Tory Schalkle explains how and why to War Game 

Tory Schalkle explains how and why to War Game 
Tory Schalkle currently holds the title of Senior Vice President of Enterprise Strategy at a regional U.S. bank and has over a decade of corporate strategy experience. He has worked primarily in management consulting and two Fortune 100 companies. Tory earned his MBA at Northwestern’s Kellogg School of Management, where he was selected as one of four McKinsey Emerging Scholars. 

How Tory Schalkle got into war gaming

Earlier in his career, Tory was helping a large company strategize how to price items online vs. in stores. The central challenge was understanding not just how customers would react to pricing changes, but how competitors would react as well, creating a bit of “multi-dimensional chess”, as he describes it. “Each party’s actions would inform the other parties’ actions – in somewhat of a self-referencing cycle. It wasn’t a simple one cycle, action-reaction dynamic,” Tory Schalkle said. Instead, he says, real life pricing changes would be a multi-step cause and effect, almost like a turn based game. “So that’s what our analysis needed to be to figure out the ramifications – like a turn-based game. It was too complicated for cause-effect analysis and too qualitative for a simple model or algorithm,” Schalkle said, “So we utilized war gaming.”

What is “War Gaming?” 

War gaming is a form of scenario planning. Specifically, war gaming has various participants play roles of various stakeholders involved, acting as they believe the stakeholder would. “For us, we identified the main competitors we were concerned about and I made fact packs for each – listing their current pricing on key items, their stated priorities (financially and which categories), pricing decision logic, and their prior price war history/ case studies. To take the customer into account, we commissioned a vendor to run conjoint analysis on consumer demand at various pricing for those key items and categories.” With those fact packs, participants could best understand how the stakeholder they represented may act in each scenario.

From there, Tory and his team ran certain scenarios. Schalkle would go first – pricing a certain way the company was considering. The conjoint analysis indicated what sales and margin would be at that price, based on consumer demand. After that, a competitor (played by a teammate) would react and price differently. The conjoint model would again adjust to new market share and margin for each player. And so on.

What war games can teach a company

War games can be engaging and even fun, but they are also insightful. “I was a bit skeptical at first, since it seemed a bit subjective and qualitative – we were predicting scenarios and mimicking a wide range of actors – but it was incredibly insightful. Particularly in how consistent the outcome was, which created a really deep conviction and learning for us,” Tory said.

One tip? “Because the inputs are a bit imprecise, the outcomes are likely to be imprecise. Don’t be fooled by false precision. But understand the direction, especially if various scenarios all lead to similar outcomes.” How war games can be used Certain problems require certain tools. So what is war gaming a useful tool for?  “It’s best for multiparty scenarios where each party is looking intently at what the other is doing and using it as an input for their decision,” Tory Schalkle says. Examples he gives include pricing, mergers and acquisitions, or entry into a new geography or category. Detroit auto manufacturers could have used it to see which foreign brands may be interested in manufacturing capacity in the U.S. Banks and other financial institutions could use it to see which exclusive tech partnerships may be best. CPG companies could use it to understand how competitors might react to a product extension, size upgrade, or channel shift.

The future of war games

After the war gaming he lead, Tory Schalkle was asked to do an internal “roadshow” to numerous executive teams at his company on what war games are and how they can be used. “It’s a bit weird and not broadly applicable, so many people weren’t aware,” Tory said. But with greater uncertainty on a range of issues – economic, geopolitical, ecological – Schalkle’s sees increasing use for it. “War games (or scenario planning more broadly) can add such insights and flag risks, no-regret moves, and early indicators. At least as an annual exercise for key scenarios or before major decisions, it’s such an insightful tool.” He’s now an evangelist for war games – training others on when to do it, how to do it, and what to do with the results. “It’s insightful and fun – a great combination!” he says.
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