The Corporate Intelligence magazine for Europe

September - November 2003

War Games in an Era of Collaboration

By Michael Sandman, Leonard Fuld

War games are not about war - they are largely about managing your competition.

hen Pergo (International, Swedish Laminate flooring company) ran a war game with its smaller competitors, the war game demonstrated that the competitors had to maximise their capacity to survive and that competing head-to-head with one other would simply result in a downward price spiral. In effect the war game showed the need to cooperate with the competition in a way that would assist the profit margins of all parties, ensure customer choice, as well as to enable Pergos well-regarded brand to retain its market share. Best Foods, when deciding how to launch its Hellmanns brand of salad dressing, knew it was

entering a crowded, highly price sensitive market. Through a war game it conducted, its product management group learned that one of its approaches could include co-opting purchasing managers for the big food chains. Best Foods gave the retailers a holiday, or delayed payment period. The deal, an outcome from the war game, granted the retailer more favourable terms and extended bill payment deadlines from 60 to as many as 120 days. The result: with this favourable payment structure, food retailers effectively became partners with Best Foods, enthusiastically giving the new salad dressing shelf presence and considerable

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Bringing the Process of Strategy to Life

Many competitors and/or many changes

Scenario Analysis Strategy Workshop War Game

Few competitors & little change

More Certainty

Less Certainty

Issues are clearer and more immediate

Fig 1. Strategic gaming alternatives

Future competitive environment is clear

Many alternative futures possible

market share immediately after launch. War games and strategy workshops are excellent tools for situations where the competitor and the field of endeavour are clearly defined. The war game concept fits into the broader field of strategic gaming, which allows companies to test and recalibrate their strategies against the likely course of future events.

How it Operates
The classic model of a competitor war game is to set up three to five teams to represent those key target companies. Helped by good background research on the industry, and often by an outside

facilitator who brings an element of independence to the scene, the teams can test their ideas about competitive strategies, discover holes in their assumptions about the competitors and work out how to fill the holes. The very term war game seems to imply we win, they lose. But war games do not need to assume this and are often about manoeuvring around not vanquishing your competition. Sometimes this means that a collaborative solution will emerge as the best strategic choice. In fact, as consolidation rolls across one industry after another, pure competition between companies has become an endangered species.

THE WAR GAME CONCEPT ALLOWS COMPANIES TO TEST AND RECALIBRATE THEIR STRATEGIES AGAINST THE LIKELY COURSE OF FUTURE EVENTS.

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The Corporate Intelligence magazine for Europe

September - November 2003

WAR GAMES ARE OFTEN ABOUT MANOEUVRING ARO

In most industries, companies that compete with each other in one segment often have a suppliercustomer relationship in another segment, or have an informal alliance with regard to industry standards. In an era when collaboration has become much more common, it takes a different outlook to run a war game. These issues are more likely to come forward in a war game when the teams in the game represent at least one non-competitor typically a key customer or key supplier. For example, in the case study below, one of the teams represented the parent companys own operating divisions, as they were customers of software produced by the internal technology development team. This other player team can bring a strong sense of reality to the proceedings, as a well-briefed team will reflect a set of interests that often will not be obvious to the teams of direct competitors.

CASE STUDY

A strategy workshop was set up for a major European company that relied heavily on technology for its competitive edge. Advance work with the companys operating units showed that its internal technology development team was in competition with its main technology vendors. The following table shows the impact of the war game on the companys thinking:

Pre-War Game Beliefs

The internal technology groups work was narrowly focused, so

Issues Exposed by the War Game

The technology group was building modules that duplicated parts of the major vendors broader application suites. The internal group was viewed by the outside vendors as a direct competitor, which made them wary of sharing their latest ideas with the parent company.

Post-War Game Understandings

Access to the outside vendors latest ideas was so important that the internal group needed to focus on applications that were unavailable from outside vendors. The parent company needed to make sure the outside vendors understood that.

Internal View

there was no conflict with the companys major technology vendors.

Operating Reality

The companys operating divisions purchased the internal technology groups products because they were superior to those which the vendors offered.

The operating divisions only bought the internally developed applications if they had no other choice. They preferred the vendors products because they were far more user-friendly and were better integrated into the broader applications workflow.

The technology group had to focus on a much more limited range of modules and provide them in a form such that they could be implemented easily by the operating divisions worldwide.

Unanticipated Issue

The emerging industry standard for integrating modules into a coherent workflow was of limited significance to the internal technology group and even less important to the parent company.

One of the outside vendors was trying to shape the emerging standard to its advantage. If they succeeded it would lock out smaller outside vendors who often had superior modules.

The parent company needed to become actively involved in shaping the standard in a way that would preserve access to the market for all vendors.

The result The war game forced the technology team to revise its approach and recognise that it was in a collaboration mode vis--vis the external vendors rather than in a competitive mode.

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Bringing the Process of Strategy to Life

OUND NOT VANQUISHING YOUR COMPETITION.

Management should consider a war game if it finds itself facing threats or opportunities such as the following: A threat from current competitors, such as a new product, the implementation of new technology, or some similar shift that changes the balance between the competitors. Imminent entry of new rivals into a traditionally stable market, when these rivals introduce new competitive behaviours. Industry consolidation or consolidation of customers or suppliers that alters the competitive landscape. Change in the external environment (e.g. the economic or regulatory climates) that threatens to upset the balance, whether to the companys advantage or disadvantage. A threat from new technology or a similar discontinuity that presents new threats and opportunities. Some of these five situations describe complex market environments whose competitive conditions often lie outside the immediate control of rivals. Because the threats and opportunities are complex, war games can help companies manage if not control the competitive landscape in which they operate. In an era of collaboration, war games may be a more useful tool than ever before as they are able to provide a means for uncovering potential conflicts between the multiple objectives and strategy of a company in todays multi-faceted business environment. Leonard Fuld is president and founder of Fuld & Company, a competitive intelligence consulting firm with offices in Cambridge, Massachusetts, USA and London, UK. Leonard can be contacted at lfuld@lfuld.com Michael Sandman is Senior Vice President of Fuld & Company and a leader in its strategic gaming and consulting practice. Michael can be contacted at msandman@fuld.com mCritical EYE Publications Ltd. 2003

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