John Horn, a consultant with McKinsey & Co., thinks "war games" have much to offer business decision makers.
First, to be clear: Business war games don't involve playing war. They're analytical exercises that put a business through the paces of planning a strategic response to a worst-case scenario -- anything from a devastating recession to the entrance of an aggressive competitor into the same market.
Admittedly, Horn makes his living in part by designing these war games. He thinks they can help us learn by simulating -- albeit to a limited extent -- real-world environments. The key to their effectiveness, however, lies in their design. There's a difference between using a game to teach, and trying to learn from a game that's designed to entertain.
What I like about Horn's analysis, which recently appeared in McKinsey Quarterly [free registration required], is that it doesn't assume off the top that business is like a game, or that games can always or usually teach us anything useful about business. Instead, Horn questions that basic assumption, and concludes that business war games can, in some limited cases, with luck and careful design, be worth playing.
Horn warns that you can burn money, waste time, and make bad decisions if you play the wrong game or for the wrong reasons. Games aren't always appropriate, he says. They work best when you face a limited range of alternatives. They may be of little use unless you can accurately represent all of the important real-world stakeholders -- not an easy task if one of those stakeholders is, say, the U.S. Congress, as one defense contractor realized. He also says you need different games for operational, organizational, and strategic challenges.
Business games, of course, aren't a new concept. Monopoly has been gratifying make-believe slumlords for three-quarters of a century. Although considerably less venerable than the real estate board game, Tradewinds, a computer game that puts players in the role of swashbuckling sea traders, draws its inspiration from TRS-80 personal computer games played circa 1985.
Monopoly and Tradewinds are just for fun. Cashflow 101, on the other hand, is an educational tool supposed to impart valuable business knowledge to players, who can then use the lessons to get real-world rich. It's the brainchild of Robert Kiyosaki, whose "Rich Dad, Poor Dad" franchise makes him one of the most listened-to small business advisers on the planet.
How well does it work? The game has been hugely successful, spawning players and clubs around the globe. But many players say that Cashflow's lessons are rudimentary and can be obtained elsewhere through conventional educational materials. Another criticism is that luck, in the form of dice rolls, plays a large part in the game's own flow. Finally, it's just too easy, with some players saying they can win almost every time. No game can be complex enough to truly model real life, it seems.
So where does that leave us? "Well-designed war games, though not a panacea, can be powerful learning experiences that allow managers to make better decisions," concludes McKinsey's Horn.
Should you pay McKinsey's (or another consultant's) stratospheric fees to set up a game for your own business? Probably not. But the article is a good read, and if you're trying to plan ahead for uncertain circumstances, it's a good reminder of what should go into your thinking as you run through your options.
Mark Henricks has reported on business, technology and other topics for The New York Times, The Wall Street Journal, Entrepreneur, and other leading publications long enough to lay somewhat legitimate claim to being The Article Authority. Follow him on Twitter @bizmyths.
Image courtesy of Flickr user Brian U, CC2.0