This component of the project gives you the opportunity to run a simulated company that is getting started in the solar systems industry. This online simulation illustrates the organization and operation of a company.
The work in this component contributes to your grade with the following parts:
- The Excel template to report your results from the CleanStart simulation
- The simulation analysis portion of your written report
Project Component: CleanStart Simulation
Before beginning the simulation, open the Excel Template (posted in this same module). The second sheet (second tab) in that Excel workbook is the sheet on which you will report your results from your operation of the simulation. Note that this simulation processes quickly, so that you can start over and run a full set of years as many times as you wish. You will report only one set of your results (i.e., one set of up to 4 years [16 quarters] or until bankruptcy, whichever comes first). This simulation will advance one quarter at a time.
In this simulation, you are managing a company that is just getting started in the industry. This startup company will give you experience with challenges such as the situation of trying to manage the profitability so that the company can avoid bankruptcy and how to generate sales.
In this simulation, you will have the opportunity to make decisions regarding organization structure and controls and building a sustainable (i.e., surviving long-term) business. These concepts are covered principally in Chapters 9 and 10 and in the idea of balanced scorecard (Ch. 2) and stakeholders and sustained competitive advantage (Ch. 1).
Your objective here is to operate the company at least four years (16 quarters) without going bankrupt. You are working to grow the company to a point of being able to survive (i.e., being viable or sustainable). It is OK if you cannot accomplish this goal and your company goes bankrupt. But if your first try results in bankruptcy, try at least one more round of quarters (start over). As you’ll see, you learn more each time and can increase the chances of survival. Regardless of how many times you start and operate the simulation, you need to choose just one of those attempts (one set of quarters either to four full years or to bankruptcy) to report in the Excel template.
Please access the main screen for accessing the simulation:
On that introduction page for the simulation, scroll down and click on the “Play Simulation” choice. (See screenshot on next page.)
| Click on “Play Simulation” |
After clicking on “Play Simulation”, you are taken to the start page for the CleanStart simulation. Here, you can access the instructional video and then, launch the simulation. I highly recommend that you begin with the instructional video.
The simulation is a simplification of a complex business environment. As such, the simulation lets you gain experience with some, but not all, of the decisions that go into operating a company. The instructional video demonstrates some of the operational complexity of competing in this industry – particularly in the first 10 minutes. For example, minutes 6-9 give insight into the design complexity of the systems that your company is selling – this shows why you need skilled engineers and why you need skilled salespeople who can speak clearly to the customers.
In the instructional video at minute 9, the video mentions scenarios – note that I have not created any unusual scenarios beyond the base case (so the instructions in the video apply exactly to the simulation as you will see it). At minute 10, the video begins to show you how to access and operate the simulation.
When you are ready to begin the simulation, click on “Play as individual” on the entry screen. For this simulation, you will need to choose a screen id. You will record this screen id on the Excel template so that your participation in the simulation can be confirmed.
Once you’ve opened the simulation, you have a welcome screen that gives you information about the initial set-up. (Instructions continue below.)
Specifically, every company begins with $1 million in cash. This money could have come from your own savings and friends and family – these are your initial investors (i.e., equity holders). You need to use this cash wisely. As the tutorial video notes, the $1 million will last about one year (four quarters) of operations. You can see this initial $1 million in several places on the screens. For example, on the Overview screen, your cash balance is shown here (and updates each quarter when you “Advance” the simulation).
Or you can go to the Cash Flow screen by clicking on “Cash Flow” in the menu of screens. The Cash Flow screen shows you the cash amount and the “runway” that the instructional video talks about. The “runway” is an analogy to an airport runway used by planes taking off. You have about 1.5 years of cash available to use to get your business off the ground. (See screen below.)
“Runway” shown on the Cash Flow screen:
To avoid going bankrupt due to running out of cash, you need to generate additional cash to support your operations. The most sustainable way to generate cash is to operate the business successfully by selling products and increasing the sales over time. This simulation also lets you request financing from venture capitalists (VC’s), and this financing will provide a lump of cash to support your continued operations. Keep in mind, though, that you need to show that your business has potential for success in order to convince the VC’s to invest in you. For this reason, if you request cash from VC’s, your request may show as “pending” for several quarters before you are granted the cash. And you may never be granted that cash if your company isn’t showing progress toward being profitable and surviving.
This simulation will advance one quarter at a time.
You will make your entries on the Overview screen using the menus on the left-hand side.
For your company, you are making strategic decisions across several functional areas of the business – specifically, human resources (HR), engineering & operations, marketing, and finance. As you make these decisions, notice that you are having to balance tradeoffs across these areas. For example, you could charge little for your product and pay your employees a high salary – which would make the customers and employees very happy. But they would be happy for only the short run, because you’d likely go out of business if your decisions are not profitable. The decision categories you have control over are the following:
- You will make decisions about the organization structure by choosing how many employees to hire and how many will be sales employees and how many will be engineering employees.
- You make decisions about the organizational controls by choosing how you will compensate the employees. These decisions about employees are driving results such as reported job attractiveness and employee turnover.
- You set the price for the product. While a low price might be attractive to your customers, you need to make sure your price covers the cost of the product (look at the Product screen for the cost).
- You manage the financing strategy by choosing if and when you will apply for venture capital funding. If you are able to generate sufficient profit early on, you likely will not need the VC funding. However, it is OK if you do need to request VC funding – just recognize that you are taking on owners since VC’s provide equity (not debt).
Your decisions affect the profitability of the business because you are driving both sales and expenses. By affecting profitability, the decisions affect the sustainability of your company – its continued existence (you need to generate enough cash to keep operating – either through the company’s own operations or through venture capital investors).
Note, again, that this simulation advances only one quarter at a time. Therefore, your approximately 1.5 years of cash to begin will cover about six submissions (six quarters = 1.5 years). In the Excel template for this simulation, you are reporting each quarter’s results. If your company goes bankrupt, that is OK. But you might want to try to operate the simulation more than once to see if you can improve your performance (operate for more years) since you can learn from a bankruptcy.
Reporting your Experience
You will report your performance results in the Excel Template provided in Courseden. You need to report only one set of results – up to four years (16 quarters) if you can keep operating instead of going bankrupt. If you go bankrupt before four years, you can report those results (just type “bankrupt” in the Excel template in the quarter your company fails). As you add more quarters of operation, the simulation’s results pages will add additional columns of results.
You can see the actual numbers rather than just the graphs by selecting “View Data.” The Income Statement page is shown below as an example.
Proceed now to the Instructions for Written Report to continue working through the project.