Strategic Wargaming For Business - “Execution excellence through disciplined rehearsal” - Presented by Paul Roman and Fred Aubin to Deloitte's 50 Best Managed Companies Symposium at the Metro Toronto Convention Centre on 16 April 2013
Wargaming is a LEADERSHIP activity. Get direction from corporate leadership on:Defining the problem space.Establish CEO’s criteria for success.Discuss Wargaming methods and options.Agree on whether this is a test of the plan, a rehearsal for execution, or both.Agree on organizational learning requirements.Agree on business targets and objectives to be put at risk / tested.
The wargaming process can be as simple as a detailed narrative or master events list (as dictated by your plan or course of action) that describes:actions, probable reactions, counteractions, assets, and resources to be utilized.
Validation of corporate strategic assumptionsShared Situational Awareness amongst leadershipConfirmation or refinement of strategic centres of gravity and factorsConfirmation or refinement of your critical competitive, commercial, business or market intelligence requirementsImproved synchronization and alignment of business objectives and activitiesConfirmation or refinement of the comparative pros / cons / strength / weaknesses of particular plans and courses of action (COAs)Confirmation or refinement of your mission analysisConfirmation or refinement of your corporate decision support requirementsDetermination and confirmation of your strategic high value targets…. and those of your competitorsConfirmation or refinement of business targets and markets, clients, products and R&DConfirmation or refinement of your corporate structure and identification of organizational orphans and “enfantsterribles”Identification of branch plans, sequels, new markets and focused opportunitiesRefined performance measuresImproved corporate communication through disciplined and balanced feedback
Scalability: Wargames can be utilized at all levels from strategic to tactical level and can also be progressively nested as such. Focus: They can be used to comprehensively test a particular strategy or campaign options or they can be focused to test a singular discreet high risk business initiative or activity. Wargames can test the integration and alignment of an entire spectrum of business activities or discreet activities and initiatives such as: Change Management, Cultural Resistance to Change, Institutional Inertia, Corporate Unity, Commercial Intelligence, Information Security, Brand Protection, etc. The wargaming process can be as simple as a detailed narrative or master events list (as dictated by your plan or course of action) that describes:event, assets, and resources to be utilized. A more comprehensive version adds operational sketches, your business execution graphics and notes to the narrative process in order to gain a clearer picture of how the plan will be executed within a particular business environment. The most sophisticated and perhaps most complex form of Wargaming is modern, computer-aided modeling and simulation.There’s a dangerous seduction here though .....fancier may not always be better.
March 2003: Cadbury Scwepps under the leadership of Todd Scwitzer purchase Adams from Pfizer.Adams Brands: Trident, Dentyne, Chiclets, Clorets, Halls and Certs.Adams revenue was flat, margins had dropped from 19 to 12% and was bleeding market share to Wrigley globally and in the USThe purchase cost Cadbury Schweppes dearly as financial markets perceived the Adams acquisition as expensive and complex with at that time, and inexperienced leader! The Cadbury Schweppes share price fell by almost 30 percent.Mission: Demonstrate strong commercial and financial success quickly to restore share price.Target: 7% revenue growth and a return to high teen margins for the Adams businessChallenge: Where to best deploy innovation and commercial resources againts markets and competitors to the greatest effect:In Summary – The wargame was intended to allow Adams to figure out - “where to Play and How to Win
Cadbury covered the cost of capital for the Adams acquisition a year earlyAdams core brands grew by more than 7% and margins returned to 19%Trident sales doubled making it the top brand in the worldAdam’s gum share in the US grew from 25% - 34%Wrigley’s remained flat at 34%Globally Adams went from 7% - 27 % while Wrigley’s remained flat at 34%TSR averaged more than 20% driven by a share price that quickly recovered the 30% initial loss and moved on to new heights.
Battlefield analogy – Marketshare.Fall 1995, Biogen an innovation R&D drug company after 20 years is ready to launch their own first product – Avonex.BioGen – Fall 1995. New Drug for MSUS FDA approval was imminent and competition was fierce.Perceived competitive advantage was in delivery mechanism: a single injection once per week as opposed to multiple injections every week. Core strength had been R&D and now was entering directly into competition with many of their former clients who were bigger and far more experienced.Objective – Test pricing and market strategies in the US and Western Europe.Four competitor teams: Biogen, Schering/Berlex, Teva and Serono. – All public companies!Fewer than 20 Biogen executives were put on the competing teams to take on their own company. 3 moves projecting 4 years forward.Market team (representing customers) assessed the proposals of the competitor teams and adjusted market share accordingly. The white team converted these into representative financial statements and shareprice.Move 1 – Biogen’s product is priced well above the competition on the belief that their: “BioGen Outcome Guarantee” - if condition deteriorates there would be a full refund!
http://en.wikipedia.org/wiki/Millennium_Challenge_2002$250 million. Live and computer simulationVan Riper – inappropriately constrained?Lesson about the need for free play. The never stopped and went back to fix the strategy, they brushed the weakness under the carpet and carried on. Given the resources deployed, how could they not. Lesson – bigger is not always better!