I recently attended a presentation on corporate wargaming that had me thinking how it could have helped JC Penny avoid their recent retail strategy woes, and had me wondering why more retailers aren’t using it to mitigate their corporate risk.
Leading the presentation were a group of professional ex-military personnel headed up by a former Lt Colonel. While the combined experiences of the team were impressive enough, their wargaming methodology proved interesting as a valuable tool to be used by any business embarking on significant strategic change.
In my retail experiences, I have often been involved in strategy discussions, which were potential “Game Changers” for the business. Typically, new ideas, recent poor performance, potential or certain new competitors or simply the desire for additional growth, were sound reasons to review and develop strategic plans for the next phase of the business.
In retrospect, I can identify several examples of where corporate wargaming would have been extremely helpful and could have potentially saved retailers millions of dollars.
What Is Corporate Wargaming?
When businesses or public governing bodies, say a major retailer or the Office of Emergency Management, have developed a strategic plan, it is natural for those who came up with the plan to support it and want to see it executed.
Wargaming creates an environment in which to challenge this strategy prior to implementation. The SME’s [Subject Matter Experts] who have developed the strategic plan [Blue Team] are pitted against an equal group of SME Challengers [Red Team]. The objective of the process [Game] is for the strategy to be tested at every level, on every executional issue and on potential market response. It’s a stress test of sorts.
The Red Team can be made up of internal or external experts and even a combination of the two depending on available talent resources within the organization.
The outcomes of the Game can be varied; the most desired result proves the strategy to be sound and gives leadership the confidence to implement. Another positive outcome is a highlighting and identifying the flaws and/ or weaknesses of the plan. This allows the organization to fine tune the strategy and comes at a considerably lower cost than corrective action post implementation.
How Wargaming Could Have Helped Retailers With Their Strategy Changes
The recent retail strategy changes made by JC Penny that I’ve already alluded to, are an obvious example – A complete revamp and change to the way they presented merchandise in terms of display, pricing, marketing etc. Albeit a talented CEO was appointed, he was given full, unchallenged reign over the business. No testing process, no second opinion. The worst performance in the history of the company followed, as did the ultimate replacement of the CEO. Perhaps this could have been avoided with some challenge to such a dramatic shift in strategy through wargaming. We certainly hope our troops never go off to battle so poorly prepared.
I was asked to help turn around a retail organization, that had been convinced by the new CEO, to implement a strategy that was going to dramatically change every way in which a retailer executed the existing business. The product assortment, the staff in stores, the approach to marketing, and the pricing strategies where all impacted by the new concept. Although a much smaller example than JC Penny, this Canadian retailer had implemented a strategy without measuring the test results in detail. It neglected to test the gross margin to be generated by the new pricing strategy.
Wargaming in this instance would have certainly identified the flaws in the strategy before considerable expense was incurred. Experience shows that it is harder to turn back the clock and in fact this once profitable business began to lose money. SME’s tasked with challenging assumptions and strategies [remember the Red Team] would surely have challenged Gross Margin assumptions, freight costs on heavier and lower riced goods, labour costs, and ultimately loss of customer from their reduced offer.
While sitting in the presentation on wargaming, I was struck by the simplicity of the idea – Yet it could potentially have a profound impact on corporate performance by mitigating risk. As is often the case … the best ideas are simple ones.
To assess whether or not wargaming might help your company improve the development and execution of its retail strategy, I invite you to download our complimentary assessment tool.
I’m interested in your thoughts about wargaming. As retailers, do you think that wargaming could help you reduce the corporate risk of strategy changes? Please comment below.