Aspectos éticos

Here, three wargames for ma-jor companies reveal a range of

“learnings.” The first demon-strates how a CEO’s objectives for the game were realized and resulted in a call to arms. The second exposes the weaknesses in a corporate strategy and points to a better alternative.

The third indicates how an industry is likely to change even though the client company chose not to act on the

wargame’s principal takeaways.

The opening scenario for move 1 was the present day, but the players were to look out about three years in their discussions and decisions. The initial play turned out to be livelier and less tenta-tive than it was in many other games. The big companies took steps to enhance their strength. Nestlé, for example, invested in product line expansion in developing countries, divested itself of marginal products, streamlined its distribution systems world-wide, and generally reinforced its claim to be the only player in the game with a genuine global reach. Tyson Foods and IBP, two gi-ants in the protein business, bulked up their pork operations through acquisition and expanded plant capacity. Cargill worked to grow its grain operations and flour milling into global enterprises.

What did ConAgra do? In move 1, the ConAgra team established a new regional business structure outside the United States to manage an expansion of its brands abroad. Critically, it expanded its investment in information technology systems to support ini-tiatives across several IOCs.

In this game, we wanted to keep score. To keep it simple, each team was assigned a shareholder value of $1,000 at the start of the game, and control and the market team used a financial model we built to calculate an approximate appreciation or depreciation after each move. While we were doing the calculations, the Nestlé team got cute: It asked the hotel turndown service to place a Nestlé chocolate bar on the pillow of every market team member with a note expressing the Swiss giant’s thanks for consideration of its products. The gesture got a laugh from market team members, but they proved immune to Nestlé’s clumsy bribe: After we crunched the numbers, Nestlé and Cargill finished in the middle of the pack, with their shareholder value having increased to $1,300. The pro-tein companies, Tyson and IBP, were the biggest winners at $1,700 and $1,450, respectively. What about ConAgra? ConAgra brought up the rear; its shareholder value had increased 10 percent over the three years to $1,100.

Move 2, out six years from the start, brought a tidal wave of ac-tivity aimed at strengthening strategic objectives. In a joint venture

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with Coca-Cola, Nestlé expanded its bottled-water business in Asia and Latin America. In Europe, it introduced high-quality entrees and dinners with a 60-day shelf life. Also, in a major move toward achieving its goal to become the premier branded food concern in the world, it acquired Campbell Soup Company. Tyson, through ac-quisitions, joint ventures, and supply agreements, underscored its objective to become the top protein supplier to the food service in-dustry, and IBP, through acquisitions and new streamlined opera-tions, strengthened its claim as the most cost-efficient, vertically integrated company in the red meat business. Cargill was making supply and marketing alliances with players such as Nestlé and Tyson, and Philip Morris was spinning off Kraft Foods’ food-service distribution, reorganizing into three superregional entities (the Americas, Europe, Asia and Pacific Rim), and taking other meas-ures to achieve its goal of becoming the leading worldwide pro-ducer of packaged goods.

ConAgra, the home team, was active too. Its objective in the game was to become the leading global food company working across the entire food chain. To move closer to that objective, ConAgra used move 2 to build its international presence through joint ventures and acquisitions abroad. In the United States, it was investing in the commodity end of the food business by building new slaughter plants to process beef and pork and in state-of-the-art distribution systems in an effort to rationalize its portfolio of IOCs and capture cross-company market opportunities. Those measures paid off: Control and the market team reckoned that shareholder value six years after the start of the game had increased to $1,580. Still, ConAgra was lagging its competitors in share-holder growth, which ranged from $2,100 (Tyson) to $1,600 (IBP and the team of smaller competitors designated “other”).

In move 3, the teams took the steps they had taken in moves 1 and 2 and played them out another four years to see how share-holder value would be affected. Everyone improved. Tyson again topped the charts at $2,400, IBP came in last at $2,000, and Con-Agra was dead center at $2,200.

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What did ConAgra learn in the game? As the only team com-peting in both packaged goods and commodities, it faced pressure in regard to where to invest: in international infrastructure to broaden its sales of packaged goods and make runs at Nestlé and Kraft, for example, or in the commodity business to compete with focused producers such as Tyson and IBP. It would not be easy no matter what the company chose to do. ConAgra found in the game that moves by competitors, if they happened in the real world, would make life more difficult for its IOCs. A Nestlé-Campbell combination, for example, would further consolidate the branded grocery business and strengthen Nestlé’s economies of scale. Ac-tions in the game by Tyson and IBP would allow them to reduce costs and strengthen their share-of-market positions. Said one member of the ConAgra team: “If we aren’t competitive, there is no defense.”

Phil Fletcher, the new CEO, found the game a real eye-opener and used a concluding 20-minute address to his troops to sum up the principal takeaways for ConAgra’s executives. Phil really got it.

THE BIG IDEA What Fletcher suddenly understood from a perch in early 1994 was that a marketplace going global at an accelerating pace would change the nature of competition and that his company had to do a better job of deciding where it chose to compete and invest and where it chose to retreat.

Going global strategically is a matter of picking your battle.

Here are Phil Fletcher’s words to his troops:

• “We must be prepared for the unexpected. We cannot forecast what’s going to happen in the next 6 to 10 years.

• “Don’t underestimate your competition. I think half of you had the daylights scared out of you when you got inside some of the competitor’s strengths.

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• “We have a tendency . . . to ready, fire, aim. Being preemptive in-cludes a little more than firing at will. Firing at a target that we know strategically is extremely important to both us as well as potential competitors.

• “We need to make choices. We can’t underspend on everything.

We need to think strategically about how we aim our cash flows.

• “We need to grow globally. We must find the organizational structure to do that. We have not to date.

• “We need to identify our core capabilities. The entrepreneurial spirit of the IOC is extremely important to us. By the same token, I think you saw that we are fighting some very talented competi-tion, where some of our IOCs don’t stand a chance in hell. We need to figure out how to deal with that.

• “We have got to figure out how to leverage one business to help another. That means a number of things to us. That means that independence for independence’s sake can’t stand in the way.

• “We will retreat in some businesses. We cannot afford to pour capital into every business in this room. Some of you will not get a hell of a lot of capital. You better make damn certain that you are a viable competitor in your industry because you will not sur-vive otherwise.” Phil made it clear that investment capital would be considered “family money,” that is, money from ConAgra corporate, which would decide on the merits of capital plans pro-posed by the IOCs.

“Any questions about going forward?” Fletcher asked at the end. “Because now we go back to the real world.” In the real world, Fletcher’s tough words resulted in the resignations of a handful of IOC presidents in the weeks after the wargame.

A footnote: Tyson acquired IBP a few years later. Nestlé did not buy Campbell Soup in the real world, but it was hardly inactive: In the late 1990s and throughout the first decade of the twenty-first century, it has acquired the San Pellegrino water company, Ralston

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Purina, Dreyer’s ice cream, Jenny Craig, and Gerber Baby Foods.

What about ConAgra? It has navigated some difficult waters over the years. Phil Fletcher was succeeded as CEO in 1996 by Bruce Rohde, who also participated in the wargame; Rohde was followed by Gary Rodkin, the current CEO, in 2005. In the process, Con-Agra has become a leaner company with $12 billion in sales and fewer IOCs. In the 2007 annual report, Rodkin wrote: “Going from 50 incentive plans based on each operating unit’s results to one de-termined by ConAgra Foods’ overall results has made a huge dif-ference in how we think and act. Alignment creates momentum.”

Maybe Rodkin read the report on the 1994 wargame.

  

T

he end of the Cold War and the collapse of the Soviet Union meant many things to many people. To the head of the avion-ics unit of one aerospace and defense company, it signaled an op-portunity to try something innovative—and, as it turned out, controversial—and make a killing in the commercial aircraft busi-ness.

His unit was not in the top tier of avionics makers; it was fourth or fifth among a half dozen companies, and he was under pressure from his corporate parent to improve that position. In fact, it was corporate’s idea to do a wargame. We had conducted a wargame for another unit of this company, and corporate thought it had been successful. The implication, the avionics executive thought, was that his business unit might be shut down if the wargame did not show a profitable way forward.

The wargame, in the early 1990s, had several general objectives.

Chief among them were to get a better understanding of changes in the civil avionics industry and to get a clearer perspective on strategies that might guide our client’s future, including new and potentially unorthodox strategies. The so-called integrated cockpit—

a flat-screen LCD digital display to summon flight information in one place instead of multiple boxes of individual gauges—was just making its way into commercial aviation. The leaders in avionics

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already had made breakthroughs in integrated-cockpit technology.

Our client had not, but the head of the avionics unit had an idea he wanted to explore in the wargame. The Russians had made some strides in avionics; he thought his unit could partner with a Russ-ian company and produce a first-class avionics offering that would appeal to the top-tier companies in air transportation: Boeing, Air-bus, and other big original equipment manufacturers (OEMs) as well as the big airlines that bought their planes.

Five competitor teams, including our client, played the game.

There were two market or customer teams, one representing the big OEMs and the major airlines and the other representing gen-eral aviation OEMs (Beech, Cessna, Gulfstream, and the like) and smaller regional airlines. Our control team represented regulatory authorities in the United States and overseas.

It was clear from the beginning of the game that there might be problems doing joint development work with Russian avionics concerns. There was still unrest in the former Soviet Union, sug-gesting potential delays in product development; there were ques-tions about technological compatibility; and even with successful product development, there were credibility risks: Would Western OEMs really accept Russian avionics, American partner or not?

Early on, our client’s managers playing the market team of big OEMs and big airlines settled the matter. In move 1, they said em-phatically that they would not put Russian avionics in their aircraft.

“We don’t trust the stuff.” “It hasn’t gone through any test process according to U.S. standards.” “Even if we went along, the FAA [Fed-eral Aviation Administration] would put us through so many hoops that it wouldn’t be worth it.” Those are paraphrases of some of the comments by “customers” in the game during move 1.

However, something else happened in move 1: When our client’s team bid on second-tier programs with smaller OEMs such as Fokker and smaller national or regional airlines, particularly in Europe, they were more than competitive on price; as a result, they got contracts from the other market team even with technology jointly developed with a Russian company. Crunching the numbers

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at the end of the move, the control team figured that the client’s market penetra-tion rose substantially in the midmar-ket commuter category out three to five years, providing a modest increase in its overall penetration of the avionics market.

In move 2, the client team again tried to penetrate the first-tier OEMs and again was rebuffed. The first-tier market team insisted that previous

ex-perience with integrated-cockpit technology for second-tier OEMs would have to be a prerequisite for doing business with the big boys. The client team did not have the long experience the first tier required. Still, one of the big lessons was that smaller players could pick their spots and succeed and that alliances, on balance, were valuable. Technological partnerships with other companies, for-eign or domestic, could reduce costs and risks. They also might prevent gains in market share because of shared revenue. How-ever, the crucial point was that the lack of an alliance or alliances may cause a decline in market share. That is the case because the game revealed that no single company had a full product line across all segments of the commercial avionics industry. Alliances could fill the gaps in a company’s portfolio of avionics offerings and make it a more formidable competitor.

As the teams engaged to compete for OEM and airlines busi-ness, an unexpected takeway emerged. In-cabin entertainment al-ready had become a fast-growing, intensely competitive factor in the airline wars. Now, as aircraft manufacturers and airlines began to move into a world of LCD displays in their cockpits, was it possi-ble to think of LCD use elsewhere? Several teams came up with the logical next question: What about back-of-the-seat LCD displays?

When the game was over, many of the participants said the process itself was so valuable that it ought to be continued in some form as a tool to enhance understanding of the company’s strategy

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When the game was over,

In document ESCUELA DE POSGRADO PROGRAMA ACADÉMICO DE MAESTRÍA EN GESTIÓN PÚBLICA (página 35-41)