Thursday, September 28, 2017

Ex Ante Strategy Evaluation: The Case for Business Wargaming


By: Michael Pouch

Summary:

The purpose of Jan Schwartz research is to introduce wargaming as a useful tool for ex-ante strategy evaluation for the business world. He lists some important benefits of business wargaming as an ex-ante tool such as assessing a particular strategy, by simulating reality, the consequences with respect to the organizational environment (especially its competitors), and with respect to the future impact on the strategy and the future of that strategy.

The author begins to lay out several advantages of using wargaming in the business world to test a particular strategy. First, while using participants, wargaming provides not only the use analyzation of a market or a competitor but the simulation an industry, market, or competition over time. This so-called experience or simulation provides a preview of how a strategy might fare.

Second, Schwartz provides an argument that wargaming can be used to challenge the mental models of participants. Wargaming allows participants to think and act like their competitors, thereby forecasting what their competitors will likely do. In addition, war-gaming provides a simpliļ¬ed version of strategic planning that allows participants to test strategies but a form strategic planning.

Third, war-gaming can offer a means of fostering organizational learning. When the comparison between situations or moves within the business wargame or with mental models become communal the knowledge derived from a business wargame will be transferred when a similarly structured situation occurs outside the simulation.

Fourth and last, the intense competition that is involved within war-gaming, forces participants to rigorously examine the situation from several perspectives. The benefits that come along with the competition gives the participants the ability to convey a deeper understanding of the competitive situation and an awareness of the participant’s or a team’s strategy will play out, and especially how the industry will develop.

On the whole, a well-designed and conducted business wargame is important to test of strategy that sheds light on competitor’s motives and actions and ultimately see your strategies play out but also the likely results when implemented.  As shown in figure 1, wargaming provides many benefits were as other methods are limited to certain actions. 

 Figure 1: Characteristics of Business Wargaming


Critique:

Overall, the advantages that come with wargaming in business outweigh the limitations.  Although wargaming takes up a lot of resources, preparation, and participant demand, the results allow you to come out of the simulation with many external and internal perspectives in mind. Another limitation implies a human element where the simulation might not have the right participants or the participants willingness to engage in the exercise. By and large, it is an essential exercise that needs to be designed, prepared, and well-executed for a successful simulation.

Reference:


Schwarz, Jan Oliver. (2011). Ex Ante Strategy Evaluation: The case for Business Wargaming. Business Strategy Series. 12. 122-135.

7 comments:

  1. Did it mention how to prevent mirror imaging since one company can only predict the competitors based on what they themselves would do?

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    1. The article did mention that one way to prevent mirror imaging is to ask certain questions throughout the planning and execution phases to ensure our beliefs and norms have not corrupted planning and expectations.

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  2. I'm seeing a common theme here that prior preparation and design is absolutely key to the success of this method. However, do you think that having participants act in place of their competitors also opens up ways bias can creep in?

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  3. Wargaming in the business world is useful in various ways which include helping the company in operations, strategics , and execution. Despite it's limitations or resource-intensive nature, I agree with you about the benefits carrying more weight.

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  4. The author here highlights many useful advantages of war gaming, specifically its ability to challenge mental models of participants and its ability to foster organizational learning. This tool should be used with a degree of caution, however, given that created scenarios may be biased. Participants may fall subject to mirror-imaging bias or assumption bias when acting in place of competitors. Nevertheless, I share your point that the advantages that come with war gaming outweigh its limitations given its ability to force participants to think externally and from a holistic perspective

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  5. I still disagree that wargaming's limitations outweigh its benefits. Many of the competitor strategies put forth in a wargame are just forecasts, which can compound mistakes. I concede that as a teaching tool wargaming can be fantastic, but as a forecasting/analytic/decision-making tool its very weak. I would like to see a forecasting accuracy research paper comparing wargaming to a traditional open source analysis.

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