Hugh Cannon is the Adcraft Professor of Marketing at Wayne State University. He holds Ph.D., M.Phil. and MBA degrees from New York University, and an AB degree from Brigham Young University. He teaches graduate and undergraduate Advertising, Advertising Management, Media Planning, and Marketing Strategy. He joined Wayne State University in 1986 from Northwestern University, where he taught in the Advertising Department of the Medill School. His current research interests include advertising and media selection strategy and the incorporation of advertising phenomena into computer-based business simulations. He has published and/or presented more than 185 scholarly articles in academic journals, conference proceedings, or presented to professional audiences. He has consulted internationally with various firms concerning marketing strategy, marketing research, media planning, computers, and legal matters. He is currently the VP/Executive Director and a Fellow of the Association for Business Simulations and Experiential Learning. In 1999, he was given the WSU School of Business Administration’s first Research Excellence Award. He received the University’s Exceptional Service award and the School of Business Administration Alumni Association Distinguished Faculty Award” in 1998/99. He received the University Silver Excellence in Service Award in 2000/01. In 2000, he was given the American Academy of Advertising’s Excellence in Research Award, recognizing his sustained contribution of programmatic research in the field of Advertising. His research contributions in business simulation have won “best paper” awards at the annual conference of the Association for Business Simulation and Experiential Learning in 1999, 2001, 2002 and 2004.
In Brazil there is confusion about the differences between business simulation and business games. Can these terms be considered as synonymous? Do alternative terms, such as management simulation, seem more appropriate in your viewpoint?
Hugh Cannon – I agree that we can avoid confusion by being more precise in how we use the different terms. Technically speaking, a “simulation” is simply a model that represents actual phenomena. A “business simulation” is a representation of how a business operates. Thus, a good simulation can be used to predict what will happen under a particular set of conditions – for instance, when demand falls by a particular amount, when you change your price, when the competition launches an effective advertising campaign. As you might imagine, simulations provide a powerful tool for business forecasting, for evaluating the consequences of different business activities, and so forth. As a result, they are often used as part of a company’s decision support system, to help managers make better decisions.
A “business game” is a special application of business simulation technology for training managers. The game creates a kind of laboratory where managers can run companies, experimenting with different strategies and tactics. The game is based on a simulation that provides feedback regarding the consequences of the players’ decisions, enabling them to experience and respond to broad range of different problems and situations.
Unfortunately. the term “game” often connotes something that is not serious and professional. As a result, business games are sometimes referred to as “management simulations.” This reflects the fact that they simulate the consequences of management decisions. Technically, I do not think this is appropriate. A simulation can be used as part of an actual manager’s decision support system, to help evaluate the potential consequences of different decisions. This would be a management simulation, but not a business simulation game. Notwithstanding this objection, I think “management simulation” is a good term to use when discussing business simulation games in most practical situations.
Could you tell us about ABSEL and your role in this association?
Hugh Cannon – ABSEL is an international organization that is dedicated to promoting research addressing the development, application, and evaluation of business simulation games (see http://www.absel.org). As Executive Director, my role has been to handle the administrative affairs of the organization as we have sought to increase the quality of the research conducted by our members and to make this research more readily available to the global community.
Perhaps ABSEL’s most significant accomplishment during the years I have been involved is the development of the Bernie Keys Library. This is a compilation of more than 2,000 scholarly articles on the subject of business simulation and gaming. It is available free to ABSEL members in electronic, word-searchable form on a CD ROM disk. In an effort to further promote research, we have also made the articles available free on the Internet to scholars throughout the world. Unfortunately, the on-line version of the Library does not have the same search capabilities available in the CD ROM version.
Comment about Business Simulation as a management learning method.
Hugh Cannon – Simulations provide a powerful and relatively inexpensive tool for helping managers evaluate the consequences of their decisions. How else can an student experience what it is like to run an actual company in a host of different industries? How can a student, or even a practicing manager, learn about the consequences of different decisions without risking enormous financial losses when he or she makes a mistake? This has enormous educational implications.
How is business simulation used in business schools (undergraduate and MBA)?
Hugh Cannon – In the EUA, business simulation games are used in the vast majority business schools. They give students “laboratory” experience as managers. This is true for both undergraduate and MBA programs. The management-simulation approach is more common in the areas of Marketing and Management than in Accounting and Finance. However, surveys have shown that it is used to some extent in all the major business disciplines.
Could you tell us about the latest research fields in the area?
Hugh Cannon – As I view the direction of management simulations, three areas seem to be attracting the most attention. First, I see an on-going effort to develop more valid models – simulations that will give managers more realistic feedback in response to the kinds of decisions they would make in real life. For example, what happens if a manager chooses to invest in long-term customer loyalty? His or her company may not be very profitable in the short run, but it the long run, the company would thrive. A simulation should reflect both the long- and short-term effects of different marketing and management activities.
Second, I see people working on ways of making management simulations more understandable and user-friendly. One of the paradoxes of simulations is that, when they are complex enough to realistically reflect what happens in a real company, they are so complex that a student cannot see the consequences of his or or specific decisions. Simulation designers are working on a number of approaches for making simulations understandable without compromising their accuracy.
Finally, researchers are working to develop and validate methods for using simulations to assess actual managerial competence. Most simulation researchers agree that management simulations develop competence. However, to use them for .assessment, we must establish measures of performance that tuly reflect what a manager can do in the real world. This is a more demanding task.
In your opinion, what contribution can business simulation offer in order to improve the quality of management courses? How can business simulation help the students in their future careers?
Hugh Cannon – People learn best by “doing.” Managerial simulations involve students in actually doing what managers do. Students make decisions and get immediate feedback regarding the consequences. This creates a power learning tool. It also increases students’ interest in the courses they take, making them seem more real and relevant.
Comment the concepts of representational validity and educational validity of business simulations.
Hugh Cannon – “Representational validity” refers to the accuracy with which a simulation represents the phenomena it is simulating. “Educational validity” refers to the degree to which students or managers learn what they are supposed to learn by using the simulation. A simulation might have very high “representational validity,” but it may be so complex that the people who use it cannot see (and hence learn from) the consequences of their decisions. When developing managerial simulations for educational purposes, the designer must be very attentive to both types of validity.
In a previous paper you have defined the concept of “complexity paradox”. Comment this paradox and its consequences to designers of business simulators.
Hugh Cannon – The “complexity paradox” refers to the phenomenon discussed above: When simulations are complex enough to represent the real world, they are too complex for users to understand. However, this is true of real organizations as well. We can apply the same principles to simulations that real managers use to make their actual business work. For instance, we can introduce the notion of strategy, where a single strategic decision guides a much larger number of lower-level decisions. For instance, deciding to be a broad, quality leader suggests that a company will invest in high-quality products, utilize a high level of automation (to evoke economies of scale in a broad market), charge high prices, and so forth.
Other methods of handling complexity include dividing decisions into a series of logical, easy-to-understand steps, so the overall decision is not as difficult to manage. Organizations also specialize, given different people responsibility for different decisions. Finally, organizations adjust performance evaluation to reflect the consequences of specific managerial activities. For instance, a person making an advertising decision should not be evaluated on how profitable the company is, but on the degree to which the advertising accomplishes what it is supposed to accomplish. All of these techniques, of course, may be incorporated into managerial simulations.
