President of Simulation Studios, where he utilizes business simulations within the top global corporations.
At one time, business simulations were relatively unknown tools, mostly due to the high barrier for entry and usage. As the president of a company that offers business simulations, I’ve witnessed firsthand how much has changed in the last five or so years to make these strategically valuable tools more accessible. Here’s how to determine if a business simulation is the right fit for you and your company.
What is a business simulation?
A business simulation is a tool for creating highly engaging, hands-on and business-applicable scenarios in leadership development training. Historically, they were both paper- and computer-based, but most simulations nowadays are digital. Business simulations are combined with in-person, leader-led facilitation in order to get the most out of the process. (In my experience, dropping individuals into a simulation with no facilitator rarely works well.) Business simulations can be ready to go or tailored to your specific company needs. Business simulations combine strategic goals with training goals and are used as a vehicle to develop tangible skills and mindsets in order to accelerate knowledge and skills within management.
How can it help advance a company’s objectives?
There are many use cases for business simulations, but in most cases, they are used to apply complex leadership development training curriculum and accelerate strategic change. Due to the change in business demands, leadership development training requirements and complexities have drastically expanded in recent years. At the same time, the speed required to change strategies has also accelerated. These two corporate requirements both depend on and clash with one another.
Leadership development training now demands complicated learning requirements such as strategic thinking, systems thinking, analytical thinking, business acumen, effective leadership behavior and resilience to change. At the same time, there is a growing chasm between talent needs and talent availability due to retiring executives. This has put pressure on leadership development managers to develop tomorrow’s leaders effectively and quickly.
As a result, training managers are now turning to business simulations within leadership development. These tools provide tomorrow’s leaders with hands-on experience and time to navigate the company as a leader without exposing the organization to risk. Leadership development training participants use the advanced curriculum in real-world business scenarios in order to practice, fail and learn. In short, business simulations within leadership development accelerate the learning in a way that is extremely real and can easily be applied to real-world business outcomes.
Business simulation tools can also be used to accelerate strategic change within most organizations by exposing and enabling key stakeholders to live the strategic change before it happens. This is particularly helpful given that more than 70% of change initiatives fail. McKinsey & Company identified some of the common causes for failure, including “lack of employee engagement, inadequate management support, poor or nonexistent cross-functional collaboration and a lack of accountability.” The solution, according to the Harvard Business Review, is for leaders at all levels to adjust their mindsets and behaviors to help their company move in the direction of the desired change. Business simulation tools can help with that.
With business simulation tools, managers learn firsthand the what, why and how of change before the change even begins. This creates managerial buy-in and helps managers acquire both a growth mindset and the tangible skills needed in order to not only succeed, but accelerate strategic change. In other words, business simulations give managers the exposure, skills and attitudes most needed in times of great strategic change.
What are some of the potential hurdles?
Historically, these tools have been difficult for even large companies to gain access to. They have been expensive and complicated and have required armies of consultants to work. However, this is no longer the case. Technology tools have advanced, resulting in a substantial reduction in cost and complexity. Most organizations no longer need advanced custom simulations thanks in large part to quantitative platform modeling and cloud computing. What used to be burdensome quantitative model management is now easily done at scalable levels for a fraction of the cost.
That said, due to the specialized niche of these solutions, these tools often still need to be developed by outside expertise. But the need for multiple consultants in facilitation is mostly gone. Today, corporate human resources and training departments are highly involved in the facilitation and can roll out these tools.
Still, getting started with business simulations can be tricky, and companies need to take care when starting a business simulation-based initiative so as to avoid some of the common pitfalls. Here are three simple tips:
• Start small. Business simulations should not be large. In my experience, these tools work best when they are extremely focused. Resist the temptation to spend a lot of time and money on large-scale solutions.
• Involve executives. If you choose to facilitate internally, make sure you involve executive speakers. If you choose to use an outside firm, ensure the facilitators have real-world corporate leadership experience. In both cases, this adds context and credibility and encourages applicability.
• Stay in your comfort zone. Whether you build internally or hire externally, never lose sight of your training goals and objectives. Make sure you always understand the solution and remain in charge. These tools can be complicated.
Business simulations can be highly effective tools for companies of any size to help build a talented leadership bench and accelerate strategic change initiatives. The trick is to simply take your time, do your research and ensure you’re aligned with your project goals and objectives.
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