“The great strategist first wins the victory in the temple rehearsal of the battle, and then enters the competition. Those destined for defeat first enter the competition and then seek victory.”
Sun Tzu, The Art of War, 6th century BC
Strategy is a series of choices businesses make about where to play, how to win and how to configure the business to deliver sustained success over time. To create a winning strategy, understanding the competition is critical. You only need to follow the paths of Nokia, Kodak and Blockbuster not to mention key industries that have been disrupted (such as hotels, taxis and music) to understand the ramifications when the competitive environment is not understood.
Some businesses find themselves investing heavily in a new product only to find a cashed-up competitor pulling the legs out from under it. Others may find that key customers won’t support your new offering or worse, some businesses find they are trying to compete in a market that no longer exists. A strong understanding of the competitor landscape enables businesses to play the game that suits them, providing the highest potential for success.
Business strategies can suffer from several key pitfalls, only noticed with the benefit of hindsight:
- Assumptions about the competitors or the environment may be unrealistic, outdated, downplayed or even ignored.
- Assumptions about factors, such as social, economic, technological and political factors, beyond your control in the marketplace may not have been given adequate consideration.
- The team preparing the plan is so wedded to it that they have difficulty in appraising it critically.
- Your business’s plans have been developed largely in a functional silo, bringing in other areas of expertise and experience too late down the track to have meaningful input.
Wargaming helps anticipate such potential pitfalls before implementation. It is all about getting prepared for how your competitors will react in a given market situation and what you need to do to respond. It is a structured and facilitated workshop that simulates competitive conflict, based on an actual or assumed market situation. It requires participants to role-play, and is grounded in facts and insights. It aims to predict future events to help answer two questions:
- What will player(s) in my market do?
- Given this, what then is my best option?
The result is an improvement in your own strategy before the real situation occurs, ultimately saving your business time, energy and resources. It also leads to a rapid transfer of knowledge and understanding, breaking down business silos and building additional commitment behind the chosen course of action.
When might you run a wargame?
- Your business is planning a major move, and is expecting a direct competitive response from a competitor or competitors.
- Your business believes that a competitor is planning a major activity that is likely to have a significant impact on your business. This impact may be as a result of direct competitive activity or indirect activity (where activity in another business segment has flow-on effects on your business).
- Your business is aware that an industry-wide change will occur and does not know how other competitors and players in the industry will respond.
- Ownership or leadership of a competitor has changed or is likely to change the nature of competition, but you do not know what to expect.
How do you go about conducting a wargame successfully?
- Ensure you understand the true nature of the external threat or opportunity and what outcome your business is looking to achieve. Develop the scenarios you want participants to explore that will deliver the richest insights.
- Invite the right mix of people to optimise wargame outputs. You will need a good breadth of functional and market expertise, with depth in relevant areas of specialised knowledge. Ensure you include a mix of people empowered to make decisions, as well as those who will be required to implement them.
- Deliver quality, insightful research to participants ahead of the wargame around the market/industry, your competitors and other key stakeholders within scope – for example, customers and/or suppliers.
- Ensure you engage a skilled facilitator who can ‘design the scenarios and working sessions’, adapt flexibly to new learnings during the event and deliver high-value insights.
- Ensure your wargames deliver according to actionable outcomes – participants should walk away with an aligned view of the key insights and learnings and, ultimately, what they need to do differently.
A deep understanding of your competitive environment is vital to any business committed towards achieving ongoing success. Wargaming is a powerful tool to help you do just that.
This article was written with the help of Rachel Way.