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The Practice of Change

This is a test: We interrupt this change program to bring you an in-depth look at computer-based simulations. These power-sim tools deliver “that’s what” answers to your “what if” scenarios for leading change. Now back to our regular programming.

Think your change team has a better idea? Before you launch your change effort, why not beta-test your plan by entering the expanding world of computer simulations?

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At one time, simulation technology was used exclusively by military strategists and engineers for testing design prototypes. But now, companies are increasingly using that technology as a tool for change. Whether you’re leading people or developing strategies, practicing in a simulated environment will help you get it right when it counts.

Business simulations let you create a model and test what-if scenarios before you attempt to change a marketing campaign or launch a radical new strategy. If your experiment doesn’t work, you’ve avoided a very public mistake. If it does work, you have proof-of-concept results that can be taken to your senior team.

Although computer simulations are sporting all manner of technological bells and whistles these days, they’re not just overpriced PlayStations. A good “sim” usually tells a good story, letting you explore the consequences of your decisions so you can see how different scenarios might unfold.

Can the virtual world help us get our bearings amid all the changes that are occurring in the real world of business? To answer that question, we’ve taken an in-depth look at how two radically different organizations — the U.S. Environmental Protection Agency and Optus Corp., a fast-growing Canadian company — are using two radically different simulations to make and to deal with change. Here are their stories.

The Change Effort: To capture and share the institutional knowledge that’s been bleeding out of the federal Environmental Protection Agency, and to transform EPA staffers from by-the-book bureaucrats into high-stakes diplomats.

The Simulation: A nine-disk CD-ROM titled “Evans Bay: A Town Divided,” custom-made for the EPA by the Institute for the Learning Sciences at Northwestern University.

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Kristi Rea, 28, is preparing for battle. As a city program manager with the EPA’s Urban Environmental Initiative, Rea must facilitate a series of public hearings on how to clean up bacterial and chemical contamination in the Woonasquatucket River, which bisects Providence, Rhode Island.

To Rea, the event looks like a lose-lose situation. Community activists, lawyers for the polluters, environmental groups, and the city’s elected officials will all be at the hearings, and each of those groups expects her to back it completely.

Unlike former EPA staffers, Rea won’t have the option of simply reciting the federal government’s environmental regulations. As a result of an initiative to radically reinvent the agency’s command-and-control culture, Rea has a new mission: to figure out a way to mediate what promises to be a no-holds-barred debate. Gone are the days when Rea could act the part of the enforcer. In her new role, she now has to be a negotiator. She must head off a crisis by finding a way to develop a cleanup plan that each of the warring factions can live with. To make the process work, she must turn all these adversaries into allies.

Rea is also dealing with a personal change. Before joining the EPA two years ago, she worked as manager of international community affairs for a 300-person environmental-technology firm. Now she must think like a representative of a federal agency comprising 80,000 people. “I’m on a steep learning curve,” she concedes. “I’m still trying to figure out what to say when you have the force of the government behind you.”

But thanks to “Evans Bay,” a custom-made simulation from the Institute for the Learning Sciences (ILS), Rea can spar a few practice rounds before the main event. The computer-based sim allows Rea to hone her negotiating skills — without fear of alienating half the city of Providence.

Welcome to Sim World

Rea boots up her Dell desktop computer, launches the simulation program, and enters the fictional town of Evans Bay. As a video streams across her computer monitor, the simulation drops Rea into her EPA “office,” complete with an overstuffed inbox and a stash of memos that spill across her desk. The sim also delivers lifelike “surround sound”: Phones ring in the background; voices are clear and distortion free.

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Like Providence, Evans Bay is dealing with PCB contamination: For years, a company called Evercell buried cast-off industrial capacitors that have leaked PCBs into the ground. Rea’s “supervisor” informs her that she must lead a public hearing within a few hours, during which all sides will tussle over the best way to get rid of the polluted soil.

As the simulation unfolds, a rep from Evercell drops into Rea’s office and lays out the company’s proposal to incinerate the PCB-laden soil. The rep calls the counterproposal from the Evans Bay retailers’ association “irresponsible and dangerous.” Then she fires off the big question: “Which plan will the EPA back?”

At this point, the narrative stops, and a series of multiple-choice options scroll down the left side of Rea’s computer screen: She can side with Evercell, side with the Evans Bay retailers, or wait to hear from all sides. Deciding that she should listen before she acts, Rea clicks on the last choice. As the video resumes, Evercell’s rep reacts to the decision by leaning over Rea’s desk and lowering her voice: “You can’t afford to ignore our concerns.” The lesson: In environmental debates, there are no perfect solutions.

Capturing the Brain Drain

For the simulation’s public-hearing phase, Rea finds herself in a high-school classroom. Onscreen, Evans Bay’s mayor sits on her left; on her right is the leader of the retailers’ association, which wants to bury the PCBs in a hazardous-waste dump. Evercell’s rep sits in the front row, eyeballing Rea suspiciously.

The video continues, and a young priest stands up and complains that the city can’t even collect the garbage in his mostly immigrant neighborhood. Again, Rea must make a decision: Tell him to stick to the topic, assert that the EPA does not handle the city’s garbage, or promise to take a look at the problem.

Rea’s instinct says to choose the last option, but she clicks on the first choice, just to see what happens. A square window pops up at the top of her computer screen and a video clip of a community activist appears. The activist describes how cutting someone off — even when you’re in the right — sounds defensive and can cripple the larger goal of building consensus.

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This is the most innovative part of the simulation: At crucial junctures throughout the narrative, Rea can tap into a storehouse of more than 450 videotaped interviews with senior EPA staffers as well as community activists and other state officials who have dealt with the agency. Each year, about 1,500 employees leave the EPA. This data bank, rare among simulations, is a way to capture that brain drain and use it to help improve the performance of frontline staffers.

As Rea digs deeper into the sim, she finds that the decisions she must make become increasingly untenable — which is entirely intentional. Roger Schank, 53, director of ILS and creator of the model for these simulations, believes that people learn best by making mistakes and figuring out what went wrong. (Schank recently spun off a corporate arm of ILS, called Cognitive Arts, which custom designs simulations.) By giving her the opportunity to fail faster, “Evans Bay” is helping Rea to scale that learning curve — and become a battle-tested agent of change.

Coordinates: Roger Schank, Cognitive Arts, www.cognitivearts.com; EPA, www.epa.gov

The Change Effort: To figure out how Toronto-based Optus Corp. can move fast, even while it’s bingeing on a menu’s worth of big-time acquisitions.

The Simulation: “Shifting Sands,” a multimedia, facilitated simulation from InCourage Inc., a company based in Georgetown, Ontario with clients that include Sony Corp. and Nortel Networks.

It’s almost a mantra for the new economy: Great things happen to companies that finish first. But recently, the frazzled senior leaders of Optus, a unit of the Canadian communications giant MDC Corp., have begun to wonder whether the company is growing too fast for its own good.

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Launched just 13 months ago, Optus custom designs documents for financial-services companies and retailers, turning bills and financial statements into marketing tools for such customers as Aetna and Citibank. Optus has been moving at warp speed since day one, acquiring a new company every quarter and boosting its employee base by nearly fivefold. For this year’s final quarter, Optus expects to double its revenues to $40 million (Canadian), and predicts it will hit $100 million by the end of 2000.

But the stress of such go-go growth is beginning to chip away at all the good news. Maxed-out managers are frantically trying to integrate new hires into the company and still keep pace with new customers’ do-or-die deadlines. Senior leaders lie awake at night, wondering how to handle all the new business when the staff always seems to be a few steps behind. How can they help get their new people up to speed without slowing the company down?

President and COO John Hantho, 38, jokingly describes the company’s behavior as “fire-ready-aim.” Looking for a way to help his senior team quell the panic, focus on the problems, and learn to deal with change as an everyday constant, Hantho has decided that the members of the senior team should make a virtual crossing of the Sahara Desert.

This past October, two facilitators from InCourage guided the 10-person team through “Shifting Sands,” a multimedia team-building experience that helps groups prepare for organizational change. “Shifting Sands” is an on-site, full-day sim that, in part, re-creates scenarios from an actual 1977 expedition, in which a Canadian named Steve Donahue joined three other men in an auto caravan from North Africa to the southern border of the Sahara, crossing about 1,000 miles. Donahue is now a professional speaker who uses his travel adventures to talk about change.

At the Canadian Imperial Bank of Commerce Leadership Centre, in suburban Toronto, Team Optus watches a CD-ROM-based slide show of Donahue’s crossing. At different cruxes in the expedition, facilitators Tim Dixon, 34, and Peter Bailey, 36, stop the narrative and challenge the team to make critical decisions that will either propel them farther across the Sahara or bury them in their tracks. This is not a game: The team is looking at real pictures, it’s encountering real events, and it’s making life-and-death decisions that are every bit as compelling as the real-world decisions that Optus must make every day in the marketplace.

Spanning several microclimates, ecosystems, and cultures, the Sahara is a true-to-life metaphorical testing ground for all the change that’s confronting Optus. Here are three of the ways that “Shifting Sands” has helped the team make some critical changes of its own.

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To Get Ahead, Don’t Look Back

As the narrative begins, Steve Donahue says goodbye to the life he knows in Paris before he heads for the Sahara. Facilitator Tim Dixon breaks in and asks, “What are people willing to give up as their old company evolves into something entirely new?” Someone in the room jokes that daily showers have already been sacrificed — too much to do, too little time to do it.

Then the mood turns serious, and Martin Coe, VP of finance and operations, suggests that the team members need to leave behind their egos. In a desert full of surprises, they can’t always be right.

Dixon challenges the group with another question, How do you say goodbye to names? Though Optus is really a collection of smaller companies, it wants to create a single brand identity. How can Optus liquidate the name of an acquired company without piercing the loyalties of that company’s former employees?

A brainstorming session ensues, and the team suggests that Optus should create a Hall of Fame, where the names of acquired companies are “retired” in an effort to honor their past. “That’s a good idea,” says Hantho, jotting it down. It becomes the day’s first action item.

Hit Neutral before Shifting into High Gear

As the group returns to the story, they see a slide that shows a two-track road that ends abruptly. Beyond the road, as far as the eye can see, are the vast, undulating dunes of the Sahara.

The slide resonates deeply with Team Optus: The company is careering into an unknown world, where there are no signs or even roads to warn of danger and show them the way. Common sense dictates that they should slow down and get their bearings, but how can they hit cruise control when they’re competing in such a fast-forward marketplace?

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“We’re moving way too fast,” says Janie Kiezerwaard, head of the Information DesignWorks unit. “We’re just going to have to be realistic with customers: We need to be clear and up front with them about what we can take on now, and what we’ll have to do later.”

Martin Coe, sitting at the opposite table, counters that if Optus eases up, it’s roadkill. “We can’t put the brakes on getting business,” he says. “Now’s the time when we knuckle in and get creative.”

“But is that realistic?” Kiezerwaard wants to know. “We’re always late.”

At this point, Optus seems stuck in the sand, furiously spinning its wheels but going nowhere. To get some traction, they need to home in on a specific problem that they can solve.

After more back and forth, they find it. The team decides to rein in the sales reps and keep them from making unrealistic promises to clients, so Optus can deliver on the promises that it has already committed to. Only then will the company be able to kick into overdrive.

Every Caravan Needs an Oasis

The group turns back to the screen, which shows the mud-lined walls and palm trees of a Sahara oasis. In the desert, an oasis is one of the few places where nomadic people can reconnect with fellow travelers. And that’s exactly what “Shifting Sands” has done for the members of Team Optus: It’s given them an opportunity to reconnect with one another — and to recalibrate their compasses before they head into the next leg of the journey.

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After the simulation, Hantho signed off on a slew of new hires. But he’s also thinking about holding more small-group discussions with both new and veteran employees, so that no one is left behind by the rapid pace of change. And he realizes that he’ll have to deal with some new obstacles that he can’t yet identify: “If it’s difficult now,” he says, “it’s going to get a lot harder when we add more leaders from all the companies we’re acquiring.”

Coordinates: InCourage, www.incourage.com; Optus, www.optuscorp.com

Rekha Balu (rbalu@fastcompany.com) is a senior writer at Fast Company. John R. Quain (jquain@fastcompany.com) contributed to the sidebars.

Action Item: Test Site

A custom-designed simulation can easily exceed $10,000. If you want to see how computer simulations work without investing such a hefty sum, you can test generic simulation programs on the Web.

The Web site of the Association for Business Simulation and Experiential Learning showcases many simulations. Some are models for specific industries (such as airline companies), whereas others let you run fictional businesses for several years. You can download these Mac- and PC-based sims for free.

Coordinates: ABSEL, www.towson.edu/~absel/Simpack/package.html

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Sidebar: Games for a Change

Sometimes the best way to brainstorm a change effort is to declare a time-out from the business world and let yourself wander through unfamiliar terrain. Fortunately, there are scores of computer-simulation games that take you to new worlds in which you can consider new strategies. Here are the big three.

SimCity 3000: The latest version of the granddaddy of all computer games challenges you to build a smooth-running metropolis, complete with zoning rules, garbage-collection services, highways, parks, and a solid tax base. The ultimate goal, as with all change efforts, is to get everything to work together.

Coordinates: $50. Electronic Arts Inc., www.simcity.com

Civilization: Call to Power: Civilization allows you to manipulate a whole new world. This game presents plenty of brainteasers for those who are thinking about ruling the world of e-commerce or trying to build a brand. But make one critical mistake, and you’ll end up like the Romans.

Coordinates: $49.95. Activision Inc., www.activision.com

Railroad Tycoon II: With the click of a mouse, you can start laying tracks. But this game’s real challenge is dealing with the economics of running a railroad. By cultivating relationships with steel mills and auto plants, you can make profits that can be used to expand your railways, until eventually they become the arteries for an entire economy.

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Coordinates: $29.95. Gathering of Developers Inc., www.godgames.com

Sidebar: Real Gear for Simulations

Proxima UltraLight LX1 Projector

For change agents who need to fire up a large audience with a cutting-edge simulation, an LCD projector is the biggest gun in the arsenal. The UltraLight beams out a sharp, 1,024-by-768-pixel image that can be roughly 20 feet wide (measured diagonally) and viewed from a distance of 33 feet.

Coordinates: $7,199. Proxima Corp., www.proxima.com

Gateway Solo 9300CX Notebook

A tiny notebook won’t cut it when you crank up a power-hungry simulation on the road. Only a full-blown laptop with a large screen will do. The Solo weighs 7.6 pounds, but it comes loaded with a 500-MHz Pentium III processor and an 18-GB hard drive.

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Coordinates: $3,999. Gateway, www.gateway.com

IBM T55D LCD Monitor

LCD displays for desktop PCs are hot — but not for change agents who need to run simulations for small groups. The fully digital T55D is an exception; however, you do have to install a special digital video card.

Coordinates: $1,199. IBM, 800-426-7255, www.ibm.com

3Com HomeConnect PC Digital Camera

If you want to customize a simulation by shooting video footage, the easiest way is to use a video camera that connects to your PC. 3Com’s HomeConnect digital camera is a great choice. Best of all, because the 3Com camera connects to the computer via the USB port, installation is a hassle-free experience.

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Coordinates: $149. 3Com Corp., www.3com.com

Sennheiser Surrounder

There’s nothing like surround sound for letting you experience a simulation. The Surrounder uses four speakers to re-create that effect. You’ll have to spring for the Sennheiser DSP Pro decoder ($270) if your PC isn’t equipped with four-channel output.

Coordinates: $300. Sennheiser USA www.sennheiserusa.com

Sidebar: Reality Check

So you’re a change agent, But you’re not quite ready to test your new idea in the real world. Here are four questions, culled from interviews with veteran simulation designers and users, that can help you decide whether a simulation can assist your change team.

What are your objectives?

Simulations come in many varieties, so you can use them in myriad ways to custom-build your change effort. If you want to brainstorm ideas or get a reality check from other project leaders, find a vendor that offers expert facilitators who will work with your company. If you want a portable self-help tool for the up-and-comers on your change team, look for an interactive CD-ROM that people can run on their laptops.

Have you defined the framework for your change effort’s scenario?

Computer-based simulations have zero tolerance for guesswork. When you reduce the variables in your scenario, the simulation stands a better chance of delivering a forecast that you can trust.

Do you need a mediator?

Sometimes a simulation can serve as an objective mediator when you’re faced with a team in conflict. It creates a parallel universe, within which ideas can be tested without the pressures of politics and infighting.

How involved do you want to be?

Simulations, especially those that are customized for your business, require lots of information and lots of truth. When you input half-truths and half the story, you won’t get a complete picture from the output.

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