One problem I have seen repeatedly in fast growing companies is the tendency to centralize some functions as the company grows. Just as the Soviet Union collapsed under the weight of centralization, and it severely negatively impacted their economy, many companies should put a brake on growth by centralization.
Functions range from marketing to HR to finance to product to tech. The underlying hypothesis is that the company will enjoy economies of scale, share knowledge better and can build stronger expertise in functional areas. The reality is that it often leads to extra unnecessary headcount, bureaucracy that puts a time burden on anyone without noticeable benefit, an “us versus them” mentality, losing touch with your customers and weakness in the functional areas. Continue reading
Last year I recommended the ten professional books that I had found most valuable. I recently finished reading Contagious: Why Things Catch On and found it incredibly enlightening. The author, Jonah Berger, is a Wharton professor who is probably the leading expert on generating word of mouth.
Word of mouth is one of those black boxes that many growth or marketing professionals resignedly claim is a matter of luck. Berger, who has spoken to Google and Facebook among others, shows the fundamentals of creating a product that will generate word of mouth (the growth of which is not necessarily marketing, but rather integrated with building your game the right way). I will write more about Berger’s work in the future but you should put it at the top of your holiday reading list.
Most, if not all, social game companies are missing their greatest source of value. While companies struggle to add $0.01 to ARPDAU, there is an opportunity to exponentially increase the revenue from your player base. And it is an opportunity not unique to social game companies but one many technology companies should explore.
The real value many social game companies have is their player graph and relationships. A player graph is the understanding, on an individual level, of your players’ preferences, decisions and behaviors. Once you figure out how to leverage this information, your revenue from in-app purchases or advertising is a footnote. I remember years ago (2009 to be exact) speaking with a partner at the VC firm Andreessen Horowitz, then an investor in Zynga, who told me that even if Zynga’s players stopped spending entirely the company would be worth over a billion dollars (this was pre-IPO) due to its network of players.
The ability to monetize these players with in-app purchases has since turned into a mixed blessing, as it has blinded many companies to their greatest potential source of value. As many companies generated millions or even billions of dollars in revenue through in-app purchases and thus focused on optimizing revenue from each player, they lost the urgency to harness the true value of their players to optimize their company’s value. Continue reading
While it is extremely difficult to create a great strategy that generates sustainable competitive advantage, it is not very hard to craft a flawed strategy. It is more difficult now than ever to build a great business. As A.G. Lafley and Roger Martin write in Playing to Win the new normal is volatile, uncertain, complex and ambiguous. Given this environment, having a sound strategy is critical. I plan on writing next month on the key elements of a sound strategy but more pressing is analyzing your existing strategy to see if it is flawed. In Playing to Win, the authors point out the six most common strategy traps.
- The do-it-all strategy. Companies fall into this trap when they fail to make choices, instead they consider all initiatives as priorities. While this is sometimes a problem for struggling companies who feel they do not have the luxury to reject any initiatives, it is actually a greater problem for companies that have multiple great opportunities. It is harder to say no to a great opportunity than focus on the least of all evils. But if you do not focus, you are not likely to make the most of any of your opportunities and build sustainable competitive advantage. Lafley and Martin point out that strategy is always a choice, so you should not abdicate this decision.
- The Don Quixote strategy. With this trap, you attack competitive “walled cities,” taking on your strongest competitors first. Given that your competitors are also smart and trying to build sustainable competitive advantage, your chances for success are minimized if you are focusing on fighting the strongest. Part of strategy is deciding who to compete against.
- The Waterloo strategy. Much like the do-it-all strategy, this trap entails starting wars on multiple fronts with multiple competitors at the same time. No company can do everything well, and trying to compete on so many fronts will leave you weaker everywhere.
- The something for everyone strategy. In this trap, you try to capture all consumer or channel or geographic or category segments simultaneously. The problem is, to create real value for your customers, you need to know them intimately and not worry about the others.
- The dreams-that-never-come-true strategy. With this approach, you create high-level aspirations and mission statements that never get translated into concrete where to compete and how to compete choices, core capabilities or management systems. The authors point out that with this trap aspirations are not strategy.
- The program-of-the-month strategy. This is another trap I have seen all too often. With this trap, a company chooses generic industry strategies, in which all competitors are chasing the same customers, geographies and segments the same way. It is a classic red ocean approach, and you have little chance of doing better than everyone else (despite how smart you think you are). The more your choices look like those of your competitor, the less likely you are to win. Continue reading
Although there are many tricks and buzz words thrown around to help people become great leaders, the single most important attribute is trust. A recent article on the Psychology Today website, Why Trust is Foundational to Sound Management, provided the evidence to support my claim. It also provides evidence that although trust is incorporated into many (if not all) companies’ mission statements, it is not showing up in practice. A recent
Gallup workforce survey asserted approximately 70 percent of employees are disengaged. For those who do not think this is an important statistic, Gallup points out that work units in the top 25 percent of engagement have significantly higher productivity, profitability, and customer ratings while suffering lower turnover and absenteeism.
Achieving trust with your team is one of many things easier said than done. When things are going well for your group or company, it is much easier to act trustworthy. Last year I wrote about how someone reacts to difficult times is the true measure of that person
and the same principle applies to leadership, your team will judge you by how trustworthy you are in trying situations. Continue reading