The Art of War-Gaming
by Ben Gilad and Mark Chussil
Until a decade ago, all of the top-10 companies in the Forbes Global 2000 were from developed countries. Today, two Chinese firms and one Brazilian company are among the top 10.
What does that list mean to the competitiveness of seven out of ten top companies?
The USA is slipping in the World Economic Forum’s Global Competitive Index. That’s not yet a competitive cliff; the index is complex and long-term, and not every indicator affects any given company today. But if we look at those indicators related to business sophistication, American companies should worry. The USA ranks below not only obvious frontrunners such as Germany, Japan, Singapore, and Switzerland, but also Hong Kong, Israel, Qatar, South Korea, and Taiwan. In only one measure is the USA among the top three: sophistication of marketing. Kudos to Philip Kotler, but is this enough?
Adapting to “global competition” isn’t merely translation and sensitivity. The strategic objective isn’t to communicate better with non-Americans. The strategic objective is to compete better. That’s where American companies are falling behind.
As strategy professionals who have run strategy war games for the Fortune 500 since the 1980s on six continents and in every industry imaginable, we’ve seen first-hand — and from both sides — the effects of rising global competition on American businesses.
We’ve seen the resulting consternation and flurries of activity. But one fundamental factor in slipping competitiveness keeps flying under the radar.
Western executives understand Western executives and therefore can anticipate their behavior, but few truly understand foreign competitors. (The very word “foreign” reflects their inscrutable otherness.) One needn’t be a military historian to see the truth in Tzu’s famous saying from The Art of War, that if you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat.
(Did you nod knowingly when you read that quotation? Think about that nod. Do you think business is war? Do you think your competitors do? Would you if your competitors don’t?)
A failure to understand competitors is a self-inflicted strategic wound. The managerial culture of nations affects their business strategies and therefore your business’ performance.
In strategy war games in India and Israel we noted managers were remarkably aggressive by American standards. They rarely let each other finish sentences, push mercilessly in debates, and insist their strategies will win. Our hosts explained why: long before they become managers Israelis and Indians are taught that you have to be aggressive or else you could die. That tells us something about how they think about strategy.
In Mexico life is volatile, planning is hard, and flexibility is priceless. Managers there are fatalistic and laid back. The entrepreneurs who hire them take enormous risks, and are more opportunistic than strategic.
In China, family connections and internal harmony are paramount. Family companies follow the founder’s lead, and the founder deliberately eschews “western” management values as a strategy to appeal to the Chinese audience.
American executives unconsciously assume everyone has an MBA and behaves “rationally.” They assume foreign competitors’ actions must reflect the same reasoning as theirs. They use those assumptions (as do humans everywhere) to infer competitors’ motives and goals, and they use them as they predict competitors’ next moves by asking “if I were in their shoes what would I do?” Those assumptions were never true — they were never true even within the USA — but today it matters that they’re not true, and it will matter more in a more-global tomorrow.
When it comes to understanding the strategic thinking of Austrian, French, or Swiss competitors, let alone Brazilians, Saudis, or Taiwanese, companies send rising-star managers to “learn the culture” in international postings. That’s not a bad thing. But it is the most-expensive method by far, and strategy decisions won’t wait for the globalized few to return.
Instead, companies should start thinking about using the art of war-gaming to role-play foreign competitors based on gathered intelligence on the variables affecting executive thinking. Feed “Chinese” assumptions into a western manager and for a few hours he or she may actually think like a Chinese executive. We’re not talking about some parody, skit, or abstraction. We mean putting people in tough, realistic competitive simulations wearing a different mindset. The cost is astonishingly low, especially compared to the benefit.
How do we know? Research demonstrates the usefulness of role playing in predicting behavior (mostly published in forecasting journals). More significantly, we see it in action and results, both behavioral and financial. When we war-gamed industries in Argentina, Belgium, Brazil, India, Israel, Malaysia, Mexico, Russia, South Africa, Turkey, and other countries, local teams could role-play American companies well with just a few basic assumptions about what drives strategic thinking in the US-based Fortune 500. Not only could they do it; they were eager to do it, because they recognized the value.
Your executives can do the same. Know thy competitors!
Further reading: Motor Swilling Forbidden.
Dr. Benjamin Gilad is the Founder of the Academy of Competitive Intelligence (ACI) and formerly a professor at Rutgers Business School. Mark Chussil is the Founder of Advanced Competitive Strategies. ACI/Gilad and ACS/Chussil are partners in a venture called Sync Strategy, which focuses on high-intensity corporate-university programs for rising-star managers.