Scenario Planning and War-gaming: What’s The Difference?

Like many strategic planning concepts, scenario planning and war-gaming mean different things to different people.  However, there seems to be a strong tendency to confuse the two approaches, and to even consider them to be largely the same thing.  Nothing could be further from the truth.

Scenario planning and war-gaming are two different techniques, with different outcomes and designed to solve different problems.  What’s the difference?

1. Purpose: Scenario planning is useful as the basis for strategic development — that is, to generate a range of options to consider depending on what the external environment might look like in the future.  War-gaming is more operational and focuses on how to execute a particular strategic initiative — such as a new product launch or new market entry — or how to counter known external market developments — such as a particularly aggressive competitor or a new regulatory development.
2. Timeframe: Scenario planning is a long-term technique.  The timeframe for scenario planning is typically at least three years into the future, and more often as much as five or 10 years.  War-gaming is a more near-term technique.  The timeframe for war-gaming is usually two years into the future or less.  
3. Focus: Scenario planning is a broad technique, designed to address the intersection of several trends, including customers, competitors, technology, regulators, new entrants, etc.  War-gaming is more focused, usually on one or several industry players, including one or more competitors, suppliers, or customers.  

Improving Strategy Development with Opportunity Analysis

One of the hallmarks of an efficacious strategic planning function is its ability to accommodate forward-looking industry and competitive assessments.  Why, then, are strategists so compelled to use tools focused on the present, and, more alarmingly, on the past?

A technique called Opportunity Analysis may provide an answer.  Unlike tools that describe the present and historic environment, Opportunity Analysis asks: what specific activities can an organization perform to increase the chances of achieving its strategic objectives in the future?  Opportunity Analysis does not focus exclusively on a firm’s current capabilities, industry structure, or even whether a company’s activities are congruent with its long-term vision.  Methods such as SWOT Analysis, Porter’s Five Forces, and the Balanced Scorecard address these questions effectively.  Rather, Opportunity Analysis is purposive; it inspires action in ways these other techniques do not.

Opportunity Analysis identifies opportunities and/or vulnerabilities that arise from external circumstances that can either advance or impede an organization’s strategic objectives.  The model does so by forcing intelligence consumers to identify and articulate the “best case” scenario for their business and then to identify the environmental conditions that have a direct bearing on the firm’s objectives, either for better or worse.  After identifying all the impeding and supporting conditions within the operating environment, a firm should then identify the tactics necessary to either take advantage of supporting conditions, or minimize those conditions that may impede the firm’s desired outcome.

Opportunity Analysis compels strategists to focus on the “what should be?” instead of the “what is.”

Senior Executives’ Expectations of Competitive Intelligence

Senior managers can seem like fickle and demanding customers of competitive intelligence.  It is often hard to know what they expect, how to serve them, and how to be of value.  Here are five tips, from the point of view of senior executives, on how to make competitive intelligence valuable to them.

1. Get me information and analysis on time, so I can make an informed decision.  It it is late, I will decide without it.  You must know my agenda and calendar, know what decisions I am facing, and know when I need your intelligence.
2. Tell me something I do not already know.  Bring me new news, or show me a different way of looking at a situation or issue.  Know what I know and know what I need.  If I ask you for something, consult with me to make sure I am asking the right questions.  Tell me what I did not ask for that I need to understand the issue, and give it to me.
3. Give me fact-based analysis, and let others write op-ed pieces.  You need to organize facts in a way that reveals patterns, notes change, and has insight.  Make your analysis transparent.  Tell me what you know, how you know it, and how confident you are in your judgments.
4. Don’t be afraid to be wrong.  If you are wrong, tell me so.  I am more likely to respect you and have confidence in you than if you do not tell me when you are wrong.
5. Tell me not only what I should be worried about, but also what opportunities exist.  If you over-warn, I will ignore you at your peril.  Keep me honest with any bad news, but you will have to persuade me.  If I misunderstand an issue, figure out a way to make me listen.

Secrets to War-Gaming Success

At the Strategic and Competitive Intelligence Professionals 2011 European Summit, held earlier this month in Vienna, Austria, Outward Insights President Ken Sawka led an interactive breakout session focused on ways to improve business war-gaming.  Conventional wisdom holds that the success or failure of a war-game rests on the quality and quantity of information and intelligence collected on the competitors and market players a company chooses to simulate in the war-game.  To be sure, good intelligence is a necessary ingredient for a successful war-game; without it, participants simply behave as their own organization would in the guise of a competitor, supplier, or customer.

However, what does “good intelligence” look like?  For many companies, it’s hard to know without a strong war-game design.  Any good war-game design must address two critical factors:

1. How will the war-game simulation proceed?  Organizations must determine the focus and objective of the war-game, and then design independent but related “rounds” of competitive simulation that help participants get to the defined objective.  Options for the various “rounds” of the game can include specific stimuli to which war-game participants react — such as a new product launch, new competitor entry, and the like — as well as market disruptors including regulatory or technology developments, in addition to the basic strategy formulation that characterizes most war-games.  There is no “rote” formula for a good war-game, and each needs to be designed with your unique set of objectives in mind.
2. Who should participate?  Which functional departments — marketing, competitive intelligence, strategic planning, product development, R&D, etc. — should be included?  What role should senior managers play?  Should we invite outside participants such as advertising agencies or market research firms?  Again, there are no textbook answers to these questions; each game should include a unique set of participants, thoughtfully considered given the game’s objectives.

Only after addressing these war-game factors does it become clear what intelligence is required ahead of conducting the game.  Knowing the answers to these questions will make your intelligence gathering more focused and relevant for those who are participating.

Healthcare Competitive Churn

The lines between insurance companies and healthcare providers are blurring as payers increasingly look to acquire or align with provider groups to control their front-end costs.  In doing so, payers are upsetting traditional rules of competitive engagement in many US healthcare markets.

UnitedHealth Group’s acquisition in September of the management arm of Monarch HealthCare, an Irvine, California association that includes approximately 2,300 physicians in a range of specialties, underscores the importance payers are placing on such deals ahead of the full implementation of healthcare reform in the United States in 2014.  The deal establishes United’s Optum health-services unit as a significant presence in southern California.  According to the Wall Street Journal, Optum had previously acquired the management arms of two smaller southern California groups, AppleCare Medical Group and Memorial HealthCare Independent Practice Association.

Many insurers are investing in providers, according to the Wall Street Journal, though not all plan to make those operations available to other health plans. WellPoint recently closed its acquisition of senior health provider and Medicare Advantage plan CareMore Health Group, which is also based in southern California. Last December, Humana Inc. bought Concentra, which has urgent- and occupational-care clinics. In June, Pittsburgh insurer Highmark Inc. struck a deal to buy West Penn Allegheny Health System, a five-hospital operator that was struggling financially.

As this competitive churn likely intensifies, certain players could find themselves left out.  Hospitals, in particular, may be at risk as payers may calculate that they can do better controlling costs in partnership with physicians, who are typically not strongly loyal to any particular hospital and may be happy to refer patients to several hospitals, at payers’ discretion, that can demonstrate lower costs.  To avoid being left behind, innovative healthcare providers are using tools like war-gaming and scenario planning to explore the implications of these alignments, identify implications, and strategize to achieve the best positioning possible amid the turmoil.

Management Approaches for Internal Competitive Intelligence Networks

Not that long ago, there was a debate in the competitive intelligence community as to whether internal networks — individuals within an organization that serve as sources of information and analytic expertise for the CI function, on either a formal or informal basis — were necessary.  Pro-network arguments focused on the immediacy, currency, and exclusivity of the information and insights such networks could provide, while anti-network arguments focused on the difficulty of forming, managing, and engaging such networks.

As far as I can tell, the pro-network advocates have won this argument.  Most CI professionals would agree that a key criteria for a world-class intelligence function is the existence and active utilization of one or more internal human networks.  The debate today is over how to manage and maintain such networks.  Typically, this debate focuses on whether intelligence networks ought to be formal or informal.  Formal networks would entail designating specific individuals to serve as members of the network, and would explicitly designate them as members of the network in job descriptions, performance evaluations and the like.  Internal networks would be comprised of individuals who support the intelligence function largely voluntarily, finding reward in doing so from the exchange of information that may benefit them personally.

I think the formal-informal labels miss some of the nuance associated with using internal intelligence networks.  Perhaps a better way to look at the role of networks in intelligence functions is to determine whether they operate explicitly or implicitly, both within the organization and with the intelligence function.  Explicit networks can be managed both formally or informally, but in either case they would be clearly working on behalf of the intelligence function and overseen by a member of the intelligence team.  Implicit networks would be more fluid and more representative of company cultures in which individual networking, mentoring, and information exchange were a hallmark of how the company operates.  Again, they could be either formal or informal, but would be more reflective of internal behaviors around information sharing, career advancement, and mentoring.

Why does this distinction matter?  It is hard to know how to engage an intelligence network without first knowing whether it should be an explicit or implicit network.  That is the first determination the CI manager or director should make when organizing the CI function.  Making this determination requires knowledge of the organization’s culture, expectations around collaboration and information sharing, and personal reward systems, all qualities that can be hard to identify and define.  However, doing so will enable the CI function to chart out the most effective manner for organizing, leveraging, managing, and rewarding network participants, no matter whether the networks are organized formally or informally.

Overcoming the Cassandra Curse of Competitive Intelligence

Cassandra, from Greek mythology

In Greek mythology, Cassandra was the daughter of King Priam and Queen Hecuba of Troy.  Her beauty caused Apollo to grant her the gift of prophecy, but when she did not return his love, Apollo placed a curse on her so that no one would ever believe her predictions.

“Cassandra cried and cursed the unhappy hour, foretold our fate, but by the god’s decree, all heard, and no one believed the prophecy.”  – Aeneid 2.323, Dryden Translation

Experts cite Cassandra as a figure of tragedy, where her combination of deep understanding and powerlessness exemplify the ironic condition of mankind.  And, it can be argued, of competitive intelligence professionals.

For competitive intelligence to be valued, it must go beyond providing a description of past and current competitive conditions. High-value competitive intelligence that is relevant to strategic decision-making must also anticipate future conditions, identify signposts of future competitive activity, and give senior executives a credible outlook of what external conditions may impede or help their company’s competitive positioning.

Sadly, it is often the case that the best anticipatory intelligence goes unheeded, just as Cassandra’s prophecies did.  Why? Because most senior executives require data and evidence to support competitive intelligence predictions.  This, naturally, comes with its own irony; how can there be data and evidence about things that have yet to happen?

What, then, can competitive intelligence professionals do to break Cassandra’s curse and compel senior executives to heed their warnings and predictions?

• Be transparent in your logic.  When offering scenarios about future competitive conditions, or describing a likely outcome to a competitive situation, be clear about how your arrived at your conclusions.  Using structured analytic techniques like Porter’s Four Corners Analysis or Opportunity Analysis makes it easy to describe the logic and reasoning behind your judgments, making it more likely that senior executives will place more confidence in your assessments.
• Find opportunities to repeat and re-communicate your forward-looking judgments.  By identifying signposts of likely future activity, every time you observe a signpost occurring, it provides an opportunity for you to alert senior management as to the occurrence of the signpost, and to reiterate your underlying conclusions about the anticipated outcome of a competitive circumstance.
• Find alternative ways to deliver your message.  Don’t rely on a single report or presentation.  Instead, make yourself available to sit down with your intelligence consumers to go over your analysis and address any questions they might have.  Behave as an internal consulting resource that can not only perform good forward-looking analysis, but that can also help management use your judgments and develop and implement strategy based on them.