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War games
1. M A R C H 2 0 11
Bill Butcher
S T R A T E G Y P R A C T I C E
Playing war games to win
John Horn
They can be a powerful business tool—but only if you get the
design right.
As the global downturn kicked in, a been anticipating. Moreover, while
high-tech company’s senior there would probably be industry
executives decided to run a war mergers and acquisitions, as the
game to prepare themselves for the company had expected, the deals
uncertainties of the post-crisis were unlikely to kick off a wave of
landscape. After two days of M&A or to have a material impact on
simulations—when teams the company’s share of any market.
representing competitors and
stakeholders role-played against a These insights made a difference.
“company” team—the executives When actual deal making began and
understood that a strong competitor the player on the sidelines
on the sidelines was likely to enter announced its intention to become a
the market aggressively. The market leader, the high-tech
executives also realized that the low company didn’t leap into the M&A
end of the product range would face fray or otherwise lose focus. Instead,
more price pressure than they had it concentrated on protecting its
2. 2
core business, minimizing low-end two or three outcomes seem
losses, and investing in a major plausible along each of several
growth opportunity that required dimensions. When no amount of
new technology and a long analysis will provide the right
incubation period—and has since answer, the results of gaming can
proved valuable. shed valuable light on the range of
possibilities that executives should
For a variety of reasons, many be considering.
companies don’t learn as much from
war games. Some misjudge when In addition, there must be some
they are appropriate. Others foul up meaningful competitive dynamics
the game’s design by not including between the company and various
the right participants. Still others stakeholders—a game to be played,
take a cookie-cutter approach and in other words—and a clear way of
rely on standardized game design representing the most relevant
software or apply to operational players. Often this presents little
problems the same approach they challenge: the high-tech company,
previously used for strategic or for example, ran its game against
organizational ones. current and potential competitors
and included consumer teams in
To avoid these pitfalls—and the some rounds. But it can be tricky to
wasted time, money, and poor portray certain stakeholders, such
strategic decisions that go with as the US Congress, which one
them—CEOs and other senior aerospace and defense contractor
executives should ask tough realized it had to include for its
questions when contemplating war game to yield valuable insights.
games or answering proposals to
use them. Four questions, drawn Consider other approaches if the
from our experience with more than level of uncertainty, competitive
100 war games at scores of dynamics, or stakeholder realities
companies around the world, can seem problematic. Scenario
greatly increase the chances that planning can help with decision
your managers will use war gaming making if there is too much
to make better decisions in the uncertainty. Cost curves, pro t pool
real world. analyses, or other standard
frameworks are effective when
complex competitive dynamics
Can a war game help are absent.2
with our problem?
A nal word of caution: be wary of
The sweet spot for games is some the argument that war games are
moderate level of uncertainty.1 If the primarily about generating new
uncertainty is too great—say, the ideas. Companies following this
impact of robotic nanotechnology approach often nd participants
on manufacturing industries—game taking an “I’m going to prove how
planners can’t offer enough clever I am” posture, leading to
guidance for the players to make unrealistic, impractical ideas. We
reasoned decisions. More suitable is suggest conducting idea generation
an industry environment where, say, workshops instead (for more, see
3. 3 March 2011
our upcoming article “Seven funding, moves by competitors, and
steps to better brainstorming,” outcomes of technology
to be published in March, investments—would not have
on mckinseyquarterly.com). justi ed the executive time spent on
the exercise.
What kind of game Instead, the company designed a
should we play? game to answer the more strategic
question: how can we win market
Let’s say a consumer goods share given the budget pressures on
company is considering a narrow the Department of Defense and the
problem—raise prices 5 percent or moves of competitors? The game
keep them constant—and wants to tested levers such as pricing,
know how its biggest competitor contracting, operational
might respond. Given the tactical improvements, and partnerships.
objective, the consumer goods The outcome wasn’t a tactical
maker might run two separate playbook—a list of things to execute
games: one in which it raised prices and monitor—but rather strategic
and one in which it didn’t. guidance on the industry’s direction,
Alternatively, the company could the most promising types of moves,
run a game in which it raised prices the company’s competitive
by 5 percent but made other strengths and weaknesses, and
adjustments, sometimes boosting where to focus further analysis.
marketing expenditures and
sometimes offering retailers
concessions. It could then compare Who will design and
the result with the outcome of the play the game?
game in which it didn’t change
prices. The key is running the gamut You have big personnel choices to
of potential choices to make sure make or approve—who designs the
each is tested. Such games are game and who plays. In both cases,
most valuable when a company has deciding exactly how wide to cast
very few but discrete choices to test, the net depends on whether the
as well as a similarly small set of game’s objective is primarily tactical
possible responses by competitors. or strategic or the creation of
organizational alignment.
Tactical games aren’t always
practical, though. The aerospace Tactical games, with their detailed
and defense company mentioned moves and evaluation criteria, are
above originally considered running relatively straightforward: leaders
a tactical game to better understand with deep expertise about and
shifts in the US defense budget and responsibility for implementing the
their impact on the business. But decisions are critical sources of
the bene t of testing a very large input. The design of a strategic war
number of scenarios for individual game requires much broader
weapon systems—scenarios interaction. To ensure that the
involving, for example, levels of defense contractor’s game wasn’t
4. Playing war games to win 4
unduly in uenced by the customers.” This shared experience,
hypotheses of its designers, for which would have been impos-
example, they asked all 40 sible with a smaller or more
executives who would play it which homogenous group of participants,
trends, scenarios, and decisions has continued to stimulate
should be tested. discussions across the company
as market conditions evolve.
The selection of players is also
critical. A tactical exercise, such as
a pricing game, can have a relatively How often should
small set of participants. You should we play?
cast a wider net in a strategic game
and a much wider one in an The one-off games described so far
organizational game in which the are the most common type; it’s
objective is to get people on board usually pointless to run a game
for a strategic move. repeatedly to test the same
uncertainties with the same
In a game in which the goal is participants. It’s often bene cial,
organizational alignment around a however, to repeat a game for the
strategic decision, for example, you sake of organizational alignment
should include leaders of all when you want to bring along
functions that will be involved in its people who didn’t experience the
execution. Often, it’s also worth rst game—usually, the wider group
including frontline managers, of employees who will implement
product designers, and account the decision. Most people learn
reps, since they can raise different better by doing, and when they have
viewpoints during the game and shared experiences, they are more
disseminate the lessons to likely to embrace change.
colleagues afterward.
Repeating games also can be useful
A more diverse set of participants when conditions are changing. If
also creates valuable opportunities competitors or technologies have
to broaden their understanding of evolved, for example, it may be time
the industry—for instance, by to rerun a strategic game. Tactical
assigning them to stakeholder games like those for pricing
teams with roles that are less negotiations may bear repeating as
familiar to them. In the debrie ng frequently as every three or four
session after the high-tech months, with the same set of players
company’s game, the leader of a and slight modi cations to re ect
business unit, who had paired up changes in the market. That helps
with a salesperson on a customer salespeople re ne their pitches as
team, remarked, “Having played the customer needs, competitive
customer, I now understand what offerings, regulations, and other
the sales force means when they factors shift.
say we get push-back on price.
I am going to make sure we give You may, however, want to run the
you the support you need to make same set of players through a game
the value-based argument to the repeatedly and rapidly to practice
