LONDON, England (CNN) -- Picture this: You work for a
racing car company that needs to raise $18 million in sponsorship. Do
you go with a reliable sponsor that can only offer part of that sum, or
take the full $18 million from a company getting bad press for selling
arms to a Middle Eastern country?
"Eagle Racing" is a video-based simulation designed to teach business skills.
That's the scenario of "Eagle Racing," a video-based business simulation designed to teach collaborative decision making.
It was developed at the Center for Advanced Learning Technologies
(CALT), run by business school Insead, and it's an example of the kind
of simulation used by business schools and companies wanting employees
to hone their business acumen.
Business simulations have been
around since the 1950s, starting out as little more than business-themed
board games. But as technology has improved, simulations have become
increasingly sophisticated and widespread.
can teach general skills, like decision making, or allow participants to
try their hand at all manner of specific business disciplines, be it
finance, accounting, marketing or human resources.
Halpin is Vice President of the US-based Association for Business
Simulation and Experiential Learning, and chair of Business/Health
Administration and Economics at Arcadia University in Pennsylvania. She
says that computer-based business simulations are now widely used on MBA
"Simulations are becoming increasingly important in
business education because they create a reality for students that can't
be taught by textbooks," she told CNN.
Halpin's own undergraduate MBA students
use a broad-based business simulation that lets them make finance and
human resources decisions, as well as a marketing simulation. In the
past they have used a simulation that lets them experience running their
But simulations aren't only used by business schools
-- they are equally in demand with companies wanting to arm employees
with new skills.
BTS is an international company that produces simulations for clients including Coca Cola, Procter & Gamble and ING.
Willem Pennings, a Senior Consultant at BTS, told CNN that businesses
approach BTS to request custom-made simulations that replicate the way
their business functions or that teach specific skills. A custom-made
BTS simulation can cost a business anywhere between $500,000 and
While the exact nature of any simulation depends on a
company's requirements, Pennings says they are often designed to give
participants a holistic view of their business, allowing executives to
experience how other departments function, without having to actually
work in those departments.
He gives the example of a simulation
that lets someone who works in marketing make financial decisions so
that they develop a better understand budgeting issues.
to Pennings the advantage of simulations over other teaching methods is
that they let users apply the theoretical knowledge they have learned.
And he says the economic downturn has benefited BTS as businesses focus
on training their staff to be more efficient and more aware of
Professor Albert Angehrn works at CALT, in Paris,
where he develops interactive technology for management training. The
simulations developed at CALT are widely used in business schools and by
companies including IBM and BMW.
"Simulations are seen as an
important component of management development because they put people
directly into a scenario, and that means there is stress and emotion,"
Angehrn says that business simulations
have traditionally taught more quantitative skills -- for example a
finance or marketing simulation might allow participants to work out how
much money should be allocated to advertising.
simulations have been refined to teach more "soft skills," addressing
people dynamics, such as driving change in organizations and making
companies more collaborative.
He adds that while simulations are
suitable for individual learning, their real value comes when they are
carried out in groups, with participants from different disciplines
working together and sharing knowledge.
The internet has
revolutionized the way business simulations are used. Where an
administrator once had to manually input the participants' in-game
decisions into a computer, users can now input their own decisions
online. Online simulations allow employees from different companies to
take part in the same simulation and can add an extra dimension to
online MBA courses.
Angerhn says there is a trend towards
"massive" online simulations that allow hundreds of users to
simultaneously participate in a scenario. He says these are popular with
big organizations, such as IKEA, that want to rapidly increase know-how
across the company.
As for the future, Halpin
thinks that business simulations will become more immersive,
incorporating the visual elements of virtual worlds like Second Life.
That could provide an even more realistic experience, and if the old
adage is to be believed, experience is the best teacher.