Case study in detail: A war game in the automotive industry

The following text describes in detail a war game in the automotive industry based around the concept of future management

The situation

One of the world’s largest automotive suppliers wanted to analyze a number of dynamic competition scenarios  for the business units of its most important division by means of a business war game. A strategically significant acquisition made by a competitor had caught the executives by surprise and made them anxious to know more about potential competitors in the future. FutureManagementGroup AG were asked to prepare, facilitate and lead the war game project.

Goals of the war game

The war gaming project was undertaken on the basis of four goals determined by the client following intensive discussions. To:

1. Identify possible competitive situations and map competitor moves in the future.
2. Reduce the number of blind-spots in the top managers’ perception.
3. Solidify the corporate strategy against the unexpected.
4. Identify, develop and evaluate future opportunities.

Identify possible competitive situations and map competitor actions in the future
This primary goal was pursued and achieved by elaborating a series of competitive future scenarios which might evolve as a result of action and strategic moves by competitors. Since the probable and therefore most likely moves were already entirely known and had been thoroughly analyzed, the client was looking for those considerably less probable and more surprising future moves and situations with the strongest impacts. Despite the need to identify the unexpected, the moves and situations all needed to have a reasonable degree of plausibility.

Reduce the number of blind-spots in the top managers' perception
Blind spots are inevitable. Dangerous developments can evolve unnoticed by managers and catch the company by surprise. At the same time, blind spots hinder leaders’ ability to discover of new favorable developments and  strategic opportunities in the business environment. It is impossible to get anything even close to a complete picture of all factors in the environment.

Blind spots are due to barriers to perception, awareness, imagination and action which arise from a manager’s lack of knowledge, intelligence and expressional variety as well as his or her incorrect assumptions about reality and personal bias or aversions. All these factors can be amplified by the present condition of the respective person. As a consequence, FutureManagementGroup deliberately confronted the participants of the war game with an unconventional design for their management meeting and with several challenges to commonly held beliefs.

Solidify corporate strategy against the unexpected
Identifying blind spots, thereby reducing their number and developing eventual counter-strategies implies making the corporate strategy more robust against the effects of possible surprise.  One of the core purposes of future management is to enable management to be less likely to be surprised, which means looking for possible surprises and prepare yourself for them, at least mentally.

Identify, develop and evaluate future opportunities
We define future opportunities as both the potential and identified actions of an individual or an organization which are advantageous. The eventual plans developed to reinforce the strategy are a form of reactive opportunities. The alternative kind of future opportunities lies in the more active pursuit of possible advantageous actions which are largely independent of the competitors' own decisions and actions. Such opportunities may originate as a result of the weaknesses or vulnerabilities of competitors, unmet customer demands, new technologies or untapped markets.

Trigger change of the corporate culture
There was an additional goal which was particularly challenging with this client. The company’s strategic behavior was and still is based on the values of good ethics and sustainability, as is the case with many traditional companies. Their behaviour is correct, value-driven and  technology-focused.

However with more aggressive competitors from Western countries let alone Asia, this kind of defensive culture was perceived as a dangerous weakness. Through the  war game managers were supposed to learn to embrace aggressive strategies without abandoning their values.

Planning and Preparation

The war game was organized as an intensive two-day workshop with 60 participants representing the entire top management of the company. There were simultaneous war games involving three business units each with three competitors.  Nine facilitators and nine recorders (individuals whose task was to note down exactly what happened) were needed for this setup, in addition

to an overall facilitator for the entire group. The client chose to recruit half of the facilitators and recorders from their own staff and the other half from FutureManagementGroup. Figure 1 illustrates the process of the war game.
Figure 1: The process of the war game

A series of preparatory analyses were required in advance of the game:

1. Internal experts from the client's corporate intelligence departments helped identify the main trends in the automotive industry.
2. Another 39 future factors, for example trends, technologies and change drivers were chosen and prepared in the form of posters for the walls of the workshop rooms in order to expand the thinking horizon.
3. We do not recommended you assume that the workshops will be spontaneously creativity, so we prepared a list of 26 archetypal aggressive strategy moves, defining particular changes in value networks, pricing, acquisitions or niche strategies. These moves were designed to serve as templates for thinking on what the competitors or of the company might possibly do in the future.
4. A comprehensive profile was produced for each of the three competitors in each of the three business units. These nine profiles were summarized as nine one-pager documents.
5. The nine groups were formed: three market groups, each with three competitor groups. It was a particular challenge to mix participants, within each group,  who had prior knowledge about the respective competitor(s) and market(s) with participants who had fresh minds.
6. Facilitators and recorders were provided with a click-through presentation to help them structure and lead their workshops along with an electronic form to document the results. There was also a workshop booklet with a thorough description of the process and the rules to support the game and ensure good preparation.

The preparatory work ended with a half day workshop in which the project leaders, the facilitators and the recorders discussed and rehearsed the workshop process.

The War Game

Opening and introduction
The war game took place in a secluded hotel which had enough rooms for the groups and the plenary sessions. The chief executive officer welcomed the participants, presented the core elements of the company’s current strategy and provided the rationale for the war gaming project. FutureManagementGroup set the scene with stories about war games through history and in recent times as well as with foundations on future management.

Rehearsal of the present strategy and identification of competitors
The participants were acquainted with the structure of groups and they were first sent as three market group to their respective rooms. These groups  rehearsed separately the business unit’s current strategies. Questions from the participants, especially those from outside the unit, were answered in a brief session.
The three market groups were then split into three groups representing three types of competitors:

1. The company’s main, actual, competitor in the market,
2. A potential new entrant from a related market and
3. A typical (and ‘virtual’) competitor pursuing an aggressive low cost strategy.

Round one: competitor attacks ("Be the enemy")
The group workshops were designed as the competitor’s strategy session. The working groups developed their moves and strategies based on the prepared material previously described. Each participant was assigned with a role within his or her group (e.g. operations manager of company A, marketing director of company B,) which was documented with a corresponding name tag including the competitor's logo. “Be the enemy”, was the guideline.

In order to increase the aggressiveness of their moves and strategies, competitors were assumed to have virtually unlimited funding by a notional investor. The main goal was to drive the (client) company out of the market with intelligent, effective, plausible and essentially legal moves and strategies. The moves and strategies were recorded as they were elaborated. The recorders used an electronic form in order to keep information flowing steadily throughout the process of interrelated workshops.
At the end of the first workshop (round one), a member of the group was appointed “ambassador”. He or she was required to present the strategy to one of the other groups and to join this group during the second turn in order to explain the thinking and intentions of his original group through the presentation and written documentation.

Round two: defense and counter-attacks
The goal of the second round was to develop strategies to counter the actions envisioned in round one. In this round the groups reverted back to their “real life company”. The ambassadors played the role of a high level executive, who recently changed from the competitor to the company, bringing inside information on the competitor’s strategy, in order to present the strategies to the groups.  The group then analyzed the impacts of this strategy.

This point represented the end of day one and the participants were given the opportunity to think about the impacts and possible elements for counter-strategies overnight. The following day, the working groups gathered to develop counter-strategies which might be either defensive or offensive. These elements were deliberately detached from the current strategy in order to provide more room for innovative approaches.

We identified seven typical ways to handle a possible surprise, once identified, as shown in figure 2, and to develop eventual preventive or crisis strategies.

Figure 2: General types of eventual strategies
As before, the results were recorded and passed back to the competing group for the next turn.

Round three: responses to counter-attacks
In round three the working groups reverted again to their role as the competitor from round one. The ambassadors returned to their original groups to play out the following scenario: the results of their strategy session were fortuitously transferred to the “own company”. By chance they (the competitors) received an intercepted e-mail, describing the company’s counter-strategies. The ambassador filled the role of the person who received the e-mail and presented the content, following which the impact was analyzed, the attack strategies adapted and further elements added.

Impact analysis
The impacts of the new strategies were again analyzed by the competitor groups. At this point the participants were allowed to abandon their roles and “become themselves again”. They now agreed and recorded the most important lessons from their group. Following this the three working groups reformed in the market groups to present and discuss their lessons for the business unit and for the company as a whole. Finally all three market groups rejoined the plenary session to summarize the findings for their business units and the whole company as well as the implications for the current strategy.

Success factors for the war game
What was potentially the first critical success factor - the need to gain the top executives' time and attention - was irrelevant in this case since it was the CEO himself who had triggered the project. Consequently the real first critical success factor was to achieve and maintain the kind of open mindset needed for a war game of this kind. Many of the moves and strategies were extremely challenging since they went beyond the imagination of many of the participants. One example involved imagining a competitor who had developed an injection pump with a much lower pressure than is currently regarded as possible. It is only when participants focus their thinking on "why not" rather than on "that’s impossible" that they achieve the prerequisite for lifting blinkers, opening their minds and expanding horizons of their thinking.  The psychological problems associated with war games are as follows:

1. Probability thinking: Participants tend to forget that they are supposed to look for the unexpected, which means setting aside the probable and look for improbabilities.
2. Groupthink: In common with many groups, executives suffer from a degree of groupthink which needs to be handled well by mixing the participants in the groups and by the facilitators asking awkward questions.
3. Blind spots: People cannot see what they do not know.  Therefore the client searched to reduce the number and significance of blind spots as described in the goals above.
4. Experience based thinking: Executives, in particular, tend to rely heavily on their experience. However, experience can prevent them from imagining alternatives. This is the purpose behind mixing inexperienced laymen with the executives in each group.
5. Craving the sensational: People to attach meaning only to what is spectacular.  However, it is often small, undervalued moves and developments which make the difference.
6. Product focus: Executives and technical executives tend to love their product(s). They need to be reminded that customers pay for functionality and benefits, not for products and not for "solutions".

The second critical success factor involved managing the requisite complexity when sixty top executives were working in unfamiliar setups and in strange roles. Switching several times between different roles made the process even more challenging for everybody involved.
We managed to succeed thanks too long and thorough planning, preparation and testing with all actors involved - with the exception of the executives themselves who were unavailable beyond just two interviews with the CEO. We developed a methodological model with suitable tools and techniques specifically for this project and we made sure that each group workshop was led by an experienced facilitator.

Lessons learned

The executives identified several vulnerabilities in their strategy which they admitted  had not been on their radar screen before. In addition, they discovered opportunities for improving their competitive position by anticipating the possible future actions of  their competitors.

Results

The results of the war game triggered several strategic initiatives to improve the company’s strategy and to make it more robust against the impact of possible surprises. Several projects were started or changed to put the lessons learned and the new decisions into action. On the basis of the substantial results, similar war gaming projects were planned for other parts of the group.