Business Simulation - History

History

The first use of games for education and development was the war game simulations in China in about 3,000 B.C. These games bore a vague similarity to the early 17th century chess. In the Western world, war games date back to at least the German Kriegspiel of the mid-nineteenth century (Faria and Diskinson). Faria and Dickinson note that different war games have also been conducted in Japan before the Second World War and war games have been long used by the British and the Americans to test battle strategies. Military officers trained with war games in the 1930s and 1940s started to use their military training to manage civilian businesses. Some of the business game evolution can be traced to a 1955 Rand Corporation game, which simulated the U.S. Air Force inventory management within its supply system. Greenlaw et al. state that business simulation exercises may be considered an outgrowth of earlier developments in three fields: military war gaming, operations research, and educational role-playing.

According to Naylor, the use of games in business and economics goes back to 1956 when the American Management Association developed the first so-called management decision-making game, called the Top Management Decision Game. Faria and Dickinson and Greenlaw et al. also find this the first widely known business decision-making simulation, although Greenlaw et al. date the origin of the game to 1957 and further specify that it was the first non-military competitive business game. Greenlaw et al. note that the Top Management Decision Simulation stimulated the design and use of dozens of other games. In this simulation five teams of players operated firms competing in a hypothetical, one-product industry. Teams made quarterly decisions covering price, production volume, budgets, research and development, advertising, and sales force and could request selected marketing research information. During the period 1955-1957 only one or two new games appeared each year (Faria, 1990).

A rapid growth in the number of business games occurred over the years from 1958 to 1961. Greenlaw et al. had made a summary of some business games available by the beginning of the 1960s. The summary includes 89 different business games or different versions of a certain business game developed by industrial firms, business associations, educational institutes, or governmental units. Naylor mentions already in 1971 that hundreds of management games have been developed by various universities, business firms, and research organizations. These management games have been used both for research purposes and for training people in diverse disciplines such as management, business operation, economics, organization theory, psychology, production management, finance, accounting, and marketing. Also Faria (1990) and Dickinson note that the number of simulation games grew rapidly in the 1960s. McRaith and Goeldner list 29 marketing games, of which 20 had been developed by business firms and nine by academians for university teaching. In 1969 Graham and Gray listed nearly 200 business games of different varieties. Horn and Cleaves provided a description of 228 business games. Faria (1989) mentions that over 200 simulations were in use in the USA in over 1,700 business schools. Overall, taking advantage of computer games in education increased enormously through the 1960s to the 1980s, see for example Ju and Wagner.

At the end of the 1980s Faria (1990) estimated that there were approximately 228 games available in the USA, and that there were around 8,500 instructors using business games. At that point Faria also believes that there is a large and growing number of business schools instructors and business firm users of simulation games. Still, Faria estimated that only 12.5% of all US business firms with training and development managers used computerized business games.

The penetration of business gaming in academia is fuelled by the following factors: the increase in student numbers, the increase in new courses, increased adoption of methods supporting diverse learning styles, and the increasing availability of technology. Dickinson and Faria state that in US over 200 business games are being used by nearly 9,000 teachers at over 1,700 colleges offering business programmes.

Larsen and Lomi describe the shift of the objectives of management gaming. They state that until the early 1980s simulation was used to forecast the behavior of a variety of sub-system level variables, ranging from the cash flow and financial performance of a company, to the inflation and unemployment rates of an economy. They state further, that during the last 15 years a new way of thinking about simulation emerged. Instead of focusing on predicting, simulation progressively became a tool to help management teams understand their company and industry’s problems and opportunities. Simulations could prepare for the future and reduce the sensitivity of possible strategies to changes in alternative frames of reference – or mental models. Larsen and Lomi further note, that the emphasis of computer-based simulation models has shifted:

1. from predicting the future, to understanding how multiple possible futures might be linked to decisions and actions that must be taken today, and
2. from designing the best strategy, to analyzing how robust our preferred strategy would be under different assumptions about how the future might unfold, or about how the past actually produced the events that we perceive.

In the late 1990s, training and consulting companies began designing and customizing business simulations for individual companies to augment their corporate leadership development programs. The business simulations often focused on strategy and business acumen. The business simulations allowed participants to test their decision-making skills, make mistakes, and safely learn from their experience. Some refer to this type of employee education as "experiential learning." By 2000, business simulations were available that blended the traditional business acumen (financial) skills with the softer - interpersonal - skills required for effective leadership development.