Pipeline Workshops: Improvements to the Game

Enabling builders to test the principles and lessons learned is a significant part of the takeaway we offer in a Pipeline workshop. We have repeatedly received feedback from attendees saying that the opportunity to simulate production in a progressive series of scenarios enables them to “see” production in a way that they have not previously experienced.

There is nothing comparable to a Pipeline game, anywhere. It is both a production simulator and a business game;  in large measure, the Pipeline game is what makes Pipeline workshops so intense, so interactive, so competitive, so worthwhile.

 

 

Although the game is already a tremendous tool for teaching both production and business principles, we, nevertheless, take seriously the opportunity to make it better.

And, we do listen. Partly as a result of feedback, we recently made two significant changes to the game.

The first change was to shorten the duration of the game, without diminishing its effectiveness, so that we can run more scenarios in the same amount of time; basically, we halved the number of rounds. Unexpected benefits of shortening the game: (1) it makes every operating decision more consequential; (2) it makes the results more realistic, easier to comprehend, therefore, more intuitive.

The second change was to more realistically reflect the outsourced nature of homebuilding production. Previous versions of the game used the resources to reflect both the capacity of the system, and the cost of that capacity. That arrangement is appropriate for a manufacturing operation or even a project management organization, but a more accurate reflection of homebuilding production is to separate capacity and cost.

In homebuilding, the external resources that determine production capacity are a part of Cost of Sales (which makes them a direct, variable cost); Cost of Sales is a measure of product cost, not capacity cost; rather, it is Operating Expense – the indirect, non-variable cost of internal resources associated with overhead – that determines capacity cost.

In previous versions of the Pipeline game, using the resources to reflect capacity and cost meant that we disregarded Cost of Sales, and focused on Throughput, which is more closely related to residual Gross Margin. In the new version of the game, we bring Revenue and Cost of Sales back into the picture;  in effect, we now account for the margin side of Return on Assets. The external resources in a game now only define the production system’s capacity, and their cost is reflected in Cost of Sales, as a percentage of Revenue; they are now the true, variable costs associated with production.

Throughput is now Revenue, less Cost of Sales, which is still Gross Margin. This represents a huge stride in reconciling these terms, and making operating decisions easier to connect to financial outcomes.  Operating Expense is now an imposed (budgeted) value, reflecting the cost of the internal capacity required to manage work-in-process; it is a non-variable cost, and it is now only indirectly related to expected project completions.

The overall effect is now a board game much more reflective of a homebuilding operation; the lessons are now much easier for builders to understand, with a production simulator that exponentially increases learning over that which occurred before.

The new version of the game was rolled-out for play this past May at the Housing Leadership Summit; it was explained at the BuilderMT-Sales Simplicity Client Conference earlier this month; and it will be part of the upcoming Pipeline workshop in October.

Don’t miss it.

 

The next Pipeline workshop will be held at the Ponte Vedra Inn and Club, Ponte Vedra Beach, Florida, on October 15-16, 2014. Cost is $795.00.

Delivered by SAI Consulting. Sponsored by BuilderMT and Big Builder (Hanley Wood).

Details: www.buildervelocity.com