Learning: The Power of Simulations

Last week I facilitated a day-long course on the “Fundamentals of Finance for Decision Making” as part of the DeGroote Executive Education program. I was using the Apples & Oranges simulation from the Swedish company, Celemi. I say “facilitated”, rather than “taught” because the essence of Celemi’s approach is for coaches to create contexts for learning, not for teachers to teach.  Today, with educators talking about “flipping the classroom”, the physical simulations from Celemi show the power of having people together physically and how to use that time and context to the greatest advantage. The results cannot be matched by any lecture-type formats.

I began working with Apples & Oranges about fifteen years ago, when I was designing and delivering executive development programs in Hong Kong and China. In my opinion it is the finest vehicle bar none for managers to learn the basics of finance and accounting. Teams of four work around a simulation board for a whole day, following the fortunes of a company as it conducts business for three years. The teams track half a dozen value streams and are active in the process of transforming value from one category to another. When they make mistakes they help each other get back on track. Raw materials become work-in-process with the addition of labour, which is then transformed into finished goods. Invoices become accounts receivable and receivables become cash, which it becomes clear is the hub value category for the business; “profits are fiction – cash is reality”.

At the end of each three-period year every team member prepares financial statements – profit and loss and balance sheet, with special attention to the role of cash and the impact of decision-making on cash. During the course of the three years they perform a management turnaround – increasing the velocity of working capital – they conduct a growth strategy, once again with special attention to the impact of these moves on cash. They come to understand the complexity of integrating and judging the effects of multiple improvement programs. Since I last worked with Apples & Oranges Celemi have updated the simulation and made it much more powerful. Today one can customize it do deal with the issues faced by single organizations and can discuss advanced financial concepts like Economic Value Added (EVA) and how to calculate a Weighted Average Cost of Capital.

The Power of Simulation

The power of this simulation, especially when compared with the traditional teaching approach to the topic, has to be experienced to be believed. Participants are engaged throughout the day and the hands-on approach, with the need to count out value and physically move pieces around the board, sets up mental processes that are untapped by the conventional pedagogical approach. At the end of the day the managers are energized and confident that they have a grasp of the “big picture” – I have had MBA graduates come to me and say that they learned more in seven-and-a-half hours from this simulation than they did in their 13-week finance and accounting courses at graduate school!


Teaching Versus Learning (Copyright Celemiab Systems AB)

The Learning Process

Celemi was founded in 1985 by Klas Mellander and two consulting colleagues. The inspiration was Mellander’s acute dissatisfaction with the dominant lecture-based approach to learning, which he believed rendered the learner far too passive, which led to boredom and the absence of learning. In 1993 he produce his book, The Power of Learning in which he identified the essential factors involved in learning:

  1. Attention: only when the conditions are right, with our interest awakened and our curiosity aroused, are we ready to receive facts and data.
  2. Information: we are only receptive if the facts and data meets our expectations to some degree – it has to be meaningful to us. And to test that, we have to compare it with our experiences.
  3. Processing: the information needs to be processed, connected with other information and integrated into a coherent whole – this takes time and a break from information reception. If a learning session sticks with you after it’s over you know that your brain is still processing the information.
  4. Relationships: the brain is continuously hunting for gestalts – meaningful relationships that form wholes. Images or shapes can be enormously helpful here. When you put together a meaningful whole you get that “Aha!” feeling; that’s when you know that learning has occurred.
  5. Application: unless knowledge is applied, it becomes what Alfred North Whitehead called “inert knowledge”. A good simulation allows multiple opportunities for the application of the knowledge as you gain it. Knowledge+Action = Experience+Insight that become Skills and Attitudes.

A typical response from someone who completes Apples & Oranges is “Now I get the big picture! I see how everything fits together and why we are doing what we are doing.”

The Big Picture and the Details – the Ecological Perspective

Apples & Oranges fits very neatly with the ecological/systems perspective on management, the essence of which is that contexts matter. One cannot look at any aspect of a complex organization in isolation; one has to look at it in context. Once you have the big picture, the details become much more meaningful. This is where the analogical approach to systems thinking really shows its benefits by using analogies drawn from nature and symbols like the infinity loop of the ecocycle to remind people of the big picture. Once they have the big context it becomes much easier to fit everything else together.

The Need for Good Simulations

Ideally one would like all education to consist of meaningful learning experiences. When it comes to management the evidence from the Center for Creative Leadership (CCL) is that this is usually the case. Executives typically list their greatest learning experiences as: 

  1. 1.    Challenging assignments
  2. 2.    Significant bosses, and
  3. 3.    Hardships – setbacks and reversals

Ideally good simulations should mimic these experiences but in a safe context and with a much accelerated timeframe. Unfortunately good physical simulations that cover the entire field are hard to find. Computer-based simulations are common but unless they are multimedia they tend to be unappealing. Data on screens is not much more meaningful than data on paper. Harvard Business School is starting to put out some good multimedia cases and I have found the cases build around movies produce by Hartwick College to be very powerful. After last week’s experience with the new, improved Apples & Oranges I have also made a mental note to take a look at the other products produced by Celemi.

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