October 2013 – The Business of Social Games and Casino

Why acquisitions and new business initiatives often fail

I was recently reading Playing to Win by A.G. Lafley and Roger Martin and realized that acquisitions and new initiatives only work when they build on your company’s existing skills. This insight sheds light on why some many acquisitions or extensions in the game industry fail. In order to win (to use the authors’ language), or what I would describe as building sustainable competitive advantage, the book shows you need to build systems that support winning. If an acquisition or new initiative requires different systems, however, being part of a company that wins in its space a different way can doom your efforts. This insight is crucial when considering an acquisition (either as a buyer or seller) or pursuing a new business unit.

You need competitive advantage

One of the themes of this blog, and my conversations with almost everyone, is that you need to have unique, sustainable competitive advantages if you are going to succeed. There are a lot of smart people, there are a lot of people who have raised investment, and if you think factors like these are going to make your company a success you probably need to start thinking about the next company you want to start because you will fail. Very rarely does a strategy of trying to be smarter than your competitor actually work. It is an arrogance that I have seen lead to the waste of millions of dollars of investment and years of sweat equity. Instead, great businesses are built by creating processes, technologies and other unique and non-replicable systems that make your product or services more valuable to customers (or cheaper) than your competitors. Continue reading “Why acquisitions and new business initiatives often fail”

Presentation on data quality and LTV

Presentation I recently gave at Groundwork Labs on LTV and data quality:

Groundworks presentation on ltv from Lloyd Melnick

The best option left in game financing: growing your company

I get many questions on how to raise money, and in the current business environment the best strategy is growing your business through cash flow. Institutional investors who are open to the game industry are primarily looking for companies that are at a later stage, have significant cash flows and customer bases and are already close to an exit. In fact, the venture capital environment has shifted for almost all enterprises, with a typical A-round (the first round of institutional investment) now primarily going to more advanced companies that already have traction. A few months ago, I wrote about Turning Your Customers into Venture Capital and the importance of that practice has been magnified in recent months.

You do not need investment to create a billion dollar company

I recently read Hamdi Ulukaya’s article in Harvard Business Review on how he grew Chobani (the Greek yogurt maker) into a $1 billion business without any external capital. This article drove home that financing from cash flow could not only be a way to create a nice, profitable lifestyle business but also create a billion dollar business that could IPO if it wanted to go that route. If you are not going to rely on a huge investment to build your company, though, you need to do everything the right way since you cannot just fall back on a big pile of cash. As Ulukaya wrote, “Too many entrepreneurs believe it’s impossible to scale a business without relying on VCs or other equity investors. That view is wrong. If I could grow a company from zero to $1 billion in less than a decade in a capital-intensive industry, many other businesses can too.”

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You need competitive advantage

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You do not need investment to create a billion dollar company

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A strategy built on arrogance

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