• Reprint From Training Magazine 

    Simulations: The Next Generation of E-learning 

    By Sarah Boehle


    Robust, interactive online simulations. They often put learners in a virtual business environment,     encourage them to collaborate, and force them to make decisions. Participants, immersed in an experience that draws on their individual expertise as well as teamwork skills, learn by doing. 

    And that's why proponents of the technology—not to mention academic research and anecdotal evidence—suggest that interactive computerized     simulations are one of the most effective ways to learn tasks ranging from running a cash register to running a company.

    The experts generally agree that simulations     boost learning retention rates dramatically. An often-cited study conducted by the NTL Institute for Applied Behavioral Sciences in Alexandria, Va., found that on average, students retain 5 percent of what they hear in lectures, 10 percent of what they read, and 20 percent of what they see and hear in audiovisual presentations. But add "practice by doing" and "teach others/immediate use" to the mix—two learning techniques that computerized simulations possess in spades—and retention rates shoot up to a jaw-dropping 75 and 80 percent, respectively.

    Some also credit simulations with     accelerating the learning curve. According to James Lundy, vice president of Gartner, the Stamford, Conn. research firm, students learning via simulation-based training become proficient more quickly. When students learn on the job, it usually takes them longer to be able to perform the same task with the same proficiency, he says.

    Proponents also point out that simulations allow students to practice newly acquired skills and apply new knowledge in a realistic, yet risk-free, environment. That means, for example,     students feel they can experiment and explore the cause-and-effect relationships between operating decisions and business outcomes without facing real-world consequences—like plummeting a company into bankruptcy or worse.

    That kind of experience simply can't be matched by traditional e-learning or a lecture-based course, says Chris Musselwhite, president of Discovery Learning, a company based in Greensboro, N.C. Other types of learning don't get at the real issues of how people work together and influence each other, he contends.

    "Simulations are a way to get people out of their academic understanding of a subject, to see who they really are and what happens to them under stress when they are challenged or exposed to change or ambiguity."

    Good, Fast—and Not Out of Reach?     

    If you're now convinced that simulations are good and fast, you may suspect what comes next. While the military and the aviation industry have used interactive simulations for decades, large-scale multi-layered simulations have remained out of the reach of all but a few corporate budgets until recently.

    That's beginning to change, thanks in part to the proliferation of technology and the fact that many simulation vendors are churning out better semi-customized and plug-and-play simulations that allow for less expensive customization of content than ever before.

    In fact, according to Gartner, computerized simulations, which are the biggest subset of experiential online learning, will soon emerge as a critical component of most courseware. Lundy predicts that 70 percent of all off-the-shelf and custom e-learning content will include simulations of some type. 

    Time will tell whether such predictions prove accurate, but the growth of the simulation business is real enough. Revenues at Austin, Texas-based simulation vendor Enspire Learning have increased more than 80 percent this year over last—growth that CEO Bjorn Billhardt attributes almost exclusively to clients buying solutions with an experiential learning component. Likewise, simulation provider BTS USA in Stamford, Conn., has been growing at a steady clip of 20 percent per year—despite the bursting of the tech bubble earlier in the decade. "This year our growth rate in the United States will be in excess of that," says BTS senior vice president Rommin Adl.

    Gartner's Lundy isn't surprised by these figures. "annual spending for training worldwide is over $100 billion right now, and e-learning content accounts for only a couple of percentage points of that," he says. When it comes to potential growth in the e-learning content market, "we haven't even gotten near the iceberg, let alone the tip. Much of that growth will be driven by simulations."

    Simulations At Work 

    That growth, in turn, reflects the results that simulations can produce.

    Gartner's Lundy points to a major bank that puts more than two dozen of its     high-potential internal candidates through a multifaceted simulator that asks them to run a company for a specified period of time. During the exercise, candidates try out a variety of jobs and are then assessed on how well they perform in each role. "The goal is to determine what skills and abilities they may have that aren't on their résumé, but that they might be good at anyway," says Lundy. The bank then uses the results to identify potential CFOs for its various branches instead of going outside the company to hire. As a result, Lundy describes the bank's savings in hiring costs alone as "astronomical."

    At Humana, Inc., a health-insurance company headquartered in Louisville, Ky., simulations have proven to be just the right medicine for helping the company's executives to better navigate complex change initiatives. The company sent 150 of its top executives through an exercise in which teams of trainees ran a virtual version of their company in a two-day business simulator workshop. Only four months after the workshop, CLO Ray Vigil says participants attributed     savings that amount to an ROI of 14 to 1 directly to the program—not to mention the immeasurable benefits accrued through enhanced teamwork and cross-departmental collaboration. By year's end, when participants' final simulation projects are due, he predicts that savings attributable to the simulator will far exceed that ratio. 

    For Humana, the decision to use a customized simulation resulted from a shift in organization strategy. "We had to rethink the competencies and skills we had among our senior executives," says Vigil. "As we looked at moving from being a product-focused company to a more consumer-centric enterprise, we realized that it would require a pretty dramatic learning curve and a whole new set of competencies from our leadership team."

    In response, Vigil hired BTS USA, which worked closely with Humana's top executives to create an interactive, multi-player spreadsheet of the company. Twenty-five participants at a time in cross-functional teams of five went through a two-day simulation called the Business Simulator Workshop that modeled Humana's business at all levels. During the simulation, students were confronted with investment and trade-off decisions similar to those that Humana's senior executives, particularly the CEO, face throughout the year. Through it all, students     raced against the clock—and their classmates—to win by growing revenues by introducing new products and initiatives that reflected Humana's new consumer focus over a three-year operating cycle.

    Of course, just as in the real world, limitations were imposed on participants. Students had to allocate a limited budget among 56 different priorities, which ranged from budgeting and designing employee benefits packages to setting target service levels and beyond. "Wobblers," or     unexpected events such as a corporate service center burning down, were frequently introduced into the simulation to mimic the uncertainty of everyday business.

    "We were trying to get at the big questions, like how much you want to grow the business, and how you manage costs," says Vigil. While the underlying goal of the simulation was to develop the business acumen of Humana's high-ranking managers and executives and equip them to     function in a rapidly changing marketplace, other benefits accumulated as well.

    Because each team consisted of individuals from different departments, for example, they returned to their jobs with a better understanding of the many factors and influences that have an impact on business decisions, as well as the complex processes that exist in Humana's business. "We wanted people to     understand all of the interrelationships and trade-offs that need to be made, and some of the challenges associated with making decisions in a growing business," says Vigil. "The best way to do that was to create what I like to think of as a flight simulator on steroids for our executives that gave them hands-on control of the business at all levels." 

    According to Vigil, the simulation also encouraged participants from across the organization to focus more on long-term strategic decision-making and less on short-term profits. For Leslie Andrews, vice president of sales for the company's Colorado market, that lesson hit home early on. "It was an eye-opening experience," she says. "Right off the bat, people had an increased overall awareness and appreciation for the fact that     every decision we make doesn't affect just us; it affects every segment of the organization." That knowledge, she says, has not only affected the decisions she makes, but also her working relationships with other departments. "Do I work better? I think I now work smarter with other functions in the company and have a much clearer understanding of how my decisions affect others, as well as how to form more effective relationships with other departments." 

    Based on her experience, it also appears that the simulation showed participants the     value of long-term strategic decision-making. The competitive environment of the simulation at first led many teams to focus on the short term, using any means necessary to balloon profits and to pull off a big win, Andrews says. But it didn't take long for simulation participants to realize that short-term decision-making often led to disastrous results; steady, long-term growth strategies often proved to be the most effective. 

    Today, Andrews uses that knowledge in her interactions with the company's pricing department. "From a financial perspective, I have probably formed a much stronger alliance with the folks who do pricing, and now I do a much better of job of understanding their needs and getting them to understand mine. I recognize that they are dealing with certain restrictions in order to give me the pricing that I need to be competitive, and that we have to meet in the middle." 

    That work, Andrews says, has essentially turned Humana's Colorado market around financially, allowing it to operate on a profitable basis. "We haven't grown from a membership perspective yet, but we now are employing a long-term pricing strategy to facilitate profitable membership growth as opposed to growing very fast. We might not have devised that strategy before going through the simulation."

    Trying This at Home 

    Intrigued with the possibilities a computerized simulation may offer your organization? Before you give it a try, heed the experts' advice. 

    1. Select the right simulation for the right need. When should you use simulations? Clark Aldrich, lead designer of Simulearn Inc. in Norwalk, Conn., and author of Simulations and the Future of Learning (Pfieffer, 2004) and the forthcoming Learning by Doing (Pfieffer, 2005), doesn't mince words when asked that question:     "If the learning actually matters, use simulations. If it doesn't, don't worry about it," he says.

    Some simulations are better equipped to handle certain types of learning than others. "If what needs to be conveyed to learners is a set of step-by-step instructions on how to fill out paperwork, you don't need a full-blown experiential learning simulation," says Enspire's Billhardt.

    But if learning goals entail teaching participants to     deal with conceptual content like ethics, business acumen, teamwork and leadership, or major change initiatives like a significant shift in an organization's strategic direction, then it's time to consider large-scale systems simulations. "If you want to change employees' mind-set and behavioral patterns, you have to let them experience, in a visceral sense, the outcomes of their actions," says Billhardt. Enspire's The Executive Challenge and BTS USA's Business Simulator Workshop, for example, both allow students to manage a high-level virtual model of an organization and refine their understanding of the strategic, tactical and financial implications of business decisions.

    If a full-scale, multi-player simulation doesn't fit your organization's needs, however, you may still want to consider the simulation option. "It doesn't have to be all or nothing," Gartner's Lundy says. Large-scale simulations may be the wave of the future, but less expensive, smaller-scale versions are already being embedded into other types of e-learning, such as call-center and technical training. These simulations—sometimes referred to as branching stories, virtual products or virtual labs—typically teach key skills, then enable learners to apply those skills in a simulated business environment.

    In the fast-food industry, for instance, cash register simulators are used to teach new hires not only how to run a cash register, but also how to do so while they interact with different types of customers. Similarly, Circuit City, a consumer electronics retailer headquartered in Richmond, Va., recently replaced its training workbooks and videotapes with e-learning courseware in which every product introduction contains a simulation exercise that helps put students' learning into context. They deal with different types of customers describing what they want in products ranging from coffee pots to camcorders.

    2. Rethink your evaluation method. Simulations are not just a different version of a linear, straightforward program, says Aldrich. "People who are new to simulations tend to judge them against the old standard, which is     like evaluating a car against the horse and buggy," he says.

    His recommendation? Develop a formalized process for evaluating simulations. "For instance, you might take three to five people who are part of your target audience and ask them to take a simulation without telling them that they will be asked to evaluate it. Instead, make them take the course and tell them that the results will go on their record."

    If students care about the results and act accordingly during the simulation, he says, their actions will give you a much clearer understanding of a simulation's value to your organization.

    3. Decide what your goals are up front, and be specific. Do your homework before you start looking for the right simulation. What are the real problems you want to solve, and what are the real goals? 

    Discovery Learning's Musselwhite says clients all too often, identify a training problem and then suddenly decide that they want to use a simulation to solve it. To achieve substantive results, he says, specific objectives need to be set early on. "What I always ask people is, 'Let's assume we do this and it's very successful. When people walk out of the door, what are they doing or saying differently? What will their behavior look like?'" 

    Another element to consider, he says, is the relevance of a given simulation to your target learners. A simulator that's more strategic in nature, for instance, is more likely to work well with senior executives who understand the nuances of upper-level decision-making. The same simulation would probably fall flat with lower-level workers who lack a strategic perspective.

    4. Look for the right mix of collaboration and feedback. Make sure the simulation you select provides an     adequate feedback strategy, says Enspire's Billhardt. "With a linear e-learning application, you don't necessarily need feedback; all you need is a multiple-choice test at the end," he says. But with sophisticated large-scale simulations where the stakes are high, participant interaction and collaboration are focal points. The participants must have a time and a place to interact, exchange ideas and synthesize their experiences. "You can't simply put a full-scale experiential learning experience up on a learning management system platform by itself and expect it to be effective," says Billhardt. 

    That's why many large-scale simulations take place in a blended environment, he notes. "A simple branching story simulation that involves no collaboration or interaction with other people is easier to do alone in front of a computer because you are walking through the story on your own as its protagonist. Spreadsheet simulations, however, are better suited to blended delivery where you have both the computer in front of you and also an     environment that is conducive to discussing your choices and making decisions as a team while competing against other people." 

    5. Simulate the real world, but not too closely. The more specific the behaviors you are trying to teach—think customer service and technical training—the more like reality your simulation should be, says Discovery Learning's Musselwhite. On the other hand, the more abstract the learning concepts—like teamwork or change management—the more abstract your simulation should be.

    This may seem counterintuitive, he acknowledges. "But if you make a simulation too realistic or too like the real industry that students are in, they have a tendency to get bogged down in the details instead of focusing on the bigger issues that the simulation is trying to teach," he says. If you want to teach highly conceptual content, Musselwhite recommends     using a simulation that is a metaphor for what you do, but not identical to it. 

    6. Involve senior management. When Humana's Vigil decided to create a simulation to prepare upper-level workers for a major shift in the organization's strategy, he made certain that his fellow senior executives were involved in every step of the process. "One of the key things we did was to spend time connecting with senior leaders and have them be part of the design," says Vigil. That strategy included launching a design committee with various representatives from across the enterprise, who helped to identify (and subsequently simulate) the driving forces and parameters of Humana's business. 

    Humana executives also volunteered to serve as guinea pigs for the first simulation session. "Our executive committee decided that they would go through it first and, if they liked it, others would do it, too," Vigil says. "We were kind of holding our breath at first, but the good news is that they loved it immediately. They dove in and were competing like crazy and had a lot of fun—but they also immediately saw the benefits of the experience." They were so enthusiastic, in fact, that many of them subsequently volunteered to serve as teachers and facilitators in future simulation sessions—participation which Vigil believes has been crucial to the simulation's success. 

    Involving senior management up front also is imperative to gaining their buy-in, especially given some assumptions about simulations. Some executives, for example, may be put off by what they consider a high price tag. Still others may have a tendency to view simulations as just a game, rather than as a form of learning that is suitable for a serious business environment. 

    If you face such resistance, Musselwhite suggests the best tactic is to give would-be naysayers a better understanding of simulation and what it is capable of accomplishing. "One of biggest challenges is trying to articulate what happens in a really good experience," he says. "So we always try to emphasize the fact that we have seen     teams accomplish things in one to three days in a simulation that would take them six months to work through and learn if they were left to the trial and error of their day-to-day activities." 

    Then there's the all-important marketing component. For example, Aldrich recommends showing simulation newcomers video clips of people who have just spent two to three hours in a simulated experience. "Three days ago," says Aldrich, "I was running a simulation at United Technologies Corp. and there were lots of parts of the simulation that were really intense. At the end of it, the students were exhausted, but if I had put a camera on one of them and pressed record and asked her to tell me what she just did, the person explaining it to me would do so with this incredible amount of nuance and would sound like some super-expert who had spent 10 to 20 years working on this stuff. And that's after only two to three hours of actual exposure to the content." 
    In the end, Aldrich says, capturing the impressions of those who have experienced a simulation, and allowing others to see and hear the excitement in their eyes and voices, may be the most effective way to demonstrate the "incredibly sophisticated mastery" of material that can be achieved with the aid of a worthy simulation. 


    January 01, 2005 Training Magazine