Simulations Help Make Better Businesses

DECADES AGO THE GREAT SOCIOLOGIST Daniel Bell laid down the line separating the industrial and information ages. In the industrial age, work was a game against nature; in the information age, the opponent became other humans. As more and more physical elements of production disappear into machines, those humans must concentrate on the parts of the production process that involve getting each other’s attention, understanding, agreement and cooperation.

Michael Schrage (of MIT’s Media Lab) recently elaborated on that theme as it applies to the world of e-commerce: “The so-called information revolution itself is actually, and more accurately, a ’relationship revolution,’” he wrote in a white paper for the Merrill Lynch Forum. “Every organization that has enjoyed success on the World Wide Web [recognizes] that the quality and quantity of interaction matters every bit as much as the quality and quantity of information.”

For Schrage, information managers need to be more like relationship managers, concerned with issues such as group learning, collaboration and coordination. In his most recent book, Serious Play: How the World’s Best Companies Simulate to Innovate (Harvard Business School Press, 1999), he argues that one of the key tools they use to these ends are computer-aided business simulations, specifically gaming simulations, in which people interact with each other in real-time.

Business-oriented strategy gaming is not particularly new. We originally covered the subject as part of an article on business simulations in general in November 1993. Surprisingly little in that article requires updating. Most of the vendor companies mentioned in the piece are still in business?a rarity when we revisit most technologies. On the other hand, interactive gaming hasn’t exactly grown into a management tool of first resort.

According to Schrage, the big change in the market during the past decade has been a focus shift away from senior management using simulations to focus on strategy, to using simulations to integrate strategic concerns with operational effectiveness. Traders in the financial sector routinely recruit their colleagues to play against new investment strategies. Tiger teams (friendly hackers) are thrown against network security features, and so on.

A more specific example is the story of the simulation developed by Donnelly Corp., a company based in Holland, Mich., which makes mirrors and windows for car manufacturers. In the mid-’90s Donnelly decided to switch to a new system called lean manufacturing.

In conventional manufacturing, both workers and equipment specialize in specific tasks, such as attaching a single part to a frame. They perform this particular act over and over, using machines built specifically for the purpose. As they finish each task, the frames either travel to the next worker by an assembly line or, far more often, just accumulate until a forklift comes along to make a “batch” transfer.

In lean manufacturing, neither workers nor equipment are specialized. Management instead divides workers into small teams, each responsible for an entire productive cycle. The productive technology is simple, distributed, flexible and very reliable. Everybody is capable of doing everyone else’s job, and everybody knows everything that is going on, including enough about corporate finances to see how their work contributes to the big picture. Everyone is even expected to suggest improvements to the process periodically.

Lean manufacturing represents a revolution in workplace relationships. Workers are expected to “give away” their skills by teaching others; plus they assume a host of new responsibilities, leaving themselves open (or so they might fear) to criticism from every direction. The difficulty of navigating this change has often proved an insurmountable barrier to adopting the new system.

Donnelly attacked this problem with a lean manufacturing simulation for production personnel: a microfacility stretched across three banquet tables and organized according to traditional principles. The players were given one abstract lecture on the principles of lean manufacturing, turned loose on the microfacility and told to find improvements.

According to Sean Dwyer, a manager of organization development and HR technology at Donnelly and one of the original designers, over a few hours the players usually find their own way to a lean manufacturing-style organization. Once they had done that on the simulation, the experience of introducing lean manufacturing to the real work floor became much simpler. Dwyer says that lean manufacturing has contributed to a 30 percent increase in productivity and a 90 percent decline in defects. (The Donnelly plan is now sold by the Scanlon Leadership Network of East Lansing, Mich.)

Gaming simulations are the business equivalent of practice sessions for sports teams or rehearsals for music, dance or drama companies. They are not necessary when people are doing the same work year in, year out. But as we move into a world in which organizational change is both common, radical and integrated with very high levels of performance?then these tools are likely to become critical. n