business simulations

The UN’s eight Millennium Development Goals aim at transformation of the wellbeing of the world’s poorest by 2015. Six of these goals demand massive expenditure and only two, promotion of gender equality and creation of a global partnership for development, are enablers for wealth creation.

Wealth must come from somewhere - and experience has shown that private business is the most effective mechanism known for sustained wealth creation. It achieves this through a combination of enterprise, ingenuity, creativity, skilful design and use of capital markets and flexible organisational structures, coupled to an appeal to the basic human craving for a better life for family and descendents.

Business – which ultimately means millions of ordinary people who are investors through pension trusts and mutual funds - gains from the process. But so too, massively, and often more so, does government, not only through direct taxation on business - and, in the case of the extractive industries, through royalties – but through government’s relentless pursuit of personal and value-added taxation of direct and indirect employees. It is this which pays for education, for welfare, for health and for infrastructure – and for realisation of the UN’s Millennium goals.

Yet Business faces distrust and suspicion as never before, from governments, from media, from NGOs, form local communities and from ordinary citizens. Some of it is justified, based on shameful exploitation and mismanagement in the past, or even ongoing, but much of it is unreasoned and emotional, based on a misunderstanding of what Business can deliver.

Such distrust feeds on outrage, a conviction that Business doesn’t understand, nor wants to understand, that it’s insensitive to the interests, the hopes, the fears of those its activities impact upon.

And Business – responsible Business – is equally bewildered, pleading that it only means well, that it can generate wealth in ways which are mutually beneficially for government, environment, host communities and business itself, that it operates to high ethical standards and, above all, that it’s misunderstood.

Business fails – repeatedly – to get its message across. It often also fails to understand what the message should be in the first place and to whom that message should be delivered. Business fails because its managers have been trained to address technical and financial issues, not socio-economic or human concerns, still less how to identify who will be affected by its activities, and how to listen to them and build alliances for mutual benefit.

It is to address these shortcomings that Role-Playing Simulations have been developed.

Business Decisions are not just about money and technology…

Major investment decisions – those that impact most strongly on society and the environment and which evoke the greatest outrage if they do not secure an informal “Licence to Operate” from their host societies – are multi-layered and should address the following questions:

Environmental: Is the ecological footprint of the proposed development acceptable?

Social: Will the host society be a better place to live if this proposed development proceeds?

Economic: Will the host society’s economy be improved if this proposed development proceeds?

Political: Will the host nation’s political stability improve if the proposed development proceeds?

In practice Business tends to focus most of its effort on the Technical and Commercial issues, and to the extent which the law demands, on the Environmental, but Social, Economic and Political factors are largely ignored, especially as regards long-term impact. This reflects the education and background of most Business Managers, and the short-term performance on which their remuneration is based.

But it is inattention by Business to Social, Economic and Political factors, and to some extent on Environmental ones, that generates outrage by local communities, governments, NGOs and media. Once the trust of such stakeholders is lost it may be almost impossible to regain it and the future of the Business will be in jeopardy. Examples abound, from chemical plants in built-up areas, to oil production in West Africa, to clothing manufacturers marketing products in the United States, to mining companies facing opposition to exploring in the Philippines because of a history of mismanagement in the past.

The decisions which are most critical for a Business’s long-term sustainability are usually non-technical and non-commercial factors and include how to identify and manage:

Long term social, economic and environmental consequences of the presence of the business
Issues – concerns – perceived by third party stakeholders, including issues which may take years to come to maturity even though their seeds are sown in the early life of the business
Stakeholders – including those not immediately or directly affected, even those in other countries
Likely changes in attitude over time – e.g. will local communities that are apparently satisfied by the presence of the business today still be satisfied when their expectations change in the future?
Major societal trends – changing views on issues like climate change, human rights, diversity and inclusion, revenue distribution – usually spearheaded by NGOs which will be looking for “test cases”
Increasing demands for transparency and accountability, both legally and against business’s own published codes of conduct, with shortcomings mercilessly exposed by the media

The Role-Playing Simulation approach allows participants to investigate how these factors interact in a realistic situation, how trade-offs can be made for mutual long-term benefit, how alliances can be built – and how long-term sustainability can be assured or threatened, and how failure can be punished.

What happens in a Role-Playing Simulation?

The starting point is a business or political challenge – the decision to commit to investment in a major industrial development, or for a government to nationalise an industry, or for a municipality to extend an urban transport system. The decision must be taken within one year of simulated time from the start. It will have long-term financial, economic, environmental and political consequences and may well trigger social change. A wide range of stakeholders will be affected by the decision and though some will see themselves benefiting from it, others will see it as a threat to their wellbeing and way of life.

Participants – role players – are provided with a detailed description of the natural, political, economic and social conditions within the country or city being simulated. Thus corresponds to the key public-domain information that would be accessed by an internet search-engine enquiry related to the country or city and to the main stakeholders, including government, business, NGOs, communities and media.

The participants are then allocated roles which they will play in-character through the one or two-day simulation. They will then be allocated further confidential briefing notes which are unique to their own particular circumstances, interests and viewpoints. This information may be exchanged, or traded, with other role players, and forms the basis for negotiations, creation of alliances and deal making.

A typical simulation, “Discordia”, based on an oil discovery in a West African country recovering from a recent civil war, will have 30 to 50 players and involve the following stakeholders:

Business and Government need to set very definite objectives and strategies. They have a large amount of information, though not necessarily accurate or complete. The also need allies – either (i) to bolster their reputations and gain acceptance of their policies internally or externally or (ii) to help them in areas (e.g. community development, revenue management) in which they are not expert themselves.

The Opposition (and perhaps part of the Government) need to survive, perhaps even literally.

The Villagers suffer from poverty, minimal educational and medical provisions, poor communications and high infant and maternal mortality, while HIV/AIDS is making its first appearance. Oil exploration offers jobs and access to cash, but brings also the possibility of irreversible and possibly uncontrollable change. The villagers may well find themselves the pawns of players on all sides who have agendas radically different to the community’s wellbeing.

The NGOs may have very complete information on their own areas of interest but very limited ones in others. They need to come to a decision on what their stance will be as regards growth of a new oil industry in Discordia and if, and how, they will involve themselves in the process – will they be passive or pro-active players, and if so, what strategy will they adopt?

Media have very little information to start but are free to ferret, dig and investigate without the need for major commitment on investment that others have. Media may well drive the course of future development, depending on the energy and insight with which they follow up various stories.

Participants play out their roles over a full year of simulated time, reacting to the behaviour to others, and to new information, and leading up to the critical decision point. Media publish articles based on their investigations, other players issue press releases or stage press conferences, and all are free to make alliances, open or secret, to further their ends. Some players may want to support responses to the initial challenge, others to influence or even frustrate it, others may wish to manipulate the situation to further their own organisations’ positions of strength.

The final debrief – by a “market stall process”, in which all they players “come clean” about their objectives, strategies and tactics and analyse the lessons they have learned from the process - is a key part of the simulation.

There is no single “right solution” – the simulation could be played out a hundred times and have a hundred different outcomes, depending on the importance individual players assign to the multiple issues inherent in it. Rather than a single optimum solution to a single issue, players must aim at a combination of possibly sub-optimum solutions for individual issues which together add up to the most pragmatic overall response. The simulation mirrors real life challenges to business and government.

The approach was first developed for training managers in the oil industry by a company. The creator had 36 years experience in the oil industry in a dozen countries, including Chief Executive positions in companies in Turkey and Venezuela and 9 years experience in Nigeria, at ground level and at managerial level. He handled negotiations with government in these countries, plus Iran, Britain and Norway and developed extensive contacts with NGOs and Think Tanks in Europe and the USA. He ended his oil-industry career as External Affairs Vice President for Exploration & Production for a Oil Major. Since then he has run workshops and simulations for business and in Columbia University (New York), George Washington University (Washington DC), Oxford University (UK) and the Asian Institute of Management (Manila, Philippines). Participants have included senior company executives, Latin American politicians and administrators and university students at both postgraduate and undergraduate levels.

Though simulations can be custom-designed to allow investigation of options and strategies appropriate to specific circumstances, a number of ready-made simulations are available which are ideal for training purposes. Though names are fictionalised, all are based on actual countries, organisations and events. These simulations include:

“Discordia” Entry by competing companies in post civil-war situation in West Africa

Primarily Political Orientation:

“Latinia 1” Gas Nationalisation in Latin American Nation
“Latinia 2” Mining Nationalisation and Coca Legalisation in Latin American Nation

“Tomboa” Reactivation of Mining Industry in the Philippines
“Badajoz” Expansion of Mass Transit System – in a major Latin American city