Business simulations explained: how they work and what they deliver

What business simulations are, and how they work

This guide is for learning and development managers and senior leaders weighing whether a business simulation is the right learning intervention for their managers and leaders. It explains why simulations work, what benefits participants and sponsors report, and the seven characteristics that tell one simulation from another.

I focus on simulations used for management and leadership development. That excludes very useful simulations that build practitioner skills, such as customer service or servicing a printer, and the valuable (sometimes life-saving) simulations used for analytics, medical skills, or other operational training, which tend to need hyper-realistic models. If those interest you, the work of places like the Centre for Medical Simulation is excellent.

Why use business simulations for learning

There are four main reasons why organisations choose business simulations.

A safe and efficient learning environment

'Let's take flight simulation as an example. If you're trying to train a pilot, you can simulate almost the whole course. You don't have to get in an aeroplane until late in the process.' Roy Romer

Business simulations owe a huge debt to the techniques pioneered in aviation flight simulation. In commercial aviation, simulation is used for skills training, emergency procedures, and type conversion, and the three main benefits are safety, cost, and environmental impact. My article on what businesses can learn from aviation flight simulation explores how the same benefits apply to learning in business.

Experiential and social learning combined

Business simulations let people learn by doing and gain insight by making mistakes, which is classic experiential learning. Team-based and facilitated simulations add the extra dimension of sharing those experiences with others. In his book Informal Learning: Rediscovering the Natural Pathways That Inspire Innovation and Performance, Jay Cross argues that up to 90% of the information and skills we need to do our jobs is learned informally and socially rather than formally.

Engagement through gamification techniques

Gamification is the application of gaming techniques in non-gaming settings. Thoughtfully adding elements such as leader boards, penalties, rewards, and the unexpected can significantly raise engagement and team cohesion through competition between teams.

Scalable engagement

Facilitated sessions without simulation can be hugely effective, but they depend on the facilitators and are labour-intensive to scale. E-learning scales easily but struggles to create real engagement. Business simulations offer the best of both: the same experience can be rolled out quickly and effectively to hundreds of managers or leaders.

Benefits of business simulations for leadership development

When I interview participants and business sponsors after a simulation, the benefits they report fall into five categories.

Virtual experience

This is the classic flight simulator model. Participants try out 'dangerous things' in a safe and forgiving environment with no adverse business consequences. It covers the decisions they practise and the scenarios they meet, including unexpected shocks, whether brought on by their own choices or pre-programmed into the simulation.

Knowledge sharing

A well-designed simulation is one of the most effective ways for an organisation to spread knowledge, experience, and best practice between colleagues, using the social and informal learning approaches above.

Resolving dilemmas

Any well-designed simulation presents participants with dilemmas: business, leadership, and team dilemmas. It should reflect real-world scarcity. There are rarely enough resources (money, people, machinery, or stock) to achieve everything, so participants must make trade-offs. To see this in action, explore Dilemma.

Change and pressure (agility)

Simulations also model the real-world fact that things change unexpectedly and time is short. That is the essence of agility: handling unexpected change well and in a timely manner.

Confidence and ambition

A common theme reported three to six months after an event is that participants feel more confident and are taking on bigger responsibilities. When I ask why, the usual answer is that the simulation was challenging, yet they still succeeded, for example running a flour mill or a country business unit in the face of difficult trading conditions.

Seven characteristics that define a business simulation

Many characteristics describe a business simulation for learning. I believe these seven classify them best, and they are a useful checklist when comparing providers.

Players: individuals or teams?

Are participants playing as individuals or as teams? In our simulations, participants always play in teams. Other simulations may have individual participants.

Player dynamic: collaborating, competing, or both?

In Consortium, a silo-busting simulation, teams start off focused on their individual goals but soon realise they also need to focus on collective goals, without which they cannot achieve their own.

Role of the computer: against the computer or against each other?

In Acumen, all teams grow market share independently of each other. In Compete, teams compete directly for market share in real time.

Learning domains: which management and leadership topics?

We have found that the 12 areas in the leadership colour wheel below summarise well the main requests for simulations we receive. Typically there are one to three primary domains and one or two secondary domains. More than that is usually a sign of an overly complex simulation or an unrealistic set of learning objectives.

Mediation: self-directed, facilitated, or virtual?

In our simulations, a subject matter expert or facilitation expert always facilitates, to drive home the learning. Other providers may offer self-directed learning.

Customisation: off-the-shelf or custom-built?

If it is off-the-shelf, can it be configured? If it is custom-built, is it built from scratch or from existing components? We offer both: most of our catalogue is off-the-shelf, and we co-design tailor-made simulations directly related to your business.

Off-sim elements: how much is wrapped around the simulation?

Is the simulation wrapped in off-sim components such as papers, props, role plays, or even actors, or is the simulation itself the whole experience? Done well, off-sim components greatly enhance the blended learning experience. In Influence, our change management simulation, the facilitator or actors can role-play the characters inside the simulation.

Where to go next

The right next step depends on the capability you want to build:

• Leading change and engaging stakeholders: the change management challenge and Influence
• Commercial and financial judgement: the financial acumen challenge and Acumen
• Decisions under uncertainty: the strategic thinking challenge
• Breaking down silos: the collaboration challenge and Consortium
• A need specific to your own business: a tailor-made simulation