Fantasy CEO – Round 8 Annual Report

Filthy Lucre

It’s the last round. Do you play as if there’s no tomorrow?

Should you cut right back on investment to maximise short term profits, or should you assume that the business will continue and invest accordingly?

I compromised and made investments that would pay off this year (marketing, sales, quick and dirty rebuilds) but not ones which would pay off next year (automation). Even so, I rebuilt the products simply to bring their age down and make them more saleable.

Like David who commented on my Round 7 Annual Report, I was expecting the goal-posts to be moved half way through the game with a plunge in the stock market or a change in legislation or some other “external” factor which pushed us off course. In some ways I’m disappointed that this didn’t happen, in others it’s been fascinating to be able to play in such an stable environment no matter how artificial that is. But with hindsight, I could have been bolder and splashier in my early rounds, safe in the knowledge that nothing fundamental was going to change in this little world.

I am ending the game feeling mildly frustrated. I have no idea whether my performance is mediocre because I chose a mediocre strategy, or whether it’s because I implemented a good strategy too cautiously. I went for “a differentiation strategy, with a product life-cycle focus” assuming that I could save on R&D costs by letting my products age gracefully from one sector to another. However customers don’t like old products so you have to dicker with them just to keep them in the right age range. I suspect that all the strategies involve similar trade-offs but it would be nice to know.

Somewhere in the copious training material is the comment that many players make the mistake of seeing debt as a Bad Thing and lose out on the chance of making profits because they under-borrow and under-invest. On top of which the Balanced Scorecard loves it when you borrow. So I did borrow a bit, even though the sheet describing my strategy advised me to raise funds by selling shares. I know that one of the top 20 players borrowed copiously in the early rounds to fund massive investment. It worked for them so maybe my mistake was to be overly cautious. My frustration is that I don’t know.

Around Week 6 I got much more organised with my forecasting, but I never completely nailed it. I’d dearly like to know if anyone did get their sales forecasts right for all their products in every round. And if so – how?

The lonliness of the online gamer

This really is a repetition of the comments about the fact that we are playing very blind – with no forum to compare notes in, with weekly commentary from a journalist rather than a tutor, and opacity around the scoring. I will say once, here, that it’s really extremely poor that we have to submit our final round entries before the Round 7 league table is published. If it ever will be. If I was one of the top 10, I’d be livid. I’ve also seen nothing which explains the logistics of the last week. Will the league tables be published? If so, when? When will the winner be announced? Et cetera and so on. I’ll stop now, before I get any more whiny and shrill.

On the other hand, blogging about the game has made all the difference to my experience of it. There’ve been some interesting responses to these posts, and some thought-provoking debates.

What have I gained?

So, 8 weeks in, and what have I got out of it? In my first Annual Report, I said:

I want to do this for a variety of reasons … the first of these is bloody mindedness: it was making me nervous, therefore I have to do it.

Another reason is that I am enjoying using the simulator.. .

I’ll learn things I don’t yet know I don’t know …

It is … good practice for me to work with a P&L and a Balance Sheet rather than staring at them and saying “oh look – that’s a Profit and Loss Account and that’s a Balance Sheet”.

So all in all, my motives are not competitive. I am using this as a chance to study and learn … I’m just incredibly thankful I’m not having to discuss every single decision I take. It’s hard enough as it is.

I already knew that most things I find intimidating can be made familiar by practice, but it’s nice to have it confirmed.

As the game’s progressed I’ve come to appreciate the sophistication and complexity of the modelling behind it. One of the commentators in an early Times report said that in real life you don’t have such sophisticated modelling tools. Big businesses have modelling tools far more complex than this one of course, but in an entrepreneurial situation you don’t have these sorts of tools, and 8 rounds of Fantasy CEO would serve to tell anyone thinking of starting their own business that they really do need to understand how the numbers interplay with each other.

Yes, I have learned some stuff, but not as much as I’d hoped. If you don’t know what you are looking at, then no amount of looking at it will make you any the wiser. I could have got one of my books on accounting and really dived into the reports each week, and I chose not to. I think I just have to live with the fact that my instinct around beans is to sprout them or bake them but not to count them.

I was wrong to assume that the game would be less enjoyable played as part of a team. Now I think it would have been much more enjoyable played that way. I am really glad that I blogged about it. In fact I doubt I’d have had the stamina to play the game just for the sake of the scores each week. The comments here have hugely increased my enjoyment of the game, reducing my sense of competition in this thing and increasing my sense of community.

Other things I’ve learned:

At the end of Round 6 I noted down a couple of other things which I knew already but which the game confirmed:

Working the numbers out by hand may destroy your soul, but using spreadsheets for everything blunts your instincts

I semi-automated a lot of my analysis during Round 6. I lurve conditional formatting in spreadsheets. I love it when a cell changes itself from Red to Amber or Green when you change a number somewhere else entirely.

On the other hand, this reminded me of something I knew already: that when you are analysing something there’s an optimal level of automation which varies from person to person and dataset to dataset. Spreadsheets take the drudgery away, but automate too much and you miss out on the understanding you can only reach by getting down and dirty with the data.

I have a tendency to blank information I don’t understand.

This is most clearly shown in the way that I blanked the obvious sections in the reports referring to the recap scores, but I’m aware that I skipped blythely over the financial reporting pages of the FastTrack reports each week. On one level this means that I have the ability to focus on my own stuff and trust others to get on with their druthers which makes me a good corporate minion. I like minionhood, so that’s ok. On the other hand, to do my job well I really do need the self-awareness to notice when I’m ignoring something, the self-control to look at it long enough to find out if it’s ok to ignore it, and the self-discipline to get stuck in to learning about something I really don’t understand and don’t want to.

Round 8 Annual Report

Well, if I were only playing against the robots, I’d be feeling pretty chipper by now. My decisions have come good compared with those of my automated competitors, my share price has risen up and overtaken them all, I’ve got better market share, more profitability and so on. But once again I underestimated what I could sell, and ended up with empty shelves and disappointed customers which brought down my profits and earned me penalty points on my Balanced Scorecard.

If I could ask the top players one question, it would be how the hell do you get accurate sales forecasts?

My placing in Round 7 was decidedly average, and my placing in the game overall is brought down by noticeably poor performance in Round 3. That was the first round that I played using the Balanced Scorecard as a tool, and I like to think that I did poorly that round because of unfocused decisions the rounds before. Of course I did.

I’ll probably publish a “How was it for you” piece when the Times publish the final league tables. I do want to find out how everyone has done.

Thanks everyone for reading and commenting on this. It’s time to breathe a sigh of relief, crack open a bottle of wine and reclaim your Sunday evenings!

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16 responses to “Fantasy CEO – Round 8 Annual Report

  1. Aphra,

    If the Times run this again I think they should pay you a huge fee and ask you organise it.
    Thanks for your Blog, I will just have to pop back now and again in the future.
    For what it is worth my total score was 704, share price 220 and Cum profit was 105.2+42.5 = 147.7.

  2. Well done Steve. I got over 420 points in total, playing a very high risk strategy which didn’t work out. I also made the mistake of playing to outperform the computers without keeping an eye on the balanced scorecard. Coupled with a massive risk taken in round 4 which failed, after that it was simply an exercise in damage limitation, which actually went very well.

    As far as predicting demand is concerned, I had the luxury of everything I produced being sold in general. My problem was knowing how many more unit spaces in production to purchase, and trying to compete after a massive setback 😉 Where I was producing less than I was capable of, it tended to be a reaction to:

    1) Consumer purchase in the previous round
    2) An estimation of the effect my changes would have on that in the next round

    I think the Times were expecting something like the 4000 or so people who signed up to actually play the game, and when that dipped to only 600 or so in the first week, they lost interest in actually keeping us abreast with information regarding it. I think I would definitely play again, but I highly doubt they would run it again given the disappointing response rate.

    There are a million and one things that could be done to improve this game and the way it was run, but I think at the very least the Times should have got the ‘league tables’ sorted out before the game started. By the end, I felt as if I was doing a favour to the Times by actually finishing the game and its quirky implementation 🙂

    Peace and God Bless!

    Andre,

  3. Steve, good luck with your chance at the £10k.

    As has already been stated I to am glad that I lasted to complete all 8 rounds although, considering it is just a game and I’m likely to finish around the 140 mark, I felt oddly very annoyed that I could not go through my ritual of printing off the fasttrack info from my excel spreadsheet. But that was syptomatic of the game as a whole I couldn’t do what I wanted when I wanted, I couldn’t get the information I wanted when I needed it the most, time was against me, the robots didn’t play the way they should, the sales weren’t in line with my forecasts, I stocked out when I shouldn’t have, I had extra stock when I shouldn’t ha……. Perhaps I have learnt about what it’s like to be a CEO after all….

    Aphra – I look forward to your final piece, but may I ask that it is not your final piece. Some of us out here have a genuine interest in business in its many formats. From the why’s and wherefor’s to the ethics and theories. We do not all have the background either educationally or in practice but are willing to learn without the tedium of actually learning. This forum has been interesting and the Times, as I’m sure there commercial arm have already thought, has the opportunity to work with you to provide topics that the world are intersted in, even if right now we are a very small world.

  4. By the way I meant that I thought that I would finish around 140th in the game (although I wanted to finish in the top 100) with a score of approxiametly 481.

    I visited the capism.com site the other day and the winner in Spring 2007 won with a score of 705 and the winner this fall scored 776/1000. But not one of the winners, prior to the Balanced Scorecard, had a greater cumulative profit than Steve. Not sure whether this simply shows my analy retentive side or if it is somewhat interesting.

  5. For what it’s worth – Aphra, this was my strategy:

    Having two products in each category and keeping them near the sweet spots. My major fault was being debt averse and not leveraging up enough, thereby necessitating vists from Big Al twice.

    Nevertheless, I managed to clamber from around #180 in the beginning to #65 in round 7. So am happy with that.

    You are absolutely right that they should throw in external events like suppliers defaulting or stock market jitters or some such thing.

    Has no one an idea why Zursteige dropped out at the last minute?

  6. Cheers to all for comments – it’s v. interesting to hear how others have done and strategies used – particularly as The Times are not giving anything useful away! (even the demographic breakdown of average results on the results page – which could have been very interesting – is so distorted by drop-outs as to make the figures next to useless it seems).

    For what it’s worth, I came out with a total score of 646 which I hope should put me around the top 25. Am relatively pleased with this considering I started off in Week 1 of the competition with a huge emergency loan and a ranking of about 390th.

    Steve – congratulations on a great performance. How on earth did you get to the point of earning well over 40m profits a year?! This is around 50% higher than mine – I’m intrigued and would love to know what your strategy was, how you spread yourself between the sectors etc. I guess you’ll be keeping this to yourself in case they run it again though…! Good luck for the big prize when (if) they get around to revealing the results.

  7. Well my final score is 688 which will hopefully keep me near the top of the first page.

    I built 5 products as quickly as I could and had 3 in the higher margin high-tech sector and 2 in the low-tech sector. A large part of my strategy was to go for high leveraging and borrow as much as I could to enable spending on r&d, sales and promotion. One of the main things was to grab as much market share as possible as early as possible and then keep it which meant high awareness and accessibility as well as keeping products near the sweet spot. This strategy seems to have given me the highest sales in the game, but not the highest profits so I certainly overspent somewhere – and although it won’t happen with this comp I would like an expert analysis to show me where.

    When will the final table be published?

  8. 642 for me so probably just behind AJN. I would describe my progress as steady throughout the comp; I started in 131 and gained a few places each week.

    This week was the first week when I scored lower on a round but that was because I ran out of a little bit of steam and as a consequence had three product stock outs that perhaps could have scored me a couple of extra points.

    My strategy was to create a product every round or two and let them pass through a product life cycle from high to low. Strange that I perceived myself as a High Tech supplier but ended up dominating the Low Tech sector. Agape proved to be a real cash cow over the course of the game.

    I would like to have seen the simulation carry on for a few more weeks to establish if it could cope with industry consolidation and product retirement.

    Very enjoyable and congratulations to all.

  9. Dare I say something right after Ron? ;^)

    With my fingers trembling as the hit the keyboard, I’d like to add a couple of things. Firstly, I was probably the only one of the lot not involved in real life business as my background is in academic research.
    As I prefer to keep the anonymity of my name I’m not saying what my final score was; I just say that I should be somewhere around the second page.
    Secondly, I think my big mistakes were,
    a) not having used as much of the resources available as I should. In fact it should ‘ve been indicative of what was expected from us, that round after round we were able to borrow in ever greater quantities. Unfortunately I didn’t take advantage of that.
    b) only till very late in the game I noticed that retained earnings came from an already pre-set policy, and that distribution of dividends came from them. Therefore by implementing a dividend policy one could manipulate leverage levels (i.e. more points).
    c) from aprox. round 5/6 I lost interest and just kept going pretty much by inertia (i.e. repositioning products and keeping levels of awareness and accessibility), so I didn’t try to maximize any of my moves. Paradoxically I did keep the interest in what it was said here.
    Finally, a big thank you to Aphra for providing this stage for our comments.

  10. Steve, if the Times want to pay me a huge fee, I’ll accept it gratefully, but somehow I doubt it’ll happen. And please pop back any time you like, though I’ll make no promises about what you’ll find when you get here. 😀

    Andre, I’d be very interested to know how many people the Times expected to play the game. One thing that strikes me is that they would have benefited from the buzz of a forum as much as the players would. I suspect you’re right and the Times won’t run it again, which would be a shame.

    Mark, I’m glad it’s not just me who’d developed rituals around the spreadsheets! I’m interested in all sorts of aspects of how businesses intersect with people, so I’m sure I’ll post about business-related issues again. In fact, I can feel a post coming on about soft skills even as I type this reply! Incidentally, I felt myself getting all excited when you mentioned “open” competitions on the Capsim site, and all disappointed when I realised that I didn’t qualify to enter, so I clearly will be playing again if the Times run the competition next year.

    Shah, what I find really interesting is that it seems your strategy was very similar to mine, and our placings were much the same. The thing I’d really like to know is whether or not some specific strategies are more successful than others.

    AJN, that’s a good point about the breakdown of averages. The Times really did not think through the issues around scoring, did they?

    AE, from what you and others are saying, the game really does seem to reward borrowing, doesn’t it?

    Ron, did you get stock outs because you took your eye off the forecasting, or for some other reason? As you know, I got obsessed with the forecasting, so I’m eager to learn.

    Dar, one of the things I found really interesting is how decisions taken early (like the dividend policy one you mention) whiplashed through later rounds.

    I’ve popped an email through to the Times asking them nicely when the expect to post the final table and making some other suggestions which all come down to teaching my grandmother how to suck eggs. It’s just that I really do hope they run the competition again next year….

    Thanks all for your kind comments. It’s been all of you far more than it’s been me. The conversations here have made the game multi-textured and multi-dimensional and I’m grateful to you all for stopping by and commenting rather than just reading and clicking on.

    Aphra.

  11. Hi All,

    I just noticed the round 8 scores have been posted.

  12. Dar.
    No probs. You elucidated your points very well; it’s just that I enjoy the cut and thrust of debate so apologies if needed.

    Aphra

    I will forward to you the sales details of my game but basically I got visited by Big Al in round 3 to the tune of 12 mill and that worried me in that had that been real life I would have committed the fundamental error of going bust running a profitable business.

    However, analysing from thereon I had stock-outs in each round thereafter which again in real life would have lost me customers.

    In the market segments my estimates were out and I found it difficult to gauge, i.e. estimate the amount that I should ‘tone down’ the sales estimated in the marketing module.

    For example, for Agape the extimate might have shown 2,100 but I would estimate for sales of 1400 given the other products and the actual out-turn was probably 1480 if the market potential was to be believed.

    As I wrote earlier, I started to dominate the low tech segment far more than I planned for and there seemed to be no reason for that; some of my competitors were far cheaper than me with better perfomance and size figures in some instances.

    Still, the game generally seemed to like my strategy so no complaints really.

  13. I blew out in the last round, dropping from 6th to 11th place; 😦
    With less time available than I had in previous rounds, I got my forecasts wrong, produced too much and priced my High Tech goods too high.
    Given failure to master the game in the last round, I hesitate to comment too much on my strategies. Nevertheless here are a few comments on how I reached my peak position of 6th place (at the end of round 7).
    1. I chose a similar strategy to Aphra – ie. product lifecycle/differentiation approach.
    2. I invested heavily in R&D and automation in the early rounds.
    3. I funded my investments with both debt and equity and paid no dividends in the early rounds. (similar to Aphra, I started out using mostly equity, but switched to more debt when it was clear I was getting nailed on the scorecard for my lack of leverage)
    4. I invested heavily in promotion and sales, and then maintained very high accessibility and awareness levels throughout the rounds.
    5. By round 5, I had 5 products in production and on the market. I would have liked to be able to have more, but this was not possible.
    Some speculative observations and questions to other players:
    i) More products are required to win – I am interested to know how many products other players had during and at the the end of the game.
    ii) I struggled much more with the forecasting in the high tech sector than low tech. As in real life I suspect, the high tech game seems risky and volatile; not for the faint-hearted. I did well in spite of always being either out of stock or heavily over-stocked in my high tech products. I am sure this was only because of the stability and certainty I managed to create with my low tech products.
    iii) I had a visit to Big Al in Round 2, following which I became very cautious financially. I was surprised that in spite of this I managed to do reasonably well overall (I only managed 3.6 of the possible 20 points for the emergency loan score on the final recap table). Did anyone manage to go all 8 rounds without any emergency loan?

    As well as Mr Z, did KR who was posting here in the early rounds, also drop out?

  14. Hi guys,

    I’m Tran, finished at 14th post on the ranking table. Round 5 I was at 8th place and was hoping for a top 5 ranking but then it all changed in Round 6…

    It’s quite interesting in my game because things weren’t as expected – at least to what it said in the ‘foundation guide’ – where the dollar value of hi-tech and low-tech would be about 50-50 at the end of the game.

    In fact, in my game, because I’ve done so well in R5, in R6 there was a huge change in my competitors’ pricing strategy. They dropped the price without caring about all their ratios. The only thing they were after is surviving in the market.

    It made the effect worse when after R5, I decided to expand my marketshare in terms of unit sold – invested heavily in production and also, paid about nearly $22M dividend. So I ended up visiting Big Al and took $6M from him – which with my company post at that time, wasn’t too bad. I still got strong retained earnings, the stock pilled up is there and they’d be sold in next year.

    But the way the competitors reacted made me scared! One of the companies got 2% ROS, and a profit of around $1.5M ??? I said to my self ‘what the hek is going on?’

    At R6, 7 – my sales revenue was even bigger than the smallest 3 companies’ – in R8, it was almost as big as 4 companies’

    And because of the R6 effect, my strategy changed. Before it, all the projections pointed to where my low-tech sales (in terms of dollar value) would be higher than hi-tech sales all the time untill the final round – same thing with total market sales.

    But then, it changed, up-side-down! My hi-tech sales increased in almost 74% compared to R5 – low-tech sales suprisingly decreased by 10%. Market growth rate (again, in dollar value) in low-tech was -2.08% – the first and only time in my FCEO history I see a minus growth rate! hi-tech normally growth at around 16-22% but in that round, it was 10% only! I said to my team-mate: “this is madness!”

    I know that effect was indeed, created by my company, as in the past rounds, I was getting more and more of the market share – money value and units sold. I could had foreseen the way other companies reacted but I didn’t expect it was gonna be that bad. A minus growth rate is too bad for the industry! and it happened in my game!

    We found it was quite hard to get on with the pricing strategy afterwards.

    On one hand, if we reduce our prices (we always have our products priced at top of the expected range, even more expensive – one of our products in low-tech was priced at $38 and it kept stocking-out since it appears on the market – avg units sold about 900) – we would lose our ratios and ultimately lose our scores on balanced scorecard.

    On the other hand, if we don’t reduce the price – it’d be really hard to get the market share we wanted, also, we were wondering how we are gonna cope with the so-low prices of our competitors.

    Besides, if we use predatory pricing we could ‘kill’ some of the competitors – but that was not gonna get us anywhere with the balance scorecard.

    We exepected to get 71pt in R7 but we only got 68 – huge disappointment! and that means the pricing strategy that we’ve chosen to react with the industry trend wasn’t good enough. We’ve been dropped to the 16th place on the ranking table.

    But then, in the R8, we expected 71pt, we’ve got 71.4 – or so – points. And this time I told to my team-mate, now we know how to play the game 😀 – the only problem is that it’s the end of the game already.

    If the Times run this game again, I’m sure I’ll be ready for it. Only one thing, I haven’t heard anything from the Times, apart from a ‘simple article’ annoucing the winner. Is that all??? A competition ran by The Times online, Orange and the company that created the game itself, ended up with one simple article???
    anyone has any ideas?

  15. PS: sorry for my bad English. Btw, the pricing strategy I applied in R8 was ‘independent pricing strategy’ – I invented it :p – and I think, it could only be used in FCEO.

  16. So it wasn’t just me who found forecasting to be a black art then Ron? I’m comforted by that.

    Jen, you may have had a similar strategy, but you were clearly better at implementing it. And your last round reminds us all that there aren’t any short cuts. I’m sorry to hear about you being pipped to the first 10 places though.

    Trin, thanks for such a full explanation. I’m particularly intrigued by the differences between the strategies of those on the first page. I doubt that the Times will publish anything more than the one article they’ve published already.

    Aphra.

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