A NEW METHOD FOR MODELING INNOVATION AND R&D IN BUSINESS SIMULATIONS: ILLUSTRATED WITH A SIMULATION OF A NEW PRODUCT DEVELO... Developments in Business Simulations and Experiential Learning, Volume 32, 2005 A NEW METHOD FOR MODELING INNOVATION AND R&D IN BUSINESS SIMULATIONS: ILLUSTRATED WITH A SIMULATION OF A NEW PRODUCT DEVELOPMENT PORTFOLIO Gary Summers Skillful Product Development simsumm@verizon.net ABSTRACT Though appropriate for total enterprise simulations, the common method of modeling innovation and R&D in business simulations is not suitable for teaching the management of innovation and R&D. The common method is deficient because it simulates the outcome, but not the process, of R&D. This discussion paper presents a method that was proposed at ABSEL 1999: modeling innovation and R&D as a search of a technology space. This paper also presents the first simulation to use the new method. The simulation teaches R&D managers to manage a portfolio of new product development projects. Technical innovation is a potent competitive force. It can raise a small firm to industry leadership or cause the fall of an industry giant. Even when its consequences are less dramatic, technical innovation is a perpetual concern of managers of high-tech companies. Every year scores of management books offer prescriptions, and every year companies of all sizes struggle to develop new technologies and create new products. How do managers and executives learn to manage innovation and R&D? They learn on the job, and herein lays the problem. Several qualities of R&D hinder learning. Uncertainty is high. Years separate decisions from outcomes, and many factors affect results. People learn poorly in such situations, and the results are catastrophic. Instead of writing off mistakes as large, one-time educational expenses, high-tech companies pay for these mistakes again and again. Seminars, conferences and knowledge of best practices are not a solution to this problem. Applying formal knowledge to work requires practice. In analogy, no medical student moves directly from Gray’s Anatomy to surgery. R&D executives and managers need business simulations so they can develop their skills in a risk free environment. Unfortunately, the common method of modeling innovation and R&D – probability functions – is insufficient for this task. The common method of modeling innovation in educational business simulations has a student allocate capital to an R&D function, and this allocation purchases a draw from a probability distribution. If the draw exceeds a predetermined threshold, the firm innovates (Pray & Methé, 1991). The learner might make additional decisions that affect the threshold or the probability distribution, such as staffing or the duration of the research. These decisions make the learner confront important aspects of R&D management. This method is useful in simulations where innovation and R&D play a peripheral role, such as total enterprise simulations (e.g., Capstone). Unfortunately, the common method cannot teach the management of innovation. Neither can it teach the management of high-tech companies, where technological core competencies, technology-based competition and coordinating R&D with strategy are essential for success. Three qualities of the common method limit its usefulness. First, the method simulates the outcome of innovation but not the process of innovating. Second, the method reduces the management of innovation to an investment decision. Although investment is essential, innovation is a process of creating and exploiting knowledge. Any simulation of innovation must explicitly represent this process. Third, the common method poorly simulates technical advance. Technological advances create a multitude of opportunities and substantially increase uncertainty. The common method only simulates a small number of new opportunities, specified by predefined probability distributions. The common method has a dominating precedent. Nearly all economic models that consider innovation use probability distributions. Is there another method? Building upon research from complexity science, this discussion paper presents a new method for modeling innovation and R&D in business simulations (Summers, 2004). This method models innovation and R&D as a search through a technology space. The demonstration will proceed as follows: Review of the common method: Exceeding the comments above, the common method will be described, and its benefits and limitations will be described. The technology space method: The technology space method and its principal components will be introduced. The type of functions used with this method will also be illustrated. Does the technology space method realistically simulate innovation? This question will be answered by demonstrating how the technology space method models technological advances, knowledge, innovation (incremental through major) and qualities of innovation, such as unpredictability, failure rates, path-dependency, surprise and probabilistic success. 291 mailto:simsumm@verizon.net Developments in Business Simulations and Experiential Learning, Volume 32, 2005 Analyzing students’ decisions: Most simulations teach with an indirect method. Students try various strategies, observe the results, and hopefully, infer an improved understanding. The technology space model enables directed learning. With directed learning, the simulation analyzes students’ judgments and decisions to discover their strengths, weaknesses, biases and errors. This analysis enhances feedback, debriefing and the simulation exercise to personalize the experience to each student’s needs. The demonstration will describe this capability of the technology space method. Examples: The demonstration will illustrate the versatility of the new method with examples of simulation architecture. A simulation: The demonstration will present the first simulation using the technology space method. This simulation teaches students to manage a portfolio of new product development projects. The demonstration will present the architecture of the simulation, the students’ decisions and the analysis of decisions. Components of the interface will be illustrated, and if possible, the demonstration will present results from the first use of the simulation. REFERENCES Pray & Methé (1991) “Modeling radical changes in technology within strategy-oriented business simulations.” Simulation & Gaming, Volume Twenty- Two, Number One, March 1991, 19-35. Summers (2004) Management Training Simulation Method and System. US Patent Application, publication forthcoming. 292 Table of Contents Volume 32, 2005 LEARNER BEHAVIOR IN THE ONLINE CLASSROOM EXPERIENCE THE EFFECTIVENESS OF A SIMULATION EXERCISE FOR INTEGRATING PROBLEM-BASED LEARNING IN MANAGEMENT EDUCATION DEMONSTRATION OF FOUR WEB-BASED SIMULATIONS THRESHOLD COMPETITOR: A MANAGEMENT SIMULATION ENTREPRENEUR: A NEW VENTURE SIMULATION MERLIN: A MARKETING SIMULATION MICROMATIX: A STRAGETIC MANAGEMENT SIMULATION LEARNING STYLES INFLUENCES ON SATISFACTION AND PERCEIVED LEARNING: ANALYSIS OF AN ONLINE BUSINESS GAME INTERNATIONAL INTERNSHIPS: DESIGN AND EXPERIENCES SIM MAP: TURNING ACTION-BASED LEARNING INTO SIMULATED CONSULTING PROJECTS NOTEL HEALTH SERVICES: A ROLE-PLAYING SIMULATION TEACHING EXPERIENTIALLY WITH THE MADELINE HUNTER METHOD: AN APPLICATION IN A MARKETING RESEARCH COURSE SIMULATING CUSTOMER LIFETIME VALUE: IMPLICATIONS FOR GAME DESIGN AND STUDENT PERFORMANCE VIRTUAL PROGRESS: SIMULATING ECONOMIC DEVELOPMENT ONLINE STRATEGIC MANAGEMENT: AN EVALUATION OF THE USE OF THREE LEARNING METHODS IN CHINA ADOPTION OF DISCUSSION-BASED TEACHING AND ASSESSMENT IN TEACHING STRATEGIC MANAGEMENT IN CHINA STUDENTS' VIEW ON THE USE OF CASE METHOD IN CHINA CHINESE STUDENTS' PERCEPTIONS OF BUSINESS GAMING EXPERIENCECSR - A CORPORATE SOCIAL RESPONSIBILITY SIMULATION CREATING DYNAMIC INTERACTION IN A VIRTUAL WORLD: ADD VALUE TO ONLINE CLASSROOMS THROUGH LIVE ELEARNING AND COLLABORATION: A DEMONSTRATION CAPABILITIES OF EXPERIMENTAL BUSINESS GAMING A COMPARISON BETWEEN SOLUTIONS AND DECISIONS IN A BUSINESS GAME VALIDATING BUSINESS SIMULATIONS: DOES HIGH PRODUCT QUALITY LEAD TO HIGH PROFITABILITY? ALIGNING ART AND EPISTEMOLOGY: ILLUSTRATIONS TO DISTINGUISH DISCOVERY FROM KNOWLEDGE BUILDING TUTORIALS USING WINK STUDENTS AS LAB RATS: THE ETHICS OF CONDUCTING NON-PEDAGOGICAL RESEARCH IN THE CONTEXT OF CLASSROOM SIMULATIONS AND EXPERIENTIAL LEARNING THE EFFECT ON GAME PERFORMANCE OF DIFFERENT MEASURES AND UNITS OF ANALYSIS IN QUANTITATIVE ANALYSIS ANALYZING AND THINKING WHILE PLAYING A SIMULATION COMPUTER BUSINESS SIMULATION DESIGN: THE ROCK POOL METHOD EXPANDING THE ROLE OF E-ROOMS IN DISTANCE LEARNING APPLICATIONS TO MANAGEMENT EDUCATION APPLICATION OF TRADITIONAL AND ONLINE JOURNALING AS PEDAGOGY AND MEANS FOR ASSESSING LEARNING IN AN ENTREPRENEURIAL SEMINAR DEVELOPING MANAGERIAL EFFECTIVENESS: ASSESSING AND COMPARING THE IMPACT OF DEVELOPMENT PROGRAMMES USING A MANAGEMENT SIMULATION OR A MANAGEMENT GAME INTERNATIONAL MANAGEMENT GAME Œ AN INTEGRATED TOOL FOR TEACHING STRATEGIC MANAGEMENT INTERNATIONALLY STUDENT EXPECTATIONS OF SIMULATIONS DISTANCE EDUCATION DELIVERY OF AN INTENSIVE SIMULATION BASED COURSE TEACHING SERVICE LEARNING USING A BUSINESS GAME ROLE-PLAY SIMULATION EDUCATIONAL PERSPECTIVE OF COLLABORATIVE VIRTUAL COMMUNICATION AND MULTI-USER VIRTUAL ENVIRONMENTS FOR BUSINESS SIMULATIONS SIMULATION PERFORMANCE & PREDICTOR VARIABLES: ARE WE LOOKING IN THE WRONG PLACES TO MEASURE THE RIGHT LEARNING? VIDEO CASE: JET-A-WAY INC. Œ FOCUSING ON DIVERSITY AND ENTREPRENEURIAL LEADERSHIP ACTIVE LEARNING: WHAT IS IT AND WHY SHOULD I USE IT? FACILITATING THROUGH COLLABORATIVE REFLECTIONS TO ACCOMMODATE DIVERSE LEARNING STYLES FOR LONG-TERM RETENTION ONLINE CUMULATIVE SIMULATION TEAM PERFORMANCE PACKAGE WHEN PROPHECY FAILS: A SMALL SAMPLE, PRELIMINARY STUDY USING EXPERIENTIAL LEARNING TO INTEGRATE THE BUSINESS CURRICULUM FORECASTING STOCK VALUE EMPLOYING PROGRESSIVE PRACTICES AND PRINCIPLES TO FACILITATE SEMINAR ROOM LEADERSHIP AMONG LEARNERS: SHARED POWER AND COLLECTIVE ACCOUNTABILITY INDIVIDUAL ACHIEVEMENT DOES NOT GUARANTEE TEAM PERFORMANCE: AN EVIDENCE OF ORGANIZATIONAL LEARNING WITH BUSINESS GAMES DECISION MAKING IN BUSINESS SIMULTION DESIGN ZUG UM ZUG 2015: COLLECTIVE BARGAINING AS A TWO-LEVEL GAME A NEW METHOD FOR MODELING INNOVATION AND R&D IN BUSINESS SIMULATIONS: ILLUSTRATED WITH A SIMULATION OF A NEW PRODUCT DEVELOPMENT PORTFOLIO DEVELOPING A MICRO SIMULATION EFFECT OF MARKET SHARE AND PRODUCTION EXPERIENCE ON COMPANY PROFITABILITY RE-DESIGNING A CURRICULUM THAT VALUES A WORK-INTEGRATED APPROACH TO STUDENT LEARNING HOW SIMULATIONS AND EXPERIENTIAL LEARNING FIT AS WE COMPLY WITH LEGISLATIVE AND AACSB ASSESSMENT GUIDELINES: HOW TO DEVELOP ACADEMICALLY SOUND COURSES THAT ALSO MEET STAKEHOLDER NEEDS EVALUATING SERVICE LEARNING: REFLECTION AND ASSESSMENT FROM THE STUDENT POINT OF VIEW SIMPLIFYING AND ENHANCING FINANCIAL ANALYSIS IN CASES AND SIMULATIONS OVERCOMING THE BUSINESS GAME COMPLEXITY PARADOX EXPLORING THE PREFERENCE IN LEARNING APPROACH AMONG THE HONG KONG UNIVERSITY STUDENTS: CASE STUDY, PROBLEM-BASED OR TRADITIONAL TEXTBOOK QUESTION AN EXERCISE FOR EXPLORING THE RELATIONSHIP BETWEEN JUNGIAN PSYCHOLOGICAL TYPES AND POLITICAL STYLE IN THE WORKPLACE EVALUATING THE DIRECTION OF RESEARCH IN ONLINE EDUCATION: ARE WE GOING ANYWHERE? AIS RAIL SYSTEM: A COMPUTER-BASED JOB-ORDER COST SIMULATION BLOOM BEYOND BLOOM: USING THE REVISED TAXONOMY TO DEVELOP EXPERIENTIAL LEARNING STRATEGIES DELIVERING A TECHNOLOGY-BASED CASE IN A TECHNOLOGICAL WAY: THE SMARTCART CASE USING THE INTERNET TO ENHANCE COURSE PRESENTATION: A HELP OR HINDRANCE TO STUDENT LEARNING TEACHING PRACTICES: A CLUSTER ANALYSIS OF STUDENTS IN HONG KONG TEACHING PRACTICES: A CLUSTER ANALYSIS OF TEACHING STAFF IN HONG KONG EVALUATING A SIMULATION WITH A STRATEGIC EXPLORATION TOOL A SYMBOLIC MODEL OF THE SIMULTANEOUS ACHIEVEMENT OF CONCRETE BENEFITS AND LEARNING BY PARTICIPATING GROUPS IN EXPERIENTIAL ACTIVITIES: ‚THE SPHERE OF EXPERIENTIAL LEARNING