Business Wargaming for Teaching Strategy Making

Summary

This research primarily deals with how the notion of developing foresight in order to deal with complexity and uncertainty, particularly with respect to the future, has translated into the education of business students. Schwarz (2013) argues that “an increasingly complex and dynamic business environment requires new approaches to teaching strategy to management students” (p. 59) and notes that simulations not only have positive effects on learning, but are also appropriate for educating management students. This observation points to business wargaming, which is essentially a dynamic strategic simulation.

Schwarz contends that business wargaming is necessary in management education because it can help close the gap between theory gained in a classroom setting and the application required by professions. Schwarz (2013) also maintains that the notion of gaming in regard to simulations is relevant in this context, because “gaming is credited with providing concrete experience that is processed through reflection” (p. 60). Schwarz states that the advantage of simulations and gaming is that it more deeply involves the participants through the emotional elements of simulations, which produces a different and less traditional kind of learning experience.

Kurtz (2003) describes a business wargame as a role-playing simulation of a dynamic business situation. Each team in the wargame is cast in the role of a certain stakeholder, such as a competitor, in some sort of business situation. The typical business wargame lasts several rounds, each one representing a defined time period. A business wargame is usually preceded by extensive research on the industry in which the wargame is supposed to take place. “Wargame” is the literal translation of the German Kriegsspiel. In the business environment, there is some discomfort with the words “war” and “game.” Hence, wargames are often referred to as “strategic simulations” and can have several purposes, such as strategy testing, crisis planning and management, change management, planning, training, and education.

Roots

Although the application of wargaming in the business context began in 1957 when the American Management Association (AMA) developed the first widely known business game, “The AMA Top Management Decision Simulation,” business wargaming itself can be traced at least as far back as ancient Greece. Perla (1990) credits the Chinese general and military philosopher Sun Tzu for developing the first wargame about 5000 years ago. This game was called ‘‘Wei-Hai,’’ meaning ‘‘encirclement.’’ ‘‘Go’’ appeared around 2200 BCE, ‘‘Chaturanga,’’ around 500 CE, and, later, chess could be perceived as its successor. Even though chess is much more abstract than a wargame, it contains several elements of warfare and can be regarded as a wargame in a broader sense.

How Business Wargames Work

The following is an excerpt from Schwarz’s paper:

A typical business wargame evolves over three moves, representing a certain length of time (e.g. three to ten years). A business wargame is predominately designed to evolve into the future, eventually describing scenarios of competitive business situations. The first move starts in the present, and is based on available data and information. A ‘‘move’’ is a decision cycle, which begins with the stakeholders or competing companies and the client team taking the initial actions, including competitive offerings, alliances, investments, or lobbying efforts. In general, four types of teams exist in a business wargame: a client team, competitive or stakeholder team, market team, and control team.

Competing teams will have to think about strategy, product, pricing, capacity, and technology, while also considering the business environment. The members of the client team have to execute and adjust their own strategy. An essential part of each move is the reaction of the customers, usually played by a market team, consisting of a group of market experts. The market team will provide the reactions of customers, providing figures such as size of the market, market segments, market share and revenue, and how these figures have changed in the course of the moves. All this data will be passed on to the control team, usually run by the wargaming experts, who use a financial model to calculate profits and losses. In addition, the control team is in charge of supervising the wargame and introducing discontinuities (e.g. technological developments or policy issues) to add real life dynamics. The control team can also assume the role of other stakeholders, such as regulators not represented in the business wargame as competitors.

At the end of each move, the control team calculates the results of the competing teams and the client team, and uses these results as the starting point for the next move. While the market team reacts and the control team calculates the figures, the competitive teams and the client teams plan their next move. They then learn the results of the previous move. As pointed out earlier, concerning computer-based simulations, models are supportive, adding reality to the business wargame but not intended to drive the simulation.

Prior to carrying out a business wargame, the objectives must be laid out, and a database of all information that is potentially useful to the players is created. The model translates the game’s data and the players’ decisions into game events, quantifying the moves and results of the wargame. After a business wargame has been played to completion, the wargaming experts and managers of the client company carry out an analysis, which is important for discussing lessons learned during the exercise. This analysis allows the managers to describe their experiences, to reflect on what they have learned, and to discuss subsequent steps, which will then result in additional lessons learned.

Source

Schwarz, J. O. (2013). Business wargaming for teaching strategy making. Futures, 51, 59-66.