March 22, 2004 (Computerworld) --
They didn't understand the threat until it was too late. For years, the cyberattacks came, increasing in sophistication and growing in the damage they did to the U.S. economy and to certain targeted industries in particular. Just when the nation was awakening to the nature of the threat—thanks to a defector from the enemy side—the enemy country switched to bioattacks. Like the cyberattacks, these were hard to pin down. (That outbreak of mad cow disease was an accident, wasn't it?) So clever were the attacks that in most cases, U.S. officials didn't know just where they were coming from. As a result, their foreign policy toward the originating country was wholly inappropriate: They spent billions on weapons to defend against a military threat, when in fact the opposing country was hellbent on economic warfare. Fortunately for the U.S., this isn't a true story. It's a brief summary of a two-day war game that played out recently in Newport, R.I. Put on by the military strategy experts at Alidade Inc., the game pitted a Blue Team (the U.S) against a Red Team (an Asian country, perhaps China). The players were mostly military types hoping to hone their strategy skills, but some players, including this reporter, were there to see how war-game concepts might be applied in the commercial world. The teams began by deciding how to spend their military budgets—$300 billion for Blue, $30 billion for Red—and over the course of five moves, each one covering a period of five years, Blue and Red took turns acting and reacting with various military and foreign-policy actions. For example, when Blue and Orange—Orange is a country in Red's region with close economic ties to Red—agreed to a joint military exercise, Red saw it for what it was: a naked attempt by Blue to exercise influence in Red's back yard. The Red Team, meeting in a hotel conference room next to Blue, considered six responses, including doing its own military exercises with Orange, funding massive high-tech economic development in Orange and threatening nuclear proliferation in the region. Red ended up making only token moves in any of those directions. Instead, it focused on beefing up its cyberwar capabilities, both offensive and defensive, while making various cosmetic overtures to Blue, such as proposing to establish joint projects in biotechnology, ecology and IT. Red Team Commander Scott Borg, a senior research fellow at the Institute for Security Technology Studies at Dartmouth College, describes Red's winning strategy this way: "We knew Blue wouldn't attack us, and we knew we couldn't win any military conflict with them. So we made it an economic war." Although Borg conceived of most of Red's ideas, he nevertheless learned something new from them. "It will keep me awake at night," he says. "It's made me realize all the things a Red Team really can do." Mismatched Moves Jeffery Cares, president of Alidade and a self-styled "military innovation expert and naval futurist," says teams in war games often misread each other and respond inappropriately. "Often Blue plays A/counter A, while Red plays D/counter D." That's what happened in this game. And that's what often happens in the corporate world, where companies with entrenched strategies—reinforced by success—fail to anticipate out-of-the-box competitive moves. For example, IBM in the 1970s failed to foresee competition for the mainframe. War games can be a uniquely effective way for corporations to do long-range planning for investments, including IT investments, says Paul A. Strassmann, a lecturer in national security studies at Syracuse University and a Computerworld columnist. "I am a strong believer that war-gaming will displace much of what these days is called corporate strategic planning," he says. Strassmann is a former CIO at several Fortune 50 companies and a former member of the Pentagon's war-gaming simulation review board. The time has passed when IT can justify its budget solely on the basis of its contribution to the efficiency of the corporation, Strassmann says. It must now work at a more strategic level. "Global competition is now conducted in terms of commercial information warfare, and IT is a weapon of choice," he says. "So competitive planning in the commercial sector really becomes war-gaming. Then the question is, Will the CIO get a seat at the table when the game is played?" Virtually all companies do long-range planning. But doing "what if" speculations with co-managers around the boardroom table doesn't produce the kinds of insights and discoveries that players say can come out of a formal war game. "The worst thing that can happen in strategic planning is that the boilerplate plan from last year is dusted off, the blanks are filled in, it's distributed, and people immediately file it on the shelf next to last year's plan," says D. Scott Frondorf, president of Nextscale Inc. in Cincinnati and a member of the Blue Team in Newport. "You have to do something that brings the strategic plan to life," Frondorf says. "You have to give it character and a space in which to operate. Something like a war game does exactly that. In fact, it could be a test for the boilerplate plan." Testing the boilerplate is just what a major manufacturer did in a recent war game, Strassmann says. The game pitted a Red Team, consisting of managers who had put together a traditional five-year plan, against a Blue Team of lower-level line managers responsible for making the plan happen. Perversely, this arrangement forced those who had developed the plan to attack the company trying to live by it. "The result was counterintuitive" for the participants, says Strassmann, who moderated the game. "At the end of the game, everybody said, 'Hell, we didn't know this.' " "The top management that prepared the plan had never walked the shoes of the other guy," Strassmann says. "Now that they had Red shoes on, they saw the vulnerabilities of the Blues and they said, 'We are just going to take them to the cleaners.' " The game helped the company realize it had an ace in the deck all the time, Strassmann says. "The ace was one of many projects pursued on an exploratory basis in advance engineering. The game moved the project high on the list of priorities and accelerated deployment. This turned out to be a great success in gaining market share." This particular game focused on product development and marketing and not directly on IT issues, but the CIO did participate, Strassmann says. "The CIO gained enormous understanding of the marketing issues, and I understand he subsequently reallocated some of his priorities," he says. Jack Reader, a senior business development manager at Cisco Systems Inc., attended the Alidade war game and says the concept could be applied internally for long-range planning. "But no one here has bought into it yet," he says. "These out-of-the box things take a while to find the right sponsorship at a big company like Cisco." Reader says war games are well suited to corporations faced with making expensive and complicated long-term technology choices. For example, he says, a CIO at a small bank might adopt the role of a Red Team against a larger competitor's Blue Team or, if the CIO works for a dominant bank, it could play the role of Blue against smaller competitors playing Red. "What would you do if your CFO came down the hall and told you your IT budget had been cut 80%?" Reader says. "As it turns out, there are some pretty decent strategies when you are the small guy. It's less brute force; it's about being smarter." Alidade likens its war games to "exploring the landscape." Now, having played the game, Frondorf agrees. "A war game forces you to think through the scenario and create what I call 'trail heads,' places that mark pathways to explore," he says. "I like to say that everything interesting happens at the boundaries. In IT, that's especially true."
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