In a large circular classroom called The Hives, Ramon Casadesus-Masanell is roaming the floors this week as he oversees the second running of Strategic Brew, a computerized business simulation designed for first-year MBA students at Harvard Business School.
HBS is no stranger to business simulations, but Strategic Brew stands alone in scope. All 940 first-year students play the game simultaneously as part of the required Strategy course. Roughly 40 faculty and project members manage and supervise the events.
“It’s a product everybody knows. It’s something that’s relatively exciting to students. So we thought, why not?”
“This is orders of magnitude more complex,” says Casadesus-Masanell, the Herman C. Krannert Professor of Business Administration at HBS. “I don’t think the School has ever done anything quite like this. It’s been a big effort and a lot of work for everybody.”
The two-and-a-half-day simulation puts students in charge of a brewery for 7 fictitious financial quarters. Working in four- to five-person teams, players make decisions on everything for running their business: types of ingredients to use, packaging, pricing, and customer segments to target. Five breweries are combined into one “industry” in which those teams compete, independent from the other industry groupings.
With each round, teams can see how they’re faring and how their rivals are performing, altering their path as needed. The game highlights the importance of having a clear strategy and coordinating choices throughout the value chain while giving students a sense of how competitive dynamics work.
Two years and thousands of hours in the making, Strategic Brew is the idea of Casadesus-Masanell and Gaston Llanes, a professor at Pontificia Universidad Catolica de Chile. In 2013, these two research collaborators came up with the idea of creating a simulation.
The resulting technical manual (which they make available to players) contains all the equations used to make the simulation work and explanations for each number and how it relates to other numbers. They turned to HBS’s Information Technology group to implement the model, with versions going back and forth as they calibrated and set hundreds of parameters for the game.
About 20 people worked on the project, and Casadesus-Masanell in particular cites the herculean efforts of former lead programmer Jeff deBeer during the initial two years, as well as the work of his successor Leo Haskin, who took over the lead after deBeer left HBS.
The simulation made its debut in March 2015, and the team started on Version 2 just a few months later.
Previously HBS used a simulation from an outside vendor for the Strategy course, but Casadesus-Masanell said that there were several shortcomings in that arrangement. It was hard to alter the model to align closely with the objectives of Strategy course, and the vendor’s product—capacitors used by electric utilities—was a little arcane. Beer is much more fun.
“In real life nobody tells you what is the number you have to maximize”
“It’s a product where you get both vertical and horizontal differentiation. It’s a product everybody knows. It’s something that’s relatively exciting to students. So we thought, why not?”
He and Llanes are already thinking about Version 3 for MBAs, and Casadesus-Masanell hopes to tweak the simulation for his executive education courses.
Into the sim
There have been some downsides to HBS creating its own simulation, particularly around technology. The outside vendor’s simulation had technology proven with decades of use. Strategic Brew doesn’t have that track record yet, making for some anxious moments. Last year a glitch was found during practice rounds, just hours before official play was to start.
“We were able to fix it just one minute before the thing went live. It was very, very tense,” Casadesus-Masanell says.
The new version of Strategic Brew is easier to play. The number of regions breweries operated in dropped from three to one. Customer market segments—like premium or craft—were pared down from seven to five. The model for demand is more realistic, and the new version makes it harder for breweries to fall into bailout loans, which happened to many teams last year, Casadesus-Masanell says.
Enhanced graphics include waterfall charts for just about every metric imaginable on a team’s own brewery and its competitors. Teams can drill down via a historical dashboard or a forecast dashboard with full pro-forma financials. Press releases are seen instantly by competitors, allowing rivals to react in real time.
Perhaps the biggest change is how the game is presented. Last year students were given a performance measure factoring in growth and profitability. The team getting the largest number was the winner for its industry. This year students are told to maximize their brewery’s overall performance while operating as an ongoing business concern.
“That’s just saying play well; you decide what you want to maximize,” Casadesus-Masanell says. “In real life nobody tells you what is the number you have to maximize. Also the issue is that our students are very smart. If you give them a particular formula, then they’ll kind of game the game to maximize that formula, and that may detract from the real learning.”
The game’s afoot
Strategic Brew takes place over two days with up to 7 rounds, and all teams have the same baseline budget and number of beers to work with.
Once play begins students can redesign or scuttle existing beers or create new ones. Rounds start off lasting two to three hours each, but gradually reduced. When time elapses, an administrator stops the program, results pop up in about five minutes, and everyone moves to the next round. “Once you get familiar with the game and once you have strategy, then you can be quite quick. At the very beginning you need more time because there’s so much data and so much complexity in the game,” Casadesus-Masanell says.
At the end of the week the teams make brief presentations, faculty present aggregate data, and students discuss what they learned.
During last year’s simulation Casadesus-Masanell watched as teams, surrounded by a sea of whiteboards covered in diagrams, huddled around laptops to make decisions. “They all want to win, so that makes them very alert and engaged.”
And like real business, pressure is very much part of the experience. A frequent comment from students was about the overwhelming nature of the data, but others believe the game needs to stay that way. “In real life, you’ll be exposed to loads of information and you have to be shrewd enough to decide what to take and what to disregard and focus on the right things,” Casadesus-Masanell says.
While HBS is known for its case study method, business simulations add something important to the mix, Casadesus-Masanell believes.
“If you have a case discussion in the classroom, you can say whatever you want and the world will continue. Nothing will happen. Here, if you make wrong choices, you start losing money and it might take time or might be very hard to recover from poor decision-making.”
Make-believe beer hardly makes things better afterwards.