Every few years, just like clockwork, Bill Biach would have a
really good year. He'd reinvest earnings in a new marketing
campaign, an extra salesperson or an engineer who added expertise
to Biach Industries. Then every few years, just like clockwork,
profits would plunge and force him to curtail his marketing
efforts, lay off salespeople and furlough engineers.
Biach, whose father founded the 26-person, Cranford, New Jersey,
industrial design firm in 1955, went through several cycles
before seeing that the cause of the bad times was his reaction to
the good times. "We didn't realize it, but we weren't
managing these investments well," Biach admits. He'd hire
an engineer with expertise in a new market, for instance, but fail
to add salespeople with experience in that market. "After four
or five years, we had this body of expenses we weren't getting
anything from."
Biach gained this insight after modeling the company's
boom-and-bust profit swings on a computerized business simulator.
The software program used a mathematical model incorporating
Biach's figures, such as costs and profit margins, to represent
the way the company's policies would fare in the real world,
and quickly revealed that although reinvesting in the business may
have been well-intentioned, it was poorly executed.
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"We realized we needed to be much more diligent about
creating an expectation for those investments," says Biach,
"monitoring what we were getting and stopping the expense if
we couldn't get the results we expected."
It may seem obvious now, but Biach says he might never have
figured out the problem without the simulator. Many other
businesspeople are also learning that computerized simulations of
their companies can provide a safe, inexpensive way to test
theories, grasp the workings of complex systems, and reveal
problems in communication and management.
Firms such as AT&T, Xerox and Sprint have spent hundreds of
thousands of dollars creating complex simulations of their business
environments. Smaller firms like Biach Industries are making use of
inexpensive simulation programs that run on standard desktop
computers. "I think it's just getting started," says
James Ritchie-Dunham, president of Strategic Decision Simulation
Group, an Austin, Texas, management consulting firm that has helped
numerous large corporations and government agencies use
simulators.
Mark Henricks is an Austin, Texas, writer specializing in
business topics.
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