Sim C.E.O. by Laura Vanderkam Sep 5 2008

A scene from Marketplace, a popular simulation game in which students run a computer maker.

http://www.portfolio.com/careers/features/2008/09/05/Sim-CEO
Videogames have come to the classroom—even to the venerable Harvard Business School. Instead of case studies, students are entering business simulations—with mixed results for the real world.

It’s Monday morning, and the president of Back Bay Battery, a $240 million company, is looking over his financial statements. Sales are way up for his main line of nickel metal-hydride batteries, and yet he can’t help noticing the customer complaints, particularly about how long the batteries take to recharge.

The company’s new ultracapacitor batteries recharge in less than a 10th of the time, but so far they’re losing millions of dollars as the company scales up production. Betting that they’re the future, though, Back Bay’s president takes a deep breath and decides to shift scarce R&D dollars away from nickel metal-hydride research and toward ultracapacitors.

It might sound like another stressful day at the office, but it’s actually a stressful day at school—the business simulation will be part of an assignment for Harvard Business School students in their second-year Building and Sustaining a Successful Enterprise course.

Simulations like Back Bay Battery have become increasingly popular at business schools as educators seek to promote experiential learning over passive instruction via lectures, arguing that students work harder and retain more information when given more hands-on instruction. And they seem to be a natural fit for students raised on playing videogames. Today more than 90 percent of business schools use at least one simulation in their teaching, and many use more.

Simulation games have become so successful that H.B.S.’s publishing arm, Harvard Business Publishing, which also produces the classic case studies that generations of B-school students were weaned on, has begun producing its own simulations in partnership with Forio Business Simulations. One of the first is a simulation of running a Benihana restaurant that’s based on a bestselling case study. Other simulations focus on specific business situations and challenges, such as managing a complex supply chain (The Root Beer Game), running a technology-driven business (Back Bay Battery), and climbing Mount Everest as part of a team (Everest).

“Experiential learning is a big deal everywhere” says Denis Saulnier, Harvard Business Publishing’s assistant director for educational technology. “[We] saw it as a natural complement to the case-study method," he says, adding that students actually get to act out scenarios and see cause and effect.

Saulnier says that while sales of its simulations and other e-learning products are nowhere near that of the publisher’s paper cases because they’re so new, they are the fastest-growing part of its catalog, and he expects them to become a significant part of overall sales in the future. Customers of the simulations, which typically cost about $12.50 per student, include many of the country’s top business schools, including Columbia, Cornell, and Carnegie Mellon.

Harvard Business Publishing already has some strong competition, however. Dan Smith, president of Capsim Management Simulations, estimates that sales of his recently launched Comp-XM game, in which students run a virtual $100 million company for five sped-up years and answer questions about their decisions, are up 20 percent over last year. And Sam Wood, a former Stanford Business School professor who founded Responsive Learning Technologies to market the games he and fellow professor Sunil Kumar developed, notes that the majority of schools accredited by the Association to Advance Collegiate Schools of Business now use either his or Capsim’s products.

The virtual simulations do bear some resemblance to old-fashioned case studies. In general, students watch a short clip explaining the scenario (just as case studies set the scene), and then have to make a decision about what to do next. Unlike with case studies, however, students using these simulations are able to get instant feedback on their decisions through multiple rounds of play.

In Harvard’s Benihana restaurant simulation, for instance, students choose whether to move customers from the bar to the restaurant in batches or individually—and see how this affects sales. They can change the size of the bar and the number of tables. They can try to speed up table turnover, then run 20 iterations instantly and see how profits change. Students seem to prefer the challenge and the format. Wood notes that when Stanford started using an early version of Littlefield Technologies, an operations management simulation that he and Kumar designed, student ratings for that class rose dramatically.

The games do have their critics, however. One study conducted during the 2004-’05 school year at a business school in Edinburgh found that while the majority of students enjoyed the simulation game, it seemed largely due to their novelty rather than to any inherent advantage they possessed. Others wonder just how realistic these simulations can possibly be, which even some of the game makers admit is a limitation.

“Would a kid who ran a simulated company be qualified to run a Subway franchise? I doubt it,” says Capsim’s Smith, who is an adjunct professor at DePaul’s business school. But, he notes, “You can get some clue whether the students mastered the basic concepts and more importantly, can integrate them together.”

The games also get knocked for the poor quality of their graphics, especially given the power of today’s computers. Harvard’s Everest simulation, for example, looks little better than the Oregon Trail computer game many current business students may have played in elementary school. Saulnier says graphics are secondary to the game’s content and ease of use, but other simulation makers are taking a different approach.

The latest version of Marketplace, a popular simulation about selling computers put out by Innovative Learning Solutions, features factories that could show up in Second Life, scenery reminiscent of World of Warcraft, and colorful characters like a villainous loan shark named Guido. “People do like a little bit of entertainment along with the education,” explains Ernie Cadotte, the University of Tennessee at Knoxville marketing professor who designed the game.

For its part, Harvard Business Publishing plans to issue six more simulations this year, including extremely current topics such as a mergers-and-acquisitions simulation and another where students manage a private-equity portfolio. “We’re only going to scale up,” Saulnier says.

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