War games/competitive simulations overall framework

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Besides the introduction we did, there was no unifying framework, so far we had seeing different models in an isolated way. Putting every framework in context is the purpose of this article.

We believe that the best way to present this is by graphically depicting how the different models stack together in the following diagram:

There are three levels of analysis on the above diagram:

  • Strategic, where strategic moves are analyzed and decided, which includes using:
    • Product introduction framework
    • Strategic war games
  • Tactical, where tactical moves are analyzed and decided, using tactical war games
  • Post-experience analysis, where we analyze if everything went as expected and if not, what could be done to improve analysis. We did not talk about this part so far, however, it is extremely important, because competitor analysis is not an exact science and analysis can be significantly improved over time, as this type of exercises always shed some light on how the competitor thinks.

These models can be used independently, for example, only tactical analysis can be done or just strategic analysis can be conducted or any combination of strategic and tactical. If at least one model is used, then, we strongly recommend doing an analysis of how the analysis stacked up with reality, as a means to improve it for next time.

Competitive learning:

Estimating competitors’ next moves is not an exact science; there will always be parts that were correctly forecast and parts that were not so well anticipated.

Analyzing what the competitor did differently from what we estimated, offers an opportunity to better understand it. Generally, the misperceptions are in the competitors’ goals and assumptions, as these factors determine how it acts.

It can be said that every time a competitor does something irrational (according to us), there is something on the competitor that we do not understand well.

Most competitors are rational and act rationally. Just for reference, the definition[i] of rationality in a business context is:

  • Mental state of a rational person characterized by:
    • Beliefs that are coherent (not contradictory) and compatible with the person’s/company’s experience within a given context
    • Purposeful (intended to produce certain results) behavior guided by means versus ends analysis
    • Decision making based on cost-versus-benefit (pain versus gain) evaluation, and
    • An overall optimization approach (utility maximization) expressed in attempts to maximize advantages or gains and to minimize disadvantages or losses

Having that said, what comes up of a competitive move might not be satisfactory (the competitor might incur in losses), however, remember that nobody makes mistakes or takes wrong decisions on purpose. Every competitor move tells us something on how he/she thinks.

Final thoughts:

We believe that with these articles we contributed to increase the knowledge on how to predict competitive next moves and that readers can really profit from putting these models into practice. Indeed, in our experience most pharmaceutical companies do not use any of them. Therefore, using the models we presented can serve to leapfrog competitors.

Indeed, we have seen pharmaceutical companies gain real life competitive advantage by using the models we presented. Thus, we are convinced that the readers will get a positive pay-off of putting these models into practice.

[i] http://www.businessdictionary.com/definition/rationality.html