April 02, 2017

20 Teams Competed For The Coveted Prize!!

At last week's VT/NH event, two-hundred participants divided into twenty teams battled through a five-year business simulation!

Why put people through this?

A quick story. When I worked at Lands' End, we had answers to questions. When I worked at Eddie Bauer - not many answers until 1999 - poor data. That didn't stop us from making decisions. As long as we made decisions we pushed the peanut forward.

Well, in our modern world, we have more data than ever - but I keep hearing that people don't know what to do - or I keep hearing that the "right" metrics aren't available.


You are smart.

You know your business.

Maybe you just need permission to make decisions (and be allowed to make mistakes).

The point of the simulation was to demonstrate that smart business people don't need perfect metrics to make good decisions that result in positive outcomes. And in our simulation, the participants proved me right!!

Each team (approximately 10 professionals) chose a "CEO" to communicate the business plan each year. Each team had five minutes (which wasn't enough time ... and was not enough time by design) to review annual results and then develop a new business plan for the next year.

The teams could change a handful of tactics.

  • Each team started with $200,000 cash. The could spend it all on advertising (offline and/or online), or they could choose to not spend the money.
  • Each team had to allocate 10 staffers across offline marketing, online marketing, and mobile/social marketing.
  • Price of Widgets, Price of Bidgets, Price of Tidgets. Widgets had a $30 cost of goods. Bidgets had a $20 cost of goods. Tidgets had a $10 cost of goods.
  • Promotional Strategy: Teams could select the percentage off promotional level they wished to employ.
  • Paid Shipping, Free Shipping with Hurdle, Free Shipping 24/7/365. Each team had to select their shipping strategy.
Each team selected a "one word" team name.

The teams developed strategies.

I furiously keyed-in twenty business plans within five minutes, sweat beading upon my balding head. If I was stressed ... then imagine how stressed each team was?

The winning team would maximize "company valuation" ... 0.25*Net Sales + 2*Earnings Before Taxes in year five. In other words, you could fail for four consecutive years and then win the whole thing in year five.

The results were in ... here are the results for each of the twenty teams following year one of the simulation.

Yeah, sure, click on the image, blow it up and study the strategies employed by each team.

"Widgwon" took the early lead, leveraging a strategy where marketing dollars skewed online, staff skewed offline, prices were average (compared to other participants) with the exception of Tidgets (which were cheaper than average) ... coupled with no promotions and free shipping with a hurdle.

"Dozen" brought up the rear ... after taking 50% off as an initial business strategy.

Ok, here's what I want you to pay attention to ... pay attention in subsequent runs how the "average" metrics iterate toward an overall optimal solution. With no metrics to demonstrate how advertising / staffing / pricing / % off / shipping impact company valuation, the teams were able to improve business performance. This is the point of the simulation ... you don't need great metrics ... you need great people making great decisions!!

Tomorrow, we'll study the adjustments that teams made!

And yes ... you go right ahead and name me a single popular industry conference where you get to spend two hours competing against other attendees in a business simulation ... I'll sit right here and wait while you name one ...

Year 1 Valuation
  • Widgwon = $740,000.
  • Loopy = $706,000.
  • Pickaxe = $660,000.
  • Name = $645,000.
  • WBT = $631,000.

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