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Chapter 1
Of Games and Game Design
Like so many prior arrivals on the educational scene -- lectures, seminars and case discussions among them -- management games are here to stay. This statement can now be made without any doubt; yet there continues to linger in the minds of many much doubt and many questions concerning the functions, construction and effects of games and their proper place in various curricula as well as in research. The present work makes no pretense at answering all questions or trying to allay all doubts. However, in this introductory chapter we shall discuss basic problems of application and design in a manner which may assist the reader with less practical experience of gaming to form his own reasoned views.
Later chapters are devoted to the International Operations Simulation (INTOP), representative of a small but growing class of fairly complex general management games which we consider particularly suited to executive development in corporations (particularly but not exclusively those engaged in international business), to business school training at functional as well as general business policy and organization levels and to a variety of research and business planning uses.
Games as simulation and training devices originated with the military, who for several decades were the only interested party. The last fifteen years have witnessed the emergence of business games as well as diplomacy and international relations games, and simulation by gaming is rapidly finding many other applications, ranging from the planning of state university systems via city governmental affairs to the determinants of public opinion. No particular degree of familiarity with these developments is required here; neither shall we attempt a systematic analysis of an already oft-surveyed and rapidly burgeoning literature. Pointers from our own experience as participants in and administrators and designers of management games will, however, be used to highlight the discussion.
1. Simulation by Gaming: Purposes of Games
Games represent a form of simulation. The concept of simulation is not without its ambiguities in either popular or scientific parlance. We find it natural and useful to think of simulation as "a technique for studying the behavior of complex systems." Thus, it involves the use of a model of reality comprising a bundle of interrelated variables, and the manipulation and/or observation of the behavior of this system over time. More often than not it is impossible to represent in the simulation all variables at play in reality and to assign them their proper relative weights. The proximate test of the value of simulation is whether by such means we increase our general understanding of the real system; the ultimate test is whether simulation permits us to predict developments in the realistic situation with greater accuracy.
Games are generally designed to meet only the more modest of these tests; that is, they purport to portray reality only in a broad and general way. In this one respect management games resemble the classical economic theory of the firm, although the more complex game simulations at least incorporate a great many more variables, economic as well as institutional, than one would expect to find in any model based on that theory. Game designers usually have not been interested in building a "computerized copy" of reality in any given industry, and we think for good reason. At least at the present stage of the art, the number of variables and the complexity of interaction involved generally speak in favor of highly specialized, non-game models for this more sophisticated but typically also more narrowly applicable species of simulation.
For a more detailed discussion of the purposes of business management games -- and we shall focus on such games -- it is convenient to distinguish three somewhat separate areas of application, namely, education, research and business planning.
A. Education
In the area of education three major types of purposes may be distinguished: to increase the student's understanding of business problems at the functional level (marketing, production, etc.), of the inescapable interrelatedness of the functions and parts of a business and of the various firms in an industry, and to broaden the grasp of, and provide some practical training in, the problems of organization, policy and decision-making processes in general. Many games are designed to provide exclusive or special emphasis on a certain business function, such as marketing or finance. In these simulation exercises students get an opportunity to grapple with such functional and sub-functional problems as market research and forecasting, sales management, pricing, physical distribution, advertising, or investment policy, procurement of financial resources, budgeting and financial control. While the details of these problems will differ from any specific situation facing the students in real life, the principal elements, their general linkage and their dynamics will be sufficiently similar to offer the students a taste closer to "the real thing" than that of almost any other potion educators are in a position to offer.
Even quite simple game models do show up the inevitable interconnectedness between various parts of business. The risks of narrow-minded specialization, "localism," and suboptimization are usually demonstrated quite forcefully and in surprisingly realistic ways. Judging by our experience in the Executive Program of the Graduate School of Business at Chicago and by information from several corporate development programs, this facet of business games seems especially pertinent in training at the middle management level.
The more complex games will do what the simpler games do in the functional and inter-functional areas. In addition, they are generally vastly superior instruments for top management and leadership training in general, due to their automatic emphasis on problems of organization, policy and decision-making processes. The number of decisions to be made, and the amount of information processing required for reasonably intelligent decisions, is so great as to confront the teams with the urgency of a sensible division of labor, the desirability of long-range planning and the merits of applying a variety of techniques of management analysis such as cash-flow budgeting and rate-of-return analysis. The team leader is given an excellent opportunity for sensitivity training, and for all members an experience in group decision-making and action is provided in which they get a chance to observe and improve their own "style" in an informal, if rarely relaxed, organized interaction context. An incidental payoff of participation in a complex game is that it forces players to learn how to live with computers. Whatever the effects of computerization in business will be, we will see more of it. Team members will learn, usually the hard way, that generally speaking computers are characterized by inexorable logic paired with complete lack of judgment. It turns out to be quite a strain on untrained minds to write computer instructions and decision rules under these highly realistic constraints.
B. Research
There can be no doubt that management games hold a vast potential as instruments and settings for research. This is especially true in two fields, economics and marketing constituting one and organization theory and behavioral sciences the other. As to economics and marketing, the discussion about the most efficacious research applications seems to have swung like a pendulum between two extremes. Some persons seem to think that designing game models resembling as closely as possible the constructs of classical economics is highly desirable, presumably with a view to "check out" these as a prelude to their ultimate application to real-life situations. Apart from the nagging question of whether we can ever hope to transplant an essentially static theory into something practically applicable even in a highly structured game environment, there is the challenge of using a new instrument of research inductively rather than deductively. In other words, by incorporating institutional and behavioral features of real-life markets into our game models, we may begin to learn things about the relationships between market structure and market strategy that in a new light, which is sorely needed. ???we never knew before. At least we may begin to view these relationships.
Several other avenues of economic research suggest themselves. One might try to gauge the impact of changes in public policy -- especially with regard to antitrust and tax legislation and international trade policy -- in terms of both aggregate effect on behavior and reaction times. It is further most likely that our understanding of decision-making under conditions of uncertainty and risk will be increased by experimentation with varying degrees of such conditions in controlled game situations. Certainly such endeavors would represent a marked step forward from most highly artificial and simple experiments in gambling and choice behavior of the past. There are also the great new vistas opened by the emerging behavioral theory of the firm, which focuses on the impact of institutional and organizational factors on business decision-making within firms. There is already enough empirical evidence at hand to assert with sublime confidence that the organization structure and information-handling processes of the firm greatly influence its specific decisions in such vital areas as price, output, equipment acquisitions, advertising and so on. Here we find the vital cross-link from economic theory to organization theory and behavioral science.
Simulations may also find applications in research aimed at the industry rather than the firm. Thus, some of the more sophisticated games could well be used in elementary simulations of market structures of widely different characteristics as regards production and demand functions, degree of competition and number of participating companies.
The research opportunities presented by management games in the area of organization structure and behavior seem almost unlimited. Again it must be kept in mind, however, that only games with a certain minimum level of complexity will meet the criterion of reasonable realism, both in terms of portraying real-life institutional and economic conditions and being conducive to realistic division of labor among team members. If these conditions are fulfilled, a myriad of research projects which have been carried out under the common label of "small-group research" may be replicated in an environment which in many instances would represent a clear-cut advance in degree of realism. If the results achieved under small-group laboratory conditions stand up in experiments repeated in complex games, this would seem to support at least a preliminary rebuttal to the argument that what we learn in the small-group laboratory may not be at all transferable into the realm of reality. Game simulation may also be used heuristically to generate new hypotheses for research on actual organizations.
Some of the most interesting research perspectives are now opening as regards formal organization and the interaction of formal and informal in organization. Under what circumstances in terms of personnel, objectives and environmental conditions should structural elements emphasize purpose (product), clientele, function and/or geographical area? What environmental circumstances favor delegation of decision-making authority? How are structure and behavior influenced by variations in accounting systems? What are the characteristics of those groups which will stand up better under time pressure than others? What is the effect of a new member on an on-going organization? How will various restrictions on information flow affect team performance? These are only some of the many questions which we may hope to shed new light on.
The psychologist, the sociologist and the organization theorist alike will be interested in exploring the emergence and exercise of leadership in initially unstructured but heavily task-oriented groups. By changing parameters in terms of the game task environment, number and composition of team members and their assignments, we may also gain new insight into what is really meant by the assertion that leadership is largely situationally conditioned. While it is certainly premature to make definite statements in this regard it is also likely that certain types of personality tests based on performance in management games will be developed.
Bargaining and game theory constitute another research area of multi-disciplinary interest in which simulations permitting meaningful inter-team transactions hold great promise. Simulation-based research may, for example, help test the hypothesis once propounded by Harold Guetzkow that the more adequately the members of a group envision the techniques of inter-group collaboration as means to their ends, the greater the tendency to move toward collaboration.
Clearly, our brief survey has suggested only a few of the great many research opportunities presented by management games. It is also clear that most or all projects suggested could be carried out by alternate means. Some can, and undoubtedly will, be executed on real-life businesses, in which case the question of realism, at least, need no longer bother the researcher. But research on real-life organizations, especially if it involves experimentation, is generally extremely costly -- costly in terms of time, in terms of direct expense involved and frequently also in terms of upset or disturbed human relations. In all these respects working in the game environment represents a distinct advantage. On the other hand, a sophisticated management game has the advantage of much greater realism (subjective if not objective) than the simplified situations employed in much small-group research in the past.
Considering the vast potential use of management games for research purposes, one may legitimately ask why the accomplishments to date (even including the respectable work at Carnegie Institute of Technology) are but quite modest. A number of reasons explain this situation. The most powerful one is probably that these games are so new. The main effort of researchers in the past has been to conceive of game models and then to try to make them work. The latter part of the effort is not to be underestimated, as making a complex game of the type needed for much economic and organizational research really "fly" will often involve several man-years of work by highly qualified people. Neither can we lose sight of the fact that the prime motivation behind the development of new games in the past has been their use for educational purposes. An often heard observation on the campus is that the exigencies of educational application will tend to hold back the use of games for research in the absence of a clear-cut policy to the contrary.
C. Business Planning
The third major area of application of management games is business planning. For present purposes it seems natural to look upon this as an area of applied research, as opposed to research of a more fundamental nature just discussed. Again, a distinction seems useful (even if in the end artificial) between simulation of markets and economic systems on the one hand and administrative systems on the other. Simulation of the former kind typically aims at the examination of alternate specific production, finance, marketing, etc., policies of the firm under game environmental circumstances which in some i...
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