By Arjan Singh
In a complex global and competitive world, formulating a plan without testing it against likely external reactions is the equivalent of walking into a battlefield without the right weapons or a plan to win. In situations where the cost of being wrong is high, war games can be very helpful to understand from a 360-degree perspective the external opportunities and challenges of all the key stakeholders in the industry. War gaming can guide a company to succeeding in this competitive world quickly and without making costly learning mistakes.
WHAT IS A WAR GAME?
War games are structured role-playing workshops that help to develop and refine strategy. A war game simulates the moves and counter moves of key companies and influencers in the marketplace to anticipate what they are likely to do when changes in market dynamics occur. War games are a common tool used by life sciences companies — about half are conducted without external support.
War games enable participants to openly discuss how they view the competitive environment and help align participants on what key assumptions to make when thinking about responses and strategies. War games also help engage stakeholders in the decision-making process to get buy-in, identify gaps in market knowledge, and create a defensible business strategy. In addition, they help highlight the key differences between your company’s and others’ assumptions. Finally, they help to assess and anticipate likely changes in markets so you can plan your options and anticipate what other players are likely to do.
HOW DO LIFE SCIENCES COMPANIES USE WAR GAMES?
Many life sciences companies conduct war games at the beginning of their business planning cycles to take an outside-in approach. Rather than looking at planning insularly, they endeavor to understand the key dynamics affecting their industry, and with this knowledge, they develop their strategies. These strategies are more robust as they are not created in isolation of external factors.
An alternative approach is to conduct a war game after initial strategies are formulated. This enables companies to pressure test their strategies against external dynamics to understand which ones are more likely to succeed given the competitive realities of their particular industry segments.
Both approaches can succeed, but the key is to ensure that a war game is conducted prior to strategies being finalized to ensure external dynamics are completely factored into strategic thinking.
HOW TO CONDUCT A WAR GAME
The war gaming process usually takes up to three weeks to properly plan, execute, and deliver. A project manager can expect to spend a couple of hours a week managing the process. To run a successful war game, the following should be considered and planned out:
Whenever there is a likely change in the business environment, it is a good time to consider running a war game. The first step is defining the key business issues to address and the objectives of the game. Start by engaging with stakeholders across departments to formulate the issues to consider and to determine the current level of understanding on these issues.
War games are typically used to analyze changes in the external environment and competitors' behavior. These changes can include a new product launch and regulatory or environmental changes that modify the competitive dynamics of an industry.
Significant changes to a competitor, (e.g., changes to management, business operations, supply chains, manufacturing) that may give them a competitive advantage or disadvantage can be examined through war games. If a competitor's behavior does not make sense or seems irrational, a war game can help you understand what is driving the behavior. Also, if your company is preparing for a big decision, war games can help ensure you are factoring in your company's internal information and fully considering the external forces that will make or break those decisions.
Ideally, a maximum of 40 participants should play a war game, as a higher number becomes hard to manage. The participants should include cross-functional stakeholders from the organization such as sales, marketing, strategy, research, and manufacturing, with the actual composition aligned to the war-game objectives. The key factor is to compile a group of stakeholders who know about the issues being discussed and who can add insights from their functional areas. External partners from advertising agencies, suppliers, and research companies also can be invited, as they are useful when an outside perspective is important. And they are less likely to censor their opinions.
The facilitator operates the war game and should have experience in facilitation and strategic thinking; being an assertive and clear communicator; having the ability to balance between task and people orientation; and being impartial, flexible, and energetic. Typically, director levels and above have the experience to be effective in this role.
Preparing a comprehensive briefing document ensures all participants have common knowledge of the key issues being examined, understand the current competitive intelligence available, and recognize the intended outcomes of the war game. Distribute the briefing document about 10 days before the event to give participants adequate time to prepare.
The briefing document should start with the war game objective, the agenda, and an industry and market overview. Details on each of the companies in the game should include their strategy, investor information, current products, and products in development.
Normally, the competitive intelligence group in a company prepares the briefing document. If your company does not have a competitive intelligence group, the work can either be produced internally or outsourced to an external vendor.
A war game commences with a plenary session that describes the game objectives, team orientation, and background on the key issues. Next, participants are divided into teams where they role-play the competition and work on exercises in separate rooms.
The time allocated for each task is typically one to two hours. Once teams have completed their exercise, they return to the plenary room to present their work and to respond to questions from other teams. Depending on the length of the war game, there are between three and five rounds of these structured exercises.
In the final exercise, all the competitive teams are dismantled and participants work together to build strategies and actions for their company based on the insights generated from the war game exercises.
An effective war game produces insights that can last for years if stored and updated regularly. These insights need to be formally documented in a final report and then circulated internally to ensure they are acted on and then updated regularly.
All flip charts, presentations, and notes should be collected. These outputs can be used to compile a final report as either a document or presentation.
A war game report should start with a description of the game and objectives, roles, and participants. It should detail the analyses, strategic options, and actions that were agreed to at the outcome of the game. Finally, the report should include a schedule for updates on the analysis from the game after a few months.
War gaming is a core foundation upon which competitive strategies can be formulated, rehearsed, and stress-tested. Organizations that invest time and resources to conduct war games may have a better understanding of their competitive environment and the dynamics affecting this environment so they can then proactively take action.
ARJAN SINGH is president of Pharma War Games and is a lecturer of strategy at the University of California, Irvine.