Companies must determine the appropriate strategy and implement it in the best way during all critical periods of product life cycles. Making strategic decisions and implementing them in all the chaos of the business world is a very critical and rare competency. In order to acquire the competence in strategy formulation and implementation, reading the books and articles written in the field of strategy, listening to the strategy veterans, etc. passive learning techniques are quite inadequate. Strategic thinking is a competence, not a technical knowledge; and competencies such as playing chess, dancing and sculpting can only be learned by experience.
On the other hand, leaving a manager candidate to learn by experiencing his/her development in the field of strategy carries a great risk. First, companies cannot afford to wait years for their managers to develop into good strategists. They need managers with strategic thinking skills right now and always. Second, leaving strategic competencies to natural learning processes by trial and error often means taking the risk of making wrong decisions.
Advantages of simulations:
Strategy educators now use simulations to solve strategy problems. Business simulations offer participants a kind of deep learning opportunity through trial and error decision making in a risk-free environment. A typical business simulation; It is played in teams of four or five, in 6-10 terms, by making business decisions. A good simulation; It includes competing with other teams by making decisions in all areas of expertise such as marketing, sales and distribution, production, quality management, finance and corporate responsibility. Simulations, with a special competition modeling algorithm, ensure that the decisions made are reflected on the company performance as closely as the real market conditions.
After each decision period, all competing teams see their company’s performance in comparison to other companies in other important performance dimensions such as stock price, profitability, equity efficiency, and more. Thus, participants instantly learn about the effects of their decisions on their market share and financial situation. At the end of the simulation, strategic positioning and the importance of inter-functional coordination are important learning gains for each participant. Due to these holistic learning and competence development advantages, business simulations are applied in capstone courses in the world’s leading MBA and Executive MBA programs.
Research in the field of strategy education shows that business simulations cause a serious improvement in critical thinking and decision-making abilities such as questioning assumptions, evaluating data, questioning the logic of suggestions (Lovelace et al., 2016). The two main reasons for this are that the training process is based on 100% interactivity and instant feedback. Studies have also shown that participants who receive training with simulation are more satisfied with the training than participants who participate in other types of training, and what they learn causes more changes in their attitudes and behaviors (Bell et al., 2008). For example, teamwork in simulations is a unique opportunity to develop participants’ effective collaboration and leadership abilities. Studies covering the periods after the trainings showed that the participants who were successful in the simulations earned higher wages and rose faster than the other participants as they progressed in their business life (Gosen & Washbush, 2004).