Dress Rehearsal

Land Of Make-Believe

Computer simulators are now commonly used in business schools, where they're often called management flight simulators, and are becoming more widely used in practical business as well. The main reason is the same one that makes flight simulators so useful for training pilots: They provide safe ways for people to test their wings without the danger of crashing.

With a business simulator developed by Richmond with his company's ithink simulation program, business owners see long-term results of moves such as changing prices, adding workers, borrowing money and increasing their own salaries. Entrepreneurs commonly have to run through numerous scenarios before the simulated business will survive for more than a few months without running out of money. In the real world, that would be a disaster. In a simulation, it's just another learning experience.

Biach appreciates the way a simulation shows the interplay of complex systems with many variables over long periods in a way that, he says, human brains could never figure out on their own. "Once you get to a system with even three components to it, it doesn't act intuitively," he says. "You can't just know what's going to happen."

Using simulations also helps businesspeople understand the long-range effects of decisions, Biach says. And, by exposing the assumptions underlying the models people carry in their heads, playing around with a simulation can help communication between groups such as marketing and design.

John Mandelker used an ithink simulator several years ago at Sound Disk-tributors, his 170-employee St. Louis videotape distributor, to help salespeople understand how their actions affected the rest of the company. Salespeople would promise clients immediate shipment on large orders that--due to the need to perform credit checks, establish distribution and so forth--might actually take months to prepare. Salespeople also sometimes failed to tell the purchasing department about customer plans for special promotions, causing sudden runs on inventory that resulted in back orders.

The simulator helped the salespeople understand the need to grasp the requirements for credit checks and the like, and communicate better with other departments. "The salespeople know how to ask the right questions, and they make sure things are done right," Mandelker says now. "That would never have happened if we hadn't run the simulation."

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This article was originally published in the April 1998 print edition of Entrepreneur with the headline: Dress Rehearsal.

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