Sometimes conversations with clients turn to how much detail a business simulation for senior executives should have. Here are my two cents.

When planning a business simulation for managers it is tempting to try to model the real world as much as possible.

It seems like common sense that the more detailed a business simulation is, the more readily a leader can apply the learnings when they are back in the office.

Not seeing the forest for the trees

The problem is that more detail can distract from the basic concepts. And many people in high positions lack basic financial understanding because their career paths have focused on other areas.

Actually, even people with strong finance background often lack overall business acumen – they understand the finance side of the business, but not necessarily the drivers of a competitive market.

To teach the foundations, simplify

You can think of a good business simulation as a bit like a good cartoon. It gets across ideas and evokes a response with a sketch or a few frames. It is not, and ought not try to be, a set of detailed drawings or photos. Its power lies in simplifying — leaving out unnecessary details and highlighting the essentials.

In the case of business fundamentals, the essentials include things like:

  • The difference between cash flow and profit
  • The importance of supply and demand
  • Understanding cost structure

Generally, a board game simulation is better suited to dealing with concepts rather than details. This is because it is dealing with whole physical objects as opposed to fractions and decimals. There is a natural emphasis on simple modeling of fundamental dynamics (financial statements; marketplace pressures; inventory control; innovation and improvement; the need to manage separately for profit and cash flow; and more)… and not on complex modeling of exact relationships of activity-based costing.

Computer simulations are useful for modeling the details of dollars and cents, but not as good for conveying concepts. So my recommendation is: don’t go to the detailed complexity until you are sure that your target audience has a clean, simple, big-picture overview of the conceptual structure of how a business works. Once the learners have mastered the foundational concepts, you might use a computer simulation to challenge them with a fine-grained look at your business.

The takeaway

Everyone benefits from a simplified model that focuses on the key drivers of financial results. Make sure everyone has the foundations of business understanding, and then follow up with the challenge of a fine-grained competition.

What is your experience? Chime in using the comments box below.