January 2025 | Give Us Some Space – to Work in the Space Economy 31 Jan 2025, 8:13 pm

Physicists have long believed that space and the cosmos are expanding – and now the space economy is too.  Projected to grow at an impressive 9% per year over the next 10 years, the space industry could achieve a value of $1.8 trillion by 2025.  PriSim had posted previously about space-related SPACs, and funding has gone mainstream with space-related companies bringing in $8.6 billion in investments in 2024 alone.

The impact of the growing space economy is not just about astronauts and space travel, but about business opportunities and global economics.  McKinsey says “backbone” and “reach” applications of the space economy are expected to grow at twice the rate of GDP, impacting many industries and helping solve global issues such as climate change.  Jobs come along with that, too.  If you’ve always wanted to take a trip to outer space, maybe a more down-to-earth alternative would be to take a trip to the inner-space of Huntsville, AL, dubbed “Rocket City”, or to Brownsville, TX, the headquarters of SpaceX – just 2 of the booming locations luring engineers and other workers with space-related jobs.

And look out below – the space junk and “orbital debris” collecting above earth is also expanding so fast that NASA published a poem lamenting its growth.  But some companies, such as PriSim’s client Lockheed, are skipping the poetry and opting to profit instead from the flotsam and jetsam.  The value of orbital debris could be worth up to $1.2 trillion in recovery and recycling.  Could this be the start of the “space-junk economy”?

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October 2024 – The business experts with only 1.9 years of experience…! 1 Nov 2024, 8:12 am

Apparently, all you need is 1.9 years of real-world experience to be a living, breathing business expert.  At least, that’s what PriSim’s pre-class surveys of participants in our aerospace and defense industry business simulation classes seem to indicate.

Participants in one of our client’s ‘leadership development programs’ with an average of 1.9 years of real world experience self-score their competencies exactly the same, on average, in six categories of business acumen as did participants in a ‘program leadership’ class for program managers with an average of 17.7 years of experience.  The six categories of competence surveyed were: strategic thinking, business planning, plan execution, financials statements, financial ratios, and leadership.

And the highest score across all 6 categories for those with 1.9 years of experience was an average of 5 out of 5 compared to 4.8 for those with 17.7.  Thus, the ‘best’ of the least experienced scored themselves higher than the ‘best’ of the most experienced.  This is a generalized result that PriSim sees consistently across our classes.

Let’s break it gently to the 17-year business veterans – they’ve wasted 15.8 years gaining what appears to be useless experience.  But wait a minute… if the 1.9-year group is already that good, why aren’t they sitting in the CEO’s chair?

Before we just accept the survey results at face value, we might want to, like any good 1.9-year business expert, ask a few questions:

1. How could a ‘newbie’ with only 1.9 years of experience be a 5 out of 5 in any area of business acumen, much less across 6 areas? After all, the aerospace and defense industry has some pretty unique and complex dynamics that take time to absorb, such as Earned Value Management reporting. (Answer: maybe they’re not actually a 5 out 5)
2. Does the fact that the participants self-scored themselves have something to do with the results? (Answer: yes)
3. Is it possible that real life is imitating academic theory in the form of the Dunning-Kruger effect? On which we’ve previously posted, describing a common “cognitive bias whereby people with low…experience in a task or knowledge area tend to overestimate their ability or knowledge.”  (Answer: yes)
4. If we can’t immediately promote them to be CEO of the company, can we at least elect them President of the United States? (Answer: to be announced on November 5, 2024)

After asking and answering these questions, it’s clear once again that just because somebody says it, doesn’t make it true.  As Mark Twain might say, there are 3 kinds of lies: lies, damned lies, and pre-class survey results…

And one nagging question remains – if the results are so biased, why has PriSim used pre-class surveys as a key part of our classes for over 20-years?  Answer: Because we believe that they are an indispensable part of a business simulation class, even if the results are sometimes unbelievable.  And we believe you should feel the same.  Read more about how we structure and use pre-class surveys in our previous post Know Thy Audience – Pre-Class Surveys, which includes a sample pre-class survey.

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September 2024 – Jet Engines – Out with the New, In with the Old… 5 Sep 2024, 11:25 pm

Sometimes older is actually better than newer, even when the sky’s the limit.  Such as in the aviation industry where leasing old jet engines is actually more cost effective and efficient for carriers than buying shiny new ones.

The post-pandemic aviation industry was supposed to be flooded with an oversupply of aircraft, engines, and unneeded parts.  But just when the industry prognosticators had it all figured out, people did something different – and decided to fly anyway, and a lot.  Reuters reports that U.S. summer air travel is expected to be 6.3% higher than in 2023, with United Airlines setting a personal best in Memorial Day travel.  As a result, air traffic controllers, jet engines, and parts are now all in short supply.  Add in quality and durability issues from the major engine suppliers and you have a supply chain stalled in midair – or ready to be reinvented by a savvy player…

Enter the savvy player FTAI with a flight plan to disrupt their corner of the aviation supply chain, and who’s success in doing so is a textbook example of how to turn turbulence into value within an industry.

A one-stop jet engine leasing and maintenance, repair, and overhaul (MRO) shop that originally began as an investment firm, FTAI has been gaining altitude since their counterintuitive prediction that air travel would take off after the pandemic.  Taking along with it the company’s stratospheric stock price, which has soared more than 800% over the past 5 years.  Due to the demand for refurbished jet engines and the company’s growing economies of scale, FTAI predicts that its engine repair costs will eventually be 50% lower than other MRO shops.

At PriSim, we start our BizFighter™ aerospace and defense business simulation classes with several suppliers signaling ‘mayday’, with lousy cost and schedule performance (CPI and SPI).  Teams are challenged to chart a course of improvement for their integrated supply chain.  Should they invest in their suppliers?  Increase their accounts payable days as punishment?  Use different suppliers?  Maybe they should just call FTAI instead…

Here’s wishing FTAI the absolute best and may the wind beneath their wings always be fortuitous – since we’re probably flying on planes they’ve serviced.  Sounds like another very good reason to never let your supply chain fall to earth.

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May 2024 – A Recipe for Success from Traditional French Bakeries 13 May 2024, 7:57 pm

Traditional bread bakeries are the toast of France due to some astute strategic-planning and a unique twist on a phrase often used in the real estate industry: location, location, location.

In a bite-sized article in Harvard Business Review, the authors describe the surprising results of a detailed (but presumably well-fed) analysis of 19-years’ worth of data on the strategic locations of bakeries in Lyon, France.  In the French boulangerie market, traditionalist and modernist bakers, who would typically never break bread together, often operate in very close proximity to one another.

Which seems counter-intuitive in a market that is anything but a cakewalk and in which pricing is competitive, ingredients are regulated, and any “cost-saving practices…are more or less invisible to consumers.”  It’s hard to make bread from selling bread.  But the strategy that traditionalist bakeries have cooked up to compete with the newer and more efficient modernists is precisely that of placing their businesses close to the modernists, allowing them to emphasize and underscore their traditional values.

In PriSim’s classes, we often discuss the classic Marketing Mix model composed of the 4 Ps (Price, Product, Place, and Promotion).  The Lyon boulangerie market is an example of just how important Place can be, particularly for a commoditized product.

In giving customers their daily bread, traditionalists have found they cannot live on bread alone without a strategic location to go along with it – grist for the mill if you’re “one of the many companies competing on the basis of traditions or values.”

Let’s hope that the dough from French bakeries’ sales continues to rise…

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March 2024 – “Discovering” Talent for Your Organization 21 Mar 2024, 8:26 pm

Most of PriSim’s clients identify themselves as “talent organizations”, where success hinges on the decisions and actions of their people. In these environments, sustainable competitive advantage stems from the ability to identify and retain top talent.

Despite being a small business, PriSim has made a few hires over our 25+ years, and we’ve encountered our share of missteps. Even with our limited hiring experiences, we know that recruiting the right talent can significantly impact performance and energy levels. I can only imagine the challenges faced by organizations tasked with hiring hundreds or even thousands of new employees annually. Traditional interviewing techniques sometimes fall short in revealing true talent and fit, leaving employers uncertain about their decisions until months after onboarding.

A few years ago, we worked with a large US insurance company on an innovative approach to the talent challenge. The insurance carrier had the idea to run a PriSim exercise as a “Talent Observation Laboratory”. This Laboratory had two objectives: to enhance business and financial acumen, and to uncover hidden managerial talent within their existing workforce. The firm’s Chief Learning Officer (CLO) was having difficulty finding new managerial talent to bring in from the outside, and she had a theory that there must be talent available inside the organization that had been previously overlooked.

The Laboratory was not your typical training exercise; it was a strategic blend of PriSim business simulation competitions and targeted observations. Each participant had an observer assigned to them, tasked with evaluating specific individuals on various criteria. These observers, who were employees of the company, would periodically provide real-time feedback on team dynamics, individual contributions, and overall performance to their assigned individual(s). As Plato famously remarked, “You can discover more about a person in an hour of play than in a year of conversation,” and this rang true in our simulation exercises.

Engaging in a competitive business simulation lays bare both commendable and concerning behaviors and attributes. Participants operate in a manner likely akin to their real-world decision-making processes. While I’m no expert in behavior observation, I’ve routinely observed participants displaying either highly constructive or detrimental tendencies during our courses. At our US insurance client’s Talent Observation Lab, the CLO meticulously selected and trained observers to discern crucial traits. Furthermore, participants were informed upfront about this feedback loop, and the overwhelming majority embraced the opportunity for mentorship and growth.

Years later, and many Observation Labs later, I had a conversation with the CLO and inquired about the effectiveness of the Lab. Her response was immediate and enthusiastic: “Jeff, you wouldn’t believe the wealth of hidden talent we’ve unearthed through this process.” While her revelation wasn’t surprising, it prompted me to reflect on the prevalent “war” for talent that many organizations wage. Contrary to conventional wisdom, this battle doesn’t necessarily need to be fought on external fronts against competitors; sometimes, the most valuable gems lie within, waiting to be discovered.

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February 2024: Data Rich – but Collaboration Poor…? 14 Feb 2024, 7:24 pm

Big Data has had its share of big news days, even becoming the coolest class at some California high schools.  And as California goes, so goes the nation.  Maybe, but with one caveat that might deter some would-be big-number crunchers: it turns out that data scientists actually have to talk to other people and even work together with them.

But why – wouldn’t it be easier to just lock the door and analyze the data without all the talking and collaboration?

Not according to the big-data experts at Rice University, who say that collaboration is one of the most important skills, and that a data analyst must be able to work with people from varied functions and backgrounds.  HBR concurs on the importance of collaboration, saying that getting returns from data requires that data experts clarify the options and make recommendations, that businesspeople identify the value, and that both, “…collaborate to identify areas where data provides the best returns for the organization,” so that better business decisions get made.

For some tips on building collaboration within large, complex teams, take a look at this HBR article, and this Forbes article about building a more collaborative business in the post-pandemic world.

And it turns out that business acumen matters too.  According to Rice University, for a data scientist, “…business acumen is about understanding how an industry or business, for example, insurance or retail, works in order to ask the right questions and communicate insights in a relevant way.”  Don’t say we never told you –  for over 25 years PriSim’s business simulation classes have been building the business acumen of both data scientists and those with whom they grudgingly work.

OK, that’s what we had to say and we’re done talking – you can go back to analyzing your big datasets now…

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January 2024 – Words of Wisdom…in a Glossary 1 Feb 2024, 7:53 am

While not as scholarly and elegant as a dictionary, one should never gloss over the importance of a glossary.  Especially in a business simulation class.

Accounting is often referred to as the language of business.  But if that’s the case, then many industries seem to be speaking their own dialects.  And often have a vocabulary of terms that is very specific to their “branch of knowledge”.  A lexicon by any other name…

Take the insurance industry, for example, in which a variety of incomprehensible terms are used such as Gross Combined Ratio, Premiums to Surplus, Quota Share, and Loss Tails.  For anyone but an actuary, a glossary of terms would be helpful to understand what these words actually mean, why they’re important, and how they’re used – and why they’re not as chilling as they might sound at first.  Important knowledge when running an insurance company – or a simulated carrier in an insurance business simulation class.

Here are some examples of PriSim’s glossaries used in both our live and virtual classes:

• Glossary of Insurance Carrier Financial Terms
• Glossary of Insurance Brokerage Terms
• Glossary of Manufacturer and Other Industries Financial Terms

A few of our best-practices in writing glossaries for business simulation classes include:

• Keep it short and specific – remember that it’s a glossary, not a dictionary.
• Write with the audience in mind. You may be an actuary who loves complex mathematical analyses and risk tables, but your participants may have had other uses for their precious time on earth.
• Use simple and plain language, bullet-ize the terms, and organize them into categories such as financial terms, ratios and KPIs, operating terms, etc.
• Ask an industry subject matter expert to edit and triple-check your definitions before you publish your glossary.

Give your business simulation participants words of wisdom, literally, by providing a glossary of key terms.  You’ll find them speaking and communicating in the same language and in the same dialect, unlike what happened in these 13 “lost in translation” business flops.

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November 2023 – Insurers Pay The (Inflated) Cost to be The Boss 21 Nov 2023, 8:00 pm

PriSim recently held a virtual Open House featuring business simulations for the insurance industry.  One of the discussion topics was how hard the insurance industry has been hit by inflation.

Insurance companies sometimes get a bad rap for their profitability, but inflation is adding pressure to claims expenses and increasing the cost of repairs, litigation, and jury awards (“social inflation”).  Add to that more frequent natural catastrophes and insurers just can’t seem to get a break – in prices nor in their combined ratios (incurred losses as a percent of earned premiums plus underwriting expenses as a percent of written premiums – see PriSim’s glossary of insurance terms).

Insurance companies are paid to manage and cover risks, but even in the best-case scenario they don’t always get it right; to paraphrase physicist Niels Bohr once again, “Predictions are hard to make – especially about the future.”  In PriSim’s insurance-industry business simulations, participants offset risk by making coverage, reinsurance, and pricing decisions – and yet still encounter unexpected challenges and catastrophes delivered through our Disruptor Engine™.

If inflation, hailstorms, and hurricanes are deflating your expectations of insurers, remember that every (thunder) cloud has a silver lining.  The catastrophe bond market, an alternative approach that insurers use to manage extreme risks, is forecasted to double in five years – even while covering more and more risky events.

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Leadership vs. Management 3 Nov 2023, 10:27 pm

What do you think is most important to succeed at the top of an organization: Leadership or Management? Are they different at all? Is one better than the other?

According to Harvard business professor John P. Kotter , leadership and management are two different systems of action, complementary to each other, and both are required to succeed at the top. Leadership deals with change, while management deals with complexity. When you are in leadership mode, you are “on” the business, setting the direction of your organization, aligning your people, inspiring the heart, and driving change at the right time. When you are in management mode, you are “in” the business, bringing order and predictability to business situations, establishing processes, organizing staff, and controlling/solving problems.

One of the reasons PriSim’s customers send their high-potentials to our courses is that PriSim provides a business laboratory in which participants can enhance their leadership and management skills. In our courses, participants are split into teams. Each team runs own simulated company in a competitive marketplace. The challenge is to improve their company’s performance over several simulated years. To accomplish this, teams have to lead (set the company’s direction/mission/vision, and goals) their company. But also, teams are responsible for managing (executing strategies and tactics) their company over multiple simulated years.

In Kotter’s experience, the most successful companies try to develop their people to become leader-managers. One of our customers (CEO of a top 200 US insurance broker) said it best “A great business person has to be excellent with the telescope and with the microscope”. That is, leadership and management are both equally important. If you want to rise to the top of an organization you have to be able to Lead (excel with the Telescope) and Manage (be great with the Microscope).

[1] John P. Kotter What Leaders Really Do [online]

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September 2023 – New-Customer SOS (Shiny Object Syndrome) 21 Sep 2023, 10:24 pm

McKinsey & Company has revealed a top-secret competitive advantage for incumbent companies: their existing customers.

Customer retention is almost always less expensive than customer acquisition.  And the data supporting that common knowledge is striking: McKinsey found that the most effective growth companies produce 80% of their value “from their core business – principally, unlocking new revenues from existing customers.”

It’s tempting to spend resources on aggressively chasing new customers, partly because that’s what competitors and new entrants to the industry are likely doing – and taking your lunch money while they do it…  But when companies play that game, they’re ignoring the tremendous additional value that exists in their current base of customers.  Instead, McKinsey bluntly recommends that companies “Shut up and listen to your customer,” and focus on improving their experience.

In PriSim’s business simulation classes, participants assess and manage their customers’ experience through:

• Policy retention/renewal rates in our Insurance Challenge carrier simulation.
• CPAR (Contractor Performance Assessment Report) ratings in our BizFighter A&D simulation.
• CSI (Customer Satisfaction Index) scores in our Broker Challenge and Test Drive

Put another way, McKinsey’s message in a bottle to incumbent companies is to growth up, salvage your depreciated thinking, and pay attention to your existing customers.  And to stop sending out an SOS (Shiny Object Syndrome) looking for new customers…

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