Article Bill Hall wrote for Entrepreneur published February 8th, 2007. This touches on business management, leadership development, and strategy. Enjoy!
When most people think of 'business simulations' they automatically think of two things: Highly quantitative financial management or they think of something similar to the Sims®. Many leadership "purists" will balk at the idea of combining the needs of the corporate strategy with pure leadership behavior. When I talk with corporate leaders, they are looking for a combination of both and the trends appear to be clearly moving in this direction. Corporate leaders are looking for leadership development that combines three ingredients: Behavior, Business Acumen, and Impact on Outcomes. Let's have a look more closely.Read More...
With a new year can often come a renewed sense of changing and/or implementing a new corporate strategy. The group of people that drive this corporate strategy often know the entire enterprise's business landscape better than anyone. It is here where the problem with getting the strategy off the ground resides. As a business strategist, we fail to understand that most managers don't know the landscape as well. This is where the frustration comes from: The managers within the enterprise are unable to drive the strategic change they are being asked to drive. This is simply because they don't have the knowledge necessary to feel confident in the change. But, the good news is that there are ways to alleviate this fundamental problem.Read More...
I don't think it's necessarily fair, but for the most part, execs think that T&D professionals are still very focused on T&D 'best practices'. They talk about things like the Kirkpatrick and other models and methods that impress other T&D managers. As a past non T&D executive, I can tell you from experience that this usually frustrates executives. I used to have an understanding that the T&D manager is doing his/her job, but there were time where I just wanted to simplify the discussion.Read More...
With the aging boomers and the lack of experience of the current middle managers, companies are scrambling to build the corporate talent bench. A large part of building this bench is effective business acumen. I'm not talking about the generic, theoretical business acumen traditionally taught in colleges. I'm talking about the real sticky stuff. The 'finance meets people meets marketing meets operations, meets IT, meets leadership, meets corporate strategy meets the impact on the bottom line performance' type of business acumen. The real stuff leaders used to learn over the course of many years. The real-deal business acumen.Read More...
I have had the displeasure of being hired to cleanup yet another oversized sim mess. It frustrates me to no end when I have to go into a customer's offices in order to cleanup the mess left behind as the result of hiring a huge firm that tried to create a monster sim. I feel bad for the customers and it makes me dislike my own industry (even though I love what I do for a living and couldn't imagine doing anything else). I want to be clear here:
Just Say No To Huge Sims (unless you have tons of money to waste).
Let's have a quick look why using smaller focused business simulation is more effective than monster sims.
In general, most CEOs want training to influence one of three outcomes: Increase revenue, decrease costs, or both. Most training managers think more along the lines of knowledge development. They want people to learn a skill in order to do their jobs better. But the CEO and the executive team want to know how the training will influence the three factors. Here lies a slight disconnect. Executives want training that teaches the business of the enterprise. This isn’t to suggest that knowledge development isn’t important. Having a direct connection between how knowledge impacts revenue growth, expense reduction, or both is critically important to the corporate strategy.
Demonstrating these impacts can be challenging. Training managers struggle with how to help training participants understand the connection between the training content and its impact on revenue and/or expenses. In many cases, training managers have to bridge the connection gap with general examples and a leap of knowledge faith. This is usually where leadership training often breaks down and relevancy is reduced. When training managers are able to make the training part of the corporate strategy, the training becomes one of the central components of corporate strategic execution.
I’ll get this opinion out right from the start: I don’t think Game Theory is very applicable to real world strategic planning and/or strategy testing. Like most knowledge labeling from Higher Education, this is interesting inside of a lab. Basic game theory is fun, and interesting to think about, but isn’t very usable for corporate planning. Once you get into more advanced game theory such as Nash Equiquilibrium, this becomes exceptionally useful when economics tries to predict behavior. But this is where I ‘go off the rails’ a little. I personally get frustrated with predicting human behavior. Don’t get me started on AI. Let me explain.
There are two elephants in the room with game theory. Game Theory assumes the following: 1) Human behavior is reasonable and predictable resulting in ‘rational and predictable behavior’ and 2) the assumption that all parties have equal information that has equal interpretation. I’m sorry, but c’mon! Since when are humans predictable and rational and since when does anyone not bring their experiences and bias’ into any situation.
In 1979, researchers Kahneman and Tversky wrote Prospect Theory: An Analysis of Decision Under Risk. This looked at the impact of physiology on decision making. It's an amazingly interesting piece to read (a little thick though). Daniel Kahneman won a Nobel Memorial Prize in Economics for his work developing Prospect Theory. Incredibly interesting stuff that will pretty much make you raise your arms up and say, “Oh man, then who knows what to do.” Absolutely right… we can only take an experienced mix of theory, experience, and tactics and do your best with what you think should be done (you can also gamify your strategy to see what happens).
Back to game theory: Again, I’m not a huge fan. It’s interesting and fun to think about. A little workout for the brain, but I see only a small spot for it in strategic development and implementation. As someone who has created and implemented strategy, I’ve yet to see anyone or any company be rational and predictable. - WPH
You might be saying, "Behavioral economics? I'm outa here!" But hang tight because it's actually pretty interesting. I'm going to pull everything from online sources and I won't get into the math or anything overly deep. It is worth reading because behavioral economics goes right to the core of the reason why relativity based business simulations are superior to static model based simulations. Let's dive it.
Behavioral Economics studies the effects of psychological, social, cognitive, and emotional factors on the economic decisions of individuals and institutions and the consequences for market prices, returns, and resource allocation, although not always that narrowly, but also more generally, of the impact of different kinds of behavior, in different environments of varying experimental values. (source: Wikipedia). I have to say that this is actually a pretty easy to understand and overall nicely laid out description of such a complicated topic.
Business Simulations are tools utilized to reinforce corporate training and development program material. In most cases, these tools are in the form of a game based method where teams are making decisions in order to see an outcome.
There is a substantial criteria that you need to think about when you think about business simulations: Relativity Modeling. This basically means the business simulation should be setup in order for participants to compete with each other. You are probably able to see why behavioral econ and relativity based simulation modeling go hand in hand.
By utilizing a relativity model, you are more in line with the advantages of behavioral economics. The nice thing about behavioral econ is that it takes into account the human emotion part of the economics equation(s). Thus, this is why business simulations is such a great fit for leadership development programs. Leadership, at its core, is a behavior. By implementing a business simulation that takes into account the behavior of the program, you are by default adding a real-real world scenario that can be found in no other place.
So yes, behavioral economics and relativity based business simulations are cut from the same cloth. This might seem somewhat esoteric, but the general gist is that when you're looking for a business simulation for leadership development, it is important to look for a solution where teams are competing against each other and not against the computer. Also, make sure they aren't competing against the computer and then comparing their scores. This is basically the same thing. Relativity based solutions are more real, more engaging, and proven to be more effective.