SIMULATION SCENARIOS-RATIONALE AND ILLUSTRATION Developments in Business Simulation and Experiential Learning, Volume 26, 1999 SIMULATION SCENARIOS—RATIONALE AND ILLUSTRATION Hans B. Thorelli, Indiana University ABSTRACT Business games, by and large, are closed sys- tems. That is, participating firms are assumed to operate in one or several self-contained markets, unaffected by market-exogenous events. To provide a vital dimension of realism such events must be added. A series of this kind of events constitute a scenario. In 1993 the first Model Scenario of World events was developed for the International Operations Simulation (INTOPIA). A new INTOPIA Model Scenario of possible events in the 1998-2000 period has just been released. INTRODUCTION By definition, all simulations are dynamic. By design, most simulations, such as military gam- ing, pilot simulators, economic input-output models, inventory “pipelines” tracking, manu- facturing process and automobile collision simulations, incorporate the possibility of ex- ogenous events calling for adjustment by the system. A sequence of such events we shall call a scenario. Strangely, most business games pay little or no heed to such system-exogenous chains of events. In this respect they are based on the increasingly dubious assumption that the firm is like a machine conducting “business as usual” for the duration of the game. SCENARIO RATIONALE A scenario in the sense discussed here is at least in part providing an application of chaos theory. That natural science concept is concerned with attempts to reveal structure (and, hence, ulti- mately manageability) in aperiodic, unpredict- able dynamic systems. Chaos theory is a reac- tion in natural, and increasingly, social science, against the notion of an orderly periodicity in- herent in extant dynamic systems. It is obvious that more or less chaotic events occurring be- yond the confines of any given market may im- pact that market as well as the sellers and buyers composing it. Thus, the ultimate rationale for such a scenario is to concretize the notion now broadly recog- nized in management theory (though far from always in practice) that strategic planning is really inherently a continuous activity, rather than an episodic or periodic one. Predicting the probability of a given “chaotic” event occurring, its likely impact on the market, and planning alternate strategic adjustment behaviors is also a highly lifelike experience. ILLUSTRATION: NEW INTOPIA MODEL SCENARIO Sample Events Business cycles moving from one part of the world to another. Inflation changes in interest rates, devaluation. Labor peace upsets: slow- downs, unionization drives. Social responsibility tests: ray-screens on PC, smuggling in Brazil. Privatization of PC plans in Brazil. Price con- trol, export subsidies. EU requires labeling, manuals in four languages. US-EU trade war, antitrust problems. Robotics, containerization. Breakthrough economy PC ("Network Com- puter"). Nippon Electric introduces major com- petition. World Trade Organization adjudicates trade conflicts. Documentation and Implementation Documentation of the INTOPIA Model Sce- nario includes: Introduction for the Facilitator. Listing of all events, prior notices, rumors, con- firmation, Q(uarter) by Q for an 8-Q run. Re- prints of Gazette trade journals, Q1-Q8. Sundry ideas for other Environmental Events. Default decisions of Nippon Electronic competitor. Il- lustrative company decisions and financial 364 Developments in Business Simulation and Experiential Learning, Volume 26, 1999 statements from Q1. Printout of parameter changes on Scenario disk (for illustration only— not for implementation). Scenario diskette for automatic implementation. Once the Model Scenario disk has been copied to the INTOPIA directory, implementation of most events is automatic, including autosynchronization with whatever Q is the current one. Only some 10% of all events call for some kind of Facilitator intervention. In each case the type of human in- tervention called for is detailed in the Introduc- tion for the Facilitator. Criteria for Selecting and Introducing Events The Facilitator is free to use the entire Model Scenario, just parts of it, or none of it. (Other circumstances equal, the latter course may be the wisest one in the first run of the simulation.) As Facilitator gains greater experience s/he may well opt to use some alternate / additional events suggested in the documentation, or design a Scenario from the ground up. (Starting from scratch will involve weeks of work.) Some crite- ria in the selection and introduction of events: It is probably more important to aim for variety (quality) rather than frequency (number) of events. An exception might be events especially suited for a particular course. It may make good sense in an International Finance course to in- troduce a series of devaluations (and revalua- tions) of currencies, for example. The events should not be overwhelming in number and/or impact. If participants experience a series of events as so many catastrophes, or unrealizable opportunities, they may switch from profes- sional management to "Cowboy" (shoot-from- the-hip) management in frustration. There is a certain creative joy in designing a scenario or individual parts thereof. Too, in INTOPIA, the Directory of Parameters makes the implementation of events "a breeze," in con- trast to the invasive surgery that would be re- quired in many other games. Team reactions to scenario events vary as widely as do those of companies in the real world in similar situations. For example a slowdown staged by labor in European PC plants is accepted stoically by some, while exceptional companies turn the po- tential setback into an opportunity, loading up on EU inventory by imports. This brings up an- other point: most events of significance in the world of practice are typically predicted or at least rumored in advance. Determination of ap- propriate periods of advance notice, and of a suitable quota of rumors never to be realized, is a matter of careful deliberation. As always in simulations, it is also essential that both events and prenotification periods are perceived by par- ticipants as realistic. TO USE OR NOT TO USE A SCENARIO? A rationale for using a scenario of exogenous events in management games was given early on. There are several reasons why such a sce- nario might not be used in a given run: the Fa- cilitator simply may not wish to take the extra bother, however marginal it might be. Or s/he may feel that taking on a scenario makes the exercise overly complex for participants (say, incoming undergrads), or that s/he would like to gain more experience of the simulation as such before entering this "extension." Finally, if the endogenous variables make a sufficiently com- plex exercise to meet the objectives of the course and the needs of the students, this may well speak against introducing a scenario of the type discussed here. Nevertheless, we do believe that such a scenario introduces an additional element of realism cur- rently lacking in most strategy simulations in the management game form. 365 Table of Contents Volume 26, 1999 ABSEL's Historical Research Interests Back From the Future: An ABSEL Merlin Exercise for the Year 2005 The Contributions of ABSEL During the 1980's ABSEL's Contributions to Experiential Exercises in the 90's ABSEL's Contributions to Experiential learning/Experiential Exercises: The Decade of the 1970's Business Simulations - Algorithms and Model Enhancements: A 25 year Review A Study of the ETS General Field Test as an AACSB Assessment Tool and the Impact of Experiential Exercises and Simulation on Learning A Framework for Assessing the Competencies Reflected in Simulation Performance Developing A Learning Culture: Assessing Changes in Student Performance and Perception Financial Simulation Using Distributed Computing Technology Analyzing Managers' Judgements and Decisions with an Educational Business Simulation Understanding Your Business through Home-Made Simulator Development An Examination of a Reanalysis of the Impact of a Market Leader on Simulation Competitors' Strategies Applying Shocks to TE Simulations: A Demonstration Increasing Efficiency of Management Skill Assessment A Testbank for Measuring Total Enterprise Simulation Learning Developing Leadership Skills - Video Live! LEADSIMM: Collaborative Leadership Development for the Knowledge Society A Team Approach to Producing Multi-Media Laptop and Video Formatted Presentation Tinkertoys Revisited: Exploring Trust Based Relationships Overall Dominance in Total Enterprise Simulation Performance Success or Bankruptcy: The Relationship between Personal and Goal Orientation and Simulation Performance Assessing the Effects of Feedback: Muti-method and Muti-directions in Multi-pedagogical Courses The Missing Ingredients in Experiential Learning Purpose and Learning Benefits of Business Simulations: A Design and Development Perspective Building Capabilities for Change through Laboratory Simulations Modeling Innovation as a Process of Design in Educational Business Simulation The Need to Measurer variance in Experiential Learning and a New Statistic to do so Assessing Effectiveness of an Experiential Oriented Course Over Time Developing Participant Satisfaction Models of Experiential Exercises in Business Education Perceptions of Learning in TE Simulations Students' View on the Use of Business Gaming in Hong Kong Management Gaming's Lost Opportunity: Meditations about the Russian Experience and Prospects for the Future Unanticipated Enhancements in the Business Strategy and Policy Game when Running in Windows 95 Using a Business Game to Demonstrate Broad Business Concepts A New Model for Business Courses (Getting the Student Connected) Seeing the Forest and the Trees: Integrating Knowledge Using Large Scale Simulations in Capstone Business Strategy Classes Is It Here To Stay? A Roundtable Discussion of the Inter-Group Interaction Interactive Tools Used in Applying Financial Concepts Strengthening Essential Skills through a Finance Exercise: Calculation of Beta A Model of Currency Exchange Rates Understanding Currency Exchange Rates: A three-part Exercise Student Experiences in the World Intercollegiate Business Game Competition Student Experiences in the International-Collegiate Business Policy Game Competition Using Boards of Directors in Simulation Environments: Comments From Board Members Sharing Best Practices: Teaching Smarter, Not Harder Star Power: A Simulation for Understanding Power and Empowerment The Marketing Game: A Marketing Principles Simulation Alexander Islands: GSSM Tiny Business Simulator on the WWW Putting Strategy into Strategic Business Games Industry Analysis, Porter's Five Forces Model and Strategic Group Maps in the Business Strategy Game Simulation The Use of Concept Mapping to Improve Student Performance and Understanding of Strategic Management Concepts: A Comparison of Techniques Transformational thinking in the Organizational Behavior Course: The Use of Metaphor as an Assessment Tool Creation of a Virtual Learning Community for the Global Virtual Enterprise Project Inter Institutional use of Educational Resources: Joint Use of Management Simulation Games Business Insights: Theory and Practice with the Aid of a Business Simulation Progress: An Experiential Exercise in Development Marketing The ABC's of teaching the Theory of Constraints to Undergraduate Business Students Demonstrating Principles of Organizational Purchasing Behavior through an Experiential Exercise The Virtual Manager: A Different Simulation for Managing Complexity When the Rules are changing and Chaos Breeds Innovation: Recapturing the Value of Constructive Thinking and Play in Simulation Training The Pitfalls, and Potential, of Actual Events as Problem Drivers Using Business Games to teach Environmental Awareness and Green Management: The International Experience with the ENSIM Game A Review of my ABSEL-Related Work Simulation of Government: A Workshop Using GEO Creating Internet-Based Games Using Perl and JavaScript Who's on First? Exploring the Concepts of Problem-Based Learning, Experiential Learning, and Lifelong Learning Students Learn Customer Service and Selling while Conducting Research So You Want to Run an NFL Football Team–An Honors Interdisciplinary Project Supervised Internship: The Employer's Perspective Using Computer Assisted Simulation to Teach International Business Strategy: A Case of the Multinational Management Game (MMG) Multi-Cultural Experiential Learning: A Computer Simulation in China An Appreciative Stance on Diversity as We Move into the 21st Century: A Timeline Exercise to Identify Key Experiences in Good Work Relationships between Black and White Peers A Day in the Life of an Interactive, Real Time, and Internet Delivered Course: A Demonstration Comparing Internet Search Engines: An Experiential Learning Exercise Total Enterprise Simulations and the Internet: Assessing Student Perceptions and Preferences Teaching Accounting Information Systems in a Practicum Format Providing Experiential Learning in Accounting through a Field Study Payroll Project A Spreadsheet Based Business Simulation Game Computer-Behavioral Simulations Training for Project Managers Simulation Scenarios - Rationale and Illustration