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Income/Outcome provides unique table-top business simulation games and a methodology that makes learning stick. Learn more by downloading our latest guide

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Business Acumen: Supply and Demand in action

  
  
  
  

Prices rising and falling as a result of Supply and Demand isn't a purely theoretical idea, and the people on either side of the deal don't have to have even heard of it. It happens naturally. If I want some doodads, and there aren't a lot of them around, I buy all the cheap ones and then I keep on buying (if I really want them) even if I have to pay more and more for them. Other sellers see this and (if they have the business acumen) realize they can raise their prices too.

walmart high wages

Here's an example of having to pay more and more in order to "buy" enough labor to run operations in Williston, North Dakota. The oil boom there means companies are willing to pay more than average in order to run at full capacity, unemployment is down to 0.9%, and WalMart is paying 2.4 times the minimum wage in order to have enough employees.

Anyone playing Income/Outcome has experienced this and a lot of other fundamental business realities - and had a lot more fun learning about them than if they had run into them unexpectedly and painfully for the first time in the real world.

If you prefer fun to pain in your finance literacy and business acumen programs, give us a call!

Robin Helweg-Larsen                                    Request a Demo

Robin Helweg-Larsen | Director | Andromeda Simulations International | +1.919.933.6555

KPIs, Rewards and Business Acumen

  
  
  
  

Towards the end of Income/Outcome workshops we look at Key Performance Indicators (KPIs) and other metrics, and consider how people change their behavior depending on what they are measured on.

We subscribe to the rueful view that if you measure people on Sales Revenue (i.e. the top line of the Income Statement), they lose you money. But if you measure them on Profit (i.e. the whole of the Income Statement), they tie up resources all over the Balance Sheet. And if you measure them on Return On Assets (i.e. the relationship between Profit and the Balance Sheet), they strip the Assets out of the business. The question is, how can you incentivize people to think like the long-term owners of the business and make all their decisions with that mindset?

kpi i have a dream

But the question itself may be wrong. Research by Sam Glucksberg 50 years ago, published as "The influence of strength of drive on functional fixedness and perceptual recognition" in the Journal of Experimental Psychology in 1962, demonstrated that people's creativity can be impeded by monetary rewards. Given a relatively simple problem to solve, a cash reward for a speedy solution produced faster solutions than no reward; but when the problem was posed in a more difficult way so that more creativity of thought was required, offering a cash reward produced slower solutions than no reward.

In his 2009 book "Drive: The Surprising Truth About What Motivates Us", Daniel Pink states: "Behavioral scientists often divide what we do on the job or learn in school into two categories: 'algorithmic' and 'heuristic.' An algorithmic task is one in which you follow a set of established instructions down a single pathway to one conclusion. That is, there's an algorithm for solving it. A heuristic task is the opposite. Precisely because no algorithm exists for it, you have to experiment with possibilities and devise a novel solution. Working as a grocery checkout clerk is mostly algorithmic. You do pretty much the same thing over and over in a certain way. Creating an ad campaign is mostly heuristic. You have to come up with something new."

He continues that in the 20th century most work was algorithmic - not just factory work, but anything that could be reduced to a script or formula, whether in accounting, law or computer programming. Such comparatively uncreative work is susceptible to carrot-and-stick incentives, but is also work that can be automated.

Most of the job growth in developed countries these days is in heuristic work - hard to automate, and hard to incent financially in an effective way, because the incentives are likely to reduce productivity. In heuristic work, people perform best when they are working for the joy of the creative challenge. Not that they don't also need to earn enough money to be comfortable, of course! But if people work at what they enjoy, they are more likely to report 'peak experiences' at work than in leisure activities.

What happens to KPIs and reward metrics, then? 

It's not all hopeless, because one of the creative challenges that people enjoy at work is achieving goals and being successful in their job function. They should have standards, goals and metrics because these things provide challenges that can be met and therefore can make work more enjoyable - but, as with all KPIs, be careful in what you measure people on, or you can hurt their productivity, their creativity, their job satisfaction, and the health of your business. 

For more discussion on this, give us a call!

Robin Helweg-Larsen                                 Get In Touch!

Robin Helweg-Larsen | Director | Andromeda Simulations International | +1.919.933.6555

The World's Biggest Game? It's not Income-Outcome

  
  
  
  

We think we're pretty good at putting a large game together, but hacking the lighting system of a skyscraper to play Tetris is in a different league. There are times when a story is so good in itself, there's not much to do but reblog it...

Tetris on a skyscraper

Your link is here for the story, or you can go straight to the video here.

Mind you, this isn't going to improve your business acumen. For games that are just as visual but more useful than Tetris, and even more engaging over four hours... or a day... or two... or even three... you need a team-based competition like Income/Outcome.

Give us a call!

Robin Helweg-Larsen                                 Get In Touch!

Robin Helweg-Larsen | Director | Andromeda Simulations International

robin@income-outcome.com     +1.919.933.6555

 

 

The Circulations of Blood, Money and Information

  
  
  
  

circulation of the bloodA new book by George Cooper, “Money, Blood and Revolution”, uses William Harvey’s 17th century discovery of the circulation of the blood as an analogue for understanding the driving forces of a successful economy. The circulation of the blood brings in food from the intestine, and more importantly oxygen from the lungs, and redistributes these resources throughout the body to its furthest extremities, allowing the processes of life to continue and develop. Circulation is essential for health and growth, and loss of circulation endangers life itself.

The forces of economic development can be thought of in the same way. In an absolute monarchy, what money the government collects from the bottom of society is kept at the top. There is limited social mobility, and the focus of those at the top is on maintaining their privileged status rather than trying to increase wealth. There is limited taxation, little government regulation of industry, no redistribution of income… and very low economic growth.

In a democracy there is much more social mobility, and there is much more point for people throughout society in trying to create wealth. A democracy tends towards higher taxation, considerable government regulation of industry, and substantial redistribution of income. The government collects a lot of money but rather than holding on to it, the government spends much of it on the bottom of society. This allows the economic development of the bottom of society, and the creation of more wealth which is then taxed and drives ever more revenue to the top for redistribution. Everyone comes out ahead economically, and new privileged positions are constantly earned by work and innovation.

If Cooper’s analysis holds up, it would lump the Tea Party and the Saudi monarchy together as forces of stagnation. Despite the good intentions of some individuals (such as the Saudi king himself), both organizations want to reduce economic circulation. Both end up keeping all the wealth at the top of society, maintaining privileged status for the ruling class, avoiding new and destabilizing ideas, and considering economic development unimportant. No one will ever admit that this is what they want, but the lack of redistribution will drive this result.

Going beyond Cooper, the same concepts apply to corporate information flows and management decisions. If all the information available – from production and service sites, from market research and sales activities, from R&D labs and HR – all flows up to Finance or the CEO and is used there and stops there, the corporation will function for a while, but with less and less efficiency, and will end up dying or being swallowed up or broken up.

Information is best used if it is all brought to the top of the company, and then circulated out to its furthest reaches. The information should include not just whatever is useful but also whatever is of interest to the extremities. Then everyone can understand the big picture of the company and the industry, and will be better able (and more willing) to support the rollout of necessary changes. Everyone will then become better at identifying unexpected new information, and more interested in transmitting it back up to the top. Total information flows will increase in both directions - improved circulation.

For this to be effective, everyone needs to speak Finance, the common language of business. As all the data needs to be expressed (and its importance justified) financially, everyone needs a common financial terminology and the financial literacy to understand and crunch numbers and visualize the result. This is where finance literacy and business acumen workshops come in. They are important not only in the area of improved decision-making by an individual (although that frequently gives spectacular results) but also in the speed and accuracy of the flow of information, and the ability of the whole company to respond rapidly and appropriately to an unexpected crisis or opportunity. And any major crisis is likely to contain a wealth of opportunities... but only for the company that can respond most rapidly.

So that becomes the key competitive advantage in a time of rapid change. And change is becoming ever more rapid. There is no foreseeable way – short of an asteroid strike or nuclear war – to produce an environment of slower change.

So – if you want to be in the forefront of inevitable change – give us a call and find out why what we do is so effective, so rapid, and produces such a wide range of benefits. Income/Outcome and Visual Finance drive the circulation of information as your heart drives the circulation of your blood.

Robin Helweg-Larsen                                    Get In Touch!

Robin Helweg-Larsen | Director | Andromeda Simulations International | +1.919.933.6555 | robin@income-outcome.com                                

Thoughts on teaching business acumen in Asia-Pacific

  
  
  
  

I'm just back from 10 days in Singapore, where I ran a two-day Finance & Strategy workshop for Micron Technology. That's a version of Income/Outcome with a disruptive technology factor, a very appropriate dynamic for the ever-innovative Singapore, as well as for Micron's semiconductor industry. This was followed by a two-day Train-the-Trainer process for five of their personnel, followed by a three-day conference for our own regional Distributors at our annual Income/Outcome University. 

Singapore is my favourite city anywhere for business. Some people say it feels a little limiting after four months or so, and Indonesian forest fires can be a major irritant when the wind blows from the southwest. But children and teens seem to love it, as do expats who prefer year-round warm weather. The forecast offers a normal range from "32 and sunny" to "32 and rain", although there is an occasional cold snap that slashes the day's high to 31, or an occasional heat wave that hits 33. That's my kind of perfect. (32'C = 90'F for the less international). 

There is one disadvantage, from my point of view: Singapore is the opposite side of the world from our North Carolina head office. Forty hours it took to get home, door to door. But again, that just reminds me that I am living on a planet (not a flat earth), and living on an actual planet is very cool. Which has its own complications, such as trying to figure out when to try and reach people on the other side of the world. Here is the best link yet: http://xkcd.com/now

xkcd now

The link gives you a clock that clicks on every few minutes, showing the world rolling always up towards midday and down into the night. It's a planet. I tell my kids not to worry overly about things like career risks - don't worry, because you're just going round the sun on a planet, and you can't fall off.

When we brought our Distributors together from Singapore, Thailand, China, New Zealand, Australia, Kenya (and even a very brief appearance from the reticent Japanese), I had another global epiphany. I've grown up staring at maps and always thinking of Australia and Nw Zealand as being tucked away in the bottom right, far from everything else. 

But now I realise that they are the English-language centre of business training for the whole Asia-Pacific region. Facilitators fly from Australia to China to teach, HR managers fly from Australia to Japan to monitor a workshop. But Australia and New Zealand are also very closely tied to both the UK and the US. In effect, given that English, per Schumpeter in the Economist, is the primary lingua franca of global firms (well, after the language of finance, of course), that makes ANZ+S the best business node on the planet. 

It feels like the business world isn't just moving east from the US towards China, but also in some ways moving south. Singapore, Australia, New Zealand - developing as a (the?) centre of global business.

(And if you would like to develop your own global business, just contact me.)

Robin Helweg-Larsen                               Get In Touch!

Robin Helweg-Larsen | Director | Andromeda Simulations International

The New Logo for Income-Outcome

  
  
  
  

We are slowly changing over from the old logo (left) to a new one (right). 

old logo

new logo

You can see certain similarities - the blue/green which are prominent in our game boards and our pieces, the I and O with a slash between them. 

The biggest visual change is the feel from round and fluid to square and blocky. There was an original sense of money coming down the Receivables track into the Green Cash circle, which was nice. But we have now redesigned the board, flipping the Income Statement and Balance Sheet (as well as changing the color of the Receivables).

But the biggest practical change is this: now when we introduce the game board we draw a rectangle on a flip chart or whiteboard, and make a vertical slash on it: "This on the left is the Income Statement, and this, centered on the Cash Circle, is the Balance Sheet."

We have a series of little videos being produced for our facilitators, to show how many fundamental accounting lessons can be taught right on the board itself: key ratios, cost structure, leverage, the difference between managing for profit and managing for cash flow, and more.

The same conceptual structure is in the gameboard and in the Visual Finance app:

VF app

And at the end, as a reinforcement, we remind people that your Sales come down through the Costs and Expenses of the Income Statement, and what is left at the end is your Net Income. (And that line comes straight down the Income Statement side of the logo.)

And your Balance Sheet shows you the Outcome of all your activities, focused on your Cash.

The summation of the workshop is the logo itself. The logo may not mean much to someone who hasn't played the game, but everyone who goes through an Income/Outcome workshop from now on will see the new logo and remember and reexperience the key insights they developed, the key learning that they took away.

The clarity of the representation that we developed in 1996 continues to give new benefits. It remains the cleanest, clearest, simplest illustration of financial statements that you can find in the world. And the thanks for that goes to Eliza, who insisted that the board we were going to create had to have everything on it that financial statements have on them, and nothing on it that isn't a financial statement line item - and the items should be structured to reflect the structure of the statements as well.

The new logo is simply a new manifestation of that original drive. And it is very, very useful! Check the videos as they become available.

Robin Helweg-Larsen                              Get In Touch!

Robin Helweg-Larsen,  Director,  Andromeda Simulations International

 

 

The Speed of Change, and How to Respond

  
  
  
  

We all know the world is changing, and that the speed of change is increasing. Or at least, we say we do.

But not everyone embraces change. If you are already at the top of the heap, you might prefer things to stay the way they are. If you are a believer in a fixed world view - whether religious or scientific - the discovery of new facts and the destruction of old paradigms will be unsettling.

And for those of us who enjoy change - who like diversity, who enjoy learning something new even if it means we have just lost an argument - for us, technological change is as exhilarating as travel to an unexpected landscape in a new country. 

Here's a new manifestation of an idea that is pointing the way to a barely conceivable future:

MIT's Shapeshifting Display

As reported in FastCoDesign, the Tangible Media Group at MIT's Media Lab has developed a way of tracking the movement of objects such as hands in 3D, and replicating those moving objects through a grid of posts, allowing them to manipulate another object that the real hands can't reach. 

To look behind the scenes is to see someone moving their hands in isolation, as though playing a theremin, or a Wii without a controller. You move your hands here, but you can impact the world as though your hands were somewhere else. Now the phrase "Reach out and touch someone" attains a new reality. The implications for all industries can only just be glimpsed: warfare, search and rescue, surgery, construction, space exploration, gaming - let alone pornography - all will be revolutionized with the blending of robotics, AI and distance manipulation.

It hasn't happened yet, but you can see it coming. My belief is: Anything that anyone can imagine, at some point will be attempted by someone - and, given enough time, achieved. That's just what humans do.

So how can you lay plans for the future, business plans or personal plans, when the future is shifting under your feet in seismic fashion? As in our Income/Outcome business simulations, there is no certainty, and there is no predetermined correct path. The answers are:

  • Know yourself (your company) and your strengths and weaknesses
  • Know your environment (your competitors, customers, vendors)
  • Search for opportunities and threats
  • Maintain an adequate cash flow
  • Improve the speed and accuracy of information sharing
  • Use plans, not for certainty, but to identify limitations
  • Stay flexible and able to respond rapidly to change.

Our world has neither the apparently unchanging existence of previous millennia, nor the steady and gradual improvements of recent centuries. Our world is one of disruptive technologies and unpredictable change, of limitless opportunities for creation and destruction, of an ever-expanding big picture understanding of the universe. 

So in our business acumen workshops we don't teach predetermined answers. We provide foundational thinking and visualization of key concepts and driving factors of business. What you do with your enhanced insights and understanding is up to you.

Robin Helweg-Larsen                                 Let Andromeda show you Income/Outcome

Robin Helweg-Larsen,  Director,  Andromeda Simulations International


Income-Outcome at the EMBA Council Conference

  
  
  
  

For the fifth year, Andromeda has been a Corporate Member of the Executive MBA Council with a presence at the annual global conference. The event was held this week at the Omni Galleria in Houston (with a side trip to the Armadillo Palace for an evening of increasingly complicated line dancing).

Eliza and I were joined by Helmut Hergeth, the business prof from NC State University who has been using Income/Outcome for over ten years and is our preferred facilitator for academic clients. Helmut co-presented a session with Robyn Blilie and Matthew Goode of the University of Minnesota's Carlson School of Management on the growing use of experiential learning within the academic curriculum - Carlson too has been using Income/Outcome for over ten years. 

We also had Leon Grandy visiting from New Zealand. As a Director of Armillary Private Capital, a corporate financial services firm, Leon uses Income/Outcome to raise the financial and business acumen of his clients, and has sold Income/Outcome into Auckland University. 

Robin, Leon, Helmut - EMBA 2013

The event was a huge success for us. As well as co-presenting a session, Helmut was in the Shark Tank on our behalf; all of us attended sessions and various Regional meetings; and the level of acceptance of experiential learning was higher than ever before. This acceptance was coupled with an understanding of the academic environment's unique use of Income/Outcome as a team-builder and a way to overcome the Fear of Finance of incoming students... and the use of our Visual Finance app for ongoing discussion of real-world companies.

Experiential learning is growing dramatically each year in its use throughout the academic world. Our new clients in the past couple of months range from Cornell University in the heart of the US, to Tromsø University north of the Arctic Circle in Norway.

This year in Houston we renewed friendships, made new acquaintances, and expect new academic clients. (And we appreciate the hospitality we are shown!)

Teaching Business Acumen in Universities

  
  
  
  

In the past two weeks Eliza and I have worked with professors in Aalborg, Denmark and Tromsø, Norway to help run three Income/Outcome workshops. Scandinavia has a justifiable reputation for innovative designs that are interesting, elegant and functional (as in the Tromsø housing below), so we wanted to know how our foray into their universities would be received.

Tromsø housing

At Aalborg University we ran two 1-day workshops for Danish engineering undergraduates, while training and accrediting a group of business professors to take over from us. The first workshop ran all day from 8:15 to 5 pm. The students, most of whom had no business background, were exhausted by the end, and a lot of their comments were about the workshop being too long.

The profs restructured plans for the second workshop - they work in a very flexible environment - so that the first half ran in the afternoon, and the second half ran the next morning. A lot of the comments this time were that the workshop was too short!

This was a unique opportunity for us to have an experiment that compared two virtually identical groups of undergraduates. We have often suggested to clients that more learning occurs in situations where the participants can sleep on the first part of the learning, process it, and come back fresh the next day to review it and use it. Otherwise, if all the learning is crammed into one day, the participants may become exhausted.

With Income/Outcome people are learning to play a new game... learning new concepts about business management... picking up new terminology and definitions... working in a team with people they haven't worked with before... constantly making decisions... and, in this case, doing it all in a second language. No wonder they get tired!

At the University in Tromsø we ran a slightly shorter workshop for a group of 15 MBA students aged 29 to 39. They came from China, Zimbabwe, Pakistan, as well as Norway and a mix of Eastern and Western European countries. Here the students already had both business experience and business English; the workshop was a refresher for them, rather than being brand new information. We ran it over two short half-days, and again the suggestion was that the workshop should have been longer. The Russian (who had presented in class as someone who understood all this already, seeing as he had two businesses of his own back home) advocated a four-day workshop.

When we run a workshop in the corporate world, we may be providing the only finance education the participants will get for the next ten years. For a day or two, we are their university. What we don't teach them, they don't get taught.

But when the workshop runs in an actual university, we are only a small piece of their studies. Income/Outcome is best positioned as foundational learning. We provide a big picture of how all the pieces of business fit together - how the Income Statement and Balance Sheet tell you different things, how you need to think to understand the business, how you have to manage separately for cash flow and profit, how to visualize cost structure and working capital and depreciation... And then the university takes over and teaches business and finance and accounting for the next semester or year or more, and goes into far more detail than we did.

But we have provided a single big picture that the university can't provide. That is our strength. Our workshops, in an academic setting, are foundational. And thanks to us, the institution can then teach more, and faster, and in more depth, and have it all understood and remembered. 

Learning occurs best when you have a clear big picture understanding of what you are learning - as well as when you have a good night's sleep to process it.

Robin Helweg-Larsen                                Get In Touch!

Robin Helweg-Larsen,  Director,  Andromeda Simulations International

The Cardboard Cathedral - functional business acumen

  
  
  
  

Christchurch, New Zealand, was hit very hard by an earthquake in February 2011, with 185 deaths. Its cathedral was damaged so badly that it had to be replaced. The beauty of towering stone is not always a good thing. So how can you safely create a beautiful and monumental place of worship? Japanese architect Shigeru Ban has done it with cardboard. Here is Christchurch's brand new cathedral:

Cardboard Cathedral

Monumental cardboard, incorporating stained glass, and expected to last 50 years. That is interesting in itself, but I am particularly intrigued by Ban's focus on humanitarian activities, and his sense that architecture - to the extent that it only serves the needs of the rich and powerful - has lost its way as a profession. He embodies a social conscience within practical considerations of cost, speed, and the needs of his end clients. This is a marriage of idealism with the purest business acumen.

Much more of his work, and a link to a TED Talk, can be seen here.

The New Zealand Distributor for our Income/Outcome workshops, Leon Grandy of Armillary Private Capital, combines the banker's prudence with the risk of living in prime earthquake territory. He lives in the capital, Wellington, which has been rocked by a couple of magnitude 6.5 earthquakes in the past month alone. Please stay safe, Leon!

Robin Helweg-Larsen                                   

Robin Helweg-Larsen,  Director,  Andromeda Simulations International

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