Value@Stake Mission-critical insights

THEME: CHANGE COMMUNICATIONS

♦  There is a time in the life cycle of every business when it has to face ‘change’ head on.

by Alaric Marsden, Senior Managing Director at FTI Consulting, London, UK.

It could be change by choice, such as entering a new market on the other side of the world, preparing to implement critical new processes in your organisation, or perhaps entering into a new strategic partnership with another firm. Alternatively you could be forced into change, for example by new legislation, an aggressive new competitor entering the market or possibly a breakthrough technology changing the competitive landscape.

Running a successful business is never easy, and when a ‘big change’ comes, there are always winners and losers. But why are some firms better prepared for this change than others? It doesn’t matter whether the change is positive or negative, foreseen or unexpected, clear or uncertain. These firms not only have a clear strategy for it but they are also able to hit the ground running and react quickly and nimbly once their competitors start taking action. In our experience, this is not a matter of luck, nor an ability to predict the future. So how do they do it? How can companies best prepare for ‘Big Change’? The answer lies in the use of a technique known as ‘Strategic War Gaming’.

What is Strategic War Gaming?

Strategic War Gaming is a tool often used in the business world to assess the impact of applying different strategies in a competitive market to help determine the best approach to adopt. It is often used by businesses facing impending change who want to get ahead of the curve in understanding the best way to win in the ‘new tomorrow’.

What does it involve?

Imagine the equivalent of a giant game of Risk. We start with different teams, each representing a key competitor or key stakeholder group (e.g. the regulator, the media, customers) in your market environment. The teams then simulate operating in a real market, simultaneously making various strategic decisions across a series of rounds (each representing a set period of time) and we use an economic model to assess how the combination of their decisions changes the underlying market. At the end of each round, the new market position is revealed to each team and they must make a new set of decisions. We play this out over sufficient rounds until we have a clear enough idea of what works, what doesn’t work and how the market may change, at which point we can reset the game and play again. This multi-party, multi-iteration aspect of the game makes it far more powerful than just regular strategic planning.

How can War Gaming be used by my business?

War Gaming can be used at any stage of a business’s strategy development. It can be used to help determine what the initial strategy should be, stress-test pre-determined strategies, or even to assess when a strategy has served its purposes and should be updated. We often find that clients find it useful to help them prepare for upcoming ‘big market change’ (e.g. new regulation, entry of a new competitor or development of a new technology), each with the potential to transform an industry. However this is not the only time it is useful. We have recently worked with several clients who use War Gaming as a training technique to ensure that their senior executives are fully prepared and more flexible for change.

Strategic War Gaming can be used across a range of industries and by companies of all sizes. It doesn’t matter if your business is at the cut and thrust of the highly competitive retail market or making long-term investment decisions for large capital infrastructure; this technique applies just as well. You can never be over-prepared!

What resources are needed?

The process can be tailored to each company’s specific needs, involving as few or as many people as necessary. It can be run over a few hours or a few days, and can be as complicated or simple as required. At FTI Consulting we use economic models to describe the changing market and determine the full impact of decisions (such as pricing, strategic investments, etc.) to aide realism. We also use an experienced team who combine industry knowledge with War Gaming facilitation and modelling skills to make sure our clients get the most out of the exercise.

Case Study: Supporting a large European Utility prepare for future changes from an upcoming regulatory investigation into the energy market

Our client wanted to understand how a range of potential regulatory interventions might impact the market and assess their potential strategic responses.

While the client did not yet know what the interventions would be, they did not want to wait until after they were published to begin their planning. Therefore they asked FTI Consulting to run a series of War Games, each looking at different potential interventions.

We worked with the client to determine the level of complexity for the War Games and the potential market interventions we wanted to test. We then set about building the structure and an economic model to quantify the impact of different strategies throughout the games we facilitated.

Over the course of 4 full-day sessions, we were able to simulate the interventions multiple times so as to determine what might happen and how competitors might react.

This invaluable insight has helped us create a ‘Strategy Playbook’ for the client with a range of strategies ready to deploy in the event of different interventions.

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