Preparing for the Unpredictable: Using Simulation to Achieve an Uncertainty Advantage

In recent memory, the world weathered the most active hurricane season on record and saw more than fifty million acres across three continents engulfed in wildfire. Currents of widespread social unrest and political upheaval coursed through many communities as the U.S. simultaneously witnessed the largest peacetime government mobilization in history to conduct the decennial Census. The global COVID-19 pandemic shook the world and caused universal, ongoing disruption. Most business executives likely lacked a plan for any one of these events taking place, let alone a plan for five of them converging.

We are reminded of how suddenly crisis—and indeed, crises—can strike, how various challenges can compound, and how these challenges can expose a lack of preparedness. While predicting and preparing for all forms of disruption remains impossible, there are significant benefits to unlock by leveraging uncertainty to gain a competitive advantage.

Imagine you are an executive based in California tackling the residual challenges of COVID-19, with wildfires threatening to displace your workforce and disrupt your supply chain. To make matters worse, you then discover your system vulnerabilities have been exploited by cyber criminals. Undergoing a wide range of simulated events in this way will equip you to significantly limit what could otherwise be catastrophic damage, while building an uncertainty advantage.

An uncertainty advantage is about proactively anticipating, sensing, and planning for the range of disruptions that tomorrow’s risks, both challenges and opportunities, may present. In doing so, organizations develop the capability to assume calculated risk and shape future environments more readily, instead of merely reacting and responding to events once they have occurred.

We have seen increased resilience achieved by organizations who implement tabletop exercises (TTXs), competitive simulations, and war games to stress-test defenses, protocols, and procedures they utilize to manage crises. The outcomes of these processes challenge existing biases and assumptions, expose critical vulnerabilities, and illuminate opportunities for improving an organization’s preparedness, enabling them to better protect their people, data, assets, and infrastructure.

How to get started

Adopting an all-hazards approach to preparedness has proven highly realistic and effective in driving valuable outcomes. To make these sessions as realistic as possible, we begin by hypothesizing multiple future environments in which major events could take place, offering the client an opportunity to detect and understand the ‘weak signals’ that may have previously gone unnoticed.

Once the hypothetical problem is identified, we select an approach from a suite of immersive experiential learning events. Depending on the company, the most relevant potential crises (including ones that may not be top-of-mind, or for which the company is relatively unprepared), and the unique characteristics of the project, we may run a TTX, a competitive simulation or a war game. By taking this tailored approach we aim to boost anticipatory preparedness and overall resilience.

A range of approaches

TTXs provide an opportunity to test the alignment of various business teams by executing a coordinated mock crisis response. Taking this approach offers a powerful opportunity to highlight and expose intra-organizational vulnerabilities and truly pressure test plans, protocols, and security.

Our teams commonly conduct client TTXs to battle-test cybersecurity readiness.?This involves running worst-case cyber scenarios in the presence of board members, C-suite, managers, and action teams (and typically change folks’ perceptions of what “worst-case” really is). ?A TTX may launch with a cyber-attack as the trigger, but the sessions quickly evolve into a multifaceted crisis, prompting factors like stakeholder engagement, continuity, and brand reputation to become priorities.

We take this dynamic approach so as not to limit the scope of the project to the typical 1s and 0s of secure system development. The additional themes are incorporated to examine whether the client’s enterprise crisis management capability is integrated, aligned, and comprehensive across the organization. This approach also highlights whether crisis management capabilities exist in isolated individual business units, while measuring levels of maturity.

War games and competitive simulations are two other highly effective approaches, via which organizations can gain an uncertainty advantage. They are comprised of applied analytic exercises varying in appearance, structure, and outcome, with the goal of improving critical decision making under the conditions of uncertainty. These also take regulation, technology, and the market environment into account. Simulations have pre-planned responses played out by computers or models, with the capacity to achieve strengthened risk intelligence, proactive decision-making capacity, and an elevated functional alignment across the organization. The simulation of converging challenges can prepare organizations to be in an advantageous position when crises strike.

War games allow teams to collaboratively challenge conventional wisdom by assuming the role of unscripted, free-thinking competitors. This enhances the understanding of other actors and the potential impact of disruptive events, while driving new learning opportunities.

Strategic questions are often the impetus to conducting a war game, such as the need to determine how competitor activity could impact the supply chain, or how to adopt the best approach to a new product launch. By using this versatile tool, organizations can pursue a range of strategic goals, including the identification and assessment required to take intelligent risks. The tool also aids organizations in the anticipation of disruptions, preparing to mitigate downside and maximize potential upside, as well as shaping the broader environment.

Will you build your uncertainty advantage in time?

Businesses face a breadth of interconnected risks posed by natural disasters, man-made threats, insider threats, kinetic events, malintent and even fundamental negligence. The reality of not knowing what comes next in today’s world makes anticipatory readiness critical to success. While gaining anticipatory readiness is essential, the core of an uncertainty advantage is in exploiting calculated risk, enabling organizations to effectively weather a range of plausible-but-stretched scenarios. TTXs, simulations and war gaming, are helpful tools for sensing, scanning, and anticipating what lies ahead, ultimately helping organizations be more proactive in shaping the environment around them, instead of ceding the initiative to the marketplace or competitors.

This article is by Alan Iny, Elton Parker, Michael Coden and Brett Thorson. Alan and Elton are leaders on BCG's Uncertainty Advantage team; Michael and Brett are leaders in BCG's Cybersecurity practice.