Summary and Critique by: Jared Leets
Summary:
The authors, Treat, Thibault, and Asin, begin by explaining what wargaming is in business. In a wargame, teams of the managers from a company role play their own company, their top competitors, and the marketplace. Then a control team plays all other competitors that can affect the industry. This simulates possible real life business outcomes and can provide guidance for the company’s future strategies. Teams lay out objectives, decide on what strategies to take, and what and where to invest. Teams from the company, such as the market team, will review market reactions and decide where to move next. In addition, the finance team can provide feedback and tell teams, taking part in the wargame, where the profits and losses would occur if the company goes in a certain direction.
The authors describe ideal situations for using wargaming for competitive intelligence. The first situation occurs when there is a competitive dynamic in a certain industry. The second situation deals with the market reaction and its unpredictability due to constant change, emergence of new technology, or a change in market demands. Typically a deterministic model will not be able to predict that and will likely be useless. Another ideal situation would be when simulations are the only viable way of gaining insight, when not much information is available of the competitor, or when there exists an excessive amount of dimensions to the problem.
Next they describe how traditional planning does not work as well as wargaming. According to the authors, wargaming works because it confronts concerns about planning in isolation and dealing with discontinuities, and it is a holistic enterprise. Strategy can be easily dismantled, if one removes one element from the strategic plan it can fall apart and then all that is left are tactics which simply relate to the execution of the strategy. That is the main difference between wargaming and traditional planning is that wargaming demands a team to look at the entirety of the plan, while traditional planning has the team look at certains parts to the plan. Wargaming simulations are able to complete paradigm shifts and promote "out of the box thinking" due to the fact that it investigates the implications of changes in strategy with no real negative risks involved. Usually any typical strategic analysis will not work because it will interpret what happened in the past and use that to forecast the future. In this case the past never truly repeats itself. Scenario planning uses historical planning to predict future outcomes and analysis cannot predict how a competitor will react to changing conditions, for example with a new product being released. The authors state that scenarios tend to be guesses at the future which makes it relatively easy to become biased.
They conclude by stating how wargaming is much more beneficial than traditional planning. Wargaming improves strategic capability thinking for managers in a company and the feedback from those who have participated claim that it forced them to keep strategic issues at the forefront. Those that partook in the wargaming simulation focused more on their competitors plans and how to counter them.
Critique:
Treat, Thibault, and Asin explain, in great detail, what wargaming is in the business world and how it can be effectively used. Their description of it and what the ideal situations are for when a company should use it were phenomenal and they went in depth comparing it to other traditional forms of planning. Not only did they explain why traditional planning does not stack up well against wargaming, but they provided quality examples to help comprehend it all. While they did an impressive job of telling why wargaming simulation is much better for businesses, they did not do enough to explain what the potential drawbacks of using wargaming might be. Overall the article argued its point well.
Source: Treat, J. E., Thibault, G. E., & Asin, A. (1996). Dynamic competitive simulation: wargaming as a strategic tool. Strategy, Management, Competition, (Second Quarter), 46-54. http://hershbine.net/wp-content/uploads/20-DYNAMIC-COMPETITIVE-SIMULATION-WARGAMING-AS-A-STRATEGIC-TOOL.pdf
Posts
I agree with you Jared that wargaming is a beneficial tool due to its rigorous exam of a situation or strategy from multiple perspectives. In my opinion, wargaming is an art rather than a set procedural outline. In addition, wargaming is important to the decision cycle, when followed, will lead to a sound tactical decision. To add to that, though wargaming can provide a simulation within turn offers feedback, however, like in a video game we have multiple lives to help us complete the mission. Though wargaming allows us to predict what likely may come or what we might face, then again, it still may not account for other variables that may show up in real time.
ReplyDeleteDid the authors mention how information quality affects wargaming?
ReplyDeleteThey did not. But bad information will lead to unworthy results and derail developing a plan to compete with your competitors.
DeleteI agree with the author's point that war gaming is beneficial in that it assesses the current situation/strategy of a company from a holistic perspective. Scenario planning allows companies to plan for a variety of changes in the external environment, with a focus on how the market,competitors, etc will react. It would be interesting to measure/learn how effective this tool has been for businesses in the past and what specific industries benefit the most from this tool.
ReplyDeleteI understand the difference between traditional planning and wargaming, but I can't see it being any more valuable than traditional planning. You run into the same pitfalls where you cant know what you don't know and competitors decisions cannot be predicted. I think that it would be more interesting to create some kind of decision tree analysis with it.
ReplyDeleteJared, I believe that wargaming is a far better method to avoid "blind spots" in the exercise of decision making and strategy formulation, because it allows managers to think out of the box by brainstorming multiple scenarios.
ReplyDelete