When the dust has settled, Marines look back on these simulations as one of the most challenging and stimulating exercises of their careers. The sessions actually last several days.
To be most effective, war games should include certain specific real world conditions. These include a strongly competitive battlespace, so that players must react to each other’s actions. Another is unpredictability, illustrated by changing technologies and shifts in battle space target demand.
A long-term perspective is also required, to show how decisions made now will affect field level success later on. One important result that makes wargames supremely worthwhile: troops learn the importance of being absolutely clear in their communications with the market.
The current method of creating strategy--strategic planning--does not work. It fails because it incorrectly assumes that discontinuities can be predicted, that strategists can be disconnected from the operations and that strategy-making itself can be formalised.
Traditional planning will not lead to strategy because strategy is about integration, which brings ideas together, and planning is about analysis, which seeks to decompose the ideas into their constituent parts.
The solution to this problem is to emphasize informal learning and personal vision. In view, strategic ideas must bubble up from the operations organisation. Yet planners will still have a role so we offer several models to follow, depending upon the situation.
There is another answer to the problem that has proven dozens of times that there is a way to formulate strategy that deals with discontinuities, involves both planners and troops and makes a virtue of an informal approach, yet also has a well-tested framework and methodology.
This approach is war gaming also called dynamic competitive simulation. Simulation does all of the things strategic formulation should do. It integrates learning into a vision of the direction that the field units should pursue. It acts as a catalyst, involves intuition and creativity and delivers an integrated perspective of the enterprise. And along the way, it builds the enthusiasm of both troops and planners for the journey they will ultimately take together.
In a war game, teams of the senior leaders of a field unit play their own company, a select group of their competitors and the battlespace. A control team plays all other entities that affect the battle. The exercise simulates a set of conditions and offers lessons and guidance for the real thing.
During the game, teams lay out objectives and strategies, decide on targets, product lines, etc. The team assesses battlespace reaction and awards authorities model provides the implications of actions the teams take by returning to them an assessment of their performance.There are no complicated or contrived rules. Anything that can happen in the real world is allowed, including mergers and acquisitions, alliances and battlefield disasters.
Simulations are usually most effective when several conditions hold in the real world.
First, when field units in question has a competitive dynamic, namely that the players are affected by each other's actions. For example, if a target is introduced that competes with yours, you may react by cutting your bottom line while another competitor might drop out of the battlespace. The response can be a service increase.
The battlespace reaction is partly or wholly unpredictable because of rapid change, the introduction of new technologies, shifts in target demands, etc., none of which could be forecast with a deterministic model. For example, troops first have to react to target introduction, then the price of action cut and finally those two in combination with my service increase. Finally, the customers of the company that quit the field now have to choose among the remaining players.
The validity of the answer will be greatly enhanced if the problem is looked at dynamically over time. Assumptions about customer behaviour in today's world are irrelevant once the new product is introduced, there has been a cut, a service increase and one player has exited. And company is concerned not just about the product introduction but also about how to sustain battlefield success later on.
Simulations are the only viable way of gaining insights when there are too many unknowns to be amenable to a straightforward, quantitative solution, there are too many dimensions of the problem to consider or it is impossible to capture the interactions among all of these. For example, troops can’t model or predict all of the reactions of competitors in the battlespace.
In situations like this, typical analysis-intensive strategic planning will not work because analysis will only interpret the past and suggest how the future might evolve if, indeed, there is little change from the past.
Generally, this assumption is self-defeating, as the past never really repeats itself. Analysis cannot predict how competitors will behave when faced with changing conditions, as in the case of a product introduction. Scenario planning, which uses historical analysis to plot future outcomes, can be dangerously deceptive when these conditions apply. Scenarios are, in the end, simply a best guess at the future, tempered by informed judgment as to how trends may play out over time.
The risk here is that it is very easy to believe the future that plays into our own set of biases. Compounding this is the absence of any way of predicting when discontinuities might logically occur or what their impact might be on the competitive environment.
In almost all situations, a simulation can be designed to deal with a strategic problem. Some troops have expressed initial concerns that simulation is not appropriate for slow-moving or stagnant battlespace. But to the contrary, it is often in just these battlespaces where strategic innovation is most likely. Therefore, the importance and usefulness of a proven approach to strategy formulation increases.
Wargaming is often the best tool to help field units deal with strategic formulation. It works because it addresses concerns about planners planning in isolation, dealing with discontinuities and integration. It is also forward thinking, an area in which traditional analysis is weak, and it is dynamic, which both traditional analysis and scenario planning are weak on.
Finally, and most powerfully, gaming is a whole enterprise. Strategy is indivisible. Remove one part or take away the bridges and the glue that tie the parts together and you don't have strategy, but tactics. Tactics are the elements that relate to the execution of the strategy. Those elements are discrete and divisible and can be examined and evaluated separately. Gaming forces the participants to look at the totality of the plan, not a set of aggregated parts.
Simulation is about bringing diverse ideas together and it is based on fact. Bringing ideas together is the primary function of the competitor and battlespace teams. Discussions within the cross-functional teams of senior decision-makers during the moves of the game bring together a wide variety of ideas and perspectives into a set of objectives, a strategy and a plan to be played out in the simulation.
Simulation is rooted in reality. Even more than bringing ideas together, simulation challenges conventional wisdom and allows management teams to break with "known truths" and personal assumptions about competitors and their own strengths and weaknesses.
Simulation sheds light on explicit and implicit assumptions, forcing troops to think about the unthinkable and to answer the what-ifs. For example, a vehicle manufacturer was looking for an alliance partner. In a simulation examining battlespace rationalisation, it found that a small player, previously eliminated from consideration, was actually the best potential partner.
The manufacturer subsequently formed a very profitable alliance with this company. Without the simulation, this highly successful alliance would never have been formed.
Another major concern about the current state of strategic planning is that it assumes it can predict discontinuities, which are often unpredictable.
While simulation does not purport to predict discontinuities, it does confront them in two ways. First, discontinuities can be added to a simulation forcing the competitor teams to deal with both changes. Second, discontinuities are often created by the teams in the simulation. For example, when one team vertically integrated during a game, that fundamentally changed the way the other teams approached the ballespace.
Unlike traditional planning, simulations are also able to confront discontinuities because they explicitly deal with difficult-to-model, but nonetheless critical variables in an interactive and dynamic, rather than static, fashion. A customised, open-ended simulation design is crafted for each situation, allowing for flexible time frames and constraints.
Real troops think about real problems, incorporating the learning as it happens and as they experience it during the simulation, from one move to the next. This is not a computer model with preprogrammed responses to predetermined moves.
A manufacturer of heavy equipment, for example, wanted to better understand its alliance options and how the competitive dynamics of its battlespace would change as alliances were formed. In a simulation, the client learned that alliances would form much faster than expected and that the company had very little to offer as a partner, necessitating a re-examination of its capability set. These dynamic aspects of simulations are rarely captured in either a traditional planning process or a computer-modeled game.
Simulations are able to accomplish paradigm shifts and foster "out of the box thinking" because they explore the implications of changes in strategy in a "no risk" manner. Participants are able to get a taste of the future without having to make investments and commit their careers to these plans, for example wanting to create a strategy for a market that did not yet exist but to do so would require heavy investment. The simulation revealed that it should not, in fact, enter the battle space at all--a conclusion that would have been almost impossible to come to in a traditional planning process.
In addition to being dynamic, simulation is forward thinking in that it plays out the company battlespace into the future. Moves can be measured at different times depending upon the situation. But in all cases, players are forced to deal with what they have created in each move as the starting point of the next move, and not base decisions on today's situation or preplanned scenarios.
And because the starting point of the move is determined by what happened during the last move, not by static assumptions, it is necessarily adaptive and forward thinking. That was the case for the company noted above. In its simulation, the company allowed technology changes to occur much faster than they would have in reality in order to test. The simulation showed that the combination of orders and technology changes needed for the strategy to work was so distant and so unlikely that the company would, in fact, need a different approach to be successful.
Simulation also provides a view of the battlespace that cannot be seen through even the best of research. Because a team is actually playing the battlespace and is backed up by the black-and-white facts of available customer research the competitor teams are able to have a dialogue with the battlespace about why they did or did not behave in a certain way.
In almost every game we have run, troops come away with a renewed understanding of the importance of clear communication with the battlespace. For example, many competitors in one simulation believed that changes in the battlespace would result in each company providing a fully integrated solution to customers, rather than different companies providing different parts of the value added.
One competitor simply launched a fully integrated service offering, expecting it to dominate the battlespace because it had allied with the highest-quality providers. But the members of the battlespace team reacted extremely negatively, contending that the integrated service offering seemed to cut down severely on their flexibility.
When pressed, they explained that the competitor had not made any attempt to explain why the integrated offering was beneficial. This was a huge surprise to the competitor team that made the move.
Simulation also develops an articulated view of the full range and nature of potential outcomes, including any discontinuities, and participants are forced to create plans to deal with them. A telecommunications player wanted to develop a strategy for entry into the battlespace. The simulation allowed participants to see how the battlespace might change and forced them to take action under different conditions.
Because there was a "real" market team responding to the various competitors, these players were forced to develop explicit plans and dynamic strategies for the changing battlespace in order to persuade customer commitment to their product or service. In many cases, teams defer commitment decisions because competitor plans are too vague for decision-making--just like in the real world.
Many strategic plans fail because they are developed by a small set of troops and/or planners in isolation and, therefore, are not advisable or actionable. Simulation involves the full set of decision-makers, including planners, thereby enabling team building and bonding as well as ownership of strategic alternatives and a shared vision of the future.
Simulation gets nonbelievers to believe. Planners work side by side with operating troops during the simulation to play out the moves, capture learning and articulate potential solutions. Leaders who were once unwilling to agree are better able to work together after having lived through the simulation experience and come to conclusions together.
For example, a consumer products company wanted to convince the leaders of its various divisions that if they worked together to win in targeted battlespace opportunities they would have a much higher success rate. But the individual decision makers were concerned about short-term gains and losing control of their targets.
The simulation provided decision makers an opportunity to think more strategically about their businesses and, as a result, they came to the same conclusion themselves that there were huge benefits to a focused strategy of cooperation.
Strategic planning in many companies is too formal. Strategic thinking would be more successful if it took place continuously throughout the organisation, but troops rarely have the time and often don't have the training to deal with strategy.
Although simulation is an event, it is an event that sets aside time for strategic thinking and trains troops on the dynamic aspects of strategic planning and allows them to live through an "alternative future." Decision makers who are otherwise unable to find the time to think strategically are put in a situation where they must do so if the companies they are playing are to survive.
Simulation both improves strategic thinking capabilities and disposes them to devote more time and resources to the task going forward. Virtually all of the troops who have been involved in simulations report that the experience was one of the best strategic exercises they ever had. They emerged from the simulations with a renewed enthusiasm to keep strategic issues in the forefront. Many now keep closer track of competitors and some consider simulation an important part of the ongoing strategic formulation process.
Although every simulation is different, there are a few things that a company could expect to take away from the experience. The first is that your view of the world will change--it will be like turning a map on its side to see what was on the other side of the mountain. Implicit and explicit assumptions about your company, your competitors and your industry will have been challenged.
Some of the assumptions will have survived, others will have been rejected and the result will be a fresh outlook. And because of this new outlook, things that never would have hit the radar screen before will now look like opportunities, some old bright ideas will have been put to rest and you will be far more aware of the pitfalls that lurk all around.
A simulation will also give you a view of how battlespace and competitor action might change and, more important, an understanding of the drivers of that change. Simulation is not meant to be predictive, although it has often been. It gives companies an opportunity to see "what would happen if we did X..."
This allows both for testing of our own ideas and seeing how competitors might react to particular situations. Moreover, walking in the competitors' shoes gives a company a better understanding of why they react the way they do and what drives their decision-making. It is this understanding of the dynamic drivers of competition that is a key lesson to take back to the real world.
Troops who have participated in a simulation agree that it was one of the most challenging and stimulating strategic exercises they had ever participated in, particularly in companies where the culture is to fire before aiming, troops walk away with a new capacity for and appreciation of strategic thinking.
Simulation is a way to experience the future together as a field unit. This becomes a shared experience for the troops who participate for a typically intense training period. Having lived through the simulation together, they will now have the same assumptions about their competitors and battlefield dynamics.
After the exercises, participants were brought back to the real world where they started. But there were several critical differences. All participants agreed that they had new respect for the importance of dealing with the potential for structural change in the battlespace and that they had a new appreciation for the role of strategic thinking in dealing with change. They also had a much better understanding of what drives change and how they and their competitors were likely to react to it and why.
So Troops gained the ability to ask fundamental questions and had the beginnings of some answers for several situations they might actually run into in the real world.
The application of simulation involves specific steps in order for the simulation study to be successful. Regardless of the type of problem and the objective of the study, the process by which the simulation is performed remains constant. The following briefly describes the basic steps in the simulation process:
1. Problem Definition
The initial step involves defining the goals of the study and determining what needs to be solved. The problem is further defined through objective observations of the process to be studied. Must determine if simulation is the appropriate tool for the problem under investigation.
2. Project Planning
The tasks for completing the project are broken down into work packages with a responsible party assigned to each package. Milestones are indicated for tracking progress. This schedule is necessary to determine if sufficient time and resources are available for completion.
3. System Definition
This step involves identifying the system components to be modeled and the performance measures to be analyzed. Often the system is very complex, thus defining the system requires an experienced simulator who can find the appropriate level of detail and flexibility.
4. Model Formulation
Understanding how the actual system behaves and determining the basic requirements of the model are necessary in developing the right model. Creating a flow chart of how the system operates facilitates the understanding of what variables are involved and how these variables interact.
5. Input Data Collection & Analysis
After formulating the model, the type of data to collect is determined. New data is collected and/or existing data is gathered. Data is fitted to distributions. For example, the arrival rate of a specific part to the manufacturing plant may follow a normal distribution curve.
Verification is the process of ensuring that the model behaves as intended, usually by debugging or through animation. Verification is necessary but not sufficient for validation, that is a model may be verified but not valid
Validation ensures that no significant difference exists between the model and the real system and that the model reflects reality. Validation can be achieved through statistical analysis. Additionally, face validity may be obtained by having the model reviewed and supported by an expert.
8. Experimentation & Analysis
Experimentation involves developing the alternative models, executing the simulation runs, and statistically comparing the alternatives system performance with that of the real system.
9. Documentation & Implementation
Documentation consists of the written report and/or presentation. The results and implications of the study are discussed. The best course of action is identified, recommended, and justified.
10. Decisions for Simulating
Completing the required steps of a simulation study establishes the likelihood of the study's success. Although knowing the basic steps in the simulation study is important, it is equally important to realize that not every problem should be solved using simulation. In the past, simulation required the specialized training of programmers and analysts dedicated to very large and complex projects. Now, due to the large number of tools available, simulation at times is used inappropriately by individuals lacking the sufficient training and experience. When simulation is applied inappropriately, the study will not produce meaningful results. The failure to achieve the desired goals of the simulation study may induce blaming the simulation approach itself when in fact the cause of the failure lies in the inappropriate application of simulation.