“CATCH 3 MONKEYS”

C U S TO M I Z E D S I M U L AT I O N F O R B U S I N E S S I M PA C T

SERIOUS PLAY CONFERENCE 2014

USC, JULY 22-24

SIMU4WISDOM LEARNING CONSULTANTS & CO.

WELCOME BY SIMU4WISDOM !

DAVID MAWEI 马伟

• TRAINER

• DESIGNER

• GAMER

WHO IS SIMU4WISDOM?

Simulation Design

Training Deliver

Strategy Alignment

What we provide:

AGENDA

• C u s to m e r c a s e 1 0 ’

• B u s i n e s s c h a l l e n g e 5 ’

• M e t h o d o l o g y 1 0 ’

• I n t r o d u c e V i to - C r e e k s i m u l a t i o n 1 5 ’

• Q & A 5 ’

CUSTOMER (SINO-PHARMA)

• State owned company from 1950, 30Billon USD revenue in 2013

• Net profit rate<1%, Negative operation cash-flow

• Market leader in China pharmacy distribution business

• Past growth from M&A 200+ local distribution companies

MARKET

• 500Million rural people seldom go to hospital, they deal with

disease like our ancestors

• Average medical consumption per people per year: China 11$,

USA 800$.

• Notorious corruption among the local governments and

hospitals, business deal mostly under-table

DEMAND

• Communicate the strategy shift from M&A to organic growth

• Regulate the business operation ethic as a public list company

• Leadership development of the head of new M&A local

distribution companies

RESEARCH：CONCENTRATION RATIO

26%

36%

33%

5%

USA

Amersourc

ebergen

Mckesson

Cardinal

Others

9% 5%

4%

82%

CHINA

Sinopharma

SH Pharma

Huarun

Others

95% VS.18%

SAME BUSINESS DIFFERENCE IN 2 COUNTRIES

CHINA USA

Major sales channel Hospital (85%+) Retail (87%+)

Hospital admittance CFDA + Local gov. FDA

Sales competition Local gov. Fair

Payment term Local gov. Fair

Upstream relationship Local gov. Fair

…… “Guanxi” Fair

INTERVIEW WITH CUSTOMER

“What is the key successful factor of your business?”

The answer is :

“ GuanXi (Relationship)”

• The relationship with

• the local government

• the major hospitals

• the upstream company

INTERVIEW WITH CUSTOMER

“What is the headache problem that block your success?”

The answer is :

“ Meet the conflict and combined needs of 3 stakeholders”

• Local government -----------------------------------accomplishment

• Downstream channels ----------------------------categorize of medicine

• Upstream companies ------------------------------volume of sales

INTERVIEW WITH CUSTOMER

“What kind of competition you deal with?”

The answer is :

“ The competition are variable in different local market”

• Different area has different relationship level with

• local government

• Downstream channels

• Upstream company

THE UNIQUE BUSINESS MODEL

Sino-Pharm

Local government

Upstream Downstream

THE DESIGN CHALLENGES

1. How to simulate “ Guan Xi(Relationship)” in a learning programs

2. How to simulate 3 stakeholdes coupling effects

3. How to simulate the strategy characters of different company

Design Challenges

“GuanXi”

Conflict

Characteristic

THE DESIGN SOLUTIONS

1. Intangible asset measurement “ Guan Xi(Relationship)”

2. Upgrade system for 3 stakeholders coupling effects

3. Asynchronies startup among the learning groups

Design Solutions

Intangible Asset

Upgrade System

Asynchronies Startup

METHODOLOGY

1. Business impact map analysis

2. Business big picture (Over view)

3. Business value structure

4. Business logic tree

BUSINESS IMPACT MAP Behaviors Initiatives Results

Maintain No.1 and

increase the share of

market in China

Rev reach 40 Billion

USD in 2016

(CAGR 22.6%)

Increase 1% Nopat

rate and positive

operation Cash-flow

Identify the key

strategy factors and

correlated

Proactively deal with

market dynamic, build

up the solid business

relationship with

stakeholders.

Effectively allocate the

precise resources to

influence the value

chain, to achieve the

profit rate and cash-

flow

Market and value

chain analysis,

estimate the trend

and dynamic

Decomposition the

group strategy and

planning the

business and risk

control

Manipulate the key

successful factors to

influence the growth,

profitability and

cash-flow

Use KPI to guarantee

the execution and

measurement

Understand the

business challenge

and improve the

industry insight

Build up the strategy,

finance, market and

opeation capability

Find a way to

increase the

negotiation power in

value chain

Make decision in

relationship foster

and realize

Competence

HOW HOW HOW?

Local Government

BUSINESS BIG PICTURE

DUMMY Distributor Downstream

Channel Upstream Company

Backoffice Business

Logistic Financing

Cash Mgmt.

Front Business

Upstream team Downstream team Product Category Gov. relationship

Demand generation

Purchase

• Deal

• Upgrade

• Value add

Sales

• Deal

• Upgrade

• Value add

Wholesale

Sino-Pharma

Business Value

Tangible

Cash-flow Profitability Asset

structure

Intangible

Upstream Downstream Local Gov.

BUILD THE VALUE STRUCTURE

ROLE OF MANAGERS

Sino-Pharma Output

（Collect money）

Input

（Use resource）

Foster resource to build edge

2014/7/26

2014/7/26

THE BOARD

2014/7/26

Upstream

Relationship

Downstream

Relationship Local gov.

Relationship

Payment & Collection

Order

Area

UPSTREAM BRIEF

Category

◎ Generic

☆ Original

▲ Anesthetic

Company Portfolio Strategy preference Contract term

White ◎+☆ Market share High penetrate

Good refund Upgrade optimize payment

Blue ◎+ ☆ Muilti channels

Good refund Upgrade is useless

Green ☆ Hospital focus Mid refund High margin

Black ◎+▲ Binding sales ▲ No refund, need license Bad payment term

Dummy Null Money and cash 1% profit. cash on delivery

Name Category Demand Preference

H I Hospital ◎☆▲ Relationship Variety etc.

H II

H III

RC Rural Clinic

◎☆ Relationship Discount etc.

RS Retail shop ◎☆ Promotion Logistic etc.

WS Wholeseller ◎☆ Discount Variety etc.

DOWNSTREAM BRIEF

LOCAL GOVERNMENT RELATIONSHIP

Foster：

• Government Task Accomplishment • Investment, Industry benchmark , Generic coverage, etc.

• Upgrade the value chain control

Realize：

• Influence the local directory admittance

• Influence the hospital decision

• Accelerate the hospital money collection

DOWNSTREAM RELATIONSHIP

Relationship Logistic

UPSTREAM RELATIONSHIP

Hospital/Clinic

Order

Retail

Order

Wholesell

Order

Downgrade Upgrade

Distributor rank

THE SIMULATION PROCESS

Planning

1. Loan

2. Quota

3. Support

Bid

4. Hospital

5. Clinic

6. Retail

7. Wholesale

TANGIBLE ASSET

Cash 314 AR 250 Deposit 40 Logistic 16 Total asset 620 AP 0 Loan 300 Total liability 300 Beginning equity 309 Gain/Loss 11 Ending equity 320 Equity & liability 620

DIFFERENCE OF STARTUP

Alpha Beta Gamma

Tangible SAME

Intangible Difference

Wa 2 2 3

Ba 3 1 2

Gov.pt 5 5 3

Main

force Hospital I Hospital II Hospital III

MEET THE NEEDS OF 3 STAKEHOLDERS

THE MARKET FORECAST

RESOURCE PLANNING (UPSTREAM)

√

√

√

√

√

√ √ √ √

√

UPSTREAM QUOTA BID

LOCAL DIRECTORY ADMITTANCE

UPSTREAM BID

RESOURCE PLANNING(DOWNSTREAM)

2014/7/26

√

√ √

√ √

√ √

DOWNSTREAM BID

DOWNSTREAM BID

2014/7/26

EXAMPLE: THE NEED OF HOSPITAL I

GA*4, BA*1, DA*1

PRIORITY: ALPHA > DUMMY > BETA

EXAMPLE: THE RESULT OF HOSPITAL I

ALPHA DUMMY BETA

YOU GET ORDER !

Hospital/Clinic

Order

Retail

Order

Wholesale

Order

DO YOU HAVE QUOTA?

CAN THEY LIST IN LOCAL DIRECTORY?

YOU GET MONEY ! WHEN

YOU HAVE TO PAY ! WHEN

GOV.

YOU GET STATUS !

GOV. GOV.

GOV.

SIMULATION TARGET

Alpha Group

Tangible

Cashflow

Income

statement

Rev. = M Margin + Refund = M

Fixed Cost = M Net profit = M

Balance

sheet

Total Asset = M Loan = M

Equity = M ROA =

Intangible

Upstream

Relationsip

Wa·◎ Wb·☆ Ba·☆ Ga·◎ Da·▲

Downstream

Relationship

Hospital I Hospital II Hospital III Clinic Retail

Gov.

Relationship

Use ，Earn ，Reserve for next year：

BUSINESS SETTLEMENT

2014/7/26

WRAP UP

C u s to m i z e s i m u l a t i o n f i t u n i q u e c u s to m e r ’ s b u s i n e s s

s i t u a t i o n a n d t a l e n t d e v e l o p m e n t n e e d s

Design Challenges

“GuanXi”

Conflict

Characters

Design

Solutions

Intangible Asset

Upgrade System

Asynchronies Startup

VALUE CREATED

W h a t w e h a v e d o n e ?

WE SEEK US PARTNERS !

Game Designer: Templar LU

Learning Designer: David Mawei

Simu4wisdom learning consultants & Co.

Room 1607, No, 1076,Changshou Rd,

Shanghai, 200042

T +86-21-62567710/51600196

skype: Simu4wisdom

E: davidma@simu4wisdom.com

www.simu4wisdom.com