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Simulations for Business Skills: Best Practices and Market Outlook
March 2003
Author: Le'a Kent
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Executive Summary
Though simulation-based training for software or technical processes has been available for some time, business-skills simulations are emerging as an increasingly viable area of the eLearning marketplace. This report explores best practices and market developments in business-skills simulations that attempt to teach "soft skills" such as leadership or change management.
Today, eLearning companies market three basic types of exercises as business-skills "simulations":
- Robust assessment. A robust assessment is a brief exercise that vendors call a simulation but that offers a limited range of multiple-choice options to the learner, may not be fully consequential, and—at its most complex—may take the form of a simple decision tree. Most simulation experts do not consider such an exercise a true simulation. Large-catalog publishers such as SkillSoft and NETg provide robust assessments in many off-the-shelf courses.
- Branching conversation. In branching conversations, learners practice time-limited interpersonal skills by choosing realistic conversational responses from a range of choices. Learner choices have consequences in the immediate interaction only. This type of simulation is common in customer-service courses. Some of the simulations in SkillSoft or NETg courses also follow this model.
- Artificial-intelligence– (AI-) driven exercises. The six vendors that this report profiles produce simulations that run on an underlying artificial-intelligence logic engine. These simulations vary in appearance and focus, but they all use a dynamic AI process model to drive choices. The resulting simulations provide a broader range of choices and responses than the other two types of exercises do. They also offer robust consequentiality and a user experience that more closely replicates the complex decisions necessary in real business processes and interactions. These simulations are generally available from vendors that specialize in simulation, and they are usually more expensive to produce than simpler simulations.
Current Characteristics of Business-Skills Simulations
Currently, vendors use the term simulation to describe a broad range of learning products. A review of the simulation marketplace reveals the following differentiating features of currently available business-skills simulations:
- Interface structure
- Graphics intensity
- Number of learner choices and simulation responses
- Consequentiality of learner choices
- Duration of consequentiality
- Fictional duration of simulation
- Turn-based or immediate-decision models
- Number of participants
- Nature of underlying model.
From an instructional-design perspective, the key benefit of simulation is that it allows learners to practice skills in a realistic yet risk-free environment. Businesses have found a variety of other advantages of simulation-based learning:
- They allow for skill integration, creating situations in which learners must practice several skills at once.
- They help learners develop intuition by experiencing complex situations.
- They allow learning by failure.
- They create an immersive and engaging experience without taking learners away from their job sites.
- They accelerate learners' ability to process new experiences in the workplace.
- They provide remediation and virtual coaching.
- Their quality encourages faster learner comprehension of complex skills than other eLearning methods allow.
Vendor Profiles
Simulations give learners a far more complex range of information and choices than standard eLearning courses do, and finding a way to display these options comprehensibly and guide learners through them is a formidable challenge. Interface complexity and use of verisimilitude are key differentiators between vendor approaches.
This report profiles the products and approaches of six simulation vendors:
- CognitiveArts aims to align simulations to business needs and "critical mistakes."
- ExperiencePoint offers a semicustom scalable "logic-engine" approach.
- Forio emphasizes learning by developing intuition.
- Indeliq can draw on parent company Accenture's expertise and services in developing business simulations.
- SimuLearn uses a game-style interface and focuses on the moment-by-moment performance of leadership skills.
- Strategic Management Group has a long business history and a large selection of easily customized simulations.
Best Practices for Simulation Purchasing
Most simulations are still at least partially customized, and most simulations still represent a significant investment for the purchaser. Before a company enters serious discussions with a vendor, it should thoroughly research the simulation company's financial situation, insist on examining fully functional versions of previous products, and find out whether the majority of the instructional-design team is on staff, rather than under contract.
During discussions with a potential vendor, simulation purchasers need to check references, insist on access to the development staff, and ask for an in-depth explanation of the vendor's development process. They also need to understand the vendor's definition of "interactivity" and make sure the vendor will respect the client's instructional-design and methodological preferences.
During a simulation project, one of the critical keys to success is to spend time up front defining the company's most important instructional needs. Companies also need to involve their in-house development teams, end users, and subject-matter experts.
Market Outlook for Business-Skills Simulations
Where is the business skills marketplace heading? The following developments are likely:
- Prices will drop but remain high. Simulation prices will continue to drop, although simulations are unlikely to see the same degree of commoditization that large-library eLearning courses have. Currently, initial deployment costs often exceed $1000 per user and can go higher if the simulation is fully custom or unusually complex. According to vendors that Lguide surveyed, prices are already down 30% from the level in the late 1990s. In the next two to five years, customers can expect to pay approximately $20 000 to $25 000 for a prepackaged simulation with minimal modifications, some $50 000 to $100 000 for a semicustom simulation, and $300 000 and up for a fully custom simulation with its own underlying AI model.
- Simulations will have greater integration with work. As marketplace acceptance of business simulations grows in coming years, simulations will become more integral parts of normal job processes.
- Smaller vendors will face tougher competition. The pure-play business-simulation companies that remain in the marketplace will face growing competition from larger eLearning companies that integrate short simulations within longer eLearning courses, using them as practical application exercises.
- The market will see less hype and fewer disappointments. Despite a more concentrated focus on business simulations, customers will be less likely to believe the hype than they were in previous waves of eLearning. Therefore, they are less likely to be disappointed when all the touted capabilities of simulations do not come to fruition.
We welcome feedback about this report and the program, and we encourage you to contact us with any questions or suggestions. For more information, contact Eilif Trondsen, director, Learning-on-Demand (LoD) Program; telephone: +1 650 859 2665; fax: +1 650 859 4544; e-mail: etrondsen@sric-bi.com. We appreciate your support of our program and look forward to working closely with you as a Learning-on-Demand sponsor.
Table of Contents
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| Executive Summary |
1 |
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Current Characteristics of Business-Skills Simulations |
1 |
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Vendor Profiles |
2 |
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Best Practices for Simulation Purchasing |
3 |
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Market Outlook for Business-Skills Simulations |
3 |
| A Primer on Business-Skills Simulations |
4 |
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In Search of a Definition |
4 |
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Differentiating Product Features |
5 |
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Benefits |
7 |
| Vendor Profiles |
8 |
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Product-Evaluation Approach |
9 |
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CognitiveArts |
9 |
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The Company and Its Products |
9 |
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Simulation Philosophy |
10 |
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Product Evaluation |
10 |
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ExperiencePoint |
10 |
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The Company and Its Products |
10 |
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Simulation Philosophy |
11 |
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Product Evaluation |
11 |
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Forio |
12 |
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The Company and Its Products |
12 |
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Simulation Philosophy |
12 |
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Product Evaluation |
13 |
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Indeliq |
14 |
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The Company and Its Products |
14 |
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Simulation Philosophy |
15 |
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Product Evaluation |
15 |
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SimuLearn |
17 |
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The Company and Its Products |
17 |
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Simulation Philosophy |
17 |
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Product Evaluation |
17 |
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Strategic Management Group |
18 |
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The Company and Its Products |
18 |
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Simulation Philosophy |
18 |
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Product Evaluation |
18 |
| Best Practices for Simulation Purchasing |
19 |
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Research and Preparation |
19 |
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Due Diligence and Negotiations |
20 |
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Implementation |
21 |
| Market Outlook |
21 |
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Product Pricing and Strategic Differentiation |
21 |
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Use of Simulations |
26 |
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The Competitive Landscape |
26 |
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Hype: Marketing Intensity and Customer Credulity |
26 |
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| Tables |
| Exercises That Vendors Market as Simulations |
5 |
| Vendor Strategies and Differentiators |
25 |
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| Figures |
| Vendors That Lguide Evaluated |
8 |
| Pricing and Simulation Customization |
22 |
| Factors Influencing Simulation Affordability |
23 |
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| Box |
| Indeliq: Home Port in the Storm |
16 |
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