This Means War

How war gaming preps businesses for the worst-case scenario

It’s impossible to predict the future. But businesses looking to keep their competitive edge can get pretty close. The good ones know their competition — and themselves — well. With the help of advanced data analytics and strategic thinking, they can engage in wargaming, scenario planning that asks what could go right — or, more often, what could go wrong — in the market and the world that might affect business.

Armed with that information, businesses can create plans based on what they’ve learned to ensure continued success in the face of whatever disruptions might come, be they tariffs, nearshoring, or a pandemic.

Arjan Singh

“Companies at the top of their game, significant market share, doing really well, tend to have this belief that whatever they’ve been doing from a strategy perspective is likely to be successful in the future,” Arjan Singh, author of Competitive Success: Building Winning Strategies with Corporate War Games told BOSS.

But ask companies like Blockbuster how that worked out for them.

“Every single strategy that a company builds is based on an assumption,” Singh said, “and if you can challenge your assumptions, you can challenge your strategies. You can challenge the way you work.”

Preparing for the Worst

A borrowing from longtime military strategy, wargaming allows key personnel throughout the org chart to get together in a workshop format and think through various political, economic, and social risks. While there are some positive scenarios to work through, say, how to increase inventory to meet a sudden surge in demand, most of them in war gaming are negative.

“The whole notion there is hoping for the best and preparing for the worst,” Singh said.

In his work with business students and founder of Corporate War Games, Singh has run through a variety of scenarios that proved prescient. Stick around long enough, and eventually you see everything.

“We ran ‘The Battle for the Traveler’ in 2017,” analyzing the positions of various airlines, online travel agencies, hotels, and short-term rental companies. Most questions were along the lines of, “How is American Airlines going to win in the marketplace?” and “How is Marriott going to win?”

But one scenario that seemed highly unlikely at the time ended up being the most important.

“The scenario that we ran in May 2017 was, ‘What if the market for travel in the United States should crunch by 95%? What would you do?'”

Having an answer to that question would’ve been immensely valuable to any travel company when Covid hit less than three years later.

Actionable Scenarios

Such Black Swan events might be highly improbable but can massively affect operations. With war gaming, companies can ask themselves what they would do if such an event occurred.

“Do you have a Plan B, C, D that you can think about?” Singh asks. Businesses must ask themselves, “If a significant event happens that’s going to have a huge impact to our business, however, it’s a few hundred million dollars that we’re going to have to spend to be prepared for that, do we want to do that if there’s a low probability of that occurring?”

In a lot of instances, he said, the answer is no.

But businesses can identify trigger points when that unlikely scenario becomes much more probable and the extra expense becomes worth it.

“That’s when you would start enacting your plan, in response to this,” Singh said.

To identify and run through these scenarios, businesses rely on test analysis strategies such as PESTEL (political, economic, social, technological, environmental, and legal) and the Five Forces model.

“You’re building the right scenarios, looking for the right uncertainties and drivers of change, working all the way down to prioritizing different scenarios.”

That way, companies can begin to distinguish actionable war games from merely interesting ones.

Proactive & Reactive

Some strategies are proactive. Say you’re a pharmaceutical biotech company launching a blockbuster drug. What’s your competition going to do in response? How do you ensure a successful launch? How do you ride that momentum and use the peak-year revenue to invest in more innovation?

Others are reactive. Especially now that we’ve seen how chaotic things can become when a massive Black Swan event affects the whole world, more businesses are exploring quick-change scenarios.

“You can segment those into immediate next steps,” Singh said. “Here’s what we’re doing in the next 24 hours, the next five days, the next month, and then it starts getting into the longer term.”

Smaller companies have a natural advantage when it comes to turning on a dime since they don’t have as many moving parts and processes to change. But war gaming can make larger corporations nimbler.

“One of the prerequisites for this is really to have an open mind in terms of the different range of possibilities, to be able to practically track these, and then to be able to change your strategy, to pivot from what you’ve done,” he said.

When starting the war gaming process, most businesses focus on four scenarios. The more comfortable they get and the more sophisticated their process becomes, the more they can layer in complexity.

“When you deliver good news, everyone’s going to love it, and you don’t get much pushback about the work that’s been done or the methodology that’s been deployed,” Singh said. “It’s when you start talking about bad news that you start getting pushback, and that’s really why you want to focus in on scenario planning.”

With that, even when you can’t predict the future, you can at least be ready for it.