Welcome to the second instalment of our three-part interview with HFX Training on business simulations. In the first part of the interview, we explored the basics of business simulations and their role in modern training and education. Now, in this instalment, we take you through the history, development, and design process behind business simulations, and explore their unique pedagogical power.

Whether you are an educator, a business professional, or simply curious about the power of simulations, this article promises to provide valuable insights into the mechanics and benefits of using these sophisticated educational tools.

In this article, we will cover: 
- History of Simulations
- What Skills do Business Simulations Teach
- The Simulation Design Process

History of Simulations

Board Games and Military Strategy

Will: In terms of innovation and adaptation, I think there’ll be many viewers who are very interested in how simulation programs have advanced over the last several years. Can you talk us through a bit about the history of simulation models and their technological development?

Jeremy: To understand the evolution of simulation-based training, we can start by looking at its roots, which lie in traditional military strategy games like Go or Chess. These games, which date back millenia, were designed to challenge the mind and enhance decision-making under pressure. Wargames became more and more sophisticated, eventually leading to the first computer-based military simulations in the late 1950s, and the first business simulation, the “Top Management Decision Simulation” from the American Management Association, in 1955.

Over the decades, the major change has been in computing power, which has dramatically increased the accessibility and scalability of these simulations. For example, many of the design teams that we work with have been building simulations since the early 1970’s, and in many ways, their core design approach was established early on. The biggest difference between then and now, is that back then, the rounds of a simulation were processed on mainframe computers with punch-cards. This required a lot of leg-work from the instructor, not least because mainframe computers were anything but ubiquitous!

The real transformation has been in how easily these simulations can now be accessed and how quickly they can be processed. So much so that today, we almost take it for granted that simulations are hosted online, accessible by anyone with an internet connection and process almost instantaneously.

The practical consequence of this is two-fold. First, it is now feasible to deliver simulation based workshops remotely, to distributed teams. Second, the rapid processing speed (with the results of each simulated round coming within minutes or even seconds of the instructor’s command) makes the learning experience more dynamic and immediate.

Latest Innovations and the Impact of AI

Will: Have these changes mostly occurred in the last decade?

Jeremy: In short, yes. The landscape has shifted dramatically in recent years. Although it seems hard to believe, when we launched HFX Technologies in 2019, the concept of cloud-based simulations still wasn’t as widely accepted or understood as it is today. Back then, the notion of running complex simulations entirely online was still a novel idea for many.

This gives you an idea of how rapidly these simulation technologies have evolved. But it doesn’t stop there. Currently, we’re exploring how artificial intelligence can further revolutionize these tools. We’re particularly focused on how iterative AI can enhance the user experience. For instance, in our conversational simulations, we’ve started to integrate AI-driven characters. This allows participants to engage in dynamic, realistic conversations within the simulation, a significant step up from the basic multiple-choice interactions of the past. Now, participants can simulate more natural and complex interactions with a virtual client, which greatly enriches the training experience.

Virtual Reality – Benefits and Limitations

Will: I find this incredibly exciting. When I think of advanced simulations, my mind goes to something like Star Trek’s Holodeck. Looking ahead 10-20 years, do you see us using VR headsets for the most sophisticated simulations?

Jeremy: Interestingly, that scenario is already a reality, Will. Virtual reality has been in play for quite some time now. VR headsets have been available for decades, accessible even to the retail market. I recall using one in London about 25 years ago – it was a flight simulator. Today, VR technology has become quite ubiquitous, especially among the younger generation who might use it at home.

However, at HFX, our focus on VR is more selective. While VR is prevalent in several commercial and training contexts, we find its best use in operational training. For instance, VR is highly effective in clinical settings, factory operations, and military training, where the realism of a VR environment can significantly enhance the practical skills of business trainees. Flight simulators, a form of sophisticated VR, have been essential in pilot training for years, demonstrating the effectiveness of this technology. Despite its broad utility, we evaluate where VR fits best within our suite of simulation tools, focusing on applications that offer the most tangible benefits to users.

Will: So, would it be fair to say that HFX Technologies specializes in strategic decision-making simulations?

Jeremy: Yes, that’s accurate, Will. I’d describe our focus as centered on managerial decision-making, which requires deep and strategic thinking. In this context, we find that the cost-benefit of incorporating virtual reality (VR) often doesn’t quite add up. In fact, in our more complex simulations, we view VR as a potential distraction from the intense thinking and analysis required.

Pedagogy – What do Simulations Teach

Key Skills

Will: In terms of preparing current and future leaders with essential tools and skills, what would you say are the key competencies they need to develop to thrive in today’s dynamic business environment?

Jeremy: The most crucial skill for today’s leaders is navigating what we call the VUCA environment—volatile, uncertain, complex, and ambiguous. This term really captures the challenges that modern leaders must manage. Our simulations are specifically designed to help leaders understand and adapt to these conditions, providing them with realistic scenarios where they can practice making tough decisions amidst uncertainty.

Will: Embracing ambiguity is crucial. It’s fascinating how simulations can mimic the real-life ambiguity and complexity leaders face, providing a valuable training ground.

Jeremy: Indeed. Navigating these complex scenarios isn’t straightforward—it requires a specific mindset. Our more complex simulations are not just about intellectual challenge; they demand a particular resilience and willingness to engage with uncertainty. Those who excel in these environments are often those who also thrive in entrepreneurial and corporate leadership roles. They don’t just tolerate ambiguity; they leverage it to foster innovation and strategic thinking.

Our simulations push participants to step outside comfortable, well-defined roles and embrace the unpredictability of the business world. This requires agile decision-making—an essential skill in today’s fast-paced market environments.

Will: That’s a profound insight. When faced with ambiguity in my own work, I find that having time to think things through is invaluable. How do simulations handle the aspect of time when making decisions?

Jeremy: Simulations are designed to reflect the real time pressures that leaders face in the workplace. Participants must balance the need for thorough analysis with the urgency of making timely decisions, mirroring the real-world trade-offs between speed and precision. This aspect of simulations is crucial for developing the ability to make effective decisions quickly, even with limited information—a reality for most leaders today.

Game Theory and Decision Making Under Uncertainty

Will: It sounds like focusing on the core elements of strategy and decision-making, without the distraction of unnecessary technology, is key in your simulations. How does HFX integrate game theory into your simulations?

Jeremy: That’s a great question, Will. Let me focus on our complex multiplayer simulations where there is no definitive right answer, and the effectiveness of your decisions depends heavily on your competitors’ actions. Game theory is central to these simulations, particularly in multiplayer zero-sum scenarios where your gain is someone else’s loss.

Imagine you’re in an industry with five competitors, all starting on equal footing. If you decide to increase your marketing spend by 10% to gain more market share, this initially seems like a solid strategy. However, if your competitors each decide to increase their marketing spend by 20%, your relative investment suddenly becomes inadequate, potentially causing you to lose market share even though you increased your spending.

This scenario illustrates the critical aspect of game theory in our simulations—understanding and anticipating competitors’ strategies. It’s about more than just making decisions; it’s about making informed decisions based on a deep understanding of the competitive landscape.

Business simulations train participants to think like seasoned strategists at the poker table. They need to gauge not just their own moves but also anticipate others’ moves to effectively navigate and influence market dynamics. This is particularly revelatory for people who may not have entrepreneurial experience and are used to more deterministic outcomes.

Understanding Risk

Will: That brings me to another point, actually. Success in any field is highly complex, involving intricate industries and business models. In your simulations, do you also include outlier events like natural disasters, or other unexpected variables that could influence decisions?

Jeremy: Absolutely, that’s a great question. Indeed, we work with various design teams that integrate these kinds of real-world complexities into our simulations. Each team has its own specialty in how they embed both negative and positive externalities into the game scenarios.

For example, one of our expert teams excels at incorporating elements such as labor disputes, strikes, wage resolutions, and even auctions of defunct competitors into the simulations. These events introduce unexpected challenges that require players to adapt their strategies on the fly, closely mirroring real-world business unpredictability.

Another team we collaborate with specializes in the intricacies of R&D investment and new product launches. They simulate the dynamic process of adjusting to market demands, timing product launches effectively, setting the right price points, and choosing the best distribution channels. This requires a deep understanding of different market-segments, which adds another layer of realism and complexity to the training.

By including these types of unpredictable events and strategic challenges, our simulations provide a robust platform for participants to hone their decision-making skills in a way that closely mimics the unpredictable nature of real-world business environments.

Simulation Design Process

Customizable Simulations

Will: So in any of these training simulation models, participants can be hit by all sorts of curveballs, right?

Jeremy: Absolutely, and that’s part of what makes these simulations so valuable. In academia, especially, we’ve found that business professors appreciate the ability to rescript simulations to maintain engagement not just for their students, but for themselves as well. Repeating the same scenarios year after year can become monotonous, so the flexibility to modify these simulations is crucial.

Moreover, at institutions like large business schools, there’s often a need to adapt the simulations across different classes or programs. Professors can tailor the complexity of the simulations to suit the course level. For instance, in undergraduate classes, they might opt for simpler modifications like adjusting news items that affect the simulation. However, for a Master’s level capstone project, they tend to include more complex interventions and set parameters to be more challenging to really test the students’ abilities to navigate tough situations.

This flexibility not only keeps the curriculum fresh but also ensures that the simulations are appropriately challenging and relevant to the educational goals of different levels of study.

Game Design Process

Will: So when your team designs these simulations, there must be extensive pre-planning and meetings with various stakeholders to ensure the scenarios are realistic, right?

Jeremy: Absolutely. You’re highlighting the crucial aspects of development and customization. Typically, creating a new simulation tailored specifically for a corporate client involves a substantial, iterative process. This interaction between our design team and the client is especially intricate for complex simulations, which might include detailed financial models. These engagements require a deep understanding of the client’s environment to ensure the simulation is as realistic as possible.

However, striking the right balance between realism and accessibility is key. If a simulation is too realistic, it might overwhelm participants, especially in a brief workshop setting. Our experienced design teams are adept at calibrating simulations to be engaging yet manageable, which is critical from a pedagogical perspective.

Will: Are most of your simulations then readily available off the shelf for immediate use, or do they require customization?

Jeremy: Most of our simulations are indeed available off the shelf. These pre-developed simulations are designed to be adaptable and are widely used, especially in academic settings. Once business professors are familiar with the base simulation—after experiencing it as students—they often want to customize aspects like news items or crisis scenarios to better align with their teaching objectives. We provide the necessary training to enable them to make these adjustments, allowing them to tailor the simulation details to fit their specific curriculum goals more closely. This flexibility is one of the strengths of our simulation offerings, providing a solid foundation that can be modified as needed.

Instructor Training Process

Will: That’s fantastic. For someone like a university professor or a corporate trainer in a specific industry, how much training is required to become familiar with the simulation before it’s implemented within the organization?

Jeremy: In an academic setting, where you’re dealing with thought leaders and experts in their respective fields, the approach is quite straightforward. Professors will experience the simulation first as participants, which helps them understand it from a student’s perspective. Typically, if the simulation is run asynchronously, they can familiarize themselves with all its aspects — from reading the materials to making decisions — within about four to eight hours. This process ensures they grasp how the simulation can support their educational goals and enhance student learning.

Will: Is the training duration similar in a corporate environment?

Jeremy: The situation in the corporate world can differ significantly. Large corporations, especially those with in-house training capabilities, often opt for customized simulations tailored to their specific business processes and challenges. Here, the training isn’t just about using the simulation; it’s about co-developing it. Corporate trainers often collaborate closely with our team from the early stages of development, which can be a detailed and iterative process. This involvement can range from tens to hundreds of hours, depending on the complexity of the simulation and the depth of customization required. This extensive collaboration ensures the simulation perfectly aligns with the company’s strategic objectives and training needs.

This is the end of Part 2. Stay tuned for part 3, where we look at the ROI on simulation-based management training, what the future holds for Business simulations – including the impact of AI – and finally some tips for organizations looking to incorporate simulation-based management training into their programs.

Jeremy Lovelace | Director | hfxtraining.com

Connect with me on LinkedIn

The ability to make strategic decisions swiftly and effectively separates the leaders from the followers. But mastering the art of decision-making is no small feat—it requires a harmonious blend of advanced technology, rigorous training, and collaborative teamwork. Enter HFX Technologies, a company that pioneers simulation-based solutions designed to enhance the strategic capabilities of current and future leaders.

Founded by Jeremy Lovelace, a visionary driven by the desire to bridge the gap between technology and practical decision-making, HFX Technologies collaborates with some of the world’s top universities and tech hubs to create customisable, cutting-edge simulations. These tools are gateways to understanding complex business dynamics and preparing for the unpredictable twists of the corporate world.

In this exclusive interview, Jeremy shares insights into the journey of HFX Technologies—from its inception to its rise as a leader in strategic decision-making solutions. He delves into the technology of their simulations, discusses the impact of game theory on their designs, and provides relatable examples that illustrate how these tools can be used in management education.  

This is the first article in our three-part series with the founder of HFX Technologies, Jeremy Lovelace. This series will explore the dynamic field of simulations in business and education:

Part 1 introduces HFX Technologies and their role in advancing business simulations.
Part 2 delves into the development, design, and powerful impact of these simulations.
Part 3 discusses the importance and future potential of business simulations in modern training and development.

Part 1 – Introduction to HFX Technologies and Business Simulations

Jeremy (HFX): Hey, Will!

Will (Technology for Learners):  It’s great to see you, Jeremy.

Jeremy: Likewise, Will, great to see you too.

Will: Could you start by sharing what led you to found HFX Technologies?

Jeremy: Certainly. My career in management consulting was the springboard. I noticed a shift in the industry as many tasks traditionally handled by consultants were being automated by software. For instance, during a major project for a consortium of service firms, I engaged in extensive data analytics. Over the course of this project, I discovered that 60 to 80% of what we had accomplished could now be done using off-the-shelf SaaS products. This realization prompted me to pivot towards software distribution, leading to the inception of HFX Technologies, focusing on replacing traditional consulting services with technology supported solutions.

Will: That’s fascinating. What do you believe sets HFX’s simulation-based solutions apart from other training and analytical tools available in the market?

Jeremy: Great question, Will. HFX initially emerged as a strategy consulting firm, heavily invested in business analytics to aid corporate decision-making. Over time, we shifted our focus towards training, particularly through simulations that teach complex concepts and allow for safe, practical application of these concepts. This transition led us to collaborate extensively with business schools.

What truly sets HFX apart is our dual role as a value-added software distributor and a client-oriented consulting firm. We partner with diverse design teams, which allows us to swiftly deliver business simulations tailored to a wide range of management education needs, in both corporate settings and academia. Moreover, our consulting roots mean we don’t just push out generic software; we craft bespoke solutions that precisely meet our clients’ specific training requirements.

What are Business Simulations?

Will: Can you explain what exactly a business simulation is?

Jeremy: Certainly, Will. Business simulations typically fall into two broad categories, each with its distinct purpose and design. The first type is analytical simulations, which are highly tailored to specific corporate needs. These simulations are constructed to address particular challenges a company might be facing, such as evaluating the potential outcomes of a new investment or a strategic project. The goal here is to provide detailed decision support, helping executives to make informed decisions based on the simulation outcomes.

The second type is training simulations, which are more general in their design and intent. These simulations are crafted to educate and train individuals in various business concepts and decision-making skills. They’re used extensively in both corporate training programs and academic settings. The focus is on imparting knowledge and practical skills that participants can apply in real-world business scenarios.

At HFX Technologies, although we started with a broader focus, fate and market demands have led us to specialize more in training simulations. Today, under the HFX Training brand, we primarily offer simulations that enhance learning and development across various business functions.

Where are Simulations Used?

Will: Can you describe a typical training scenario that would be suitable for simulation-based training?

Jeremy: Absolutely, Will. Let’s look at how simulation-based training is applied across different sectors, specifically academia and the corporate world, to give you a clearer picture. In academia, simulations are incredibly versatile, supporting business administration curriculums at various levels—from high school to potentially doctoral programs, though they’re predominantly used in graduate and undergraduate settings. For instance, complex simulations might be used to teach strategic management or act as capstone projects, integrating a semester’s worth of learning into a practical, real-world scenario. Simpler simulations, on the other hand, might focus on specific aspects of a course, enhancing understanding through interactive learning.

In the corporate realm, the application of simulations is equally diverse but tailored to distinct needs. Complex simulations are often employed for executive training, graduate fast-track schemes, or even during strategic planning sessions, helping leaders explore outcomes of various business strategies in a risk-free environment. Simpler simulations, meanwhile, might be used for talent assessment during recruitment, or as part of ongoing learning and development programs to enhance specific skills asynchronously. This tailored approach allows simulations to address specific educational and business needs effectively, making them a powerful tool in both educational and professional contexts.

Simulations in Practice

Timeframes and Time Constraints

Will: What does using a training simulation look like in practice? How does the typical timeframe for a simulation work? Does it vary depending on the client?

Jeremy: Yes, Will, the duration and structure of simulations can significantly vary depending on their complexity and the specific requirements of the client. Simulations range from simpler, conversational role-playing types, where participants can engage individually at their own pace, to highly complex competitive scenarios. In the latter, participants are grouped into teams managing fictional companies, competing in a simulated industrial environment over several decision cycles. These more elaborate simulations often require a live workshop setting that can last from two to three days, or they can be extended over half a semester or an entire semester in an academic context. This flexibility allows us to customize the simulation experience to effectively meet the educational or strategic goals of our clients.

Will: Within these simulation models, are participants under tight time constraints, or is the timing more flexible, allowing ample time for decision-making?

Jeremy: The timing within the simulation models indeed varies by complexity. For simpler simulations, such as role-playing scenarios for first-time leaders, participants usually proceed at their own pace, navigating scenarios asynchronously. However, more complex simulations are designed to closely mimic the pressures of real-life decision-making. These run synchronously with live opponents and involve strict decision round deadlines, creating a dynamic and pressurized environment where all teams must make decisions under similar time constraints.

Whether it’s an intensive, two-day workshop or a more drawn-out academic course, the element of time pressure is critical. This setup simulates real-world business scenarios where quick, strategic decision-making is crucial, and delays can lead to missed opportunities or errors. It teaches participants to manage and organize effectively under pressure, mirroring real-life situations where outcomes depend heavily on the ability to make timely and accurate decisions. This is essential for developing skills in strategic thinking and decision-making, preparing participants for the fast-paced and often unpredictable business environment.

Learner Engagement

Will: It sounds quite fun, Jeremy. Do participants generally enjoy these simulations, or can they find them stressful?

Jeremy: That’s an excellent question, Will. Overall, the feedback is extremely positive—surveys typically show that between 70-90% of participants find the simulations to be an exceptional learning experience, which is a significant endorsement in educational settings. 

However, there are indeed some who might not enjoy it as much. Often, the challenge and stress stem from the nature of complex simulations, where participants face decision-making under conditions of uncertainty.

In these more intricate simulations, there is no straightforward right answer. The success of a participant’s decisions depends heavily on the actions of their competitors, which are unpredictable. This can be particularly daunting for those not accustomed to such open-ended, strategic decision-making environments. Those who are familiar with making strategic business decisions generally adapt more quickly and effectively.

Despite the challenges, those who do well in these simulations often embrace the stress as part of the learning process. They make decisions, learn from their mistakes, and gradually become more comfortable with the uncertain dynamics of the simulation. It’s a powerful way to develop real-world business decision-making skills in a risk-free environment.

Case Study – Academic Use of Complex Simulation

Will: Could you give us an example of how HFX’s simulations are used in academia?

Jeremy: Absolutely, Will. A great example is how we’ve implemented our Healthcare Hero simulation at Maastricht University. This simulation is part of their healthcare management course and serves to deepen students’ understanding of strategic management in a healthcare context.

The students take on the role of hospital managers, making decisions across several simulated years. They handle everything from crisis management to strategic shifts in their hospitals, mirroring real-world challenges. This immersive experience not only helps them apply theoretical knowledge but also sharpens their decision-making and strategic thinking skills.

We’ve customized the simulation to reflect current issues in healthcare, such as workforce challenges, making the learning experience highly relevant and dynamic. Since its introduction, feedback from students has been overwhelmingly positive—they find it engaging and invaluable for understanding the complexities of healthcare management.

Case Study – Simple Role-Playing Simulation for Corporate Talent Selection

Will: Could you provide a simple example of how HFX Technologies uses a simulation model to enhance skills or knowledge in a specific area?

Jeremy: Absolutely, Will. Let’s consider a straightforward example of a role-playing simulation that we’ve adapted for a specific client’s needs. We worked with an insurance company in Latin America to develop a sales training simulation. This simulation was customized and white-labeled to function not only as a training tool but also as a recruitment aid.

In this simulation, potential sales staff are placed into various scenarios they’re likely to encounter on the job. They navigate these scenarios by making choices, such as selecting responses from a set of multiple-choice options or crafting more detailed replies via email or audio recordings. These responses are then analyzed by the company to assess the candidates’ skills and decision-making capabilities, effectively helping to sift through potential hires.

Will: So, as a participant in this simulation, are you mainly typing out answers to these scenarios?

Jeremy: Yes, that’s right. The inputs in this simulation are primarily conversational. Participants might choose from predefined multiple-choice options or create their own responses in text, audio, or even video format. This variety allows us to evaluate a range of communication skills and adaptability in real-time situations, making it a dynamic tool for training and assessing potential employees.

Will: So when participants script their own responses in video or text format, who evaluates these? Is it done by artificial intelligence or by someone else?

Jeremy: In such cases, the multiple-choice responses are automatically scored by the system. For responses submitted in video or text formats, we primarily use AI for initial assessments. However, there’s also a manual review process available, where organizational staff can evaluate these responses. This creates a comprehensive approach that combines AI efficiency with human insight to assess participant performance thoroughly.

Will: At the end of this simulation, how is scoring handled? Is feedback given to the participants?

Jeremy: When it comes to using simulations as recruitment tools, we do exercise caution regarding the feedback provided, adhering to relevant regulations. Generally, the scoring and feedback are handled internally. For these simulations, a wide range of feedback options is available, tailored to the needs of both the participants and the administrators. This feedback is crucial as it helps refine skills and adjust training methods to enhance overall effectiveness.

Case Study – Complex Simulation at Large MNC for Change Management

In a corporate environment, the use of the more complex simulations is often geared towards strategic planning or supporting major change management projects. Organizations in these contexts frequently prefer simulations that are custom-built or heavily modified to meet specific strategic needs. For example, we collaborated with a large pharmaceutical company at the end of 2022, which was undergoing significant changes in its product launch process. They needed a simulation that could effectively mirror and help refine their new process in-house.

To meet their needs, we extensively reworked one of our existing simulations to accurately replicate their product launch cycle. This adaptation allowed the simulation to address the specific challenges and dynamics of their market environment, ensuring the training was relevant and directly applicable to their goals. This project is a prime example of how simulations can be tailored to assist companies in navigating complex business changes effectively.

Jeremy Lovelace | Director | hfxtraining.com

Connect with me on LinkedIn