or regulators would limit acquisitions to only parts of the business or impose the obligation to sell off other parts. After all moves have been played out, a first assessment is made of what the lessons learned are. The input is typically gathered in a plenary session during which participants reflect on what worked well in their strategies and what did not. The key insights from the game are gained from the mutual assessment of individual experiences focusing on the initial questions. In any case, after this initial assessment, a team of wargaming experts will dive deeper into the data gathered through the simulation and evaluate other sources such as the email traffic. The advantage of using email communication is that every message is logged and can be retrieved in the order in which it was sent out, and it can be traced who was talking to whom and about what. With this type of analysis, trends or patterns can be identified, such as when all players in the business wargame during a certain move aim to close similar types of acquisitions or alliances. The detailed insights are usually consolidated in a report and presented about a week later to the sponsor of the game, including recommendations for adjustments of the initial strategy.

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Part Three WARGAMING IN PRACTICE

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7 TACTICAL WARGAMING

Tactical wargaming aims at answering the question HOW something specific must be done. The objective is to develop and validate a plan on how to reach a specific lower-level objective. Such wargaming may happen in isolation, i.e. by the business unit, which wants to validate its intended approach to enter a new geographic market, its launch of a new product or service in existing markets or in order to validate if its assumptions regarding the possibilities of a new technology are correct. At this point, defense strategies at the level of products or services of existing competitors or from new entrants may be tested as well. One aspect of such isolated wargaming may also be to find out whether the resources within the business unit or team are sufficient to achieve the objective or whether more support will be needed. If the latter is the case, just these insights alone would warrant investigating the issue at the operational level, which may include an operational-level wargaming, to develop a sense for the magnitude such events could have on the organization as a whole.

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To provide you with a more specific example: The distribution organization of a major manufacturer of professional power tools got an indication that while their tools were the best in terms of quality, customers were really keen on getting the same quality tools but battery-powered and thus wireless. This insight, obtained at the tactical level, could have been wargamed at the tactical level to find out that, if not addressed, this could really turn against the company and that therefore the development of battery-powered tools should be forced going forward in order to stay competitive. It would not have taken long to realize that such developments could not come out of the business unit alone because they required substantial R&D investments and new capabilities, which did not reside in this business unit or the company as a whole. At the operational level, the implications of not addressing this development would have become clear, and thus the allocation of corporate resources toward the development of the respective capabilities could have been tested and planned as well. In reality the company did not recognize the importance of this change in customer preference for what it was until quite late in the game. The consequence was that a once almost bankrupt competitor jumped on the opportunity and established itself as the market leader with the incumbent company trying to play catch up ever since. This example illustrates quite nicely what we called a “strategic window” in the Introduction. If you miss it, which this company only did because they failed to fully analyze the potential implications properly (they knew that customer preference was about to shift), then you have to react or will be out of business soon. Aside from isolated wargaming at the tactical level only, tactical games should always be reflected at least as input into the greater planning effort at the operational level and involving strategic-level considerations as well. In the following we will describe four case studies in more detail. The first case (key account strategy for entry into an international retail market) describes how a production company simulated its accounts strategy for assessing the attractiveness for entering into a new market. The second case (defense against patent expiry and new entrants) describes how a consumer goods company prepared for the expiration of a key patent and how to position itself against

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future competitors. The third case study (crisis preparedness for a financial information provider) highlights how a financial information provider used business wargaming in light of the 9/11 experience to assess its preparedness to respond to similar crises. And finally, in case study number four (tactical wargaming examples from the military), we generically discuss how wargaming is used for tactical purposes in the military context.

Case study: Key account strategy for entry into an international retail market A production company, owned and producing for a large Swiss retailer, opened a promising business opportunity to sell some of its production in another European market to a large retailer. The company was specialized in the production of so-called “private label” products, which in the case of its owner company meant the house brands, and for other customers would mean that they would name and label the products to the liking of another retailer and this retailer would sell the products via its outlets in its geographic market. For the company this was a first success, and it appeared to be an excellent opportunity to utilize excess production capacity after supplying the retailer with its house brands first. However, the company knew relatively little about the real success factors of why they had won this deal and wanted to get a better understanding regarding the next steps the incumbent supplier they had forced out would take to win back the business with the European retailer. Interesting aspects of this game were that it involved strategic aspects (in which markets do we want to be?) as well as tactical elements (product features, packaging, supply chain, etc.) that needed to be validated in order to defend this opportunity and potentially break into more accounts going forward. Point of departure, objectives and key questions Although the company had selective business relations with foreign retailers in the past, it now had the opportunity to create significant additional revenues for the firm, if it figured out the right formula. The specific transaction with the European retailer at hand, involving

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products from different product groups in a particular product segment, was successfully completed by a highly engaged key account team, which had successfully cooperated with a local agent. Once the first products were shipped out, the management of the production company began to ask some important questions: •

• • •

Which were the real success factors that had led to this new business? Was it just price or were other factors, such as supply chain reliability, flexibility in customizing the products to the needs of the retailer, high-quality products and other value-adding services, more important? Were there factors at play that had so far not been accounted for? Can this business relationship be successfully defended, even if the incumbent supplier is going to try everything to win it back? How can the relationship to the European retailer be deepened by supplying other products as well? Can the success with this retailer be leveraged to get into business with the second significant retailer in this geographic market? Can the success be leveraged to offer other “private label” products in other segments?

The management of the company was well aware that maintaining a strong and successful relationship with the European retailer would be essential for its overall strategy. It would not only assure solid additional revenues for this particular production company but also potentially open the doors for other production companies of the Swiss retailer to pitch their “private label” products in other product groups and thus contribute to overall revenues, utilization and profitability. This willingness to embark on new approaches to business, the strategic nature of the questions, the high degree of uncertainty and the opportunity to educate 30 of his top managers led to the decision by the CEO to commission a specific wargaming exercise. Game setup and execution After a preparation time of about three months, in very close cooperation between company experts and consultants, the wargame

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TA C T I C A L WA R G A M I N G 2009

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Figure 7.1 Game design: “Key account strategy for entry into an international retail market”.

was finally conducted over the course of two days. The wargaming comprised four teams, as depicted in Figure 7.1. Besides the company team, a competitor team I (the incumbent supplier, who had lost the business to the company) and a competitor team II (another foreign competitor, who tried to break into the same market) were simulated. The market team simulated the market, but also the interaction between retailer, end customers and suppliers. It consisted of retail experts from within the company and from the consulting company and included local market experts as well as representative end customers from that market, as well as a representative playing out the concerns of the Lifestyle of Health and Sustainability (LOHAS) movement. The control team was responsible for structuring and leading the wargame. It calculated the revenues and financial performance of the competitor teams based on the offers made in the market and the assessment of the market team, which could give out specific product segments to suppliers as well. The simulated timeframe covered 2009 until 2011 and was played out over three moves. The teams consisted of slightly over 30 managers and represented a broad spectrum of departments, including R&D, logistics, controlling, key account management, productions and procurement.

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In order to answer the basic questions, the target market was defined as the entire “private label” market for a specific product group, which was sold by the top two retailers in that European ­market. Based on extensive research, the development of the target market was characterized by relatively flat volume developments, falling prices and a shift away from simple products toward more sophisticated ones, which justified price premiums. After an introduction into the topics of strategy development and business wargaming, as well as a crash course with regard to the most important trends in European retail markets and the relevant market information, the participants were divided up into their respective teams, received their gamebooks and were explained the rules of the wargame. After that, the team coaches received the tender offers for the first move and took their teams to their respective breakout rooms, where they immediately began to develop strategies and ­specific offers. Due to the tight timeframe and a growing number of tender offers per move, the pressure on the teams increased gradually. On top of that, specific points requested in the tender offers had to be analyzed, cost and production decisions had to be taken and the offers had to be completed not to lose the business from the outset. The retailers, played by the market team, were to assign entire product segments to individual suppliers, while they could select different suppliers for different product segments. The market team also acted as the buyer panel. It listened to offer presentations and negotiated on prices and sought promotional assistance from suppliers. After evaluating all facts and presentations by the company and competitor teams, the market team reached its decision and handed it over to the control team, which calculated the rough financial effects this would have on any of the competitors. In doing so, the control team looked at additional revenue and significant cost positions such as raw material costs, production costs, logistical costs and promotional contributions, as well as proportional indirect costs. From this, the approximate marginal income was calculated and subsequently presented to the competitor teams in a plenary session. This would allow the teams to take this feedback and adjust their decisions before presenting for the next move. This sequence

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was repeated three times. In the following we briefly capture the major developments over the course of the three moves. The first move represented the year 2009. The financial crisis had a negative impact on the overall economy and the spending patterns of consumers changed, looking for good value at affordable prices. Exchange rates were also a factor, because in the original contract the prices were fixed in the European currency and it had already depreciated by 20%. The company team decided to offer on both tenders and pointed out its use of recyclable packing materials, which would reduce packaging cost and waste while offering an appealing design. With regard to category management, the company team proposed a move from premium into standard products. Competitor I team also offered on all tenders and set a focus on a low CO2-footprint and competitive prices. Besides offering on the two tenders, Competitor I team took a bold move and tried to acquire two contract manufacturers to preempt the strategic production options of the company team. However, the acquisition offers were rejected by the board of the respective target companies for lack of attractiveness. These boards were played by the control team. Competitor II team followed a simple strategy and did not change any of its products. Instead, it attacked with very competitive prices. Following these offerings, all three teams received different product segments. The second move simulated 2010. The financial crisis continued and took its toll on consumers. Low exchange rates remained a problem. During this move the control team introduced a number of shocks with each competing team. These shocks focused mostly on problems with the products or their packaging and needed handling by the respective companies. The company team made offers on all product segments and ­reiterated its ability to provide a professional and innovative product group management. It also offered additional services, such as market research and market insights, trend scouting and long-term product road maps and promotional support. Competitor I team also offered on all tenders. It focused on innovation and reduced, primarily with cost reductions in mind, the CO2 footprint in order to increase the attractiveness for environmentally aware, well-funded

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consumers. This comprehensive approach toward the LOHAS movement at little incremental cost clearly differentiated Competitor I team from the other competitors. It leveraged the fact that it had production sites in the target market, which allowed for short supply routes and reduced CO2 emissions. Besides this Competitor I team sought options to prevent the company team from expanding capacity in the target market by approaching the Swiss retailer (mother company) with competitive offerings. Competitor II team also offered on all tenders and continued its low-cost strategy. As opposed to the first round, it now began to highlight its innovation competencies and tried to position itself as a full-service supplier (i.e. offering promotional support) and emphasized its ability to create products with emotional appeal. The market rewarded Competitor I in particular for its consistent strategy and offerings. It won four out of five segments tendered and could triple its revenue in comparison to the first move. The team was lauded for its impactful innovations, for its consistent consideration of the CO2 footprint and for the high level of its promotional support. The latter, however, negatively affected the Competitor I’s marginal income. With respect to the product- and packaging-related problems, the market team contested that all teams were too slow in reacting and providing support in solving such problems or supporting in product recalls. This was assessed as a missed opportunity for the suppliers to build additional trust with the client and thus move from a transactional relationship toward a genuine partnership for the long term. The company team was able to gain a small additional product segment, but revenues and marginal income only slightly increased. Competitor II team had missed the opportunity to win additional business and now was stuck with a segment that was increasingly replaced with a new technology. As a consequence, its revenues eroded and marginal income turned into a loss. The third move simulated 2011. The financial crisis lingered but did not worsen. Consumers were still spending cautiously, and overall consumption did not really pick up. Exchange rates recovered and leveled the playing field among all competitors. In this move, the company team demonstrated that it had learned from Competitor I team’s successful strategy. It announced a

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partnership with a contract manufacturer in the target market and presented a solution by which it could reduce its CO2 emissions and measure up with Competitor I, while also reducing its exchange rate risk. It further reiterated its promotional support toward retailers and its innovation competencies. Competitor I team stuck to its sustainability, low price and promotional support strategy and continued its attempts to attack the company team in the Swiss market. Competitor II team reacted to the disappointing results from the previous move and focused more on short-term and tangible innovations and the utility piece of the value equation (value = utility/ price) instead of just pursuing a low-price strategy. It also announced a cooperation with a contract manufacturer in the target market and was now also able to offer a more positive CO2 balance while hedging some of its exchange risk. In doing so, the company team and Competitor II team put a lot of pressure on Competitor I team. Despite the increasingly competitive environment and the unfavorable aftermath of the financial crisis, the company team was able to position itself in the market, mainly due to the fact that it was positioned in high-value product segments. It was able to raise its profit margin from a low initial 1% to 6% at the end of the third move. Competitor I team, as the incumbent, set out with a high profit margin of 25%. Although it was able to keep many of its product segments served, profitability suffered significantly from lower prices and increased competition, and thus it dropped to 7% in the second move and approached almost 0% in the third because Competitor I failed to convert its “bought” market share in the second move into a profitable business. Competitor II team never really managed to earn any significant money in this market. The segment it “bought” in the first move shrunk and was increasingly replaced by other higher-end products. Exchange rate effects and the initial low-cost strategy prevented it from increasing profits in this particular segment. Because Competitor II team represented a larger company that is active in multiple European markets, additional revenues in its product lines could positively contribute to the overall results of the company, but not in this particular market. The partial recovery of Competitor II team in move 3 was due to increasingly innovative offerings and less focus on its low-cost strategy.

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Lessons learned After their presentations for the third move, the teams immediately returned to their breakout rooms and started to systematically reflect on their learning of the past two days wargaming. They consolidated their findings in a structured questionnaire for a final presentation in the plenary. For reasons of confidentiality we can only show some of the learnings, which we have listed in the following: •

•

•

There seems to be a clear advantage for domestic suppliers, and they are favored by end customers. Based on this “home advantage”, retailers tend to prefer domestic suppliers, because they seem to assume that foreign suppliers lack specific market knowledge. This makes it difficult for outsiders to gain a foothold in the market. However, once the entry was successful and one’s own competencies could be proven, it gets a lot easier. It appears that the LOHAS trend will not gain as much weight as [at the time] expected. It is difficult to gauge its influence, as the overall situation is distorted by other economic factors such as the financial crisis. There seems, however, to be clear evidence that environmentally friendly offerings, ceteris paribus, are favored over standard offerings. Consumers [at the time] were not really willing to pay a premium for this. Overcomplicated and technical products do not score with consumers. The motto is “reduce to the max”. Long-term road mapping, which distracts from the immediately implementable, is not valued by retailers. Likewise, there is no appreciation for innovations that have not been tested in the market before.

Overall, several recommendations could be formulated and passed on to the company team for implementation. The recommendations included things like exchange rate monitoring and scenario-specific pricing strategies and hedging strategies that could range from purely financial transactions all the way to establishing production capacity in the local market. The wargaming also highlighted the importance of establishing market research and competitor analysis capabilities in the target market, which were to be conducted on a rolling basis.

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The game further advocated the creation of a risk-management function (financial, reputational, relationships, business risk) as well as the development of contingency plans for different types of problems with products, supply chain, etc. An interesting fact was that two weeks after the wargaming Competitor I actually did approach the mother company in the Swiss market as previously seen in the game. When this happened, the company was well prepared to fend off any approaches and was able to implement the insights gained from the wargame.

Case study: Defense against patent expiry and new entrants The newly appointed CEO of the subsidiary of a large global consumer goods company commissioned a wargame because he sensed that things were about to change, and he needed to prepare his management accordingly. The subsidiary, specializing in capsuled coffee systems, had so far enjoyed nearly 25 years of constant growth and high margins. This is because it benefited from a shift away from the traditional filtered coffee market segment toward the capsuled market segment. Point of departure, objectives and key questions Historically the company had been spoiled. Whenever a new competitor entered the capsuled coffee market segment, the segment would grow overall, cannibalizing the filtered coffee segment and thus not really creating a competitive environment where players would compete for a limited size market. Due to the spectacular growth of the capsuled coffee market segment and the high-end positioning of the firm, profit margins were high and allowed significant investments into quality and the brand. However, the CEO feared that this period would slowly but surely end. The key question was to investigate what would happen once a key patent ran out one year in the future. The success of the company so far was based to a good extent on the maintaining of a “closed” system, consisting of coffee machines that were produced by licensed manufacturers and which

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formed the installed base. The company made its money from selling capsuled coffee, which could be used exclusively with machines of this installed based. Some of the questions to investigate were: • • •

• •

Could the expiring patent be replaced by slightly modifying the machines and capsules, which could then be re-patented going forward, i.e. can the closed system be saved going forward? What would happen if the closed system cannot be defended and now other competitors are offering capsules to be used on the company’s system? How dangerous would a potential move by a former CEO of the company be who had joined a company that would offer a competing capsule product addressing many of the perceived weaknesses of the company? How dangerous would potential alliances between competing capsule producers and select retailers in particular markets be? Could the development of an entirely new system (next generation) secure the leadership position of the company and fend off new entrants into the company’s closed system? Game setup and execution

One of the challenges of this wargame was that the company was a global player, active in many markets. Trying to simulate all markets at once would have gone way beyond the scope of what a meaningful wargame could accomplish. Therefore, the first decision was to narrow the scope to pick one particular market in order to pilot and investigate the questions before taking the next steps and applying the learnings to other markets as well. The choice fell upon a major European market in which the company had a long history and a dominant market position. Over the course of about ten weeks a core team of consultants and company representatives assembled detailed gamebooks with descriptions of the market, customers and expected developments and detailed profiles of two main competitors’ ­activities in the market. This was particularly tedious work, reverseengineering competitor footprints and capabilities inferred from

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Figure 7.2  Game design: “Defense against patent expiry and new entrants”.

their global capabilities and resources. In parallel, detailed information about the client company in general and in that particular market was assembled, often collecting it from various organizational silos (production, marketing, R&D, finance, strategic planning, etc.). The game was designed (see Figure 7.2) around the company team, two global competitors’ subsidiaries in that market and a so-called wild card team, which at the core would play the former CEO of the firm and his new company that was expected to attack the specific weaknesses of the client company. The game was originally designed to be played out over three moves. In move one, the patent was just about to expire, and the wild card team entered the market with a new, biodegradable capsule at less than half the cost of the company’s capsules. As if that were not enough, the wild card team joined forces with a convenience store chain that would now offer these capsules next to all kinds of convenience items. This was particularly shocking, because long loyal customers of the client company now had the choice to either leave their house and go to a boutique to buy the original capsules or to leave the house and get the alternative capsules while getting other convenience items. The other competitor teams were more hesitant

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and did not immediately attack the company in the first move. After gauging the attractiveness (price, biodegradability, convenience of access, etc.) of the wild card offering, the market and control team calculated that more than 40 percent of the client company’s revenue in the market was at stake and that this would subsequently also severely hit profitability. When the results of move one were presented in the plenary, a murmur went through the room and many of the around 40 managers showed unbelieving facial expressions. What they had just experienced was so staggering that the CEO decided not to play move two but take a time out to rally his troops. After a workshop-style discussion in the plenary, the decision was taken to give the teams’ additional time and to replay move one, this time taking the threat more seriously and trying a number of tactics, which for confidentiality reasons, we cannot enumerate here. The results of the replay were better but underlined the need to take action now to be ready when the patent would expire some 12 months in the future. Lessons learned First and foremost, this wargame was quite successful in raising the collective awareness of the top management team that the threat was very real and that action had to be taken swiftly. Second, it had proven that while defending patent infringements before expiry was absolutely necessary, the prolongation of the patents by simple modifications on capsules and the machines did not prove to be a successful strategy and that over time more competitors would attack. Third, the game subsequently showed that the next-generation closed system currently under development was yet too far away in order to be introduced in time to prevent competitors from breaching the closed system. On the positive end, catering to loyal consumers and banking on the exclusivity of the brand, introducing premium blends and special promotions while staying true to its strategy of high-end design and promotion would prove successful in fending off further market share losses. Over the months following the game, the company was attacked in several markets and meanwhile alternative capsules have become commonplace. Nevertheless, the company was

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able to defend a good part of its business and adjust to the new realities of the market.

Case study: Crisis preparedness for a f inancial information provider Point of departure After 9/11 many businesses were worried and asked themselves how vulnerable their operations were to terrorist attacks. One such business was a large provider of financial information and transactionrelated data for the exchanges between central banks, high street banks and clearing institutions. The CEO wisely decided to run a series of wargames to understand better the vulnerabilities of his business and to enable his top management to understand these vulnerabilities and train its crisis response organization in dealing with the problem. Objectives and questions • • • •

What would happen to the infrastructure and ability to provide services in case of terrorist attacks? How effective would the crisis response team be in dealing with the situation? How could the company best manage the effects such attacks have on their customers? What were the technical consequences in case of multiple event scenarios? Game setup

While the details remain confidential, the setup consisted of a number of customer teams (central and high street banks) in different locations, all dependent on the services of the client, plus a client team and the control team running the simulation. A number of technical experts were involved to examine the exact implications various incidents would have on the technical infrastructure and what this

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would mean in terms of maintaining services for the clients, likely downtimes and so on. The initial scenario involved a terrorist attack on one of the company’s global data centers. The common belief at the time was that while an attack of this kind might cause some delays in service delivery, the effect could quickly be mitigated by switching capacity to a redundant “hot site”, where servers would be up and running and could take over the load from the affected data center almost instantaneously. During the simulation, however, the control team expanded the scenario to include a second and further attacks on other data centers, which would seriously reduce the capacity of the system to deliver service up to the point where the company had to fire up an additional “cold site”, in which servers were in place but where applications and data needed to be brought up to speed. The consequences would be serious delays in services and significant nonavailability of systems. The way the game played out, the attacks occurred locally, and the company was unaware of them until reports from the media or phone calls from local clients enquiring why services were not available started coming in. This posed the first challenge to the client: how to find out what had happened and get a complete view of the situation and when and how to trigger the crisis response team. In the subsequent steps the teams were required to execute emergency plans in close cooperation with the technical experts and the management of the company. As more attacks were reported, a strategy was needed to communicate with customers, employees and the media and to prioritize data traffic, focusing on the high-priority items only while backlogging everything else for execution once the system capacity would allow them to do so. Lessons learned The first lesson was that no matter how well prepared you think you are, you can always be better prepared! While the client had a designated crisis response team and had also taken certain technical precautions to prevent serious problems

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with its service delivery, the main area for improvement lay in the execution of the process. This included, first, how to find out that there is a problem fast; second, how to gain a speedy picture of the full extent of the problem; third, how to put into gear the necessary contingency plans; and, finally and most importantly of all, how to communicate openly and clearly with customers and other constituents. This communication would need to contain detailed instructions on how to prioritize data traffic according to importance, as well as the ability to make fairly accurate predictions as to when the backlog would be worked through and the infrastructure would be running at full capacity again. While many of these steps may appear commonsense, the company found significant room for improvement in execution. And since there is no opportunity to test systems with a real crisis, wargaming offered a very effective means of practicing procedures in as close a manner to the real thing as possible. In the case of this particular client, the wargame helped them become faster, better coordinated and technically better prepared for the possibility of multiple events—something inconceivable before 9/11, because previous plans assumed only single incidents. As recent history has shown, terrorist attacks that have consisted of concerted multiple sites trigger a far greater crisis and are more common than previously suspected.

Case study: Tactical wargaming examples from the military There are so many cases of tactical wargaming in the military that we do not want to pick a single one in order to present it like the other cases in this book. We rather would like to take a generic approach, where a higher tactical command (i.e. a brigade) has followed a very structured process, called the Military Decision Making Process (MDMP), and after various analyses of the problem, the mission, the environmental factors, the opponents and one’s own forces in order to develop different courses of action, these are developed into detailed plans for an attack or another mission with respective contingency plans. The plan could be for a classical mechanized attack,

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Figure 7.3 Illustrative mission with five intermediate targets and one final target.

the taking of a sector of a city, a special forces mission or providing security for critical infrastructures or creating a safe and secure environment during elections. What does matter is that this plan is taken as the basis and then tested, involving different approaches to test particular aspects, i.e. logistics, support of one organizational element by another etc., of the plan. The objective is to evaluate individual actions by describing how they will be conducted and by testing how they will unfold based on particular enemy actions and reactions. The main document

Figure 7.4  Illustrative and simplified matrix of synchronization.

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Figure 7.5  Illustrative “belt move”.

applied is the so-called “matrix for synchronization”, in which the intended individual actions are laid out over time for purposes of overall coordination. With respect to testing a classical attack plan, there are three basic approaches. The first approach is what we call “belt”. The focus is on synchronizing all elements of an organization within one particular phase of the greater plan, taking a transverse view. This approach will work best when the sequence of phases has been clearly laid out ahead of

Figure 7.6  Illustrative “alley move”.

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Figure 7.7  Illustrative “box move”.

time. Depending on the time available, all phases of the mission will be played, and within each phase the interplay and consequences of actions of all organizational elements participating will be investigated. At the end, the individual phases can be analyzed once more in the totality of all “belt” sequences played. The second “alley” approach is sequential, following one particular element of the organization throughout all phases. The focus lies here on a longitudinal view, playing out the entire sequence of one particular actor. This sequence is usually broken down into one or more individual phases but does not include the other organizational elements. The major benefit is that the tactical level has a clear view about what is feasible and how it wants to deliver the desired performance throughout the course of the entire mission, recognizing logistical requirements, critical interfaces with the other organizational elements and testing out contingency plans in order to offset enemy reactions. The third approach is a “box”, which implies a concise view and that only one phase out of a sequence of one organizational element is covered. This would be applied, i.e. to focus on a particularly critical phase, i.e. the taking of an intermediate target (i.e. a key terrain) without possession of which the progress of other organizational elements would not be possible. Time permitting, several boxes can finally be assembled with an alley or belt view.

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After conducting such tactical wargaming, the commander can be quite sure that his planning assumptions work and that he has some alternative approaches up his sleeve that are understood and supported by his subordinates. Most importantly, such wargames will strengthen the confidence of the commander and the people carrying out the mission that it will work and that they have a good chance for success in battle.

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8 OPERATIONAL WARGAMING

Operational wargaming aims at answering the question WHAT must be done in order to meet specific objectives and a desired end state in the long run. The objective is to validate, improve and gain the necessary buy-in for an overall plan to reach the desired end state. As opposed to tactical wargaming, this should not happen in isolation, with maybe the exception of some pre-gaming by the operational leadership. In any case, an operational plan should and must be wargamed involving all parts of an organization at least from the operational level on down. This is vital for the benefit of a “joint” analysis of the feasibility, the understanding of the consequences in the greater context of the organization and its environment, as well as for the sake to get the organization synchronized at all levels. In this chapter we present four case studies. The first case (3G mobile data market entry) describes how business wargaming was applied to assess the future dynamics of the about-to-be-established 3G mobile data market. In the second case study (how to deal with

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HIV/AIDS in India) wargaming was applied to understand how multiple stakeholders could deal with HIV/AIDS in India). The third case study (how to defend against a bioterrorism attack), also in light of 9/11, explores how several stakeholders would interact in the case of a bioterrorism attack. Finally, the fourth case study (operational wargaming example from the military) takes a look at the military application.

Case study: 3G mobile data market entry 1 Having paid an enormous amount at auction for one of the thirdgeneration (3G) mobile telephony licenses in Europe, and agreeing to invest a similar amount into building up the respective infrastructure as a condition to obtaining the license in the first place, a large European mobile operator wanted to examine whether its current market entry strategy was the right one or if it needed to be adjusted. Point of departure In 2000 a number of European countries were auctioning off the third-generation (3G/UMTS) mobile licenses to interested mobile network operators (MNOs). The so-called “3G standard”, also known as UMTS, has the advantage over the second-generation (2G) mobile technology in that it provides a higher speed for data transmission, thus enabling the use of complex multimedia applications. Depending on whether you are stationary or on the move, the transmission rate for data can reach as high as 2 Mbit/s and thus basically provides broadband access on the go, which in turn enhances the potential uses of cell phones or similar mobile devices to include surfing the Web at reasonable speeds, e-commerce, multimedia applications, video broadcastings, video conferencing, and so on. Based primarily on the decision by MNOs to secure access to this promising new technology, in Germany a total of six UMTS licenses were auctioned off in a fierce bidding war, ultimately representing a tax revenue of about $45 billion to the government. This auction forced the MNOs to assume tremendous levels of debt, leading experts and financial analysts to express doubts about the probable success of 3G

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and whether it would ever recover the sunk cost. While there was no shortage of ideas for potential applications at the time, no one knew what the killer applications of the future could or would be. The wargame was facilitated for a large mobile network operator, and the client company had already developed a market entry strategy for mobile data, enabled by UMTS. However, a far-sighted executive realized that conducting a wargame, especially in light of the substantial additional investments in marketing, product development and other related costs, would probably make sense to focus the strategy more effectively or at least gain the confidence that this was indeed the right way to go. Objectives and questions The objective of the wargame was to stress-test the existing market entry strategy, especially with respect to potential market developments and competitor actions, and to uncover any issues or opportunities previously not reflected in the strategic plan. More specifically: • • • • • • •

•

Was the company focusing on the right customer segments? Were the assumptions relating to the attractiveness of specific mobile data offerings for specific customer segments correct? If not, why, and could anything be done to change them? Would the market accept the proposed pricing models as planned by the company? Were the chosen distribution channels suitable for the rollout, and did the market value the planned customer service offerings? Would it make sense to acquire a second license? Would the planned content strategy involving selected partners be sufficient to differentiate the operator in the market? Were the measures to overcome technical hurdles (availability of handsets, network coverage, handover and so on) sufficient, and how vulnerable would the offering be to substitution (WLAN, value-added GSM offerings)? Was the envisioned schedule appropriate?

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Game setup A total of six competitor teams were planned at the outset of the game, but this was consequently reduced to four main competitors, as some of the initial competitors either went out of business or decided not to roll out the UMTS technology. A market and a control team were used to structure and control the game and represent all other constituents in the market. The competitor teams, including the client team, consisted of a team leader, a team briefer, a team communicator, and a business wargaming expert in the role of coach. The main task of the team leader was to lead the discussion and make sure that the essential issues were covered. The team briefer was responsible for creating the slides for the plenary sessions. The team communicator operated the email communication between the teams and with the control team, and the expert coach supported the team leader, making sure the timelines and templates were followed and that the teams stayed on track, ensuring a more or less consistent level of quality for the plenary sessions. If necessary, the coach would also act as devil’s advocate and pose open questions to steer the teams back on track if they diverted onto tangents. Prior to the wargame, each participant received a copy of the gamebook consisting of information such as profiles for each company played, market trends, financials, market research and so on. The gamebook comprised the basic set of background information that would be the same for all participants at the outset of the game. Its contents were compiled using public information from annual reports, news clippings, analyst reports and other sources. Broadly the gamebook would cover market information and a structured profile for each competitor team, including broad and more specific mobile strategy, financial and market performance, business activities, service offerings, distribution channels and competitive strengths and weaknesses. The wargame was played out over three moves, played on three days. The moves were structured along a strategic decision cycle, so move one simulated the first year or the “market entry”; move two simulated the second year and how the company positioned its offering versus the competitors in its effort to solidify its position and market share; and the third move looked further forward, simulating two to

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three years in the future, in order to explore how things would play out following move two and how positions would solidify in the long run. The objective for the four competitor teams was to develop and implement a strategy for launching mobile data services that leveraged 3G technologies. The strategy comprised detailed action plans with clear decisions about pricing, product or service design, marketing and promotion, as well as distribution. On top of these basic decisions, the teams also had to quantify their courses of action in terms of detailed quantitative statements covering operating costs and capital expenditures. They did so using templates provided by the control team. The teams were allowed to communicate with each other and the broader market, but again only via email and by simultaneously informing the control team. The members of the market team started by refining a clear set of customer preferences weighted by customer segment. This would serve them as a basis for evaluating the competitor teams’ offerings in the plenary sessions and rank their appeal in order to determine the likely changes in market share. They would do so by using scoring sheets, which could then be input into the market model run by the control team. Besides running the model, the control team’s responsibilities also included keeping all teams equally informed about external events and major developments resulting from competitor actions. This team also represented the government regulators, board of directors and any other entities whose roles could not be played explicitly during the game but were needed to give approval of actions, make board decisions, etc. In terms of the market model and financial impact, the simulation started with the financials, subscriber numbers, churn rates, margins, products and distribution networks as they existed in real life for each of the competitor teams. The first move was dominated by partnerships to set up fixed-mobile bundles and a strong focus on acquiring content that could be offered on new mobile platforms. In this situation the large players, who in some instances were part of a larger telecoms group, which already offered online services through their Internet platforms, were at an advantage, but took some time to establish the influence such a leveraging of in-house capabilities would carry. The smaller players tried hard to strike attractive

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content deals but found themselves often constrained by financial resources so they were unable to commit to such strategies. In any case, gaining exclusivity on content deals proved to be very expensive, and thus differentiation had to be driven by other levers as well. During move two, the large players continued to leverage their in-house capabilities while customers appeared to adapt to the new offerings less quickly than hoped for. This was in part because, aside from the early adopters, the general public needed more time and, most importantly, education on the new services, headsets and what the added value would be for them. This triggered a number of creative approaches to the distribution channels, i.e. assistance educating customers in switching from 2G to 3G offerings. During the final move, the teams pretty much continued their approach and tried to optimize their position on the basis of what they perceived to be working or not in the market. Consequently, the teams were largely concerned with focusing on DSL/UMTS bundles, further marketing UMTS and engaging in strong partnerships that focused on the corporate market, which seemed to be less price sensitive and more receptive for the new services. One thing was striking and remained unchanged each time the simulation was played: no clear killer application emerged that would significantly drive the adoption of mobile data services and that would allow them to generate the huge cashflow needed to quickly recoup the investments made. Lessons learned The lessons learned from this business wargame can be broken down in three areas: • • •

Strategy Sales and marketing Communication Strateg y

The wargame revealed that the large-scale players were able to use group synergies between their fixed line and online business and so could leverage assets onto mobile platforms. The two large-scale

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players in particular started out very cautiously, focusing on defending market shares at the expense of innovation. Consequently, they lacked a clearly differentiated position and although they enjoyed a cost and synergy advantage, their offerings did not really shape the market or drive the future of mobile data. The two smaller players, on the other hand, well aware that they had to be innovative, had considerably more risk appetite and would try out some whacky scenarios even if the outcome was not always sure. In some instances, these did not work and in other instances they worked extremely well. After some delay, the large-scale players tried to copy some of the good ideas developed by the smaller players and aimed at doing so with greater efficiency. This had the effect of forcing the smaller players to reinvent themselves constantly in order to stay ahead of the curve and in an effort to develop a loyal (for example, community based) customer base. Another strategic theme that emerged was the significance of being able to provide an international footprint. The corporate sector, in particular, appreciated the availability of services wherever their travel would take them. Good content, driven by handsets that could display it in a user-friendly fashion, powered by a reliable high-speed network could also drive customer usage, especially in the case of high-data-volume applications, such as streaming audio and video. For some of the smaller players, a plain vanilla, low-cost strategy seemed to work out equally well. The team developed this as far as limiting their offering only to selling SIM cards and prepaid cards via distribution partnerships. Sales and marketing With regard to sales and marketing, the following themes emerged: For one, the quality (highly trained sales reps, prime locations, availability, etc.) of sales channels would be key in bringing complex data products to the subscriber, as such offerings would involve an element of educating the customer in how to effectively use the service. Derived from this the proliferation of “low care”, almost self-service, sales channels seemed very unlikely and not worth pursuing. It also turned out that exclusivity of sales channels (e.g. company-owned

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stores vs. shelf space with distributors) would further determine how much control and thus success the company would have in bringing its products to the end user. Last but not least, it became clear that the new offerings would need a significant “marketing push” in close coordination with a powerful sales organization because of the aforementioned specificities of successfully selling the product/service, but also because it was not exactly a situation where the market had just been waiting to absorb the product. Communication As far as market communication went, it became obvious that companies would be better off concentrating their efforts on one or two select mobile data applications (i.e. MMS, mobile portals) rather than trying to market everything at once with the same intensity. The game also revealed that a constant effort must be undertaken in order to communicate the “value” of mobile data offerings to the end user if demand were not to remain low. Fur ther Lessons Learned In terms of customer segments, the corporate market proved to be most receptive to value-added services. Further lessons learned involved pricing, where flat-fee structures and simplicity of plans seemed to trump complex per-unit models. Handset design and functionality also emerged as a key success factor in driving the adoption of the new technology. At a macro level, the fit of the new service offerings in the overall product/service portfolio of the company proved to be important as well. For example, the launch of single creative products/services was perceived as essential, but this would be difficult to sell to the youth segment if the overall company were more associated with business customers or older consumers. These are some of the general lessons that could be learned from the game. The specific lessons for the client remain confidential and therefore cannot be elaborated in detail. However, the insights from this game allowed the client to refine its initial strategic plan and make valuable adjustments, e.g. by refocusing on the appropriate

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market segments with a focused offering that would help reduce overall cost and lead to higher adoption rates.

Case study: How to deal with HIV/AIDS in India 2 In October 2003, a collaborative team consisting of consulting firm Booz Allen Hamilton, the Global Business Coalition under Richard Holbrooke and the Confederation of Indian Industry conducted a business wargame in New Delhi. The game, which looked at the HIV/ AIDS epidemic in India, explored what would happen if nothing were done to mitigate the epidemic and sought to stimulate creative thinking across stakeholders on how the problem could be solved, or at least contained. Point of departure According to India’s National AIDS Control Organization in 2002 there were between 3.82 and 4.52 million HIV/AIDS cases in the country. At that time, the primary route of infection (approx. 85%) was heterosexual exposure. The prevalence of HIV/AIDS was high and rising, with certain groups, such as intravenous drug users and homosexuals, at particularly high risk. Mobile workers, meaning workers traveling through the country from job to job, effectively constituted the bridge between the high-risk groups and the general population, fueling the rapid spread of the disease. During this process, the disease increasingly moved out of the urban centers into the rural communities, millions of people would have contracted the disease and the expected gross domestic product (GDP) loss for the Indian economy would be enormous. Based on this scenario, all participating constituents realized that something needed to be done. Objectives and questions Using this grim scenario, the goal of the wargame was to stimulate a creative collaboration between multiple constituents and show how their actions would potentially alter the scenario and what might prove to be effective (or not). Based on these insights, specific recommendations and action plans could be put to work to prevent the

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uncontrolled spread of the disease that threatened to cost many lives and seriously damage India’s economy. The participants focused on five key objectives (Booz Allen Hamilton, 2004: 2): • • • • •

“Develop a better understanding of the long-term economic, political, and social impacts of HIV/AIDS. Understand the impact of potential interventions. Identify areas for collaboration between the public and private sectors. Determine how best to mobilize both business and public sector resources. Identify strategies for all sectors in developing a national HIV/ AIDS response”. Game setup

The two-day event was jointly developed and hosted by Booz Allen Hamilton, the Global Business Coalition on HIV/AIDS (GBC) and the Confederation of Indian Industry (CII). GBC includes over 200 companies worldwide aiming at meeting the challenges of the HIV/AIDS pandemic through access to the skills and expertise of the business sectors. The GBC helps each individual member company develop a business plan or strategy for their HIV/AIDS response. In addition, through its partnerships with nongovernmental organizations (NGOs), governments and civil society, the GBC encourages member companies to apply their core competencies and products to the response to HIV/AIDS. The CII is a nongovernment, not-for-profit, industry-led and -managed organization. It is India’s premier business association, with a direct membership of over 6,000 organizations from the private as well as public sectors, with an indirect membership of over 98,000 companies from around 342 national and regional sectoral associations. The aim of the CII is to create and sustain an environment conducive to the growth of industry in India, partnering industry and government alike through advisory and consultative processes. Overall more than 200 leaders from industry, government, healthcare, community organizations and NGOs participated. Business

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participants included senior executives from industries including consumer products, financial services, heavy manufacturing, information technology, pharmaceuticals, automotive, and energy. Representing the government were national and state officials from India, as well as officials from the United States, the United Kingdom, Germany, and Australia. Civil society leaders from international organizations, including UNAIDS, Global Fund, Oxfam, Gates Foundation, Gere Foundation, World Bank and the World Economic Forum were also in attendance. Participants also included leaders from domestic NGOs such as Action India AIDS Project, Family Planning Association of India, India HIV/AIDS Alliance and Sahara. Booz Allen Hamilton developed an approach to the wargame which included an analytical framework at its core and which leveraged epidemiological and economic modeling and partnerships with leading academic centers. The completed model, which incorporated as many as 1,000 variables, offered a new means of quantifying the proliferation of the disease and, more importantly, also the impact actions taken by the public and private stakeholders would have on this proliferation by altering one or a series of these variables. The wargame was played over three moves, simulating ten years into the future. As depicted in Figure 8.1, a multitude of stakeholders were involved in the wargame. The participants were divided into nine teams representing industry, government and civil society with a mix of sector

Figure 8.1  Game design: “How to deal with HIV/AIDS in India”.

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representatives assigned to each team. This allowed individuals to share their insights and knowledge, providing all participants with a broader perspective of the impact of the disease and the consequences of HIV/AIDS interventions and policies. In addition, a facilitation team from Booz Allen Hamilton oversaw the wargame. The highly interactive exercise allowed the teams to communicate with each other via email in order to seek information, assistance and funding and to form partnerships. The epidemic evolved according to the actions taken by the teams. Over a series of three moves a span of ten years was simulated, forcing the participants to address real-world dilemmas and manage the short- and long-term consequences of their action. Over the course of the wargame the teams experienced the consequences of relying on broad prevention and the education programs as the disease spread rapidly to the middle class. They dealt with the challenges of funding constraints as they developed programs that ended up not being implemented due to lack of resources. During the wargame, the participants were faced with pressure and constraints similar to those in the real world. Not only were they required to propose effective interventions but also to develop strategies that could actually be implemented. They quickly discovered that no single sector would be able to tackle HIV/AIDS without leveraging the knowledge, talents and resources of others. Developing effective partnerships among diverse groups of stakeholders presented several challenges: •

•

First, an initial lack of trust and understanding among the sectors proved to be a major barrier to successful partnerships. During the wargame, the teams realized that they did not address the broader group of stakeholders but focused instead on their own employees and customers. All participants realized that the failure to address the needs of high-risk and marginalized communities, such as commercial sex workers, intravenous drug users and the mobile population, reduced the effectiveness of their response. Second, the social and cultural stigma associated with HIV/AIDS proved detrimental to prevention, testing and treatment. The social and cultural mores of India prevented the open discussion

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•

•

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of many of high-risk behaviors, making it difficult to educate the population about even the most basic methods of prevention. Third, voluntary counseling and testing services were underutilized because of a lack of available care and treatment. People were reluctant to undergo testing not only because of the stigma but because testing was not supported by adequate care and support services for those found to be HIV positive. Fourth, the healthcare infrastructure, both in terms of facilities and human resources, was not sufficiently large to deal with the potential size of the epidemic. During the wargame, the teams discovered that the existing infrastructure and HIV/AIDS education and training were inadequate to support interventions. Fifth, long-term provision of treatment transforms HIV from a fatal disease to a chronic illness which increases demands on healthcare infrastructure and available resources.

During the wargame, the success of the teams in developing effective interventions led to a new set of issues and challenges. AIDSrelated prejudice was reduced, but overall prevalence and healthcare cost were predicted to increase because of longer life expectancies of those infected with HIV/AIDS. Others feared that an increase in antiretroviral therapy could lead to complacency toward prevention, increasing the number of individuals in need for treatment over time. Lessons learned As the teams responded to the variety of challenges during the wargame, four critical success factors became evident: •

•

Leadership from the top is vital, whether it be from government officials, CEOs or community leaders. This should emphasize that a strong public stance on HIV/AIDS lays the groundwork for broad participation across all sectors, addressing key barriers such as stigma and discrimination. Nondiscrimination; awareness and prevention; voluntary counseling; and testing, care, support and treatment all rely on each

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other. The wargame also illustrated that targeted early actions are often the least expensive interventions and that they can prevent the longer-term cost of delivering treatment. In addition, proactive action targeting high-risk groups can prevent the disease from spreading to the general population. Collaborative partnerships, e.g. between the business sector and NGOs, are essential in order to maximize impact. Clear prioritization of programs and innovative funding approaches are critical, given resource and infrastructure constraints. The teams noted the need for a coordinated approach to funding at a national level, making sure that the program supports the national strategy and objectives, but also emphasized the need for decentralized funding to deliver funds as quickly as possible to those who are in need. During the wargame itself, a number of innovative approaches to funding were articulated.

Having simulated ten years over the course of two days, the participants needed to come up with team actions to help mitigate the future growth of the epidemic and its impact on the nation’s health and economy. HIV/AIDS prevalence, incidence and mortality compared to the base scenario (doing nothing) might be reduced by more than 50%. Additionally, the impact of HIV/AIDS on the economy was minimized and GDP loss was reduced by an astonishing $31.5 billion, and the loss in discretionary spending was reduced by $9.2 billion. The teams initiated and explored a total of 53 partnerships and proposed 100 new initiatives ranging from business initiatives to raise awareness and increase access to testing and treatment, to government prevention efforts at a national level. The wargame clearly underlined the need for moving forward in greater collaboration between the public and private sector. Nations needed to evaluate the risks accurately and set funding priorities. Overall, government funding and resource mobilization to fight HIV/AIDS needed to be dramatically increased. Donor countries should be encouraged to contribute more through bilateral and international initiatives. In addition, developing countries should be pushed to prioritize health issues on the national agenda. National governments needed to maximize platforms for business-sector involvement in response

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to the epidemic and ensure direct and sustained participation by business leaders on national HIV/AIDS committees and the global fund coordinating mechanisms. Business-sector skills could be applied to government strategies to improve the reach and effectiveness of HIV/AIDS programs. Investment partnerships between the public and private sectors would also help scale up existing initiatives. For example, existing corporate infrastructure and skills can be used in the broader community and in order to seek support from international donors for community programs. Finally, business, government and community executives needed to ensure strong leadership and advocacy. Public acknowledgement of the epidemic and the need for urgent action to address the stigma and discrimination that had allowed the epidemic to spread unchecked for the past 20 years would inspire others to take action.

Case study: How to defend against a bioterrorism attack 3 Point of departure After the 9/11 terrorist attacks, the United States quickly realized that terrorism was no longer a problem primarily surfacing outside of the country but could strike deep within its own borders and with an order of magnitude that was previously unthinkable. All of a sudden, planners at the Pentagon and in Langley were no longer restricted in their thinking, and scenarios previously considered too far-fetched were afforded great scrutiny. In the weeks that followed 9/11 a second threat filled the news: anthrax. Letters with suspicious white powder surfaced in multiple locations, and the threat of a bioterrorism attack within the United States became suddenly very real. Partly as a result of these developments, the US government decided to run a simulation to anticipate the full effect a bioterrorism attack could have on the country. They sought to see how well America was prepared in response to such a scenario. Objectives and questions One objective of this wargame was to involve top leaders from medical products companies, healthcare providers, insurers and government agencies and have them jointly deal with a hypothetical, but

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absolutely realistic, bioterrorism attack on the United States. The aim was to confront the participants with the realities, dilemmas and consequences of alternative actions and to test how well the cooperation between the constituents would work. What would be discovered during the wargame should help lay the foundation for improvements to structures, processes and general preparation should a similar event ever take place. The purpose of the wargame was not to predict the future, but rather to raise the level of awareness among all the participants of what could happen, what would work and what would not work so that all could better prepare for the future. Game setup The wargame was sponsored, structured and prepared by Booz Allen Hamilton and the Council for Excellence in Government. The latter organization was founded in 1983 by a small group of business leaders who had served in government and wished to create a strong independent voice for excellence in government. The aim of the council is to improve the performance of government and the connections between government and citizens. In total 75 government and healthcare professionals participated in the wargame, bringing together senior policy makers in the Department of Health and Human Services, the Federal Emergency Management Agency, the Department of Defense, the Department of Veteran Affairs, state and local government, business participants, including CEOs and other senior executives from medical products companies, including pharma and biotech, as well as healthcare providers, such as hospitals, health maintenance organization (HMOs), physicians, insurers and health industry associations. To enable participants to cope with the multiple stakeholders, they were organized into three business stakeholder teams, three government stakeholder teams and a control team. The wargame opened with the following scenario: pneumonic plague bacteria in aerosol form were released simultaneously in two major cities in a coordinated terrorist attack. Although initial symptoms resemble the common flu, the pneumonic plague is nearly 100%

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Figure 8.2  Game design: “How to defend against a bioterrorism attack”.

fatal if not treated early with powerful antibiotics, and, unlike anthrax or West Nile disease, it is highly contagious. The simulated epidemic was unleashed in Detroit (Michigan) and Norfolk (Virginia). Simulated on the basis of real-world epidemiological models, the spread of the disease from its points of origination could be modeled quite accurately. As in the HIV/AIDS simulation, the spread could be affected by a variety of factors, such as vaccination programs, quarantine measures, restriction of travel and so on. Over the course of the game the participants identified a number of challenges which would make it difficult to respond effectively to a bioterrorism attack: • •

In the first place, biological warfare agents, unlike natural disasters or peacetime epidemics, spread rapidly, further accelerated by releasing the agent simultaneously in multiple locations. Second, the rapid overload of the local healthcare system and widespread panic stresses law enforcement and other social services to the breaking point.

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Third, while the immediate responders are all local, decision-­ making on issues such as where and how to allocate available antibiotics, how to inform and educate the public and when and where to close borders and restrict traffic must move quickly to the national level once the magnitude of the problem becomes evident.

Traditionally, neither private industry nor many government agencies have played active roles in homeland security, which has been almost exclusively the domain of the Department of Defense. The result was that the interaction between these players often proved difficult due to unclear distribution of competencies and ambiguous chains of command. The extreme contagiousness of the pneumonic plague and the lack of a vaccine called for both quarantine and the rapid and extensive prophylactic treatment of uninfected individuals with antibiotics and proved a significant challenge to the teams during the wargame— especially since the quarantining of large parts of the population raised civil liberties and law enforcement issues and offered no easy answers. Widespread prophylaxis would strain drug supplies and leave the country vulnerable to new attacks or naturally occurring epidemics. Logistic issues, such as how to deliver vaccines and drugs to millions of people, raised insurmountable obstacles. In sum, the following key challenges were raised: • • • •

To react quickly, industry needed a single point of contact with the government, but at the time, multiple contact points existed. Aggressive containment and prophylaxis can limit the spread of the disease but moving too quickly may consume reserve capacity needed for future threats elsewhere. Response plans normally focus efforts at the local level, but bioterrorism quickly becomes a national problem. Suspending legal, regulatory and procedural constraints may be necessary to meet immediate needs, but such steps can create serious downstream consequences for public health and business viability.

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Subsequently the teams discovered that the difference between a controlled outbreak and a massive epidemic ultimately hinged on a few critical success factors (Ahlquist and Burns, 2002: 3): • • •

“Leadership: confusion about ‘who’s in charge’ in just the first days of the attack had major consequences during the weeks that followed. Knowledge: Participants agreed that thousands of lives depended on ready information about pharmaceutical and medical equipment stockpiles through the nation. Coordination: Individual companies and local governments responded well, but what mattered most was immediate and quick coordination between companies, across agencies and among states”. Lessons learned

A major lesson was that at the time the levels of preparation and response in place in the United States were not adequate but that the existing levels of preparation could be improved. The United States might cope with a bioterrorism attack, but only if the response were rapid, coordinated across business and government, well prepared and thought out ahead of time. The teams further discovered that massive immediate action was required, but they also found that the lack of a common language between government and industry, and then a lack of a single point of contact between these groups, stymied the rapid movement needed. No mechanisms were in place to enable quick coordination across agencies and businesses to mobilize the resources available. The teams concluded that the government alone couldn’t protect the American people from bioterrorism, hence the need to mobilize business resources. Prior planning and practice proved the key to enable rapid response, which would be critical in limiting the damage. Mechanisms were needed to collect and share information on pharmaceutical and equipment stockpiles before and during crises. Preparedness would require new levels of communication and cooperation across public/

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private, local/national and military/civilian boundaries. Further, building and sharing knowledge would mean assessing potential actions and their impact. Epidemiological models needed to be developed for the most common hazardous bioagents, exploring the impact of actions such as quarantine and prophylaxis. Above all, the information needed to be shared across government and industry. This sharing required new policies, protocols and mechanisms to coordinate government and business response. Response polices needed to be integrated across federal, state and local government and among healthcare businesses in order to clarify roles and responsibilities and to identify the key point of contact and authority. The wargame enabled the teams to conclude that private/public partnerships can improve bioterrorism preparation and response by identifying and involving relevant participants; establishing agreed roles and responsibilities; sharing information on stockpiles and surge capacity; predefining economic, legal and liability parameters and limits; and coordinating public awareness and education. In addition, the wargame was able to give the mixed groups of participants a rapid education in how other organizations think and act, as well as providing a first check on ideas and suggestions, highlighting the need for a new kind of public/private partnership in homeland security in the United States.

Case study: Operational wargaming example from the military Point of departure A small European country, faced with declining defense budgets and a constant decrease in manpower, sought ways to organize what it had at its disposal more efficiently with respect to deploying its assets to the greatest effect vs. new realities of war, while at the same time better coordinating the interplay between different branches of the armed forces with focus on the operational and tactical levels. To this end, a fictious hybrid warfare scenario was developed, which had similarities to what could be observed during the period leading to open armed conflict in Ukraine. Although there is no commonly

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accepted definition of hybrid warfare, it can be understood as an opponent employing political pressure and blending it with elements of conventional warfare, irregular warfare and cyberwarfare and supporting it with influencing methods, such as economic pressure, fake news, diplomacy and foreign electoral intervention. By combining kinetic operations with subversive efforts, the aggressor intends to avoid attribution or retribution. This form of threat requires a highly adaptable and resilient response. Objectives and questions • • • • • • •

How and when to mobilize which elements of the armed forces? How to deal with irregular groups wreaking havoc in the civil society? How to maintain control over the information sphere and secure the support of the general population? How to recognize the moment to change the posture of the armed forces from protecting critical assets and maintaining control within the population to fighting irregular or even regular forces? How to maintain the required performance of the armed forces over extended periods of time? How to deal with geographic shifts of enemy activities within the country’s borders? Which cooperation, i.e. with neighboring countries, would make sense without losing control over the situation or becoming too dependent on outside help? Game setup

This game was set up in the classical sense with a red team made up of members of the intelligence community playing the opponent(s) based on a red operational design, which was targeted at the country’s center of gravity, as well as a blue team playing the country’s armed forces with all branches, and a green team playing all civilian partners ranging from civil protection, police, etc., down to representatives of key businesses and the population. The game was developed

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over several months at the operational command, based on an initial operational plan to defend the country in such a scenario and subsequently involved subordinated tactical commands individually before assembling all elements to several days of wargaming with all commands and players involved. Lessons learned Understandably we can’t go into the confidential details of the wargame. We can, however, say that the game provided clear answers as to the feasibility of assumed capabilities and revealed weaknesses and critical areas that need special attention going forward. The lessons learned did and will have an influence on future capability planning and development all the way down to specific, quantifiable resources needed in the future in order to assure the public that the armed forces can provide the performance expected of them in the future. Besides these contributions from a content point of view, the series of wargames was used to educate a large number of several hundred officers in operational thinking and in combination with specific educational formats, i.e. developing operational designs and subsequent plans. This created a core of highly trained officers who went through the same experience and understood from the bottom up why things have to be done in a certain way. Although hopefully never necessary, this core of officers will be ready to respond should the situation require it.

Notes 1. Information taken from Oriesek and Friedrich (2003) and from participant interviews. 2. Information taken from Booz Allen Hamilton (2004). 3. Information taken from Ahlquist and Burns (2002).

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9 STRATEGIC WARGAMING

Strategic wargaming aims at answering the question WHERE an organization wants and needs to be at some point in the future. The focus here is mostly on capabilities that need to be developed or acquired, which in sum will lead to the future posture of the organization, regardless of whether it is a company, an NGO, a country or a group of countries. This type of wargaming requires thorough environmental scanning, sensing and analytical prework in order to generate foresight and identify the necessary consequences. Before describing the case studies in this chapter, we want to briefly highlight the application of wargaming in the public sector. Wargaming in the public sector has a long tradition, for instance, in the United States. During the Cold War, in particular, the US government was looking for insight into how various scenarios and developments would play out and what the consequences for its foreign policy might be.

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Between 1987 and 1989 a series of wargames was carried out, focusing on the change in global power structures over the next 40 years. The objective of these wargames was to determine how global power would change, particularly in terms of the future roles of the European Community, Japan, the United States, the Soviet Union, the Middle East, and the People’s Republic of China. While these games remain poorly publicized and little is known about the specific findings and the consequences for national policy, at a strategic level, these wargames suggested the following likely developments: • • • •

The Soviet Union would fail economically and fall apart Japan would be unable to become a global superpower Eastern Europe would open to the West without intervention by the Soviet Union East and West Germany will quickly unite without intervention by the Soviet Union

While today these findings may all seem obvious, at the time of the first of these games, people could not believe what they were experiencing. In fact, they doubted the predictive power of the simulation and played the game repeatedly with different participants. Despite changing actors the same basic findings emerged with each game— the rest is history. What is interesting is that at the time, the People’s Republic of China was not playing a major role. India, too, was never perceived as the economic power that it has turned out to be over the same period of time. Another game in the late eighties, the results of which remain largely classified, revolved around the Strategic Defense Initiative (SDI). The initial idea of the program was to establish a leakproof missile defense shield over the territory of the United States in order to prevent any effective nuclear attack. The question underlying this game was: how much strategic defense is really required given the deterrence effect, and what would be the resources needed to achieve it? The wargame produced some extraordinary insight, because contrary to conventional wisdom at the time—which suggested that a complete and leakproof shield was needed—the wargame actually suggested that a shield that would effectively cover only 10% of the

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territory would have nearly the same deterrent effect as a complete shield, as long as the 10% shield could be deployed in a mobile format, which kept any enemy guessing as to its exact position. This was based on the insight that if the Soviet Union wanted to ensure a similar first-strike hit rate, it would need to fire as many rockets to counter the defensive effect of a 10% shield as it would to counter a complete shield, making any attack extremely costly. At the same time, the deterrent effect from the perspective of the United States could be achieved with far fewer resources than initially anticipated. These findings led to a complete change in US policy with respect to the program under the conditions of the Cold War. In the following we will only describe one case study that we find particularly insightful. Due to deregulation and intensified competition but also new forms of competition, an airline had to make crucial strategic decisions and tested their strategy with a business wargame.

Case study: Alliance strategy for an airline This wargame was run with a leading European airline, desperately looking for answers to complexity in its environment and seeking reassurance that it was doing the right thing. The aim was to test the viability of the current strategy, particularly in light of how to position itself within the context of global alliances. Point of departure During the 1970s the Open Skies legislation was introduced in the United States, which led to deregulation and greater competition not only in the United States but also in Europe and much of the rest of the world. The European Economic Area and later the European Union adopted a system of free connectivity between destinations in its territory, which meant the competition on many routes grew significantly, dropping prices and squeezing profits. With lower prices, airfares had become affordable to a wider group of customers who increasingly viewed air travel as a commodity to buy on the basis of lowest price. In this environment, the common strategy for airlines was to forge alliances, such as Star Alliance or One World, in

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order (a) to lock customers in by providing them a wider network through which they might reach more destinations without having to go outside of the alliance and (b) because it allowed them to realize economies of scale, including co-sharing flights, thus increasing seat load factors as well as realizing benefits in other areas such as maintenance, purchasing, training and so on. During this period competition gradually shifted from the level of national airlines to that of alliances as airline mega-merges were prohibited by regulators. The central strategic question for many airlines, including the one that commissioned the game of this case study, was: should they join one of the existing alliances, stay independent or even be so bold as to lead the formation of a new alliance? Further questions explored whether the airline would be strong enough to survive outside the existing alliances; what would happen to its negotiating influence with any alliance the longer it postponed the decision; and how might the business model and the economics within the airline industry be likely to change in the future? Conventional methods, such as market analysis and scenario planning tools, were perceived as inadequate for fully exploring the forces in the market, and no united view existed within the firm as to how best handle the challenges. As a result, the airline decided to run a wargame and find the answers to its many questions. Objectives and key questions After a series of in-depth interviews with top client representatives, the following objectives and key questions were identified: provide and train the top management team with insights in how to think about the future of the airline business and how best to position the company in order to compete successfully in the changing environment. More specifically: • • •

Can the airline succeed with its current strategy in Europe and the rest of the world? To what extent might the airline realistically operate outside any major alliance? Failing that, whom should it ideally link up with, and what was its bargaining position? What are the most important markets and client segments?

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• • •

How should a national airline position itself versus regional and global competitors? How should the network, fleet and capacity be organized? Is the current distribution model still sufficiently robust to succeed in this environment? Game setup

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Figure 9.1  Game design: “Alliance strategy for an airline”.

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competitor teams. The wargame was played out in three moves, each covering a three-year period, from 1999 to 2008. The game opened with the situation as it presented itself in March 1999. This was characterized by talks between airlines about alliances, US and Asian airlines in particular, as well as an exploration of antitrust issues between American and European partners, which would allow for alliances but would not allow mergers and takeovers. The regulatory environment remained stable for moves one and two and then was significantly relaxed for move 3 to reflect the pattern of other industries. Now mergers, including transcontinental ones, would be allowed and antitrust immunity was no longer granted. And so on one fine morning in March 1999, the CEO and approximately 50 of his top managers, as well as a group of airline and wargaming experts and support staff, gathered at the airlines headquarters. The managers had previously received reading homework to familiarize themselves with the roles they were to play over the course of the next three days. The day opened with a briefing session: • • •

Providing an overview of the situation at the start of move one Setting the objectives for the simulation Dividing the teams up

The plenary session was then adjourned and the teams retreated into their syndicate rooms, each accompanied by an experienced partner from the consulting firm in the role of coach. Within the team rooms, materials were studied, conclusions were drawn, strategies formulated and inquiries for alliances or other forms of partnerships were exchanged using an email set up between the teams, and questions were directed to the control team. Using email as the only means of communication enabled negotiations to be kept secret until they would be revealed to the public, which either happened in the subsequent plenary session, where every team had to lay open their plan for the next move or for dissemination through the control team. The teams faced clear set schedules and deadlines within which to complete their strategies, which had to be formulated in a set of templates to ensure consistency and comparable information between

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the strategies compiled by the different teams. Throughout the simulation one major hurdle remained. Participants were required to challenge and overcome their current mental models about their company and the industry. This was not particularly easy, as their own CEO had already fixed in his own mind the strategic option he wanted to pursue. The uncertainty of outcome created throughout the simulation was one aspect of the process that he and the management teams found particularly hard to accommodate. Lessons learned There were plenty of lessons from this wargame; to summarize the most important: 1. The realization that any existence outside of a major alliance would be increasingly difficult. As suspected, the network effects, operational efficiencies and potential cost savings from the economies of scale put tremendous pressure on national airlines, who were too little to be global players and too big to be niche players. 2. The bargaining power of any airline wanting to join a major alliance would decrease the longer it hesitated. The network of the alliances was becoming denser over time, which meant the value added by any new member would tend to decrease and that alliances would become more powerful as they attracted more candidates with the ability to pick and choose their partners. With a good network coverage, alliances now would shift from increasing the network by adding new partners to deepening the integration of the existing partners. 3. The understanding that customers would continue to demand cheaper fares, better coverage and become increasingly more powerful. With so many players out there trying to fill their seats and competing on price (with the exclusion of select niche players), the market had fundamentally shifted from a cost plus model, in which airlines had basically dictated prices for tickets, to a model where customers would indicate what they were willing to pay and airlines would try to offer the flight while still making a profit.

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4. The transatlantic routes had the most passengers and were the fastest-growing and most profitable routes in the world. To do business on these routes required the ability to feed passengers onto the transatlantic flights, which was also a driver for controlling the home market. For this particular client, at the time, Asia did not have the strategic importance that was generally assumed. 5. Global alliances had already been more or less established and would not change dramatically going forward. These alliances would increasingly move to a mode of coexistence rather than fierce competition, which would help stop the price erosion. 6. With the loosening of regulatory restrictions would come a new compulsion to adopt a model of even deeper integration by means of mergers and acquisitions across borders. All the players needed to be prepared should regulations change. As mentioned earlier, the CEO was sold on a particular course of action, which revolved around the formation of a fourth alliance. While basically a valid option, the question remained whether this would really make sense, given the remaining candidates for this alliance who were in the main often poorly operated and weakly positioned candidates or whether it would be smarter to just join an existing alliance. The CEO chose to stick with his conviction that the former was the better option and after thanking the consultants decided to do just that. He continued to establish a new alliance with participation of several partners of questionable value, which substantially eroded the cash base of the client over the years without ever reaping the benefits from a successful network of companies. Over time, the company became so cash constrained that it went bankrupt, the alliance was dissolved and parts of the assets were carried over into a new company. The latter finally joined one of the formerly existing alliances. There is no suggestion that wargaming in its own right would have prevented this outcome. Failing to join one of the strong existing alliances early on, is another example for a missed strategic window. However, the wargaming provided a solid indication that developing their own alliance with the partners still available would prove to be extremely difficult and should at least have been re-examined thoroughly.

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10 HINDSIGHT HOW WELL DOES BUSINESS WARGAMING WORK? AND WHY DOES BUSINESS WARGAMING WORK? TOGETHER WITH FELIX WERLE AND FELIX VON HELD1

With the experience we have gained in the past decade, and before, in designing and running (business) wargames in different contexts, we are confident in claiming that this is a very useful approach when it comes to understanding the future dynamics of an industry and assessing the future dynamics of current competitors or potential new entrants into an industry. However, business wargaming can do more than that. It has proven to be a tool to actively engage its participants in thinking about the future and challenging the status quo. Further, we have experienced business wargames also to be vital in creating a sense of urgency to act on changes in the business environment, placing business wargaming also in the context of change and transformation. In the following we want to reflect from two angles why business wargaming works and, more specifically, what the inner workings of business wargames are. These two angles, as described later, are gaming and sensemaking (Figure 10.1). While sensemaking will in a

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Figure 10.1  Two angles for exploring the inner workings of a business wargame.

broader context describe how business wargaming supports understanding the uncertainty imposed by the business environment, gaming focuses on the question of how participants can be engaged. In the context of the sensemaking discussion, we will also provide a case study.

Sensemaking Decision-making in a VUCA world has been researched with the aim of understanding how organizations can best use these attributes to gain insights into environmental changes so that they can make more robust strategic decisions. Previous research has suggested that organizations seek an interorganizational collaborative sensemaking process (Seidl and Werle 2018) to understand VUCA. The vital necessity of sensemaking capabilities has been emphasized by the concept of dynamic capabilities (Teece, Pisano, and Shuen 1997; Day and Schoemaker 2016) through which collaborators can “see different aspects of a problem […], constructively explore their differences [and] search for solutions that go beyond their own limited vision of what is possible” (Gray 1989: 5).

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Many developments and phenomena facing organizations are beyond the “sensemaking capacity” of individual organizations, so they fail to comprehend the scope and consequences of such dynamics. In addition, collaborative sensemaking embraces a variety of perspectives because of the different industries and expertise that participating organizations bring to the process. Hence, the inclusion of this variety of perspectives in exploring new topics, developments or problems facilitates an extension of sensemaking capacity that no single organization can generate. Previous research has suggested that “variety can improve sensemaking capacity” (Seidl and Werle, 2018: 4) and recommended that “managers actively engage other people in processes of strategic sensemaking in order to gain access to a wider range of frames and thereby develop a better understanding of their world”. With respect to appreciating uncertainty from developments that will affect them, organizations and managers draw on interorganizational (often cross-industry) collaboration, often in the form of sensemaking and strategizing formats such as scenario planning and business wargaming simulations that help them anticipate challenges and the need for change. Since initiating and running such interorganizational cross-industry processes is resource-intensive, corporations are attentive to ways in which not only decision makers but management as a whole can generate and broaden the requisite variety of perspectives (such as industry interests/strategies and expertise) that will inform their internal strategizing and innovation activities in addition to their decision-making. The ability to sensitize and alert organizational members and employees to build a change mind-set that enables them to consider and appreciate uncertainty and change from different perspectives, and often different strategic assumptions, is crucial to specifying what makes decision-making and strategy more robust. The central argument for business wargaming in this context is that managers of one organization are enabled, by stepping into the shoes of their competitors for a day or two, to develop multiple perspectives on their own industry’s core competitors but also their own organization. Further, the literature on business wargaming (Bracken 2001; Krupp and Schoemaker 2014; Kurtz 2003; Oriesek and Schwarz 2008; Schwarz

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2009, 2011, 2013) suggests that the main purpose of a business wargame is to support management teams in generating the requisite variety of perspectives and enabling collaborative sensemaking.

Sense making: Case study Point of departure The series of business wargames we will report on were commissioned at a midcap industrial goods company in Europe. The company had commissioned three business wargaming workshops to be included in the annual strategy meetings, one for each of the three business units. All three business units described the challenge of a VUCA environment, especially by technological changes triggered by digital transformation and by operating in markets with lowgrowth perspectives while being asked by the board of directors to grow above market average. Objectives and questions The aim of these business wargames was to address for each business division the question of how to grow in markets that are not growing and, in particular, how to achieve a competitive advantage. Further, the objective was to derive on the back of the business wargames concrete project ideas in terms of what the organization should do to reach the goal of continuing growth. Game setup Each of the business wargames was one day long. Prior to the business wargames, participants were assigned to teams, representing their own organization, competitors and a market and customer team. To allow for a quicker and more intensive identification with the assigned player, breakout rooms contained information on the players in addition to marketing materials, logos and videos. Participants wore name tags with the logos of competitor firms. In order to allow for time for discussing potential projects with respect to the learnings derived from the business wargame, only two rounds were simulated.

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Lessons learned To understand how the business wargame added to the sensemaking capacity of the firm, we began by observing the leadership team of the company who attended all three business wargames. The CEO, the CFO and the CTO were enthusiastic participants in the wargaming workshop and were as fully immersed in the activities as their colleagues. The CEO’s initial perception was that a “game” would not add any value to the discussions of strategy of the business units or to defining projects. Yet in the first business wargame we observed strong engagement of the CEO, CFO and CTO. All three were assigned to competitor teams and quickly identified with their competitor perspectives. A few hours into the simulation, one member of the board, while passing the team simulating his own company, commented “look at the losers”. This shows participants’ deep engagement with their competitor perspectives, even to the point of challenging their own company as “outsiders”. Such emotional remarks demonstrated how participants accessed and embraced new perspectives in the wargaming exercise. When asked for initial reflection and key take-aways, participants mentioned it was “eye opening”, “looking at our organization from outside” and “how can we be better than [our organization]”. The new insights indicated the value of the workshops in terms of developing multiple perspectives on the industry and their own organization. Participants agreed that this variety of perspectives clearly supported their decision-making process with respect to what strategy to pursue given the challenges they were facing. The process of defining next steps to the wargaming workshops involved identifying the type of innovation activities, such as specifying specific ideation methods that would allow the participants to build on their new understanding. Here, ideation methods such as innovation patterns resemble a methodological approach, looking at a problem or topic from several perspectives, thereby helping actors to find a different approach to the topic and leading to new solution spaces. Central to the design of a business wargame is to ensure the inclusion of multiple stakeholders (such as business units) so that several

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perspectives are incorporated. This implies the inclusion of competitors that pursue different strategies or have different product portfolios. It is also important to consider how participants can “step into the shoes” of stakeholders in order to immerse themselves in the variety of perspectives (e.g., core expertise, interests). This includes thinking about how to foster the process of immersion, for instance, by having artifacts of the represented stakeholder physically present to allow for a deep identification with the assigned player and therefore a more intense perspective. Organizations attempting to generate a plurality of perspectives by understanding the stakeholders in their business find in business wargaming an approach which through role-play elements challenges mental models by making a variety of perspectives explicit.

Gaming When taking a closer look at business wargaming, it makes sense to consider in more detail the gaming part. Games have diffused greatly in the past, and in particular, video games have advanced to being a revenue generator in the same league as film and books (Isbister 2016; McGonigal 2012). In particular looking at the mechanics of video games with respect to how they engage, especially emotionally engage, their players not only sheds light on why business wargames work but what needs to be considered in designing business wargames to leverage their effects. In particular, it is this emotional activation that is attributed to successful computer and video games (McGonigal 2012) and is exactly what the organization and its leaders constantly try to achieve: engaging (emotionally) managers and members of an organization into discussion on strategy, the future, change or transformation. As we mentioned earlier, the engagement of managers with their organization is key to, for instance, successfully transforming an organization. And further we have argued that the emotional engagement of participants in business wargames is a prerequisite for sustainable learnings. Isbister (2016) argues from the perspective of video game design that well-designed games engage players in a flow state.

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For us the idea of a flow state, describing the zone in which a person is fully immersed in an activity, describes what happens in welldesigned business wargames. Isbister (2016) refers to the following factors contributing to flow state in gaming, and we will relate those to business wargaming. 1. A challenging activity requiring skill A business wargame should address a question that is challenging for the participants to develop solutions for. This also implies that it is necessary that participants apply a range of skills to develop solutions for a special situation that is not your typical business problem. 2. A merging of actions and awareness A business wargame needs to be structured in a way that allows participants to become aware of a new business situation and then act accordingly, for instance, by introducing a new strategy or product or service. 3. Clear goals The goal of the simulation clearly needs to be defined, e.g. what is expected from participants but also what shall be achieved by running the simulation. 4. Direct, immediate feedback It is absolutely necessary that the competing teams receive feedback from the market and customer team as quickly as possible. Providing this feedback is essential for the dynamics of a business wargame and forces teams, for instance, to rethink their strategy if the feedback from the market is disappointing. 5. Concentration on the task at hand A business wargame needs to focus on what shall be achieved. If, for instance, too many topics are covered in one simulation, the danger is that the teams lose focus and participants become disengaged. 6. A sense of control The control team needs to make sure that the business wargame is evolving in the defined boundaries and that, for instance, the dynamics of the simulation are at a high level. 7. A loss of self-consciousness

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We refer here to the notion that participants should immerse themselves as much as possible in their role in the business wargame and to be critical of their own perception on how they think their industry might work. 8. An altered sense of time A business wargame should be structured in a way that literally “time flies by” and participants feel so engaged in the simulation that they barely notice how many hours they are working on their tasks.

General learnings and advantages of business wargaming One of many advantages of business wargaming is the active involvement of participants. We in particular like the following quote from Paul Bracken (2001: 18), professor at the Yale School of Management, concerning the application of business wargaming in strategy formulation: “The problem with many strategy techniques is that they are too cold and bloodless. They fail to capture human emotions, and because of their icy rational character, people don’t really pay attention to them. They are soon forgotten, and they make no lasting impact on the organization. Gaming is a profound learning experience, one that is not soon forgotten”. During the course of a wargame the dynamics of a market and of the competitors will be analyzed, anticipated and experienced by simulating a likely future over the course of several days. As a wargaming exercise evolves, the participants are exposed to creatively thinking about the future, which essentially will also expose them to some of the early signals of imminent change, which then may be relevant for the particular organization or the industry as a whole. For business, as is customary in the military, we are proposing that whenever time and resources permit, wargaming should be used to test a strategic plan before putting it into action and making significant investments. Van der Heijden (1998: 351) summarizes the

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relevance of testing a strategy in scenarios that is also applicable for testing strategies by use of wargaming: “Strategy is the art of making choices – investing both for current and future success. To understand these choices clearly, organizations should identify a business idea and test it in substantially different scenarios. This process can help an organization to develop a business idea that will serve it well as the future evolves”. If a company uses a wargame to test whether an intended acquisition will really lead to the expected synergies and advantages in the market that are assumed in the business plan, it may find out that it simply won’t work and scraps the idea all together. In the case of a product launch strategy, as in the case of a mobile network operator in Germany who wanted to test its third-generation mobile launch based on the then new Universal Mobile Telecommunication System (UMTS), in essence enabling mobile data, it helped them to pinpoint weaknesses in their original plan and better address otherwise underserved customers.

Note 1. Dr. Felix von Held and Dr. Felix Werle are founding partners of the Institute for Innovation and Change Methodologies, Munich, Germany.

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Part Four BUSINESS WARGAMING IN TEACHING

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The VUCA world not only has implications for organizations and its managers but also for how these managers are trained. This refers to some extent to the issue of learning and development, but also to management education at business schools. Business education was the first application of wargaming methodology in a corporate context in business games or management games. Faria and Dickinson (1994) point out several benefits of applying a business wargame in management education: • •

Orient and train new employees: a wargame can give a newly hired employee the opportunity to gain decision-making experience in the new company. Screen current managers or would-be managers: during the course of a business wargame, for instance, analytical or decision-making skills can be assessed.

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Ongoing management training: applying business wargaming in management development has several advantages. It allows executives to work on their decision skills, experiment with strategies, learn new analytical tools, identify areas of further training, and gain various insights in, for instance, their own organizations, competitors, and in general other stakeholders.

One potential application for business wargaming in an organizational context is to familiarize newly hired employees with the organization, in particular with its capabilities. This is especially powerful in organizations involved in project work and similar situations where people with different skill sets need to work together successfully. Such settings may include consulting firms, investment banks, private equity boutiques, executive search firms, IT service companies and the like. At the start of this form of business wargame, capability cards are handed out to the participants, representing the knowledge, skills and background of individuals throughout the firm. Based on this information, the participants are required to make sense of all this in order to pitch to a market team the right to manage a series of projects. The objectives of the game are the following: • • • • •

Leverage the full capabilities of an organization by learning about capabilities within other teams. Increase collaboration by learning about the capabilities of others in the organization. Gain new insights into building a business (i.e. synthesize existing knowledge and package it for new pitches). Emphasize competitive bidding strategies. And most important of all, meet and learn about other employees in the same organization.

Such a business wargame has the benefit of allowing newly hired employees as well as existing members of the organization to think more strategically about their business and not just focus on shortterm revenue generation. It also allows employees to experience

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and think at different levels of the organization, thus again fostering a shared level of knowledge and capability throughout the organization. However, in the following we want to focus on the challenges imposed by a VUCA world on teaching management students and how in this context wargaming can be applied. It is a truism in management literature and practice alike that organizations face a more complex and dynamic environment than ever, one that is characterized by discontinuities and an uncertain future. From our perspective, dealing with uncertainty and its many facets is a challenge not only in business but also in management education (Schwarz 2013). Paul Schoemaker (2008: 119), former research director of the Mack Center for Technological Innovation at the Wharton School of the University of Pennsylvania, argues: “The traditional paradigm of business schools, with its strong focus on analytical models and reductionism, is not well suited to handle the ambiguity and high rate of change facing many industries today”. He argues that the MBA culture draws on tools that are suitable for business in times of stability but not when uncertainty is the main characteristic of the business environment. Schoemaker (2008: 12) suggests including the following in teaching in order to address the uncertainty in the business environment: • • • • • •

“Improve the blending of clinical and research-based faculty and topics Adopt a problem-centered teaching approach, using real world challenges Encourage cross-disciplinary instructor teams who co-teach all classes Bring in speakers from industry and government to add richness and context Make students co-creators of the educational content and the learning experience Foster student teamwork on real cases; reward student leadership and creativity”.

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Other authors (Prichard 2009; Casey and Goldman 2010) have argued that it remains challenging to engage students more into such a course and that is of relevance to teach strategic thinking. How can simulations such as business wargaming address these challenges in teaching? The use of simulations in education, and especially in military training, has a long history (Smith 2010). We have in this book already discussed in detail what the advantages of business wargaming are and that learning plays a vital role. Lewis and Maylor (2007: 136) argue in the context of teaching in favor of simulations, describing the characteristics of a business wargame: “The first is an opportunity to harness the dynamic of having other people trying to achieve the same thing. Such competition, we have observed to be almost always beneficial to the student experience, creating an additional pressure analogous to a competitive market. The second kind of play, is the experiment— giving the opportunity to see the effects of one or other strategy, but without having the benefit of a human competitor”. Simulations are therefore well positioned to transfer current managerial challenges to the classroom and its usefulness is also further underlined (Ajayi-Ore 2019; Rogmans 2019). In addition, Bracken (2001) has argued that the benefit of business wargaming, in contrast to other strategy techniques, is that gaming is a profound learning experience and the experiences made and insights generated in such a simulation stay with the participants for a long time. In the following we will describe two approaches to using business wargaming in the classroom: 1. Teaching with a content and process approach: Here students not only play a business wargame in order to learn about an industry and competitive situation, but they will also be directly involved in designing the business wargame and developing the content of the gamebook. 2. Teaching with a content-only approach: Here students will work with a fully prepared wargaming exercise, including

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introduction to the industry, competitive landscape and gamebooks, and thus the focus is based on the learnings they will take home from playing the wargame.

Case study: Approach to teaching business wargaming: Content and process approach After talking about the applications of business wargaming in organizations, we will now describe in more detail how business wargaming can be applied toward the education of master-level students in strategy classes and also how students can be familiarized with the tool of business wargaming as such. Point of departure This business wargame was carried out at a German university. It was intended to give master-level students in management and cultural studies an opportunity to add to their knowledge on strategy and strategic management gained during previous semesters. Objectives and questions The main objectives for the students were to apply their theoretical knowledge of strategy and strategy formulation in a simulation. Because of the particular setup of this wargame, another objective was introduced: to enable the students to experience the relevance of competitive intelligence (in particular, competitive analysis) in strategy. One last objective was to introduce students to tools for developing competitive intelligence such as business wargaming and strategic early warning systems. Game setup In this wargame the German music industry was simulated over three moves. Around 25 students took part in the wargame, organized into five teams.

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The facilitators of the seminar and the business wargame took on the role of the control team. Several weeks prior to the business wargame the students were assigned to specific competitor teams. Once the students had been assigned to their groups, they were asked to prepare the gamebook profile for the competitors they would be representing in the simulation. All the students received a template and were asked to prepare ten slides, containing general information about their company, the industry and the relevant market, including a SWOT (Strengths, Weaknesses, Opportunities, Threats) and PEST (Political, Economic, Social, Technological) analysis. The students assigned to the market and customer team was asked to come up with an idea on how the market could be segmented and what the needs and preferences of the respective customer segments are. The game was carried out over two and half days and opened with an introduction to business wargaming by the facilitators. Following this the students presented the information they had gathered on their particular player to each other. The actual wargame started on the morning of the next day and ended around early afternoon of the third day. All the information prepared by the students was distributed to each of the teams at the beginning of the wargame. While the competitor teams were preparing their presentation, the market and customer team was asked to come up with ideas on how to evaluate the moves and how to provide concise but logically traceable feedback. This was particularly important, because the International Federation of the Phonographic Industry (IFPI) was a player in the game and thus did not allow basing the feedback solely on a quantitative model. Because the IFPI is not a competitor in the music industry in its own right, the explanatory power of a quantitative model would be limited. So, the students developed criteria from the perspective of the market and customers as a basis on which to evaluate the strategies and offerings of each team and based on which they would provide feedback to the competitor teams. During the simulation, time slots were assigned by the control team, during which the students and competitor teams could

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communicate among each other via email in order to strike deals or form alliances. The control team assumed the role of all stakeholders not explicitly represented in the business wargame. The control team further introduced a number of external stimuli during the moves, such as press releases, which added to the complexity of the industry and the dynamics of the simulation. The wargame ended with an indepth discussion reflecting not only on the weekend but in particular on what the students had learned during the wargame and how this related to their knowledge from their previous lectures on strategy and strategic management. Lessons learned In this review of the lessons learned, we will refrain from an analysis of the single moves, but rather look at the overall lessons from the perspective of business strategy in the particular setting of the German music industry. The first important lesson for the students was the particular relevance of good and reliable competitive intelligence. Naturally in a student context, the quality of the information gathered, assembled in the gamebooks and then presented by the students varied in quality, and in some cases, significantly. Those teams which had assembled only mediocre competitive intelligence clearly struggled during the first move to come up with a convincing strategy, which was based on reliable facts. Because they had focused so much on their competitors and what differentiated them, the teams with the weaker profiles had neglected to research and reflect what their own company was really all about, and they had great difficulty making up for this disadvantage during the remainder of the wargame. This left those students with an insight into how important rigorous and solid competitive analysis and intelligence are in order to formulate a strategy and effectively compete in a market. Overall, the students experienced that formulating a strategy is a highly complex and difficult task, particularly when juggling the different variables of relevance. Therefore, it was not too surprising

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that in the first move the students focused well on the customers in their strategies but neglected the fact that they had competitors. On the other hand, some teams had difficulty in anticipating changes in customer behavior over the time, while others focused too heavily on technological developments. The students also experienced difficulty in coming up with a strategy in a prescribed time, especially when confronted with information overload and an abundance of choice, with only very little time to discuss the decisions in their respective teams. “This was the best seminar I attended during my time at university”, one student stated when asked to give feedback on this form of seminar. Overall, the feedback from the students was overwhelmingly positive, emphasizing how much they enjoyed this form of “action learning”. From our experience, the benefits of using business wargaming in the classroom are manifold: 1. Students have the opportunity to apply strategy concepts they have been introduced to and work with them 2. Students gain insights into the (future) dynamics of an industry and develop insights on an industry and a number of competitors and customers 3. By including students in the design, preparation and execution of a business wargame, students are also introduced to method of business wargaming

Case study: Approach to teaching business wargaming: Content-only approach After having heard about an example of how business wargaming can be taught as a methodology and strategy tool while providing students the opportunity to gain experience, in a cut-down version, of the power and basic workings of the method, we would now like to focus on another application of business wargaming. In this case content was taught via the method of business wargaming. A case in point was the Booz Allen CEO Challenge. The Booz Allen CEO Challenge was launched by one of the authors of this book and his team in 2005 at Harvard Business School and the

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Kellogg School of Management. It has since been played at top business schools in the United States and in Europe and has been recognized as a tool for creating an employer brand (Rodriguez 2006). The CEO challenge used a number of challenging case studies, sanitized and downsized from actual client situations. The case discussed here simulated the development of the portable audio device industry in the United States.

Point of departure Although Booz Allen Hamilton was one of the top players in the strategy consulting field, it was never quite recognized for its strategy orientation among business school students and thus did not become a household name for strategy consulting like some of its main competitors. There were multiple reasons for this. For one, the company has never pursued a strategy that would give it that household name status and remained rather conservative in its communication with the greater public. The company at the time comprised two businesses: the strategy consulting division (now a part of PwC) and a division which was more government/technology oriented and operates under the Booz Allen Hamilton brand up to this day. Following the downturn after the dot-com bust, the company had lost some of its standing at top business schools because it had stopped recruiting from them and consequently did not sustain a high enough presence. As the economy recovered and business picked up again, the firm found itself at a disadvantage when competing for top talents from the best business schools in the world because not enough people knew the company and even fewer knew that it was involved in actual strategy work. When looking for an effective way to change this perception, a group of people involved in the recruiting activities of the company decided to leverage the firm’s wargaming expertise and devise a scaled-down game that could be played with business students without lengthy preparation or the need for particular industry expertise. Therefore, cases were chosen which had a clear consumer orientation and involved products/services with which the students could familiarize themselves quickly.

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Objective The objective was to create a high-intensity event that would be attended by some of the brightest minds to be found at the top MBA programs and show them firsthand what it feels like to sit on the executive board of a large company or act as a consultant to such a company. The students needed to work hard, think in a structured and strategic way and come up with specific action plans to establish how they wanted to win! Aside from the actual simulation, they were given ample opportunity to mix with Booz Allen Hamilton representatives and learn about consulting and the company. The event also provided a great opportunity for the Booz Allen people to observe the students in a high-pressure, high-performance environment and assess their behavior in a team setting. Besides promoting the firm, its people and the high-level work it does, the CEO Challenge served as an important relationship management tool from which 30 students graduate at each event. Students, even if they do not make it through the rigorous selection process, will return to their school, act as valuable ambassadors and help raise awareness about the quality of work and the people at Booz Allen. In promoting the event to prospective participants, the firm used promotional tag lines such as: Do you have what it takes to excel in the top job? You’re the head of a major electronics company playing in the portable music device market. One of your biggest competitors is poised to roll out an incredible new device, implementing the latest technology and the coolest design features—six months ahead of schedule. What do you do? Test your corner-office savvy in a fast-paced; high stakes strategy simulation that puts you head-to-head with your peers. The CEO Challenge is a chance to demonstrate strategic thinking and teamwork and to prove your worth—with the pros watching your every move! The event would put students in the shoes of a CEO and clearly challenge them, hence the name “CEO Challenge”.

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Game setup The CEO Challenge was a two-and-a-half-day event, typically played over a weekend. It included 30 hand-selected students from top MBA schools and approximately five to eight Booz Allen consultants, who moderated and coached the students as well as took care of logistics and IT. The event started with a detailed introduction to strategy and strategic planning (something students had previously heard about) and what role wargaming plays as a strategy tool. This introduction was followed up with a basic anatomy of wargaming and a presentation of relevant case studies, some of which are presented in this book. The presentations then got more specific, involving a crash course in the audio device market (the industry setting of the CEO Challenge), with information on the most important trends and players, followed by detailed instructions on how the game would be played and how the teams would be divided up. Students were not given any materials ahead of the event and were only vaguely aware of details about what industry the simulation would play in. The intention was to throw a considerable amount of information at the students, send them off to their break-out groups, ask them for ambitious deliverables, mix them up with people they have just met for the first time and give them a very tight deadline. With some help from their coaches to keep them on schedule and making sure the minimum standards for the deliverables are met, the teams needed to figure out quickly how they want to organize themselves, plan the available time, scan through the information, synthesize their findings and come up with an action plan to cover how they want to position themselves in the competitive context— not an easy task, but very typical for any type of consulting project. The coaches, all of whom have solid background knowledge in the industry and are experienced project managers, were available for individual questions, but were not allowed to contribute to the strategy formulation process. Basically, all the information the students may use was provided in the gamebooks, and the use of PowerPoint presentations or Internet research was not allowed, nor did they have the time to do it. Past experience suggested that if PowerPoint were permitted, the teams

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would focus too much on the look of their presentations at the expense of the quality of the content. While the competitor teams were given the task of analyzing the information and coming up with a strategy for their respective moves, the market and control team (which, for the sake of simplicity, was combined in this simulation) had the task of developing a market view. This view was based on customer segmentation and involved brainstorming and structuring a list of customer preferences in priority order per segment. This list would provide the basis for the subsequent evaluation of the competitive offerings for each move by the market on the basis of a system of scores. In order for these scores to work correctly and consequently generate gains or losses in market share, the control team also needed to set up a market model. This involved them adjusting the model to reflect the correct weights for each of the parameters, labeling them correctly and doing a few dry runs to ascertain that the computations were working. The model had been designed by wargaming experts and was based on the growth projections for the industry, which depending on the decisions of all teams can either accelerate, decelerate or remain as projected. Based on the attractiveness of the individual offerings of each team, their relative share in this development could either grow or shrink. At the end of each move the competitor teams received qualitative and quantitative feedback from the market and control team. Using computations within the model, they received detailed market share numbers, approximate margins and relative change information. The qualitative feedback consisted of statements from the various customer segments: what they liked or didn’t like about specific offerings. Sometimes, just to spice things up, the control team would introduce certain “shocks” or events designed to force the teams to address a specific issue. For example, unforeseen problems with hardware components, which affected cost structures, or required product recalls or breakthrough technological developments, if feasible. Alternatively, shocks could be in the form of public concerns over issues such as piracy, traffic accidents caused while listening to music on the go and so on. Whatever the problem was, the teams needed to address it in their subsequent presentation or risk the market not

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rewarding them as hoped for. These interventions thus enabled the control team to encourage the competing teams to focus on particular issues they wanted them to explore in more detail. At the end of the CEO Challenge and once the quantitative results were in, the market and control team issued several awards to reflect the battle as fought with sticks of different lengths. If, for example, you are on the dominant Apple Team, losing only a little market share is quite an accomplishment, because you have successfully defended your position despite increased competition and may still make considerable profits. On the other hand, as a new entrant or a small player, the question is much more one of survival and growing the business from nothing into something. The basis for the awards could vary from highest market share, best profitability, best marketing campaign, most innovative product and so on. At the end of the event, students were asked to reflect once more on what they had recognized and what they had learned about the industry and about their teams. This synthesis of views yielded very interesting insights, and in the past teams have actually predicted a number of the real developments to follow. For example, one team anticipated the introduction of the iPhone more than one year before this actually happened; another predicted the high-end top-quality positioning of Sony Ericsson leveraging their “Walkman” brand. They also predicted the move toward hybrid devices, i.e. the combination of phone, mp3-player and PDA, therefore concluding that the biggest threat for Apple and the iPod will come from the mobile phone manufacturers if they can get their act and their products together. The CEO Challenge was an amazing success story for Booz Allen Hamilton. Applications were skyrocketing and fewer than one out of ten students could be slotted for any one of the events. As predicted, almost all graduates had become valuable ambassadors communicating news about the event and the Booz Allen Hamilton name on campus. So, in sum, the value of the event lay just as much in the learnings for students as in the marketing promotion for the Booz Allen Hamilton brand and its people. Seeing students learn, fight and struggle under pressure developed them as individuals and fostered group learning as well. Quite often the experienced consultants were

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amazed at the findings and new angles such a diverse group of participants brought to the table. Lessons learned It appeared that for the students, the major lesson learned was to focus on the customer and to formulate a consistent strategy which would stay valid over three moves and which would eventually generate market growth or contribute in general to the value of the played corporation. The following are quotes from students who participated in the CEO Challenge: • • • • •

“Spend lots of time on strategy and brainstorming. The more precisely you analyze and get your plan right upfront, the more efficient and hopefully successful you will be in the end”. “Be efficient and collaborative and accept feedback given. The questions at hand are just too complex to try and tackle them as a one-man show”. “Focus on customers, be aware that customers differ over time and that they need time to digest technological changes”. “Understand position relative to competition. You can have a great value proposition to the customer. If your competitor has a better one, it is only worth half as much”. “Understand how the market evolves, concerning technology, lifestyle, novelty, and commodity”.

Testimonials of participating students illustrate how the business wargaming methodology represents a unique learning opportunity, which is highly appreciated. Although we speak here of a particular case study, which was organized and sponsored by a particular firm for a particular purpose, we think the case of the CEO Challenge illustrates how business wargaming can be applied to educate up to 30 people at a time about very complex issues in a collaborative yet competitive setting. The same methodology can be applied for corporate leadership programs and customized to the respective industry of the client corporation. How elaborate this is done and how much it would ultimately cost

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to put such a simulation together would be the subject of detailed discussions about the purpose of such training. One major benefit of this approach is that once it has been put together, it can be run several times with different participants, which is particularly interesting for global firms who want to obtain a certain “unite the doctrine” about some topic and educate their employees in a uniform, intensive and fun format about it.

Note 1. Based on Schwarz (2013).

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12 REFLECTION ON APPLYING BUSINESS WARGAMING IN THE CLASSROOM CRITICAL SUCCESS FACTORS1

The aim of this section is to reflect on the application of business wargaming in the classroom. We will reflect on our experiences derived from years of teaching strategy and business wargaming to a diverse group of students, in particular MBA students at business schools. This reflection will also allow us to highlight critical success factors for applying business wargaming in teaching.

Design One essential feature of the approach to using business wargaming in the classroom shall now be elaborated. In order to judge and evaluate the moves of the competitor teams, a computer model was not assigned; instead, the business wargames relied on the human judgement of the customer team, making here a distinction between business wargaming and computer-based simulation, which implies that no model restricts the strategic options developed within the simulation.

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In general, the argument is that the danger a model poses in guiding a simulation is that it represents the perspective of the analysts who constructed that model (Hanley Jr. 1992). The primary aim of not adding a computer model to the classroom business wargame was not to simplify the alleged real world by implying that there can be right answers in crafting strategies in the business environment at hand, so to say, keeping the complexity of the business environment in regard to strategizing in the business wargame. It has been argued that the advantage of role-playing simulations, and business wargaming can be perceived as such, over computerbased simulations is that in a role-playing simulation new meanings appear to be generated from the known through social interaction (Fuller and Loogma 2009). And, for instance, it has been described that the most compelling results are derived from a simulation when a team has been shocked by a competitor’s actions, as in a strategic crisis, and must then think more deeply about the dynamics of the competition (Cares and Miskel 2007). Another aspect concerning the design of a business wargaming shall be elaborated here: how to prepare students for a business wargame. Crookall and Thorngate (2009: 19) propose three broad types of simulations and thereby give an indication for the design of classroom business wargames: • •

•

“Knowledge-to-Action (K-A): Events that are designed, run, and debriefed primarily to enable or encourage participants to apply previous knowledge to some practical situation. Action-to-Knowledge (A-K): Events that are designed, run, and debriefed primarily to enable or encourage participants to generate understanding, learn new skills, and gain new knowledge from a concrete experience. Integrating-Action-Knowledge (I-A-K): Events that are designed, run, and debriefed primarily to enable or encourage participants to make connections between their actions and the related knowledge”.

These three categories can very well be perceived as a rough guideline on not only how to prepare students for a business wargame but

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also what goals can be achieved in such a simulation. The knowledgeto-action approach has proven particularly viable with master-level students, which, for instance, previously had a course on strategy, allowing them not only to apply but foremost to critically reflect their applied knowledge of strategy making. While this notion also applies for integrating action and knowledge, undergraduate students could benefit from acquiring knowledge of strategy without any background in the action-to-knowledge approach. The action-to-knowledge approach was followed in four-day business wargames with bachelor and master design students, none of whom had previously taken strategy courses. The courses began with a very brief introduction to strategy, touching upon the aspects of the strategic position of an organization, strategic choices and strategy action, emphasizing the role of customers, competitors and trends. With this knowledge, the students started the business wargame. In the course of the business wargame, the students were given the opportunity to reflect and discuss their learning on strategy. Critical success factor I: Human judgement should be applied to assess competitor moves, allowing students to take the perspectives of customers and the market. Critical success factor II: Decide before designing and running a business wargame which type of simulation in regard to knowledge and action shall be focused on: business wargaming can either be used to apply existing knowledge, e.g. on strategy, or to familiarize a group of students with new knowledge (e.g. strategy).

Action learning It has been frequently postulated that learning benefits from action (e.g. Baruch 2006; Kolb 1984). In particular, since business wargaming can be perceived as a dynamic role-playing simulation, one can argue that different roles enable the treatment of different subjects or situations, and this might be one of the most effective ways not

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only to engage students but also to initiate and maintain learning (Baruch 2006). Critical success factor III: Make sure that the business wargaming is well structured and that dynamics stay at a high level and that ideas (e.g. strategies) can be tested.

Group dynamics A business wargame carried out at an art school was characterized by emotional and political dynamics. While the members of one team from the beginning struggled heroically to work together, this experience appeared to be very valuable for the entire business wargame. This team represented a very well-established company and actually started from a very comfortable position in the simulation. However, constant fights among the team members actually hindered their ability to reach decisions. During the entire simulation, this team lost market shares to their competitors and moved their company toward bankruptcy. A key lesson for this team was how much success in such a context would depend on political and emotional factors and how successful management teams function. Such lessons, in particular, indicated the ways in which a business wargame can engage students in critical management thinking and lets them gain a deeper understanding of politics and power in organizations. Critical success factor IV: Observe group dynamics and discuss how group dynamics can either support or hinder a team in achieving a goal.

Strategic thinking Strategic thinking has been described as one crucial leadership skill in dealing with uncertainty, which, however, appears to be less developed (Krupp and Schoemaker 2014). It has been argued that strategic

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thinking benefits from work experience (Casey and Goldman 2010). A business wargame has the potential to allow for exactly this type of experience in a condensed way. The uncertainty and complexity of the business environment can very well be mirrored in a business wargame: uncertainty concerning how future trends will play out, how consumers will react or how competitors will act or react. This allows participating managers to deal with questions and situations today, which otherwise they may only address when they have significantly advanced in an organization up to business unit leader, member of the executive board or board member. Even if they are not there yet, their understanding of the challenges at these levels will be beneficial to them for their better understanding of their role in the organizational context. In the first move in a business wargame, students usually struggled tremendously to give equal amounts of attention to their business environment, and especially to customers and weak signals of change and at the same time to their competitors. However, after the first round of feedback, the teams usually not only understood the interrelationships in the business environment but were also able to handle this complexity. Critical success factor V: Make sure that the complexity and uncertainty in the simulated business environment are not unnecessarily reduced. In the first round of a business wargame students should be overwhelmed. It is part of the team-forming and decision-making process.

Debrief ing In a classroom, this phase is essential for reflecting on what has been learned about strategy. This can be achieved, for instance, by allocating the students in new groups, ensuring that in each group multiple perspectives are represented. Furthermore, it has been proven beneficial to have industry experts come in at the end of a business wargame to discuss with the students what they think and what they would recommend. Not only does this allow the students to discuss

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their strategies with the experts, but they can also gain a sense of how much of the issue is at hand in an industry they covered during the business wargame. It is interesting to note that the experts usually stated that the students did not necessarily come up with groundbreaking new ideas in all wargames, but they usually were quite on target and raised the issues that were driving that particular industry. However, in other cases the students demonstrated a considerable amount of foresight and provided valuable inputs primarily from the customer perspective. Critical success factor VI: Including sufficient time for a debriefing and ideally for discussing the learnings at the end of a business wargame with industry experts.

Note 1. Based on Schwarz (2013).

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Part Five HOW TO GET STARTED

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13 DESIGN, EXECUTION AND EVALUATION

We have provided you with an overview of the history and the basic methodology and have given you insights into a number of applications of business wargaming. We will now spend some time on how to design and execute business wargames. The specifics may vary significantly depending on the type of game and the underlying questions which need to be answered, which means that this chapter can only offer a general guide to the process. What follows is a pragmatic view of how to get from an initial idea to an executable business wargame and how the lessons learned are best captured. It is this capture of knowledge which is a prerequisite to unlocking the commercial value of any game and translates the learning into a competitive advantage. Any business wargame follows a basic four-step process: design, preparation, execution and debriefing/documentation. As displayed in Figure 13.1, each of these main steps includes a variety of subactivities, which we will explain in more detail. By way of example

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Figure 13.1  Steps in designing a business wargame.

we will relate the process to the application of business wargaming for strategy testing.

Design phase The most important aspect of the design phase is to determine the objectives of the game clearly and, more specifically, distil the key question the team will need to have found answers to by the end of the game. Perla (1990: 165), for instance, argues that when describing the objectives of a wargame: “In specifying the objectives, game sponsors, designer, and analysts must clearly identify how and in what ways the game can provide the type of experience and information needed to achieve them. The statement of objectives should be as specific as possible to allow game-design efforts to focus on those elements critical to the production of that experience and information, and to the assimilation of training lessons or the collection of research data. A wargame’s objective should be the principal driver of its entire structure”. Usually clients commissioning the design of a wargame have a broad idea of what they are seeking to discover through the game. This may include questions such as: How can we best enter a market? Should we make use of a given technology (and if so, how)? Does an alliance or acquisition make sense? What will happen if some of the basis of

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current regulation changes? What will be the impact on our current business models or how might we change them? What should we do if…? How can we test a certain course of action? and so on. It is important, therefore, as an early step that the consultants, often together with the sponsor, conduct a series of interviews with other members of the senior management team. These interviews will provide a wealth of expert views around the underlying question the game needs to answer, which in turn generates a long list of detailed questions, all of which need to be answered. Involving the right internal stakeholders in this way ensures that the client sponsor and the game itself will have the necessary internal support and management attention to have a chance of success. Ideally games should be commissioned by the CEO, a member of the board of directors or a division head or business unit manager. However, on some occasions even functional managers, such as heads of business development, marketing directors or HR directors may opt to commission a game. The senior interviews are relatively informal, yet need to spend time on a number of topics, such as: • • • • •

•

What does the company want to learn from the business wargame? What are the key questions the wargame needs to answer? What are some of the most relevant and unaddressed issues in the organization? Who should participate in the process during the design and play stages? (From which business units at what level and what should be their role in the exercise, i.e. experts vs. participants)? What is the focus of the game? Rather than trying to model every detail of the business, what products, stakeholders, competitors, customers segments and markets are most relevant in order to answer the set of questions? What should the time horizon of the business wargame be?

Answering these questions thoroughly and gaining a consensus view of the objectives is particularly critical for the success of any wargame. Unless top management is in favor of such a game and will dedicate the time and resources to it and is serious about participating in it

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even if this involves slipping into the role of competitors, the investment will be a waste of time from the outset. We also find it helpful to refer here to design principles from games in general. McGonigal (2012) argues that all games share the following four traits: •

•

•

•

The goal is the specific outcome that players will work to achieve. It focuses their attention and continually orients their participation throughout the game. The goal provides players with a sense of purpose The rules place limitations on how players achieve the goal. By removing or limiting the obvious ways of getting to the goal, the rules push players to explore previously uncharted possibility spaces. They unleash creativity and foster strategic thinking The feedback system tells players how closely they are to achieving the goal. It can take form of points, levels, a score or a progress bar. Or, in its most basic form, the feedback system can be as simple as the players’ knowledge of an objective outcome: “The game is over when…”. Real-time feedback serves as a promise to the players that the goal is definitely achievable; it provides motivation to keep playing. Voluntary participation requires that everyone who is playing the game knowingly and willingly accepts the goal, the rules and the feedback. Knowingness establishes common ground for multiple people to play together. And the freedom to enter or leave a game will ensure that intentionally stressful and challenging work is experienced as a safe and pleasurable activity.

As a guiding principle these rules help in focusing on the relevant aspects in designing a business wargame. We have already referred to aspects from video gaming to better understand what the success factor of well-designed games are. Building on the ideas and adopting Isbister’s (2016) ideas on creating a flow state, we provide in Figure 13.2 ideas how a business wargame should be designed to achieve this state. One critical issue in designing a business wargame is the question of how to ensure that the participants can immerse themselves into

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Figure 13.2  Flow-state perspective on designing business wargames.

the assigned role. O’Gorman (2017) points out that a wargame also needs to focus on the cultural beliefs, values and personal perspectives that drive an opponent’s decision. O’Gorman (2017) suggests tapping into the following sources to assess these soft factors of players included in a business wargame: • • • •

Speeches Media interviews Written documents Business letters to shareholders in annual reports

In addition, it has proven valuable in our practice of designing and running business wargames to stress the following: 1. Find a way to introduce participants to their role. Ideally this should happen prior to a business wargame, e.g. the evening before, to enable participants to immerse themselves in their role. This can be supported, for instance, by exercises that require the groups to think themselves into their role

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2. Surround participants during the business wargame with as many artifacts of the assigned players as possible. This can range from logos, marketing material, videos, products to hats or t-shirts participants are wearing.

Preparation Once the design parameters have been set, you need to gather together the requisite information about the main competitors, the market(s), customers, current and pending regulation, technology trends, possible unexpected events and so on, which are then distilled into the gamebooks (basically the screenplays describing how to play the game) and into the market and control models, which are designed to provide some objective measures to key parameters for the game. The game books contain information about the client company and the competitors in the game, a market overview, as well as the most important trends, regulations and technological developments in the industry. The market models do not aim to capture everything that is happening in the real world but are designed pragmatically around key aspects such as the main customer groups, essential financial data and so on, which will be explored in the game. While models are important for their use as frameworks for what is happening in an industry, they are merely a support tool for the experts in the market and control teams, who will need to scrutinize their results in any event and, if necessary, adjust these in order to emphasize particular developments. To give you a specific example: When simulating the portable audio device market in the United States for the Booz Allen Hamilton CEO Challenge, we prepared an elaborate model, which used a wide variety of input parameters and ratings to enable experts from the market team to assign market shares and, at the second stage of the game, to calculate margins and net profitability for a number of products. The assumptions used in order to estimate the cost levels built into the model were based on industry research. This research estimates material cost and R&D cost at various levels, depending on whether we were dealing with an audio-only, mobile phone or hybrid product, based on certain assumptions around the quality of components.

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On one occasion, a team took a very low-cost approach to the design of a mobile phone product, using cheap components, only basic functionalities requiring little R&D and so on. The model, which assumed a specific cost level for this type of product, generated a negative profit figure on the basis of the price point at which the team intended to sell the product. This meant that the control team needed to adjust some of the component costs manually in order to do the product justice. Otherwise, the team would not have been able to break even within the constraints of the model. This example illustrates how the model provides good direction but needs a reality check by the experts on an individual product basis. Once the basic model is in place, a so-called pre-test “mini” game should be conducted, in which the sensitivities of the model are tested and any bugs are detected and corrected. The “mini game” usually follows one or more likely scenarios, which reflect today’s level of knowledge in the industry. The type of base scenario for the game depends on the objective of the wargame. If, for instance, the aim is to prepare for crises or to assess the crisis management system of an organization, the scenario needs to be reasonably elaborate and will be introduced by the control team step by step. If the focus is strategy testing, then the scenario may only consist of certain key developments, which are likely to take place over the course of the next couple of years. Take, for example, the opening up of the market for electricity. The scenario in this case may simply indicate that by year X, the market for corporate clients will be open, followed two years later by the consumer market. A common framework is written on top of this basic scenario, based on what is known or assumed about market regulation. The framework is introduced as a set of guidelines for all players to follow. Beyond that the teams are free to do whatever they want within the boundaries of reality (defined by regulation and their own financial strengths and capabilities). All games have a common starting point of today, unless you deliberately choose to set it at a different time frame. What is known in reality today is also what is known in the game. However, from the second move on anything goes as long as it is within the boundaries set by the control team. The interesting thing is that at the outset of the game, even the game developers do not know where the game

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will be going after move two. It is also interesting that if one and the same game framework is given to two different participant groups, the game may develop quite differently, yet the lessons learned will be similar, as was demonstrated in the game series dealing with global power shifts conducted by the US government in the 1980s. The outcome of the initial game seemed so implausible that the game was repeated several times, only to repeat the same outcome each time. So, the preparation phase provides the data set and rules for the game, which are important to structure the game and make sure it can be kept on track and focused on the questions relevant to the client. The objective of the rules are to keep the game close to reality and also keep the game playable, avoiding a wargame that becomes so complex that no one understands what they are doing. The trick is to give the teams plenty of leeway within the rules so they can experiment with everything that would be available to them in the real world. In order to keep the balance between playability and complexity, the control team needs to be experienced in running games but also possess a profound understanding of the industry and market so that it can take corrective actions should they become necessary. In order to get the most out of the game, the participants, regardless of their team, need to receive a proper briefing. This briefing, which can make up the last step of the preparation or the first step during the game’s execution, will set the common ground for all parties involved. During the briefing the teams receive a crash course in strategy and wargaming, typically including a high-level summary of industry trends and facts, which may include a detailed competitor briefing, as well a detailed explanation of how to play the game. During the “how to play the game” part of the session, participants are divided into the various teams, assigned coaches and familiarized with the expected deliverables, how to communicate with other teams and the market and given a very detailed schedule.

Execution The execution of the game is the fun part. Typically, three moves are played out and the teams are busy trying to meet their schedule. First of all, although it is called game, this is serious business, and

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it is of utmost importance to the success of the exercise that every individual involved gives the game their best shot and tries to live the role they have been assigned. Only if the competitors try their very best to beat their real-life company will they create the necessary pressure that will drive their peers in the company team to perform at their best. Switching roles and viewing the company from the perspective of competitors is itself enlightening and helps many long-term managers take a fresh look at what their company is good at and where it can improve. In this sense business wargaming is also a means to overcome organizational blindness. The second important aspect for successful execution is to stick with the schedule and agreed deliverables. There is nothing more annoying than a situation in which four out of five teams are on time and deliver their solution to the agreed level of quality while one team then lags behind. If this happens, the entire wargame is in danger of running out of sync, which will jeopardize the objectives. For this reason, wargames are ideally conducted by a dedicated team of experts and supported by experienced coaches, who can keep an eye both on the clock and on the quality of the deliverables. Typically, you need to present an initial summary of the lessons learned after each move and certainly at the end of the actual game (which usually lasts between two and three days). This summary is assembled from the observations of the coaches, the control team and the input provided by the participants.

Debrief ing and documentation After designing, preparing and conducting a wargame, probably the most critical part is to capture what has actually been seen during the game and turn it into actionable measures. To this end, all available sources should be evaluated, such as the mail log, which chronologically captures all interactions between teams. Another source of information are the various plenary presentations by the teams. Here the actual presentations can be used, or as we have done in several cases, the presentations can be videotaped for later review. In any case, if coaches have been used, their input should go into the evaluations as well, because they oftentimes have great

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insights into team dynamics, the types of discussions that went on during the breakout sessions and the decision-making process in the assigned teams. Yet another source are the qualitative evaluations by the market team and the quantitative results calculated by the control team. At the end of the actual game, time should be invested in a thorough feedback session or so-called “hot wash up” to capture the fresh impressions of participants and coaches as well. These can be more freestyle in nature or quite structured using a set of specific questions that the teams need to prepare. These could be question such as: What would you advise the company to do? What have you learned about the industry, about competitors or about yourself? Then after everyone has left the site of the wargame, the team of consultants or company representatives who have administered the game should invest a substantial amount of time to go through all the source material and systematically come up with insight and recommendations. To this end, we recommend using a very simple structure for analysis. We call it SIC or Statement–Insight–Consequence. The idea is to first list whatever statements or facts we have observed throughout the course of the wargame. Ideally this is done on a moveby-move basis. Then based on the totality of the statements or facts, we assemble a number of insights whereby not every statement or fact has to lead to a single insight. It might very well be that multiple statements and facts lead to the same insight. In general, the more statements and facts lead to the same insight, the more important the insight is. In a next step, we take the various insights and from them derive specific consequences that need to be addressed going forward. The results from the analysis are then usually put together in a detailed report that can be distributed among the participants of the wargame. In a final step, and based on the consequences identified, ideally in collaboration with the relevant people from the company who are responsible for the respective areas, specific measures and tasks have to be generated, which then need to be assembled into an implementation plan with an assigned person responsible for the implementation and a set implementation date. Once set up, the implementation

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Table 13.1  SIC structure for analysis example Statement/Fact

Insight

I1: Customer segment X is receptive for environmental advantages. However, it suffices to highlight the environmental benefits as part of the general S/F2: In Move 2 positioning. Exaggerated additional emphasis on emphasis appears like environmental aspects and “green washing” and large additional caused a deterioration of expenditures on marketing brand attractiveness. yielded relatively little additional gains in market share. S/F1: In Move 1 customer segment X reacted very favorably to environmental aspects of the marketing campaign of company Y.

S/F3: In Move 2 it became apparent that the definition of what constitutes “luxury” differs widely between age groups.

I2: While for our current top customer segment in the age group of 40–75, the car with its attributes constitutes luxury, for our targeted up-and-coming customers (aged 20–30), this is no longer the case. Instead, they are more interested in time saved for other activities and overall convenience.

Consequence C1: Positive environmental aspects of the products need to be communicated whenever they exist and some additional money (max. 5% of total promotion cost) should be calculated at the product level. C2: No more separate budgets for “environmental campaigns”.

C1: We still need to cater to our current top customers and closely watch as they age and if they have changes in preference. C2: We need to aggressively develop new offerings that capture the needs of our up-and-coming top customers and invest X% of our total R&D budget toward that end.

plan can then be monitored and controlled on a regular basis until the changes have all been made. The depth and focus of the debriefing are again dependent on the objectives of the game. Steinwachs (1992), for instance, provides several examples of how to go about debriefing a simulation. In a strategy testing game, the debriefing follows the just described path, while in a crisis prevention game, typically an action plan or contingency plans will be developed. In educational games, the debriefing may have a stronger focus on the group dynamics and what the key points were in the decision process, where the group took quantum leaps or why mistakes were made.

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Summary At this point, we would like to summarize what we believe are the critical success factors for designing and executing a successful business wargame: • •

•

• •

•

•

Tailor-made for each client: Business wargames should be tailormade for each client and should reflect the overarching objective, issues and questions of that particular client. Thorough preparation: Preparation is critical and starts with indepth interviews with principal players prior to the wargame. Once buy-in is obtained, thorough work needs to go into the preparation of the gamebook and models. Solid quantitative data: Ideally a wargame should have solid quantitative data. If this is not possible, it should always provide a framework to allow you to reverse-engineer why certain things turned out the way they did. Pragmatic models: Models should be comprehensive but focus on the key questions and reduce complexity rather than trying to model everything that is happening. Intensive and well structured: Good business wargames are intensive but also fun for the participants. They are tightly scheduled with clear deliverables and a professional team to run and coach the game. In this way the participating managers can fully submerge themselves in the experience and actually live through a likely future. Close to reality: The better participants identify with their roles, the better the mutual learning experience. It is the role of the facilitators to set the stage and make sure participants are motivated and well prepared to take on their roles. The facilitators also need to stay on top of all the actions and keep the participants within the boundaries of reality. Follow through: Each wargame must have a proper debrief. Without a debrief, lessons learned and an action plan, it is nothing more than a game and of little use to the client.

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DES I G N , E X EC U T I O N A N D E VA L U AT I O N

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Done well, participants and companies will get a great deal out of a wargame. The most valuable aspect in our view is the unique ability to go through a shared experience of seeing what is likely to happen. Managers will see together what works well and what does not, and learning takes place in the group. It is not unusual that the energy experienced during a game will continue to have a positive effect in facilitating cooperation within and across departments. We believe the main drivers for this process are the intense experience shared, the mutual learning and the common ground established during the game and particularly during the debrief.

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OUTLOOK AND CONCLUSION

Organizations still need a baseline plan for how they intend to reach their desired end state. However, reliance on only such a baseline plan will no longer suffice in an increasingly VUCA environment. In order to be successful, organizations constantly need awareness of changes in their environment; quickly assess if such changes pose a threat, an opportunity or simply are not worth dealing with. If necessary, organizations need to quickly set in motion a process and appropriate teams to effectively work throughout the existing hierarchical structure to capitalize on opportunities or fend off threats. The actual approach on how to accomplish this can be manifold and depends on the particular organization and its environment. Generally, it appears to be worth to “open” up the strategy function to become more inclusive and involve more people and sources. Any approach to deal with such challenges, requires a clear understanding of what the role of the strategic, operational and tactical levels within the organization are and that successful tackling of issues requires a joint effort. Business wargaming can be a useful tool to validate potential decisions and intended courses of action. It can furthermore help to educate the actors at all leadership levels of what the organization wants to achieve and what each leadership level’s specific role is in

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executing toward reaching the desired end state. At the same time, one has to understand that the desired end state itself may change over time, but at a much lower speed and only to reflect major shifts in environmental decisions or conscious decisions to alter the course of the organization at the strategic level. As changes in the environment are happening at unpredictable points in time and of at first unknown consequences, the ability to sense, recognize and address unforeseen changes has become increasingly important. Within this context, business wargaming can be employed as a valuable analysis tool, which allows to recognize opportunities and threats in order to address them while the window for strategic action is still open. Business wargaming and an understanding of its potential applications at the strategic, operational and tactical level should be within the repertoire of any modern organization, not just at the top leadership level. That this view does not merely reflect the assessment of the authors was confirmed by a 2017 study conducted by Jan Oliver Schwarz, who questioned 90 international corporations whether they employ methods such as business wargaming. About two-thirds of the respondents mentioned that they employ such methods, and about 40% indicated that the methods are institutionalized at various degrees in their organizations. This constitutes a clear advancement of the method since our last book in 2008; however, there is still a long way to go. When we think of some of the ongoing challenges, we must understand that in seemingly established and “dull” industries, new entrants are just around the corner, which free of all preexisting rules (and cost) work on solutions to solve old problems with disruptive new approaches. At the same time, the incumbents are forced to constantly question their position of competitive advantage and to prepare for looming attacks on their business model. Just about seven years ago, probably no one would have thought that a then unknown company called Uber would shake up the highly secluded and regulated market for taxi and limousine services and that a new company called Airbnb would become the world’s largest provider of guest rooms without actually owning any buildings.

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Whereas some areas of business, such as global payments, are likely to be completely changed by the possibilities of digitalization in the not-too-distant future, other areas, i.e. the networking and crossreferencing of research data, offers tremendous opportunities for efficiency gains in a range of industries without changing the underlying business model per se. One way or another, most organizations have already addressed such questions, the difference lies within the rigor and choice of appropriate tools. Digitalization, for example, has implications which go far beyond the mere boundaries of organizations. Driven by the increased disappearance of physical boundaries (geographically, office vs. home office, virtual organizations, freelancers etc.), it does no longer suffice just to look at how digitalization may support or alter workflows within the company. Considering the potential large-scale ramifications of digitalization, the question about the separation of duties and responsibilities between state and nongovernment organizations has to be investigated as well. As an example, the question about how the workplace in a corporation is changing due to the introduction of digitalization can be mostly answered by the corporation itself. However, the implications of such actions go far beyond the boundaries of the individual corporation. What is going to happen to all the employees who have lost their jobs due to digitalization and which cannot be retrained or absorbed by newly emerging jobs? What will be the effect if this happens at a large scale with respect to the assistance and financing of all the unemployed workers (i.e. social security, unemployment insurance), and how will this ultimately affect the corporations again, if some of the burden will be put on them by politicians? In most cases, today’s unemployment insurance is financed by percentages taken out of the paychecks of all employed workers, and thus lower employment levels, combined with higher efforts for assistance and financing of the unemployed will most certainly lead to major government deficits over time. What social tensions will this cause in the short to long run? Should the lost income tax revenues be compensated for by increasing corporate tax levels, taxing robots and systems replacing workers or shareholders more heavily, or are there models which are based on less government pressure but

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voluntary contribution by corporations or cooperative approaches between corporations and the public sector? In the case of exactly such questions, we need to start today to think beyond the boundaries of organizations and set the course for a functioning system in the future. Business wargaming can help us master the complexity, assess problems in their entirety and, by involving more stakeholders, find a solution that can be turned into policy. However, for this approach to work, an initiating entity, i.e. a government institution or an NGO, as is often the case in the United States, is needed as well as the willingness of stakeholders to participate and share some of the cost of the wargame. Besides the dominant theme of digitalization in the private sector, the changing international security environment, especially terrorism, espionage and organized crime in the real world and in cyberspace are shaping corporations and society as a whole. Themes like the protection of critical infrastructure, exposed persons or information regain importance. Here as well, these are not simply problems of the public administration, especially the emergency response organizations or the armed forces, but these problems require a joint approach, because the collapse of the electric grid, main traffic routes, communication networks, etc., almost immediately also affects private enterprises. Pandemics, climate change and the increasingly visible consequences of these will also require solutions that go beyond national boundaries. If the temperature goes up, parts of today’s coastline will disappear, setting into motion migration flows. If the desertification continues, strips of meadowland will no longer be available, causing herders to move into other areas used by farmers. This will cause conflict, migration, possibly war in the region and further migration not only in the region but to more developed countries as well. So, unless we find a way to effectively work together across the “hierarchical silos” of the nation state construct, we will all eventually be in trouble. How do we do this? There is no easy answer because of the many stakeholders and interdependencies, but it would definitely be worthwhile to explore possible courses of action in a “joint” wargame with a common desired end state, an operational design for execution

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of a solution and the clear understanding of what each nation/actor would have to contribute to actually make it happen. Here organizations, such as the United Nations, the World Bank or suitable NGO’s could take the lead. Essentially, organizations need approaches that will help them to win what we have called the uncertainty game. What is required are approaches which, on the one hand, account for the volatility, uncertainty, complexity and ambiguity in the organizational environment and, on the other hand, allow for an integrative, “open” and active participation of many relevant stakeholders beyond just strategy departments. Business wargaming is such an approach.

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INDEX

Note: Bold page numbers refer to tables and italic page numbers refer to figures. Action India AIDS Project 106 action learning 144, 154–155 action-to-knowledge (A-K) events 153–154 Ahlquist, G. 117n3 Airbnb 175 “The AMA Top Management Decision Simulation” 63 “The American Kriegsspiel” 57–58 American Management Association (AMA) 63–64 Go in 50–51; Wei-Hai in 50–51 Andlinger, G.R. 63 artificial intelligence (AI) 19, 66 Avalon Hill Company 60 Booz Allen CEO Challenge 144–150, 166 Booz Allen Hamilton 64, 104–107, 111, 117n2, 145–146, 149 Bracken, Paul 8, 133, 140

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Center for Long-Term Cybersecurity (UC Berkeley) 62 center of gravity (CoG) 36 Chaturanga: 51 chess 51 Cold War 22, 118, 120 Combat Result Table 60 computer simulations 66 Confederation of Indian Industry (CII) 104–105 content and process approach, teaching business wargaming 141–144 content-only approach, teaching business wargaming 144–151 Council for Excellence in Government 111 COVID-19 crisis 17

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I n de x

D-Day 32 decisive points 38–39; illustrative substantiation of 39 Department of Defense 111, 113 Department of Health and Human Services 111 Department of Veteran Affairs 111 Desert Storm 32 desired end state 22, 28–31, 29, 33, 35–36, 38, 42–43, 96, 174–175, 177 Dunnigan, J.F. 61, 62 dynamic capability theory 2 European Community 119 European Economic Area 120 European Union 120 Family Planning Association of India 106 Federal Emergency Management Agency 111 “Firefight” 61 “Floor Games” (Wells) 60 “force generation” 40 “Free Kriegsspiel” 56–57 Gates Foundation 106 operational design 35, 35 Gere Foundation 106 German Kriegsspiel 3 Geroski, Paul 26 Gilad, B. 44 Global Business Coalition on HIV/ AIDS (GBC) 104–105 Global Fund 106 Guisan, Henri 33 Harvard Business School 144 Health Maintenance Organization (HMOs) 111 Helwig, C. L. 53–54 HIV/AIDS pandemic 105 HIV/AIDS simulation 112

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187

hobby wargaming 60–61 Holbrooke, Richard 104 Hybrid Warfare 116 I-Go 51; see also Go Institute for Innovation and Change Methodologies, Munich, Germany 134 Integrating-Action-Knowledge (I-AK) 153 International Federation of the Phonographic Industry (IFPI) 142 Iraq-Iran War 61 Isbister, K. 131–132, 164 ISIS 62 Japan 51, 56, 60–61, 119 “Joint Approach” 32–40; in a civilian context 41–45; essence of 32–40 Kearney, A. T. 4 Kellogg School of Management 145 Kennedy, John F. 62 Key Performance Indicators (KPIs) 71 “King’s Game” 52–53 Knowledge-to-Action (K-A) 153 Kodak 31 “Königsspiel” 52 Kotter, John P. 6, 28 “Kriegsspiel” 55–56 Lifestyle of Health and Sustainability (LOHAS) 79, 82, 84 Lines of Operation 38, 42 Little, McCarthy 58–59 “Little Wars” 60 Machine Learning 19 Management Simulation 63 Marine Corps 61 “Matrix for Synchronization” 93 Middle East 119 “Military Chess” 52

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In de x

Military Decision Making Process (MDMP) 91 Military Planning 32–40 Military Wargaming 8–10, 60–61 Mobile Cellular Subscriptions 18 Mobile Network Operators (MNOs) 97 Mobilization 57 Napoleon 56 National AIDS Control Organization (India) 104 National Defense University in Washington, DC 62 National Strategic Gaming Centre 62 Naval War College 50, 58–60 Navy Electronic Warfare Simulator 59 Non-Governmental Organizations (NGOs) 105, 118, 177, 178 Nonmilitary Wargaming 59–62 One World 120 Open Skies 120 Open Strategy 28 Operational Design 35–39, 42, 177 Operational Objectives 38–39, 42 Operational Wargaming 96–117 Oriesek, D.F. 117n1 Oxfam 106 Pentagon 62, 110 People’s Republic of China see China Perla, P.P. 50, 58, 61, 162 PEST (Political, Economic, Social, Technological) analysis 142 Polaroid 31 Political-Military Wargames 57 Porter, Michael E. 25–26 “Private Label” Products 78 Prospective Competitive Strategy Process 27–28 Prussian 50, 54 56

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Ramirez, Rafael 2 “Rigid Kriegsspiel” 57 Rohrbeck, René 31n1 Schoemaker, Paul 139 Schwarz, Jan Oliver 26, 31n1, 175 Second-Generation (2G) Mobile Technology 97 Sense Making 127–129, 129–131 Serious Games 4 Simulations Publications, Inc. 60–61 Social Reality Games 4 Sony Ericsson 149 Soviet Union 22, 119 Special Operations Forces (SOF) 6 Star Alliance 120 Statement–Insight–Consequence (SIC) 170; structure for analysis example 171 Strategic Defense Initiative (SDI) 119 Strategic Wargaming 118–125 Sun Tzu 50 Swiss Armed Forces 33 Switzerland 22, 33 SWOT (Strengths, Weaknesses, Opportunities, Threats) 142 Tactical Wargaming 75–95 Task Unit 6 “Team of Teams” 21, 43 Third-Generation (3G) Mobile Telephony 97 Toffler, Alvin 24 TUNA (Turbulence, Uncertainty, Novelty and Ambiguity) 2–3 Uber 175 UMTS 97–98, 99, 101, 134 UNAIDS 106 United Nations 178 Universal Mobile Telecommunication System (UMTS) 97–98, 99, 101, 134

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I n de x

US Air Force 61 US Army Infantry School in Fort Benning 61 Van der Heijden 133 Vietnam War 60–61 Volatility, Uncertainty, Complexity and Ambiguity (VUCA) 2, 15 von Clausewitz, Carl 3 von Held, Felix 134 von Scharnhorst, Gerhard 56

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189

Werle, Felix 134 Wikileaks 62 Window for Strategic Action 30–31 World Bank 106, 178 World Economic Forum 106 World War I 58 World War II 10, 33, 58, 61–62

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