If Business Is Really War, the Best Preparation Is Conflict Simulation

AS competition grows and technological innovation increases in the business world, some executives are trying war-gaming techniques as a way of staying abreast of change.

War gaming has been used by military establishments around the world for centuries to prepare for the unexpected in armed conflict. In recent years, a few business consulting firms have been working to adapt war-gaming principles to corporate planning.

``Business isn't very different from war, you just call things by different names - in war it's the enemy, in business it's a competitor,'' says George Thibault, who runs the war-gaming program of consulting firm Booz-Allen & Hamilton based in McLean, Va. ``Gaming is a good way to prepare people for all eventualities.''

Booz-Allen, which has been developing war-gaming techniques for the US Defense Department for 12 years, gathered a group of energy industry executives in Frankfurt last Friday to demonstrate the business potential of war gaming, using the energy sector as an example. Participants broke up into four teams and fought a hypothetical battle for new opportunities in the Italian energy market. One market move would prompt a countermove.

In the energy market - not just in Italy, but all across Europe - restructuring is the order of the day, meaning industry executives must be prepared to think in new ways, says Phillip Ellis, a Paris-based energy analyst for Booz-Allen. The development of the European Union means that many energy suppliers, who in the past enjoyed the protection and backing of their respective national governments, are now facing competition for the first time.

Lowering costs is the primary task of European energy suppliers, Mr. Ellis says. But achieving this is complicated by two factors: executive inexperience in operating in a competitive environment and political uncertainty.

For the industrialized nations of Europe, access to reliable energy supplies is a source of concern. Shaky political situations in the former Soviet Union and North Africa could mean future disruptions of oil and natural gas supplies from both regions.

Perhaps the most important problem today is the political and economic relationship between Russia and Ukraine, Ellis says. Since the 1991 breakup of the Soviet Union, the two Slavic states have been bickering virtually nonstop over possession of the Black Sea Fleet and the Crimean Peninsula. Now some political analysts say there is a potential for the disputes to turn into Yugoslav-style hostilities.

The implications of such a development for the Western European energy sector would be serious, as Russia's oil and natural gas pipelines to the West run through Ukraine. ``If Russia can't solve its problems with Ukraine, then Europe will have to look elsewhere and that will mean much higher energy costs,'' Ellis says.

Although Booz-Allen focused on the energy sector during the Frankfurt demonstration, Mr. Thibault says war gaming can be used in other business sectors. The company that uses war gaming will probably be better positioned to both anticipate and act given conditions in Europe, Thibault says.

Thibault adds that the business world finds itself caught up in a time when the technological advances in the so called Information Age threaten to outpace strategic thinking.

A military analogy highlighting the dangers posed by a gap between planning and technology is World War I, when the tactic of frontal assaults was rendered useless by the introduction of the machine gun. The result was four years of stalemate on the Western Front and millions of casualties.

``The speeding up of change is a real issue,'' says Thibault, a retired naval officer who taught at the Naval War College in Newport, R.I. ``Companies spend most of their time these days reacting. That might have been fine in the past, but it could be disastrous in the future.''

A typical business war game run by Booz-Allen will take two months of preparatory work and three days to play out. The emphasis is on planning for the future by trying to think like the competition.