Business Strategy - Simulation Advantage

Business Strategy - Simulation Advantage

Being able to anticipate, learn about and adapt to change is increasingly important. Simulations can reduce costs, risks, time and greatly increase the odds of success.  They can be used to develop and test products, business strategies, and business models.

Most companies conduct some experiments, but often they are too costly, lengthy, and ineffective.

Six Levers to Capture Simulation Advantage

Boston Consulting Group outlined six levers for “capturing a simulation advantage.”

    1. Generate and capture ideas at greater speed and lower costs
    2. Make the process of experimentation faster and less expensive
    3. Increase the volume of experiments
    4. Lower the cost of failure
    5. Enhance predictive power
    6. Accelerate learning and scale-up

Generate and Capture Ideas at Greater Speed and Lower Costs

Royal Dutch Shell’s GameChanger unit uses an online collaboration portal, workshops, and relationship with universities to gather ideas from contributors” in and out of the company

Make the Process of Experimentation Faster and Less Expensive

“Kimberly-Clark uses a 3-D virtual store to gauge consumer and customer reactions to new products, shelf layouts, and packaging”

Increase the Volume of Experiments tests “numerous page variants on different groups of consumers and track their resulting behavior”

Lower the Cost of Failure

Best Buy used an online tool where employees provided their best bets on forecasts online. The accuracy of the forecasting was significantly improved

Accelerate Leading and Scale Up

Some companies provide learning through “online knowledge platforms or virtual training”

Walmart “tests different layouts in its own stores as a regular part of its operating model. Traffic patterns are measured for each layout, and the most successful designs are rolled out across the company”

Integrated Approach to Experimentation

    • Procter & Gamble (P&G) uses innovation networks, such as InnoCentive, to solve technical design problems
    • P&G uses a walk-in, 3-D virtual store to run experiments
    • P&G uses online panel to introduce produces to friendly audiences before full launches

Business Strategy - Simulation Advantage

Highlights by David Willden