The Enemy You Don't Know

Hather, whose expertise lies in strategic risk management, says war games can be particularly useful in playing out scenarios that don't necessarily involve an entrenched competitor. "It's one thing to anticipate actions when you know who your enemy is. You can collect a ton of data and smart people and good models should help you make sense of it. It is another thing when you broaden the horizon as to where a strategic threat might come from.

"By way of example, Sony was the undisputed leader in portable music prior to Apple coming along. If Sony had war-gamed where digital music was headed, it might have used one of the other electronic manufacturers and stayed on the track of making smaller, better quality players and fighting digital piracy rather than looking for the opportunity in digital music that Apple saw. Because Sony saw Apple as a computer company, it did not see Apple as a threat - even though it should have been clear that Apple was moving into the space and had a reputation of making things that were easy to use and cool.

"Plenty of consumers were telling all the music companies that cared to ask that they often wanted one or two songs from an album not the whole thing, for example. Consumers wanted easy access, easy to manage libraries and they wanted to talk about it with friends. All of these needs were served by an easy to use digital music service. Another example is the food and beverage companies: they were slow to move on health issues despite signals of that trend and the clear implications for companies like McDonald's for over 20 years."

Rules for Success

Gilad says there are several rules and guidelines for successful war games. First and foremost is to remember that some decisions are better suited to war gaming than others. The cardinal rule: if you don't care what others will do in reaction, don't waste money on war games. And while seeming nice-to-have, computer simulations and other toys are decoration only. The war game is about thinking like third parties.

Role playing is paramount, and "mirror imaging" is the worst mistake you can make, he says. The theory behind role playing must be rigorous. "This isn't a brainstorming exercise or a chance for creative spirits to shine, Gilad says.

Your own organization's blind spots must be put on the table even if they hurt, or the competitors will do it for you. And Gilad says there is no point in running a war game if the plan is a foregone conclusion. You must leave room for changes in the plan.

Senior execs must take active part, especially heading competitors' teams, as well as the most senior playing "referee", but the game can never be only for senior managers, Gilad says. The value is in a right mix of participants.

Meanwhile Yourdon says it's vital not to make the rules so strict as to prevent innovative behaviour by the competitors. Inspiring one or more of the players to creatively break the "implicit" rules, which turn out to be nothing more than habitual, constrictive cultural assumptions, can be a prime benefit of the war game.

You should also, he says, allow plenty of time for post-mortem review. "This point is also obvious, but because the post-mortem takes place - by definition - at the end of the war game, you always risk run­ning out of the allotted time before reaching the point at which you're ready for a post-mortem. It may be useful to reserve a secret time buffer to ensure that you can do a post-mortem, which is likely to be the most valuable part of the entire experience."

And the CIO must provide participants with in-depth competitor profiles, Bensoussan says.

"I am sick to death of people thinking that they're coming to a war game and not having done the necessary pre-work, so what they're doing is mirror imaging," she says. They assume the competitor behaves in the same way they do. Now unless you've done your competitor profiling beforehand, that's not going to be true.

"The key for me, I have to say, is the research. Most executives go in thinking they know their competitors when they don't. They know some of it, but not enough to understand the thinking."

"The second rule is that it does need to involve opposing forces - not necessarily competitors but opposing forces, and elements outside your direct control. And then you need to actually go through and analyze the options that you have and play through the different scenarios until you can achieve your required outcome."

And speaking of outcomes, Ferguson points out it's vital not to assume outcomes are definitive, and that there is a feedback mechanism at work. War games should ideally be run multiple times, he says.

"I always thought that the difference between the military and the commercial world is that the military are continually practising, then have to get to do it in the real world, whereas in the commercial sector you're doing it in the real world all the time and you don't have the time to practise. You've got to take the war gaming scenario as: We have done a war game, now we are going into the real battle. The battle gives us information, we feed back into a war games scenario," he says.

But the final word goes to Bensoussan, citing a favourite quote from Advanced Competitive Strategies CEO Mark Chussil.

"Trivial changes produce trivial results. If you want to gain genuine competitive advantage, you've got to do important things better than your competitors."

That's how war games can help.