Business Simulation: The Definition and Advantages!

Kwiga
Reading time: 11 minutes

A business simulation is considered an online or offline business game based on a given topic. However, in this article, we will consider the first option since it simulates the actual internal processes of the company. An online simulation shows in detail, for example, the business model of a grocery store or metallurgical plant with tendering and two-stage production. Let's take a closer look at this concept.

What Is a Business Simulation

Business simulation is a game as close as possible to actual business conditions. It was first used by the Swedish company CELEMI in the early 1990s, after which such games quickly became popular worldwide. Moreover, over time, simulations quickly went out of business and were adopted by many universities.

So, business simulations are actively used during seminars in American institutions. Some games require such a level of training that teachers with a Ph.D. degree are involved.

In the CIS, business simulations appeared at the beginning of the 2000s. Initially, they were used by foreign companies for corporate training of employees, but very quickly, this approach was adopted by local businesses.

During the business simulation, its participants try to work with the tools based on the legend made by the presenter. By operating in "laboratory conditions," employees reduce the chance of errors in fundamental business processes.

Why Companies Use Business Simulations

There are two main reasons business simulations have become popular in corporate and academic training.

They Allow You To Assess the Knowledge of the Participants

For example, let's take a simulation of a grocery store where the user acts as a director. During the game, the participant performs tasks for analyzing the situation and setting priority tasks. After completing all the mini-games, the results are displayed on the screen. The most critical metrics are average bill, margin, write-off amount, turnover, and service level.

They Allow You To Teach Without Risks

The virtual environment allows learners to master skills that will be useful when performing real-life tasks. So, when taking part in the business simulation, students learn:

  • to decide regarding business process management;
  • to manage the company's employees;
  • to engage strategic thinking;
  • to implement specific tasks (e.g., hiring new employees);
  • to develop relationships with clients and partners.

All these benefits make business simulators an excellent learning tool.

How Business Simulation Works

First, all teams can access an online panel containing data about the company (history, business direction, and financial indicators). The list of metrics includes data on cash flow, number of employees, current morale, and more. The nature of the metrics depends on the aim of the simulation - developing human resources, improving marketing strategy, financial management, and so on.

Business Simulation Rules

The main goal is to boost a virtual company following the established winning criteria and get the highest number for all metrics. The team that takes the highest place wins.

Each team starts with the same numbers. Participants also get access to the rating, where they can determine themselves from other parties and evaluate the effectiveness of all decisions.

Participants solve the tasks by a given set of parameters - the final price, the volume of goods sold or produced, the number of attracted customers, gross profit, etc. Each specific task has a deadline, before which data must be entered into the control panel. If the team loses the time to decide, access to the control panel is automatically disabled.

After the deadline, the moderator starts the simulation through a particular teacher tool.

Business Modeling Algorithm

Special software is used for business games called an algorithm. It combines the decisions of all participants and uses the data embedded in the script. For instance, if customers are sensitive to changes in the price of a specific item and all parties decide to raise prices, then market demand will fall.

The program creates new market situations automatically. The forecast is calculated according to the T+1 scheme (i.e., one year ahead from the moment of making the decision). After that, a simulation starts, which all participants in the game can access. Based on the findings, they track the effects of earlier decisions and do new tasks.

Business simulation works according to the following algorithm:

  1. Teams receive data for starting metrics, competitor information, and end goals in the dashboard. The participants then begin a brainstorming session to discuss the strategy and action plan. They can also seek help from teachers.
  2. Participants turn the strategy into ready-made solutions, considering the specified indicators (prices, the number of goods sold, gross profit, etc.). and the game's goals. The team must make and commit decisions before the end of the deadline.
  3. When the deadline expires, the system locks access to the control panel and starts the simulation.
  4. Teams gain access again, analyze the simulation results, and begin another brainstorming session.

In general, each game has 3 to 7 rounds of simulation.

How Students Learn by Practicing

One of the main benefits of business simulators is practical skills training and theory development.

First, teams use loads of data about clients, employees, price sensitivity, and many more. This is necessary for the decisions made to meet the target audience's needs. For instance, if the audience is technologically sensitive, investment in research and development will stimulate demand for the product.

Second, participants must develop an analytical view of competitors. After all, it is quite possible that competitors better understand the target audience's needs and make a better offer. Therefore, the dashboard also reflects the performance of other teams, which helps to correct decisions.

Pros and Cons of Business Simulations

Online games like this have many advantages:

  • A low level of resistance from teams. During the business simulation, participants independently conclude and gain valuable practical experience. It can be transferred to actual business processes and improved.
  • The participants in the game can see the internal processes from different angles. They also learn to consider not one factor but a whole system that affects decision-making.
  • Employees of different departments and different levels of training can participate in the simulation. This allows the exchange of experience and improved communication between departments.
  • Using a virtual environment reduces risks to zero. The reason is simple: mistakes don't affect real business. Teams can use a variety of tactics, track the results of decisions made, and draw conclusions quickly.
  • Business simulators collect user data that can help identify knowledge gaps in participants. In addition to studying the information received, some games provide complete recommendations for further development.
  • The business simulator engages users as much as possible in the game process and motivates them to complete practical training. The point is that business simulations are unique and developed individually for each company. It allows you to fully imitate the familiar corporate environment, where employees can benefit. This is why the motivation grows.

However, such games also have disadvantages:

  1. Developing a full-fledged business simulation requires more time and money than classic online courses.

The game scenario affects the cost of the project and the timing of the work. To do this, you need to research the client's tasks, the customer company, and its business processes. The data obtained becomes the basis for future simulation.

After that, as the primary information was prepared, it is necessary to draw up a technical requirement. It needs to specify the business simulator's target audience and a list of skills for assessment or development. Also, technical restrictions are indicated in terms of reference (for example, supported devices for running the business game).

When ToRs are ready, you need to develop the game's concept. A separate document must contain the following data:

  • main screens of the simulator;
  • plot;
  • testing mechanics;
  • criteria for accessing the participants' progress;
  • game mechanics;
  • main game cycle;
  • main training cycle;
  • user engagement tools.

The final stage of work is the implementation of the project. Here you need to correctly estimate the timing of the work, write the code, develop the design and prepare texts for the simulator. To create a top-notch business game, you need a large team of specialists and several months of work (taking into account all rounds of approval).

2. The Simulator Is Not Suitable for All Types of Business

Business simulation is an excellent solution for a large company that constantly trains new and experienced employees. As for small businesses, it is better to use other formats. For example, online courses on an educational platform. It is pretty easy to create them because a convenient course builder and great branding opportunities come at the business owner's service. This is why you can launch the first module in just 30 minutes.

Who Can Use Simulators For Business Games

These tools are used in training programs in large companies, universities, business schools, and special programs for training executives (for example, EMBA).

The main benefit of business simulators is the high level of interaction between the participants. Each team wants to learn more about the simulation's logic and the target audience and find a way to win! This is where curiosity meets the desire to overtake competitors. It allows one to get valuable knowledge of business management methods. Plus, all participants have fun when developing a virtual company.

When conducting the brainstorming session, moderators answer the teams' questions and help them explain their own decision. Another person is also involved in business games - a facilitator, and its task is to guide the participants towards the correct solution through leading and sometimes entirely surprising questions. As a result, employee training depends on the employees themselves.

In addition to the practical part, moderators can conduct theoretical sessions after each simulation round. This allows for a clear connection between simulation and the overall training program. During classes, the teacher can show videos or give theoretical material related to the context of the business simulator and lead discussions about the decisions made.

Each player learns from their own experience, which positively affects the assimilation of knowledge. Moreover, participants gain a much more valuable skill - analyzing customer data, evaluating products, and positioning the business. These things are vital for a company that seeks to gain and maintain a leading position in the market.

Another strength of business modeling is flexibility. The experts recommend using a 2-hour block to discuss and make decisions for each simulation round. But this is not necessary because decisions can be made at any time during the day. Some businesses organize sessions once a week, while others - several times a day. Here everyone can establish their own rules of the game.

We hope you found our article helpful. If you have any questions regarding the development and running of business simulations, leave them in the comments below this material. We will answer them and analyze the most interesting ones in the following articles!