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Advanced military simulation techniques could be the key to better business outcomes

Business is often compared to warfare. Indeed, Sun Tsu’s 6th-century military strategy treatise The Art of War has for long been required reading for ambitious corporate executives.

But one significant discrepancy in the way that armies and companies operate lies in their use of simulation. War games are a crucial tool for testing and evaluating new military strategies but in business decisions are mostly made on a combination of historical data and gut feeling.

One company is seeking to change that. Simulstrat is a small consultancy that was spun out from King’s College London’s respected War Studies Group. It applies war-gaming methodology to its clients’ business strategies in order to test their validity.

The simulations involve real stakeholders from all the various parties involved in a given strategy: internal departments, business partners, lawyers, even government.

Rather than have these stakeholders talk through all the possible implications of a given strategy, they instead play it out in such a way that allows unforeseen consequences to arise. It is this unpredictability that gives simulation its power.

Life science

Most of the Simulstrat’s ‘business games’ have to date been conducted confidentially, but in July 2008, the company ran its first public simulation. Backed by the government’s Bioscience Futures Forum, the game was designed to evaluate the strategic hurdles facing UK pharmaceutical companies as they take a new product to market.

That process can take $1 billion and 10 years to successfully complete. And while the US biotechnology industry boasts over 50 companies worth over $1 billion, in the UK there are none, despite continued investment from the public sector.

Two teams, led by CEOs from pharmaceutical companies in the UK and the US respectively, took their products through four simulated rounds of funding: first with venture capitalists (played by real venture capitalists), then real investment bankers.

A third team consisted of representatives from interested parties, including the National Institute for Health and Clinical Excellence (NICE) and the Treasury, who could interject at any point with a plausible new law or tax directive.

Play took place in an open auditorium. Each team’s board meetings would take place in the round, giving parties from government and investor organisations an unprecedented peek into the inner machinations of a pharmaceutical company.

Throughout the game, the players would analyse simulated data using business intelligence (BI) tools from provider QlikTech. The software vendor was selected by Simulstrat’s CEO Ken Charman, who himself is a veteran of the BI software industry, for the ease with which the tools could be reconfigured and new data introduced on the fly – a feature that was invaluable during the simulation.

Lessons from battle

For the players of the game, it was eye opening, says Charman. Although neither team achieved the goal of raising $1 billion in funding during the two-day simulation, true to form the American team fared considerably better.

“When the US-based CEOs pitched it was amazing to watch,” Charman says, such was their professionalism and confidence. But this was not a question of nationality: all three US-based CEOs were British-born. It was operating within the North American business culture that had given them the skills to pitch to investors more confidently – and more successfully, they reported.

The game was equally exciting for QlikTech, says UK and Ireland managing director, Andy Honess: “For us, this is a great example of improving leadership with technology. The simulation brings the people and technology together in a way that helps the organisation to be more predictive.”

Charman adds that there are further implications of the war-game methodology for BI. Matching tools with user requirements is notoriously laborious and often unsuccessful, in part because of the difficulty in predicting what functionality will be most important once the system in use.

By performing a simulation, user requirements can be revealed quickly and reliably. “I see what we do as a missing link to help BI to be properly adopted by business,” says Charman. At the moment, Simulstrat’s simulations are high-value – they require a lot of preparation and a lot of co-ordination of different groups.

But Charman believes that with increased automation, possibly combined with graphical technologies such virtual worlds, this kind of simulation could well become a widely used business tool.

Further reading

Business Intelligence 08
Creating the intelligent enterprise. A report from Information Age's Business Intelligence 08 conference.

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