(Article by Awiwa Keller in Dagens Nyheter, 18 December 1994)
Stockholm, December 1994
We are into the third year. We've done all right so far. The cash flow was a bit dodgy, but we built a great reputation. Everything went according to plan.
There are fourteen of us here, all managers, playing Tango; a tool that will help us in our various knowledge companies, to understand, and develop efficient management principles. We had never met before, and none of us had ever been exposed to this kind of exercise.
We were divided at random, into five groups; three groups of two men and one woman, two men in one group and two women and one man in my group.
On the table, in front of us, lies a totally incomprehensible game board. We exchange anxious looks. Is there an economist in the house? No. Ah well, we reassure each other, it's only a game...
Our first task was to work out which of the intangible assets are owned by the company. We suggested reputation, know-how, image, routines, good personnel policy, synergies, concepts, etc. We agreed that the main intangible assets consisted of "reputation capital" and "knowledge capital"; essential parts of the company's assets.
Then we discussed inter-personal relations, and the decisive part they play in a knowledge company's business. As play proceeded, we soon realized how crucial personal chemistry be tween the client's representative and our own people is to the success of a project. An ability to recruit, develop and keep the right key people turns out to be vital in this kind of company.
The first project group, and the first clients were given, at the outset; what we had to do was recruit a key person. The nature of the business would then be determined by these key people.
What were the central, and most important characteristics of the consultants and clients? We felt challenging assignments would enhance our reputation on the market. If we succeed, we also enhance our own competence. With a good reputation, we will be unbeatable on the market. We had barely got started, but felt we were on the right track.
Our line was to seek recruits, and clients who were attracted to a good reputation and not so fussy about pay, and high fees. When this was done, all the groups marked up, on the joint mar ket board, where we planned to be after six years in business. At half-time, we were well on the way. We got the clients we wanted, without having to tempt our personnel with bonuses, and decided to take on more challenging assignments. We would have liked to have a little more equity, but we had not expected to be a profit machine in the first few years. We were the market leaders, and our strategy had succeeded. Of course we were cocky, and irritated the others, but we didn't mind.
They say that the best way to do good business, is to avoid bad business. Now we had to stop "wasting" over-qualified talent on old clients. They weren't paying so well any more.
Time for review: had we held the career talks we had promised and promoted people to the right level of competence? Should we seek new clients, or get rid of old ones?
Our staff were working at 94% of capacity, but the revenues were still too small. Taking on new clients, or phasing out old ones, would cost too much. We decided on a slight change of tack - putting more into R&D, and pressing ahead with the clients we had.
It was a good move. After five years in business, we are the winners on the market. It was with some pride that the three of us, none of us economists in real life, acknowledged the plaudits of our peers.
Alas, there were no cash prizes, or diplomas, but what we did get out of it was insight and, not least, some lessons. For example, that things can change fast in knowledge companies, and that the business logic depends heavily on how knowledge organizations view their invisible assets.
If you spend time and money on this method of learning, to do better business with knowledge, you ought to expect to learn how to overcome the obstacles that stand in the way of the compa ny's further development. Any method that works is good, and it was fun, too.
In a Tango simulation, up to 24 participants sit in groups of four at separate tables, each with an identical game board in front of them. For two days (covering up to seven 'years'), they act as the management of their own knowledge company, in competition with the other groups. A 'facilitator' is present to clarify the rules, organize the 'market', and act as referee. The game board is divided into three sections: one for the ordinary income statement and balance sheet, one for the invisible balance sheet and one in the form of a calendar on which projects are planned and executed.
After a dry-run in the first "year" to give players a feel of the game, the teams are required to make their own decisions about the kind of people they want to recruit, and the kind of clients they want to attract, and then to plan and execute projects. The most important decision, at this stage, is what strategy to adopt.
At the end of each "year" the facilitator asks the teams what they have learned, and what con clusions they have drawn from their results. About half-way through the simulation, some of the control indicators that measure intangible assets and the flows of knowledge to, from, and within the invisible balance sheet are introduced. Thereafter, the groups use these control indicators to monitor their operations.
The development of the 'market' in the simulation, mimics the life cycle of a field of knowl edge. When a new technology, or a new field of knowledge is introduced, there is a shortage of people who are familiar with it, and not many clients who even know what to look for. After a few years the subject has become more widely known, there are more potential employees, and more, but also more demanding clients. Towards the end of the cycle, there are plenty of people conversant with the field, but many are "overqualified", and clients no longer pay so well, be cause by now they have largely mastered the subject themselves.
To maximize knowledge transfer, all the teams are in the same room. A successful Tango simu lation resembles an arena, where participants learn through the natural, "broad-band channel". They usually enjoy the game and this is important, because we know people learn best if they find learning pleasurable. The atmosphere in Tango simulations is often very intense; people learn a lot of things at once, from each other, and from the game itself.
But one cannot predict what players will learn, any more than one can predict what anyone will learn, in any form of adult education. For some, insights into the measuring of intangible assets is the most important lesson; for others, it may be the interaction within groups, and for others again it may be the strategy, or the view of the market, that is illuminated. What people learn depends on what they already know, and they learn it from each other in a process, not from a lecturer or a teacher.
The facilitator's role is to support, rather than teach. This may feel awkward to those accus tomed to holding the floor, but adults must discover for themselves what is relevant to them, personally. A simulation model throws open the arena to the participants, and thus changes the nature of the process from teaching, to learning.
We learn best when using our whole bodies. That is why games, simulations and role-playing are so effective at transferring knowledge. They pass it on in ways that emulate the reality.
A good simulation creates a mini-world governed by rules that reflect the reality so closely, that the mini-world feels "real" to participants. This kind of arena can be used for many purposes; learning about business and strategy is one of several possibilities. It may focus on teamwork, on cultural bridge-building, or on change processes. A simulated world is a world in which sce narios and conjectures can be tested, and from which conclusions about reality can be drawn.
Palo Alto, February 1995
The room is cramped and overheated, and the atmosphere tense. Two groups of executives, representing two "companies", are deep in discussion. The problem for the two management teams is that they have a common enemy, a company that has managed to get a grip on the market and is now squeezing them out. As they discuss the pros and cons of a defensive merger, they are joined by a third company, and suddenly there's talk of a three-way merger.
The managers of the dominant company, preoccupied with the problems of their large clientele, are unaware of all this, but are approached by a small, niche company, with a large knowledge base, and they suddenly realize that what looked like being a smooth ride, is now developing into a much more threatening scenario.
I am 'facilitating' this game, and I start to get worried. We are only up to year three - not half -way yet. Where is this simulation headed? What am I going to do, if they decide to merge with each other? This is the fastest-thinking, and most dynamic group I have ever run the simulation model with; they are the top people in Hewlett-Packard's Consultancy Division.
I feel compelled to call 'time out', and explain to them that they have broken the bounds of the model, and it is pointless to continue with the simulation. I propose, instead, that we have a detailed discussion of what they have learned, and how they can apply the lessons in their work. The President picks up the gavel. My fears prove groundless. Less than half-way into the game, they have seen all they needed, and proceed to pick their present strategy to pieces, and re -construct it in "Tango" terms.
They draw up activity lists, assign responsibilities, and set reporting schedules. It is a very impressive performance that takes barely three hours.
Later on, I follow up the exercise with their President and a couple of other executives. What they felt was most important was that the simulation had taught them a strategic language.
"We have discovered, for the first time, that we can talk strategy among ourselves, and be sure that we mean the same thing, even though we come from different cultures, countries and disci plines." Karl-Erik Sveiby
In simulations, people behave according to their cultures and values. Each simulation is a little "world" composed at will. This feature can be used for cultural research or - as in the Hewlett -Packard case - for improving the clarity of strategic discussions between an international group of managers.
Nearly 100 simulations, in 10 countries, were run in Tango's first year 1995. Although this number was too small to permit any statistically significant conclusions to be drawn, some very interesting cultural differences emerged.
American teams have been the most profitable. So far, none of them have gone bankrupt. But they have tended to concentrate on their tangible profits, and underinvest in people, so they have not used the full capacity of their personnel.
The opposite business culture prevailed at a simulation where most of the participants were from the Swedish public sector. They invested heavily in people, overpaid them, put lots of resources into R&D, and virtually ignored customers. Half the teams went bankrupt before lunch on day one.
European Tango players have been less creative strategically, and "friendlier" towards each other (less competitive), than American and Australian teams. The only case of cheating that has been caught, occurred in Australia.
Americans seldom miss a strategic opportunity, in Tango. They are very successful in their profit orientation in their All-American "worlds". But, because they do not invest in people they can be vulnerable when confronted by counter strategies. As one American participant put it: "What would have happened if we had had a Japanese team competing with us?".
Teams that are able to work well together, fare much better than teams that are composed of people pushing their own ideas, without listening.
Teams may divide the mangement roles among themselves into "financial manager", "Compe tence Manager" etc. and most teams do that. However, the highest scores have been achieved by teams that do not divide their roles. Teams in which each member has the full "helicopter view" and adapts his/her contributtions to the situation and the other members. This confusing manage ment style seems either very effective or disastrous.
The highest total value creation in any single room that I came across in 1995 occurred in Aus tralia, where a number of CSIRO professionals (the Australian government´s R&D centre) utilized the full potential of the markets, without being too competitive. Although one of the teams achieved a dominant position, the others were able to find niches where they could pros per.
An obvious shortcoming is that, although a good simulation is similar to, it is not the same as reality. A simulation model is articulated knowledge; a distillation of a model builder's tacit knowledge of what he or she perceives as reality. It is thus tainted by built-in value judgements that may not match other people's ideas of what the world is like.
Like all knowledge then, the model is culture-conditioned and contextual, so the value of a
simulation model depends on the context in which it is used. A model is also static, although it shares this weakness with all articulated human knowledge. But the weaknesses are not as appar ent as they are in a book or lecture. In a simulation model only the framework of rules is static, and it takes time to spot the value judgements. In some cases they are never spotted, so using simulation models uncritically, as though they were "true", can be dangerous.
A Tango session can sometimes be seen as dangerous because it provides "too much" learning. I first encountered this oddity in the UK, when one of the players said he would never dare expose his staff to the experience, because "it would put a lot of ideas in their heads, and they would start questioning what we are doing".
For others, this 'danger' is an opportunity, for it makes the simulation a powerful instrument for change, if managers are prepared to deal with the questions it raises, and willing to discuss the basic premises on which their own strategies, and organizations are built.
But, because the simulation takes place within the four walls of a classroom, we should not rely too much on the experience gained. The important thing is to use the experience as the inspira tion for a critical examination of one's own business. A simulation is only as good as the thought, and "aftercare" devoted to it. There is always a danger that the enthusiasm, and competitiveness generated by a simulation, will reduce the exercise to playing a game, and producing a winner.
Another drawback is that it may not be easy to assign so many resources to a programme, or spare so many people at the same time to take part in a simulation. Although the efficiency of a simulation, in terms of amount learned per unit of time, is very high, it takes longer, and de mands more of participants than a series of lectures on a traditional "managers' day".
Follow-up is essential. A Tango-type simulation should not be planned as a one-off course, but should form part of a larger executive development scheme, or strategy process. This makes it necessary for the buyer of a simulation, to understand the context, and where it fits into the process.
Tango is quite demanding on the facilitators. The facilitators are not supposed to teach in the traditional sense, but they are vital to the success of a Tango simulation. They must explain and police the rules, but their most important task is to forge chains of reasoning that link the experi ence of the simulation session, to the realities of the participants' own organizations. Only expe rienced persons, with links in practise can do this. Despite their senior level, they must have the personal maturity to stand back and not "take the floor".