Articles

Winning in the Red Ocean

Using war games to train leaders for when competitors go for the throat

By Paul Kinsinger

During the Cold War, “Blue Team” pilots from NATO countries and their allies often trained for air-to-air combat against what was called the “Red Team,” a group U.S. pilots using Soviet tactics and Soviet fighters (often surreptitiously acquired from Moscow’s more venal allies).

The point was, of course, to provide “Blue Team” pilots with the most realistic training possible to increase the prospect of establishing air superiority — a situation that would allow for the most devastating impact of air power on the battlefield. One outcome was the near total destruction of the Iraqi army during its retreat from Kuwait on the so-called “highway of death” by U.S. and Allied airpower in 1991.

This kind of training is a classic example of a “war game,” a competitive role play designed to allow strategists and field operators alike to gain insight into how potential opponents think and execute on the battlefield. The concept is: The more you understand how your opponents think and behave, the more likely you are to be able to craft strategies and tactics that will defeat them.

Most companies don’t face such high stakes in the marketplace, of course, and can be best served keeping their eyes on customer behaviors. But companies occasionally find themselves swimming in a true “Red Ocean,” where growth has slowed or declined and where competitors have become decidedly more aggressive in an effort to win over a limited group of customers and dramatically alter the landscape. Companies that don’t focus their attention on their competitors’ strategies and tactics in these conditions do so at their peril, and may soon find themselves losing accounts, key employees, and even being driven out of business.

Thunderbird Executive Education was recently asked to design and facilitate some “war games” for one of its clients facing such Red Ocean conditions. Hit hard by the 2008-9 recession, many companies in this big ticket item industry have struggled to regain their footing. Some well-known players are failing; others are just hanging on in hopes of an industry upturn. At the same time, the industry is now truly globalizing, as newer players from the rapidly developing economies surmount the traditionally high barriers to entry, establishing themselves as global players, and bringing robust resources and asymmetrical strategies to bear in pursuit of the limited global customer base.

Thunderbird’s client, one of the oldest and best known players in the industry, has held its market share through pricing, but it still offers the broadest range of product lines in the industry and services generations of legacy products. Moreover, it has found itself under increasing competitive assault in its most lucrative product segments from a rapidly developing market player that has substantial government backing. In a true Red Ocean situation, this competitor had just poached two senior sales people from Thunderbird’s client company — a potentially damaging development in an industry where sales are strongly relationship-driven.

Against the backdrop of these industry and competitive conditions, key executives at the company were concerned that (1) strategic thinking at the company did not place sufficient emphasis on competitors and market insight, and (2) that strategy-making in general suffered from too little engagement and cross-silo collaboration. With an eye on addressing both conditions at the start of the company’s annual strategic review cycle, senior leaders decided that engaging in war games might address both and called Thunderbird Executive Education.

Designing a war game

Successful war games depend on three key components: The game premise, the research preparation necessary to arm all teams for the game, and the design of the game itself. The premise is simply the go-in situation statement that drives the game. This could be strategic, such as playing out two to three years of upcoming competitive bids; or it could be more tactical, such as winning a particular customer.

The preparation piece consists of two aspects. First, each team needs to have access to sufficient market and competitive intelligence to play the game. Thus, either the client or the facilitator (if from outside the company) has to undertake the work to provide playbooks to that effect.

Second, “Red Teams” must prepare to act as if they are the real competitors, and not just “Blue Team” employees behaving like Ironman. This means that, ideally, they must try to get inside the heads of their competitors’ key decision makers and they must understand their competitors’ overall strategies and what drives them. Moreover, they must also behave as if they have some key competitive intelligence about “Blue Team,” but must put aside much of what they actually know as Blue Team company employees that a true competitor would not.

Finally, there is the design of the game itself. This determines the structure of the game, the number and types of rounds, the report-out and judging formats, and the focus of post-game de-briefs, from business outcome impact to changing behavior in the workplace.

In the case in point, Thunderbird Executive Education worked with the clients to fully understand both the strategic situation in the industry and the two key gaps they had identified to co-develop the premises of the two games. Based on the premises and the desired outcomes, Thunderbird Executive Education then designed the two games — one day for each — collaborating throughout with the client to customize the design for factors such as the number and level of available participants, deadlines, and how much time they could realistically expect participants to devote to preparation.

With the design framework in hand, Thunderbird Executive Education then helped in directing the client how to prepare the teams’ playbooks, as well as provided specific instructions to those on Red Teams around behaving like a competitor.

Let the games begin

Each game then unfolded over a day with the about two-thirds of the time devoted to the prosecution of three rounds of market moves driven off the opening premise. After judges evaluated each team’s strategy, a winner of each round was declared and teams were sent off to adjust their strategies for the next round according to the judges’ feedback and moves made by other teams.

Going through three rounds gave Blue Team — the one playing the client company — sufficient opportunity to revise and sharpen its strategy for the premise so that it could then be briefed to the senior leadership team by mid-afternoon. (Red teams were asked to devise one final competitive move, the best of which was sprung on the Blue Team as part of its final presentation to senior leaders — a devilish device designed to further test their newfound competitive strategy skills.)

At the end of the final presentation, judges announced the overall winner of each game, which in one case was the Blue Team and in the other, the Red Team.

Capturing impact

While war games can almost always be counted on to get the competitive juices of participants going, if designed right, they should also serve as a great learning platform for both lasting business impact and for behavior change in the workplace.

With this in mind, the final sessions of each day were devoted to a facilitated discussion, led by Thunderbird Executive Education, in which participants were guided in capturing their key takeaways from the exercise, as well as in what they would do differently back on the job and how they would  keep themselves on track to do so.

The strategic business impact for the company, of course, remains to be seen, since it will begin to be felt as the annual strategy review process unfolds over the next few months. Even so, participant feedback during the debrief session clearly showed that many had had an “a-ha” moment with regard to how important it was to consider competitors and broader market insight as they began to develop product line strategies. And, many also acknowledged that they also now had a much better perspective on what drove their competitors’ strategies in the segments that were the focus of the games.

This included fundamentally recognizing that certain competitors began with stronger positions with regard to the targeted segment and could win by executing on the strong hand they held, while others were disadvantaged and would have to take greater risks to stay in the hunt.

Not surprisingly, the immediate debrief produced more business impact discoveries than process or behavior insights, but even so, some participants were able to identify key takeaways around the value of greater cross-silo engagement and of collaborative strategic thinking — the second learning outcome goal of the exercise. Participants were encouraged to capture these insights in terms of how they would change how they work going forward, as well as how they could mentor colleagues who were not able to participate in the games.

Thunderbird Executive Education will be working with the client to develop a strategy for affecting and monitoring behavior change in the next stage of the engagement.

Paul Kinsinger is a Clinical Professor of Business Intelligence at Thunderbird School of Global Management. He is also an Executive Director for Thunderbird Executive Education. Previously he has worked as a senior manager within the U.S. Central Intelligence Agency.

What do you need to run a war game?
War games can run from part of a day to multiple days, depending on the desired outcome. For them to succeed, they need a true champion in the company who has buy-in from senior leadership (if not actual participation) and who can motivate the targeted population to participate. You also need people who can act as judges — generally senior leaders who have no stake in the specific outcome (such as from other business units), ex-executives, board members, or trusted third parties from the industry. Judges must know the industry well enough to bring credibility to deciding on winners and enforcing rules and, of course, they need to be impartial. A game can also include a team that essentially plays the market and responds to teams’ moves, which helps make the judges’ decisions more transparent. Finally, there needs to be moderators or facilitators who will run the games, answer questions from participants, and provide counsel to the teams. Finally, companies must have the ability to provide substantial market and competitive information to participants, without which games would have little real relevance.
Could your company benefit from a war game?
Role plays are classic learning vehicles and are employed in several types of learning engagements. War games are role plays that are better suited to zero-sum outcome situations, which is why they are so valuable in Red Ocean competitive environments. As a result, ask yourself the following questions. If the answers are mostly yes, then a war game might be a great learning engagement for your company.
  • Is your company in a slow-to-no growth market?
  • If so, then is your product or service high-cost and difficult to duplicate?
  • Does your product or service have a long life cycle?
  • Is the customer base for your product or service fairly limited?
  • Is your industry beginning to feel the impact of a new group of competitors from leading emerging markets that have some measure of government support?
  • Do you have aggressive competitors who are focused on growing through taking your key customers and on luring away your top talent?