Business is War - So Let's Have a War Game

"Good morning troops!" barks Adrian Cruza -- a pipe dangling from his lips, general's stars glistening from his epaulets, a paratrooper's beret from Vietnam -- where he was a decorated platoon leader -- perched on his head.

"Good morning," comes the polite response. About 40 mid level managers from the Latin American division of SmithKline Beecham PLC, the $9 billion pharmaceutical giant, are gathered around an elegant mahogany table. They are outfitted in combat fatigues, although more than a few also sport tasseled shoes.

"I can't hear you!" shouts Cruz, a Puerto Rico-born, Harvard-trained MBA who exudes a zesty, take-no-prisoners management style. Cruz was running Sterling Pharmaceutical's Latin America unit when it was acquired by SmithKline in December 1994. He beat out two SmithKline counterparts to lead the combined operation.

"Good morning!" boom the suddenly inspired executives, their words echoing off the richly paneled walls of a conference room high above Mexico City's Insurgentes Boulevard.

Oh, what a lovely day for a war game. Cruz has spent more than $100,000 on a computer-based simulation to help his executives think through plans to introduce a new consumer product in the rapidly growing Mexican market. The product, which leverages off an existing SmithKline brand, makes great strategic sense -- at least on paper. This two-day simulation, developed and run by Advanced Competitive Strategies (ACS) of Portland, Oregon, is designed to help the team convert ideas into action -- and hopefully create a sense of urgency and esprit de corps.

"This experience will change your mind-set," Cruz tells the group. "Nobody dies and no money is lost, but nobody comes out of a war game thinking the same way. You become more analytical, more comfortable by testing contingencies and scenarios."

The Mexico City meeting uses classic simulation techniques. The managers divide themselves into four opposing camps -- one representing the new SmithKline product, one for each of its three main rivals. The computer model driving the game contains lots of real-world data. Indeed, it took a SmithKline manager one month to compile the data and feed it to ACS. Whenever the SmithKline team makes a move -- discounting the product's price, changing its package design, developing a new ad campaign -- the computer generates performance results based on consumer reactions and competitive countermoves.

Competitive simulations come in several varieties. Mexico City is a "closed-loop" game; it describes an established market with well-understood competitive dynamics. The computer model reflects the actual strengths and weaknesses of the players in Mexico. Cruz believes that's more powerful than "horse race" simulations, where rival teams start out in the same position.

There's no denying Adrian Cruz's enthusiasm for war games. He oversees at least three ACS-run simulations per year in Latin America. "I don't know anyone in the world who does war games as much as he does," marvels ACS President Mark Chussil. (SmithKline has sent managers from Japan and London to Cruz's operation to learn the process.) Cruz even maintains a permanent "War Room" in his Mexico City headquarters. Decorated in camouflage, it contains a Theater of Operations Wall (competitive map), Battlefield Reports (performance indicators), an Intelligence Cabinet (field notes), and an Enemy Arsenal (competitor's products).

Cruz says he believes in simulation because of the dividends it has paid. In 1993, for example, Cruz (then at Sterling) learned that a competitor was going to introduce a new over-the-counter analgesic into the Dominican Republic. So he convened a simulation. The team representing the competitor developed a mock ad campaign highlighting the product's support among U.S. doctors. The war game concluded that this technique could easily generate a 5% market share, much of it at the expense of Sterling's share. The team representing Sterling responded with a campaign that emphasized its product's leading position with Dominican doctors. The company launched a campaign based on this scenario two weeks after the war game -- a preemptive move that delayed the rival launch by six months. Today the competing product has a 1% share; Sterling's share has increased by 10%.

Standing at the head of the conference table, Cruz prepares his troops for today's battle. "You have to know your enemies and anticipate their actions," he says. "Crystallize your strategies. Don't be afraid to think outside the box."

The game unfolds in a rhythm of planning, executing, and evaluating. Teams meet separately and run their own simulations to devise strategy. Then they deliver their moves to ACS. The consultants enter the decisions into the computer and project the results of where the three products stand. As the game unfolds, and as each team becomes more comfortable with its strategy, Cruz tosses in surprises -- a big devaluation of the Mexican peso, changes in consumer behavior that make people more price-sensitive. The teams return to their huddles, adjust their strategies, and look at the results.