It’s been two years since the business game “Build a Company. Sell the Company” was launched. More than three thousand people have played the game with a different degree of success. As it usually happens with entrepreneurs, such questions as why this particular game is developed and how it works, can be answered only after some time. The authors of this article are trying to answer the second question.
THE MAIN PRINCIPLE OF THE GAME IS THAT ANYONE CAN CHOOSE A WORLD TO WORK AND LIVE IN.
It has nothing to do with daydreams: only a conscious choice of one’s world ensures a non-illusionary activity. The choice is difficult because there is not one but more worlds with different structures, sets of positions and basic processes at the same time, in one and the same place and even for the same person. This confusing situation causes conflicts and inflated expectations. Which is why a person can and should divide these different worlds in the course of business activity. The game serves as a map for navigation through different worlds.
THE WORLD OF CAREFREE INVENTORS
Most of its inhabitants work closely together.
THERE IS NO OBVIOUS RESPONSE TO THE QUESTION “WHY AM I DOING THIS?”. THE RESPONSE IS REPLACED BY INTEREST AND CURIOSITY WHICH ARE BASIC COMPETENCIES
OF THIS WORLD.
All decisions are made together which is considered as real freedom and equity.
Business Game “Build a Company. Sell the Company”THIS WORLD IS ABOVE ANY ECONOMIC RELATIONS. THE INHABITANTS OF THIS WORLD SUPPOSE THAT RESOURCES AND TIME ARE ENDLESS BASICALLY.
There may be not enough resources and time for a particular person at this specific moment, but the “world reservoir” in general has no limits. You can easily find inhabitants of this world in different places: from a school modeling group to the Academy of Sciences.
THIS WORLD HAS NOTHING TO DO WITH THE TECHNOLOGY ENTREPRENEURSHIP. EXPERIENCED ENTREPRENEURS POLITELY STAY AWAY FROM IT. EVEN THOUGH YOU CAN FIND A LOT OF DIFFERENT TECHNOLOGICAL “KNOW-HOWS” THERE.
This world is filled with Leonardo da Vincis and Thomas Edisons.
Inventiveness, creativity, often deep knowledge in some scientific and engineering fields are still very attractive for many of our contemporaries, just as it was five hundred or a thousand years ago. Our civilization can still afford to financially support this world (1).
THE WORLD OF ENGINEERING BUREAUS
For clarity sake, let’s call it the world of Soviet “sharashka’s”. This world is much more structured than the world of carefree inventors. It is inhabited by engineers who have basic skills needed in this field: to read and most importantly to understand terms of reference.
1 It is an interesting fact that in most cases Leonardo da Vinci, the most famous native of this world, did not transform his inventions into ready-to-use products and always missed deadlines for artwork orders. It was almost impossible to do business with him.
These engineers seek to achieve a certain result within a certain period of time.
Business Game “Build a Company. Sell the Company”THAT IS WHY DISCIPLINE HAS THE HIGHEST PRIORITY IN THIS WORLD: YOU MUST BE ABLE TO DO YOUR JOB IN TIME.
The inhabitants of this world take an indirect part in economic relations.
THEY FACE THE ECONOMY THROUGH A “SMALL WINDOW” IN THE FORM OF TERMS OF REFERENCE SPECIFYING THE DEADLINE AND THE AMOUNT OF MONEY THEY ARE GOING TO GET.
This money is more like prizes at competitions held by major players of real industries.
Since the economy is of no interest for the inhabitants of this world (they even treat it in a slightly negative way and consider it as mercantilism), the quality of their decisions is the most valuable for engineers.
This is what becomes their own standard of truth and welfare. So it is not so scary to end up in a “sharashka”: you will be given a difficult job and opportunity to work.
Entrepreneurs often have to deal with inhabitants of this world in real life. And the salary is the only economic aspect that can be found in the world of engineering bureaus. The great self-discipline of an engineer from this world turns into nothing when you try to get him into the world of business relations. Unfortunately, for an inexperienced entrepreneur it can be too sudden (2).
2 The loved and hated Elon Musk can be easily confused with a good engineer. His speech is full of engineer’s topics. And it may seem sometimes that this is the engineer, the Chief Engineer, an American Korolev, who builds factories and launches rockets with plenty of PR efforts and hype. After studying some information, one easily finds out what experienced entrepreneurs think about that — “no, this is not true”.
THE WORLD OF GARAGE STARTUPPERS
Business Game “Build a Company. Sell the Company”
This seems to be a wonderful, beautiful world full of hope and excitement by the looks of it. Its population is constantly growing because the success stories are very popular. Its inhabitants tell us how awesome it is to be an entrepreneur via various information resources.
In reality, they, who call themselves entrepreneurs, face the economy for the first time in their lives. It is their first time because none of them has built a single business yet, even if they claim the opposite.
THE STARTUPPERS ARE INTRODUCED TO THE ECONOMY THROUGH THE COST PRICE OF WHAT THEY ARE TRYING TO MAKE AND THROUGH THE NEED OF A REGULAR, REPEATABLE WORK.
THE BILLS THAT REGULARLY HAVE TO BE PAID ARE KILLING. UNGUARANTEED SUCCESS IS ANNOYING. THE IMPOSSIBILITY TO DELEGATE TAKING KEY DECISIONS TO SOMEONE IS DEVASTATING.
Those who call themselves “entrepreneurs” build a company together in order to overcome fears and emotional stress. It is scary to give up everything and launch a startup project: they’ve got no salary, nobody is willing to pay for their coffee or rent.
Such “communal” activity distorts the economy of young companies. For instance, when five entrepreneurs hire one engineer and suppose that the price of a product (or the cost price of a product) is the cost price of the engineer’s work. Of course, they mislead themselves and their potential buyers. They also should take into account their expenses spent on development of the project and organizational activities.
Business Game “Build a Company. Sell the Company”Perhaps the most unpleasant distortion is to hire an engineer with the promise of an option from the sale of the company or from the profit. Even though it seems like such an obvious solution for the inhabitants of other worlds: “everyone does it in real life”, “we reduce expenses and risks”, “we motivate our employees and strengthen team spirit within the company”. The rules of the game forbid it but there has been no game yet where there would be no ways to bypass this ban. As a result, the hidden owner of the company makes next to nothing which drastically distorts the cost price of the product. Such tough question as: “Will you continue working for this money without bonuses?”, asked as the game goes on, makes them admit that they won’t. Most of new inhabitants are engaged in an imaginary activity called “wantrepreneurship”. It is imaginary because they misrepresent their activity as a real one. Serial entrepreneurs from Cambridge have introduced this term after they’ve faced this issue, which means: “I want to be an entrepreneur”. More experienced companies expose themselves to risks when they look for suppliers and have to make their way through these distortions of motivations and economies of young startup companies.
NEVERTHELESS, IN GENERAL IT IS A VERY FUN AND EXCITING WORLD. THE OBVIOUS BASIC COMPETENCE OF THE GARAGE STARTUPPERS IS PERSISTENCE. BUT THEY HAVE IT AS LONG AS THERE IS AN ILLUSION CALLED “MARKET”.
THE MARKET DISAPPEARS AT SOME POINT. BUT IT DOES NOT DISAPPEAR BECAUSE OF THE GAME COURSE. THE THING IS THAT DE FACTO THERE IS NO MARKET FOR ENTREPRENEURS FROM THE BEGINNING.
Let us put it this way: an entrepreneur is a person who produces something, as a result of which a market is created.
Business Game “Build a Company. Sell the Company”
THE WORLD OF INTERMEDIATE AGENTS AND SELLERS
At this level of the game, an external customer disappears completely.
WHAT CAN BE DONE WHEN THERE’S NO MARKET? THE ENTIRE BUSINESS ACTIVITY WAS ORGANIZED IN THE HOPE OF AN “ORDER”.
The fourth world represents a reaction to disappearance of the “market” which was organized externally. This is what we or our parents had to experience in the early 90s. All stable relation chains within which clear orders were possible, have either disappeared or become weaker. It’s easy to live and work when you are constantly reminded that you have a partner or a potential buyer.
AT THIS GAME LEVEL NOBODY IS REMINDED OF ANYTHING. EVEN THE SO-CALLED CHAINS CREATED AT THE THIRD LEVEL ARE BROKEN.
When no one is ready for this new situation, privatization and resale of resources become the main processes because this is the easiest and the most obvious kind of making money.
At every game at this point there are several companies selling the resources: balloons, spare parts, sometimes people — engineers may be available for outsource work in some other company because people may also become not needed. It does not take a whole lot of work to protect and sell a resource. It also does not take too much work to be an intermediate agent, i.e. to buy and sell something from one party to another one. There are always gaps that can be used.
THERE ARE NO ECONOMICALLY REPRODUCIBLE ACTIVITIES IN THE WORLD OF INTERMEDIATE AGENTS. WHICH MEANS THEY ARE IMPOSSIBLE TO INVEST IN:
Business Game “Build a Company. Sell the Company”after all, any resource comes to an end at some point and tomorrow the sale of the seized resource will definitely bring less money than it does today.
One can only invest in something that is being reproduced.
“Smart money”, investment assets can only be used for something that has a stable logic of increasing added value formation. That is why both in the 90s in our country and at the fourth level of the game, there are investors but they have no one to work with.
THE PLAYERS WHO DO NOT GIVE UP AT THIS LEVEL HAVE A COMPETENCE CALLED META-MOTIVATION. IT IS AN ABILITY TO CONTINUE PERFORMING MEANINGFUL ACTIONS WHEN THERE ARE NO EXTERNAL REASONS THAT WOULD GIVE THESE ACTIONS MEANING.
A sudden disappearance of external reasons is discouraging, annoying, demoralising and makes one want to bury one’s head in the sand. The lack of enough money for living only seems to be a good motivation, while in real life it often leads to irreversible downshifting.
The players who have decided to trade resources and to be intermediate agents are adequate in terms of their earning, as well as their colleagues from the real world.
However, both of these parties do not believe that there is a completely different type of businesses and different basic economic processes. Even though the term is the same, the sale of a privatized resource or the sale of a product at the driven up price have nothing to do with the sale of a technological product.
Business Game “Build a Company. Sell the Company”INADEQUACY OF INHABITANTS OF THIS WORLD IS NOT UNREASONABLE ACTIONS BUT THE FACT THAT THEY CONSIDER THEIR WORLD TO BE THE LAST AND ONLY IN THE ECONOMY.
ONLY A HANDFUL OF THEM TRY TO WORK WITH INVESTMENTS THAT ARE BASED ON THE STANDARDS OF REAL BUSINESSES WHICH ALLOWS THEM TO GO TO THE NEXT LEVEL AND INTO ANOTHER WORLD.
LEVEL 5. THE WORLD OF TECHNOLOGICAL ENTREPRENEURS
The inhabitants of this world shock everyone with their fixation on selling the companies they build.
FROM THE PERSPECTIVE OF OTHER WORLDS, IT IS IMPOSSIBLE TO IMAGINE HOW A TECHNOLOGICAL ENTREPRENEUR IS CREATING ITS EVERY ECONOMIC ACTION. DECISIONS OF A TECHNOLOGICAL ENTREPRENEUR CAN SOMETIMES SEEM PARADOXICAL,
although they are perfectly rational and come from his/her goals. Let us not describe this new world in detail but only point out a few points instead (3).
The product of an entrepreneur is a company (not an engineering invention or profit).
Business Game “Build a Company. Sell the Company”The company is stable only to the extent to which its activity is reproducible and repeatable. One can say that any company is a robot that produces and sells products with a certain cost price. This robot consists of all the necessary components: engineers’ work, technologies, contracts with suppliers, etc.
THEREFORE, UNLIKE PEOPLE AND TECHNOLOGIES, A COMPANY ALWAYS HAS A VALUE (POSITIVE OR NEGATIVE ONE), WHICH IS WHY IT CAN BE INVESTED IN OR PURCHASED.
3 For more information see the article “The Innovation Conveyor. Who is Responsible for the Production of Innovation?” by D. Kovalevich and P. Shchedrovitsky. URL: http://asi.ru/conveyor-of-innovations/ (access date: 22.11.2018). But the above mentioned article is neither an algorithm, nor a method. It is only for reference, as well as our article. An activity appears when a principle becomes not only an interesting argument but also a guillotine which immediately cuts off all unnecessary ideas.
Should this entire system produce something with a negative economic result the price can be negative, but it is always worth something and a capital can always be invested in it. Unlike people, technologies and equipment.
A person cannot be invested in or capitalized. A technology itself cannot be invested in or capitalized as well. A piece of equipment or a building are impossible to invest in.
One can only invest in a reproducible activity.
Business Game “Build a Company. Sell the Company”Here are some of the bombs that an inexperienced entrepreneur may plant into the company’s mechanism if the basic principle is violated. As we have already mentioned above, if an engineer is the hidden owner of the company, i. e. is waiting for bonuses from its sale or profit bonuses, the cost price of products is incorrect. However, when you try to sell such a company, everything turns out to be even worse: at some point the engineer refuses to behave like one and becomes the owner. For example, he/she may leave after receiving a bonus and try to build another company. After all, the engineer has been working here for a minimum amount of money in anticipation of the jackpot. This was an investment. The entrepreneur can not afford such a mixture of positions in its company.
Another typical example is to create a non-business project. According to the terms of a companies’ buyer, a company must have ingoing and outgoing contracts in order to be bought. Because only economic transactions make business a business. Trying to fulfill this requirement (and keeping KPI in mind), a player creates several companies, combines them into cooperative business and makes one company a profitable representative while the other companies ensure the required performance. A simple question: when the company is sold and no longer belongs to you, will these highly favorable terms of transactions with your other companies remain valid? The player’s response is: of course not, it’s the new owner’s concern now.
This obvious cheating the buyer is not clear from the perspective of other worlds. If there is no such work as creating companies, then there is no concern that these companies should function exactly as they are intended to, in their normal reproducible mode.
THE BUYER PAYS THE ENTREPRENEUR FOR WORK AND TIME SPENT ON CREATING THIS KIND OF A “REMOTELY CONTROLLED” COMPANY.
What does a technology entrepreneur do if the work does not involve engineering, privatization or resale?
Business Game “Build a Company. Sell the Company”CREATION OF CHAINS
After the external order disappears from the game, the entrepreneur takes up its specific work, i. e. answers the question “What shall be done?”. The answer should lead to sustainable business relations with other entrepreneurs (to creation of chains). This means that the answer can not be a fantasy or a project.
FIRST, THE ENTREPRENEUR SHOULD ANSWER THE QUESTION ON THE TECHNOLOGY AND DECIDE WHAT WILL BE DONE BY OTHER ENTREPRENEURS.
The technology is what makes it possible to divide previously undivided activities into stages and steps. And to decide who is in charge for what. The market begins above all with the answer to this question: who is in charge for what?
AS SOON AS AN ENTREPRENEUR STARTS DOING SOMETHING, IT BECOMES A MARKET FOR ANOTHER ONE WHO IS DOING SOMETHING THAT THE FIRST ENTREPRENEUR HAS STOPPED DOING.
If both of them are doing the same thing, nobody can buy anything from one another. Nobody is interested in anyone.
Business and cooperation begin with the answer to the question: “What am I not doing (What do I stop doing)?” This is the most important thing.
There is a common motive in the game: it is safer to do everything by yourself and the company will cost more. It is difficult to accept the fact that a company with different activities, apart from those that the buyer needs, actually costs less.
In games it is sometimes possible to achieve a very high density of economic transactions between companies. The game program builds a diagram of connections in a real-time mode which allows inexperienced entrepreneurs to partially see the activity. This diagram created by the computer shows how stable companies with many business relations are and how lonely and unprotected are those who do everything by themselves and do not delegate the responsibilities.
Business Game “Build a Company. Sell the Company”CREATION OF DEMAND
So where is the market? This question is partially answered in the previous paragraph.
THE THING IS THAT THERE IS AN ILLUSION THAT AN ENTREPRENEUR STARTS ITS BUSINESS WITH MARKET ANALYSIS.
It is written in textbooks and taught in management and economics schools (even in entrepreneurship schools) usually by teachers who have never created a single business project. They tell about things that do not happen in real life.
AN ENTREPRENEUR NEVER STARTS ITS BUSINESS WITH ANY FICTIONAL MARKET OR EXPECTS THE MARKET OR THE “DEMAND” TO APPEAR. AN ENTREPRENEUR ALWAYS WORKS ONLY WITH EXISTING OPPORTUNITIES.
In the game course, the fifth level offers a significant capital increase: it consists of salaries that the online bank has brought into the economy by financing the entrepreneurs and investments in different companies made by the investor. This capital can be used only if one of the entrepreneurs would make a series of experiments trying to invent a product that would be interesting for players instead of organizing the work of engineers in order to produce another useless thing.
Business Game “Build a Company. Sell the Company”Steve Jobs could not possibly perform a market analysis before inventing an iPod because there was no such market. The analysis of the market of audio players would be useless as it is a different market. He made something completely different than existing products. And then he did it again and again.
Technological entrepreneurs can transform investments into “demand” if they spend their time on it. After one of the games, two dozens of participants have left with “oscillating watch” made by game companies and bought with game money. On the one hand, this is work with the engineer, with their wallet; on the other hand, this is work with other companies in an attempt to combine several items into something that can be bought.
THIS IS A SPECIFIC KIND OF WORK: TO ISOLATE SOMETHING THAT CAN BE SOLD FROM SOMETHING THAT CAN BE MADE.
Demand is not a constant, it is not something that exists as an “objective reality”. It involves the same work as production business and the same processing work as development.
ONLY THOSE CAN BECOME ENTREPRENEURS WHO HAVE DEVELOPED SUCH A COMPETENCE AS THE RESILIENCY (IN ADDITION TO THE COMPETENCES ALREADY LISTED ABOVE).
Business Game “Build a Company. Sell the Company”In physics, this term means the ability of the material to maintain its properties when exposed to the ambient environment. As an entrepreneur, you are under constant pressure made by investors, employees, clients, wife, children; it is hard, of course, but it does not break you. The entrepreneur does not forget basic principles of self-discipline and business activity.
PROBABLY THE HARDEST AND THE MOST IMPORTANT THING IS NOT TO LOSE COMMON SENSE WHEN UNDER PRESSURE AND IN A SITUATION OF REAL EXTERNAL CHANGES.
NAVIGATION INSTEAD OF SELF DEVELOPMENT
So, these five worlds are the basis for five levels of the game. You can see that technological entrepreneurship takes place only at the end of the game. The game levels do not represent steps for building a company. The transition from one level to another is something like the transition from one parallel world into another. It is similar to a portal.
In this regard, the game makes it possible to visit all these different worlds and see their differences (different basic processes, different sets of competencies needed to take action) in one day.
In real life, we don’t always know what exactly we are faced with. The game is a model that introduces players to different worlds in their pure form. Its function is navigation in a very messed up world of our life.