Pipeline Workshops: Improvements to the Game

Simulating production principles is a significant part of a Pipeline workshop™.  We repeatedly hear that the opportunity to simulate production in a progressive series of scenarios enables builders to better “see” production.  Both a production simulator and a business game, the Pipeline game™ is what makes Pipeline workshops™ so intense, so interactive, so competitive, and so worthwhile.

Pipeline Game (staged)

The game is already a tremendous tool for teaching both production and business principles, but we recently made two significant changes to make the game even better.

The first change was to shorten the duration of the game, so that we can run more scenarios in the same amount of time.  Shortening the game had the additional benefit of making every operating decision more consequential, and making 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 realistic 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;  it is Operating Expense – the indirect, non-variable cost of internal resources associated with overhead – that determines capacity cost.

In earlier versions of the Pipeline game™, using the resources to reflect capacity and cost meant that we disregarded Revenue and Cost of Sales, and focused on Throughput, which is more closely related to residual Gross Margin.  In the newer 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 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.

This represents a significant stride in reconciling Revenue, Cost of Sales, Throughput, and Gross Income, which makes 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;  that makes Operating Expense an indirect, non-variable cost, as it relates to Revenue and the completions that produce it.

The overall effect is now a board game much more reflective of a homebuilding operation, with lessons that are now much easier for builders to understand.

The improved version of the game was played at 2014 Housing Leadership Summit, explained at the 2014 BuilderMT-Sales Simplicity Client Conference, and it was part of the most recent Pipeline workshop™ in October.

 

The next Pipeline workshop™ will be held at the Ponte Vedra Inn and Club, Ponte Vedra Beach, Florida, on March 11-12, 2015.  Cost is $795.00.

Delivered by SAI Consulting.  Sponsored by Big Builder (Hanley Wood) and Continuum Advisory Group.

Details:  www.buildervelocity.com