Saturday, October 29, 2011

Playing war games to win

They can be a powerful business tool—but only if you get the design right.

The article “Playing war games to win” was published in the McKinsey Quarterly of March 2011. I chose this article because it relates to first week’s class as it shows “war stuff” is still used in connection to strategizing, and it shows an approach to develop strategies for companies. It is also relevant for the topics discussed in week 2, since gaming might be a way to improve strategic planning. I find this article especially interesting because I’m doing a master at Delft University of Technology in the Netherlands that specializes on modeling, simulation, and gaming.

The article starts with an example of a company that used war games to prepare for the uncertainties of the post-crisis landscape. In this case, the use of war games was very successful as it led to many insights that the company could use in their strategy to prevent a decrease its market share. However, many companies do not learn a lot from war games because they misjudge the suitability of the games, they use the wrong participants, or they use standardized game design software which is often not appropriate for their situation.

To improve the use of war games in strategy development, companies should ask themselves four questions:

1. Can a war game help with our problem?
2. What kind of game should we play?
3. Who will design and play the game?
4. How often should we play?

The answer to the first question is, in short, that if analysis will not provide the right answers, gaming can be used to get an insight on the range of possibilities that executives should consider. Industry environments where two or three outcomes seem plausible along each of several dimensions are most suitable. Also, there must be competitive dynamics between the company and stakeholders, and it must be possible to represent stakeholders in a real way.

The second question was answered by stating that the kind of game that should be played depends on the purpose of the game. If a more tactical question is posed like “Should we raise prices 5 percent or not”, then a tactical game should be used in which different game rounds are run. If a more strategic question is posed like “How can we increase market share”, then the outcome will not be a tactical list of things to do, but it will be a guidance on what the company’s direction should be etc.

The answer to the third question, again, depends on whether it is a tactical or a strategic game. Tactical games are more straightforward, the design of a strategic game is more complex; a tactical game needs fewer participants than a strategic game.


The answer to the fourth question is that mostly games are played just once, since it is often pointless to run the same game multiple times; the same uncertainties will be tested with the same participants. However, it is beneficial to replay the game with new participants, or when conditions are changing. Replaying the game with the same participants and the same conditions may only be useful when a group has to practice for an upcoming event, like a negotiation with a client.

In short, the article states that using war games can be a powerful learning experience that can increase the quality of decision making if executives ask themselves the previous four questions.

This article is interesting as it introduces a way to increase the quality of strategy development which is not used very often. However, even though the question “Who will design the game” is posed in the article, the question isn’t really answered. Neither does the article pose the question of how to design games. Since more and more companies originate that actually only focus on developing serious games, I think the use of serious games in companies may increase dramatically in the following years, but it may also be possible that companies will not see the value in using serious games. That is why I’m interested in the following questions:

How soon will serious games be used to develop strategies in a large number of companies? Will using serious games become a standard way of increasing the quality of strategy development in companies?

Source:
Horn, J. (2011). Playing war games to win. Retrieved from:
https://www.mckinseyquarterly.com/Strategy/Strategy_in_Practice/Playing_war_games_to_win_2757

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