One of the core features of Advantexe’s digital business simulation platform is its ability to capture data for review and performance analytics. The performance analytics from a well-designed business simulation can be used as part of capabilities assessments and career planning. For a recent business simulation workshop, we conducted for a top car manufacturer, we pulled all the simulation results from the last five cohorts which focused on four critical metrics of success including, revenue, sales expenses, operating expenses, and Net Income (profitability).
The learner experience was designed to simulate a year in the life of a dealership, divided into four quarters with financial and other results reported at the end of each quarter so users can chart their progress. Users take on the role of General Manager of a fictitious car dealership called Sunnytown Motors and are tasked with making business decisions across five departments: New Vehicle Sales, Used Vehicle Sales, Finance & Insurance (including leasing), Service, and Parts.
This learner data captured allowed us to complete an in-depth analysis that compares the original base conditions with actual results after playing the 4 simulated quarters. The shifts in data showed actual participant’s skill development and behavioral change as a result of consistent improvement in results of the simulated companies which can be linked to an understanding of new skills. It also showed the difficulties that some teams and individuals had with the concepts which led to the identification of areas for remediation and additional training.
The Business Results
Total Revenue - In the simulation, teams were tasked with growing total revenue for each of the departments of Sunnytown Motors. The focus of the learning was to help learners better understand the many different factors that drive revenue including price, marketing, sales effectiveness, customer service, available inventory, and others. Revenue grew for 14 out of 16 teams. It grew from an average of $10,640,879 per quarter to an average of $12,094,505, or an increase of 13.6%. There was a quarter team-high of $16,002,941 and a team-low of $5,560,726. This was the good news.
Expenses – Two other metrics that were tracked were sales expenses and operating expenses. We tracked these numbers as they consist of some of the core drivers of revenue. Since revenue increased so much, we wanted to see how well learners were managing the expenses associated with driving the revenue. This is an area where learners struggled, and the results represent one of the core benefits of simulation-based learning.
Both operating expenses and sales expenses increased on average at a higher rate than revenue. These results will now be reviewed. Operating expenses increased from an average of $341,049 per quarter to $560,958 per quarter or an increase of 65%. Seventy-five percent of the teams experienced an increase in operating expenses. Sales expenses also increased from an average of $808,702 per quarter to an average of $1,404,734, or an increase of 74%. Ninety-three percent of the teams had an increase in sales expenses. These increases will now be reviewed in terms of the effect they had on the Net Income of the business, or Revenue – Expenses.
Profit - With the significant increases in the costs of driving the business 56% of the companies increased their average net income, while 44% decreased their net income. Participants were faced with the task of driving revenue but had to learn how to juggle and manage expenses to maximize profitability. They had to make decisions based on customer buyer trends, competitive challenges, and changing economic business environment. The simulation created a “learning tension” between revenue generation and expense management.
This learning experience was a great example of how a digital business simulation provides a risk-free, learn-by-doing environment and helps to build necessary business acumen skills. The simulation results illustrated how real business decisions were affecting both the revenue and expenses of the business. Instead of static learning, or watching a video, teams were able to experience in real-time how their decisions, such as raising prices, investing in marketing, and managing inventory all affected the performance of the business.