Might war games deserve a greater role in business? Military analogies abound in the corporate world. Plenty of bosses look to Sun Tzu, an ancient Chinese general, for management tips. And in business, as in war, outcomes depend on what others do, as well as ones own actions. Yet many firms fail to think systematically about how rivals will react to their plansand traditional planning does a poor job of taking competitors responses into account, says John McDermott, head of strategy at Xerox, an office-equipment company. Corporate war games, which simulate the interactions of multiple actors in a market, provide a better way to do so.
Such games have two chief characteristics. First, players break into teams and take on the roles of fierce competitors . Second, the games involve several turns, allowing competitors not just to draw up their own strategies but to respond to the choices of others. Their popularity is rising. Booz Allen Hamilton , a consultancy, is running 100 war games a year, up from around 50 three years ago. Open Options, a Canadian strategy consultancy, has been going since 1996 and its revenue doubled last year.
BAH introduces a quantitative element into its games, calculating the effect of each teams strategy on their companys profits and stockmarket value at the end of each turn. Open Options takes a further step. To help Xerox understand the market dynamics of the print and copy industry, it ran a one-day workshop in which teams from Xerox took the roles of the big companies in the market, itself included. Each team identified the things their company could do to change its strategy and drew up a list of its desired outcomes; these preference trees were shared with the other teams. The results were then pumped into Open Options proprietary software tools, which played out interactions between the companies and produced a range of possible outcomes.
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