Expectations and OutcomesBy Brian P. Watson | Posted 11-10-2008
Where IT Fits in the Business Battlefield
Plenty of corporate executives have channeled the successes and failures of military leaders to help them better understand their business. And that's no surprise: The armed forces' focus on strategy and execution has long held many lessons for forward-looking executives.
Mark Herman, a vice president at the business consultancy Booz Allen Hamilton, specializes in putting those business leaders into a different kind of battlefield. Herman, co-author of Wargaming for Leaders: Strategic Decision Making from the Battlefield to the Boardroom (McGraw-Hill, December 2008), designs and stages business wargames for firm's clients.
In the book, Herman and co-authors Robert Kurz and Mark Frost lay out how, through the use of different gaming scenarios, they've helped businesses understand pressures from within their industries and from around the globe.
Wargames play on what the writers call "cognitive warfare"--the combined brainpower of colleagues and teammates working on various scenarios. Wargames also thrive on the "impossibility theorem": No matter how imaginative or determined a person is, he or she can't list the things that would never occur to them.
Unlike some other critics of IT leadership, Herman says there's no question that CIOs need to be deeply involved in these wargaming scenarios (which always include top corporate executives), regardless of whether they had anything to do with the problem at hand.
Herman explained why--along with what business leaders learn from wargames--in a conversation with CIO Insight Online Editor Brian P. Watson. What follows is an edited, condensed version of that conversation.
CIO Insight: What do wargames teach business leaders that other analyses can't?
Mark Herman: Technology people love computers and all the things computers do. But there's a fundamental thing people need to remember: Computers don't think. That's important.
You want to bash numbers around? Computers are awesome. Anytime you're looking at a problem that's fully understood, you don't want to do a wargame. It's a closed-form, an algorithm, and that's where a computer reigns supreme. You plug in your variables, you push a button, and voilÃ , an answer pours out rapidly and in volume.
However, there are many, many problems in life--particularly around strategy and competition--where there are unknowns.
One of the guys who objected to the 2004 change in the rules of what kind of leverage banks and institutions can have with their money thought that they were relying on computer models of Wall Street to avoid disaster, but the computer models couldn't deal with the continuity.
Consequently, part of the problem was an overreliance on what the models said would happen. So they tried to treat an unspecified problem with a closed-form solution. As long as everything stayed on a continuous, linear vector, everything was cool. But the first time property started diminishing in value, the whole thing unraveled rapidly and the computer models couldn't see it.
Why a wargame?
Herman: You could hold a wargame with a lot of different people, but the key is that you're holding it with people who are knowledgeable and experienced in the topic. You get the people who do it for a living and put them in a context. Humans don't know what they know, but if you put them in the context of making decisions, all of a sudden, in the context of the moment, you're going to get some very fine answers.
You're leveraging the human cognitive models you can't get at any other way. For the most part, you ask a question, and you get an answer. In a wargame, you ask what the question is. When you ask that, you get a whole different set of answers.
Then you get a competitive element: What you think is not necessarily going to go without a challenge. So you create this dynamic with human models that is extraordinary. Ultimately, that's the difference between a wargame and an analysis.
The CIO's Role
You write about "cognitive warfare"--how groupthink can often lead to better decision making. Do you find that top executives lead the charge, or do lower-level people tend to step up?
Herman: It's far more the latter than the former. There have been situations where we have the CEO of a huge entity along with IT services and infrastructure people who would never in the course of their careers have a conversation with the CEO.
Because of the wargame, certain things are revealed. We had a client doing an infrastructure resiliency scenario. The CEO came in, and they discovered a problem in their infrastructure. The CEO asked why it was so, and a guy from the back of the room said, "Because you didn't fund that thing we wanted to do last year."
The CEO was very gracious about it. He turned around and said to fix it. So a major IT investment--something like $100 million--was made right on the spot in the wargame with the CEO, because he had cancelled the thing that would have protected him from the thing he didn't want to happen.
Some investments in IT are cobbled together with others. For a lot of reasons, they aren't as clear: The business case might not be clear, or the perception of the risk isn't high. In the course of deliberations, some things land on the cutting room floor. They may have no impact on the life [of the business], but sometimes you find out it was a mistake. Wargames give you another angle for looking at all that.
What about wargames helps IT executives?
Herman: It's about information. It's not about information technology, per se, but about the information that IT can supply. Here's where the military and the corporate world really do intersect.
One problem the military has is that it spends a lot of money every year on command, control and communications. It's trying take all that data and produce actionable information. That's ultimately what IT is trying to do for corporations. IT is also the way you produce revenue and resiliency.
The same is true for the military. They are not as concerned with producing revenue, but they do need to keep track of their entire inventory. They have the same basic problems corporations have.
Let's say the military has $1 billion to spend. Do they buy tanks or information technology? One thing about tanks is you can literally kick the tires and see that it's real; IT is much more ephemeral. Understanding the value of information is the important thing.
One of the greatest commercials I ever saw for IT had a nerdy engineer-type sitting across from a corporate executive. The executive asks why he should convince the board to spend on IT. The engineer says that for every dollar you spend on IT, you get two dollars in revenue. And the executive smiles.
So you take a complicated thing and turn it into a very simple value statement. Wargames offer the context to take IT, which is very complicated, and make a simple comment about it that's very telling.
How often do you have wargames that require a CIO or someone with heavy technological expertise to be present?
Herman: In today's world, you can't do anything meaningful for a business without having the CIO present. I haven't seen or heard of anyone wanting to exclude the CIO from this.
At the very least, the CIO needs to hear the thinking behind the emerging requirements they would have to fulfill or think about. They need to be there to hear the conversation, even if they're not part of the problem.
So what do CIOs bring to table, from your experience? Is it more than just techno-babble?
Herman: There are many areas in business where being a black belt in areas like engineering or IT is a huge benefit. They are the ones who really know what they're doing.
One characteristic of a successful technical person is the ability to create telling and simple ways of describing complex things. The genius of Einstein was that he took the universe and boiled it down to things that people could understand.
In wargames, individuals who can take a complex set of circumstances and boil it down into something useful are the people who are successful and get a seat at the C-suite table. The guy who talks technical is going to have a harder time, unless the people around the table are also technically savvy. But most people are not.
Expectations and Outcomes
What expectations do executives have when they come in?
Herman: There are three categories of how people come into wargames.
The first group includes CEOs who have been in their business for their whole life, but then something comes into their world and rocks it. For example, we once worked with a company where the pricing in its market had changed. There hadn't been a price war in that market for 60 years, so there was no one in the room who was around the last time it happened. So the rules they'd learned over 30- or 40-year careers all flushed away.
Look at the financial crisis. The last depression was in 1929. We had a bad recession in the 1980s. There are a bunch of people around from the Reagan years, but no one from 1929. So what are the rules? And how do we react?
The second group--this is an unusual case--comes from businesses in which everything is going well, but they have enlightened CEOs who are worried and looking around at what's out there that could bite them.
Caterpillar was one of these. The company's president said things were going great, but once, long ago, Ford told them it didn't want [Caterpillar] to supply a new set of pickup trucks. So the president was worried about his line of business, and he wondered how he could figure out what he couldn't foresee.
The third class of individuals do strategic planning all the time and have done it a certain ways for a decade or more. They might not be doing badly, but they're not satisfied or think they might be doing it wrong. So wargaming presents a cathartic event for them to look at the world differently and get a different result.
What does military strategy and war teach business leaders about what they do?
Herman: The only difference between business and war is that in business, they don't take prisoners. Let's say there are a hundred definitions of strategy and a hundred people in the room--and it's possible for everybody to have a different one.
It's not that they vary so widely from each other, but it's a spectrum: There are different takes on strategy. So the first problem you face when you use that term is identifying what it is you think you're saying.
In warfare, they talk about the science of war and the art of war. The science of war is the logistics--supply chain, delivery, etc. Right off the bat, anything to do with military logistics has close to a one-to-one fit with business. Many generals who come out of the logistics side of the military get hired by companies like Wal-Mart--companies that have big supply chains and distribution.
The art side is where people think about strategy. People say, "I have a big organization and a lot of interactions going on." Strategy gives people a vector to see the individual transactions.
Collectively, they get more out of their transactions than just the sum of what they are, because they build on each other. They are self-reinforcing and gain momentum in the marketplace--all the things military leaders try to accomplish.
One of the big things the military does is set priorities, because you always have resource constraints. People think business can do whatever it wants, but that's nonsense. They always have limitations on what they can invest in R&D, what they have in certain accounts.
It's the same thing in the military. So it's the art of setting priorities, learning what works, shutting down the things that don't, out-maneuvering opponents, trying to change business models at the right time to gain leverage--these are all things that translate directly out of the military.
In the wargames, you sometimes find that what people assume strategy is actually is orthogonal to it.
How easy is it for them to wrap their heads around strategy and come to a consensus?
Herman: My view of strategy isn't important. What's important is that they commonly adopt their view of strategy. If they don't have the same view of what they're trying to do, it's not going to help them move forward very rapidly. We tell them that, and it works very well.
What matters is that everyone in the room knows we're using a common take on what we're doing. Everybody has different preferences, but as long as you take a common approach, you take a lot of the Tower of Babel effect out of the conversation. The wargame helps bring everyone onto the same sheet of music.
I'm guessing the concept of wargaming seems unique to business leaders.
Herman: It's been around a lot longer than people think. Most of the analytic techniques people think are conventional actually have been around a lot shorter period of time than wargaming.
But when you're in intense mental thought for that period of time, it can be more exhausting than some physical exercise. Most people don't like to think that hard for that long.
Most companies work on a strategic planning cycle. There's only a short window when there's a right time for wargaming, because the other times, they're basically operating. If you're in the widget business; you're making widgets all the time.
How real is the impossibility theorem? Are there times when executives aren't open-minded enough?
Herman: Once a company decides to embark on a wargame, there's a certain motivation. The games are not inexpensive. I've never met anyone who wasn't interested in it or what they could get out of it. I haven't heard anyone saying they didn't get anything from it.
You always see some core changes made at a company based on the outcome of the wargame. Something definitely happens.