June 2016 – The Business of Social Games and Casino

Optimizing failure

I am a big fan of failure. I not only encourage my team and people around me to fail, I consider it a problem if they do not. It means we are not trying enough new things.

Even if we have a 90 percent chance of success with everything you try, if you try 30 or 40 initiatives 3-4 will fail. I argue that only trying things with a 90 percent chance of working is too conservative; you need to look at the expected return and try any that have a positive expected value, even if they have less than a 50 percent chance (if the upside is high enough). The key is if you are not taking risks, you are not doing enough to increase value.

A great article in the Harvard Business Review, “Increase Your Return on Failure” by Julian Birkinshaw and Martine Haas, adds an important layer to the thesis of pursuing failures. Birkinshaw and Haas provide a framework to learn from your failures, so that even the initiatives that do not work create value.

The authors point out that while most companies acknowledge and support the need to fail occasionally, management processes actually work against this goal. Most budgeting, resource allocation and risk control systems are built on predictability and optimizing efficiency, giving bonuses and promotions to those executives “in control.” Thus, even if you are encouraged to fail, you are incentivized to do everything possible to avoid it. The solution is to extract value from failure so you an increase your return on it, boosting benefits while controlling costs. There are three steps to raise your return from failure.

Learn from every failure

The first step to generating additional value from failure is getting people to reflect on projects and initiatives that had disappointing results. While it sounds obvious, it often does not occur. Most people find reviewing failures quite painful and would prefer to invest their time in looking forward.

A failure provides the chance to revisit your core beliefs and adjust them where needed. The authors recommend asking the following questions to understand the benefits and costs of the failed initiative or project:

What have we learned about our customers’ needs and preferences and our current markets? Should we change any of our assumptions?
What insights have we gained into future trends? How shold we adjust our forecasts?
What have we discovered about the way we work together? How effective are our organizational processes, structure and culture?
How did we grow our skills individually and as a team? Did the project increase trust and goodwill? Were any developmental needs highlighted?
What were the direct costs – for materials, labor, art and production or software development?
What were the external costs? Did we hurt our reputation in the market or with customers, or weaken our competitive position?
What were the internal costs? Did the project damage team morale or consume too much attention? Was there any organizational fallout?
What are the key insights and takeaways for the business?

These questions will help you think of everything that you and your company have learned, how it might help you move forward and all the positive side effects from the experience.

Share the lessons

The big benefit from failures is spreading the lessons across the company. You can amplify the paybacks from failures by passing between business areas the information, ideas and opportunities for improvement gained from the above analysis.

Shared learnings also increases the proclivity to pursue future initiatives. By reflecting on the positives, you build trust and goodwill and clear the path for others to take action on risky initiatives.

Review your pattern of failure

The final step to gaining value from failure is “to take a bird’s-eye view of the organization and ask whether your overall approach to failure is working.” Do you have a process to learn from every failure? Are these lessons shared? Are you using these lessons to improve both your strategy and execution?

This analysis will help you see if you are failing too much (and unnecessarily), not enough (and thus not taking enough risks) or at the appropriate level. If you are failing too often, you probably need to make the green light process for initiatives more rigorous. If not enough, you need to generate and evaluate more initiatives.

The benefit

Failure is critical to generating the most possible value. By rigorously learning from failures, you increase their return and the ability to pursue future initiatives.

Key takeaways

You need to encourage failure. Without failure, you are not pursuing enough initiatives to grow.
To get the most from failures, and subsequently prompt people to launch initiatives that can fail, you must study failures carefully and learn about the market, customers and organization.
You also need to circulate this information through your organization.

Turn everyone into an innovator

There was an interesting article in the Harvard Business Review, How to Build a Culture of Originality by Adam Grant, that does a great job of showing how to turn all of your team into innovators. The article starts with a discussion of the US Navy, arguably the poster boy for lack of innovation, and explains how it started “exploding with originality.” What is interesting about the navy example is that the innovation was not centered around iconoclasts or entrepreneurial types but from the rank and file. Most importantly, if it can work in the US Navy, the strategy can work anywhere.

When everyone thinks the same and is relocation to move away from best practices, companies rot. To drive innovation, you need sustained original thinking in your company. The way to do this, as Grant shows, is to build a culture of non-comformity. You must give your team opportunities and incentives to generate new ideas and push beyond the obvious or traditional. You also need to vet those ideas so that the best are executed on, not simply the most popular.

Generate a plethora of ideas

It is critical to get people to generate many, many ideas. In research cited by Grant, the first 20 ideas people generate are significantly less original than their next 15. Across all fields and functions, volume leads to quality (rather than opposing it).

Get people to think boldly. Rather than asking them for improvements, ask them to propose alternative strategies. Have them think like competitors, how would they attack you in the marketplace.

You also get better ideas by asking them individually rather than in groups. When people generate ideas together, many of the best ideas do not get shared. Some people, intentionally or not, dominate the conversation while others hold back to avoid looking foolish.

Another way to generate ideas is actually a throw-back, bring back the suggestion box. While you may end up in an HBR cartoon, suggestion boxes are quite useful as they provide a large number of ideas. As Grant writes, “the major benefit of suggestion boxes is that they multiply and diversify the ideas on the horizon, opening new avenues for innovation.”

Developing a sense for good ideas

While the first step to innovation is generating great ideas, equally important is listening to the right opinions and solutions. Rather than using a democratic process to select ideas, assign people with great track records innovating to select the right ideas. You may want to weigh people’s vote based on their innovation track record or limit the vote to those with a real track record of innovation success (if you have them). The key is not turning it into a democratic group process as many people will not have a good understanding of which ideas have the best potential.

Another successful mechanic is to run a contest or tournament. As Grant writes, “When an innovation tournament is well designed, you get a large pool of initial ideas, but they’re clustered around key themes instead of spanning a range of topics. People spend a lot of time preparing their entries, which can boost quality, but the work happens in a discrete window of time, so the contest is not a recurring distraction. Thorough evaluation helps to filter out the bad ideas. The feedback process typically involves having a group of subject matter experts and fellow innovators review the submissions, rate their novelty and usefulness, and provide suggestions for improvement.”

Cultivating both cohesion and dissent

While you may develop a plan to generate and evaluate ideas, you need to put the appropriate processes in place to maintain originality over time. It is not necessarily building a cohesive leadership team. While in some cases that works, in other cases you introduce groupthink. Even unintentionally, like-minded people gravitate to each other, so you run the risk the leadership team all approaches problems the same way. It is thus critical to make dissent one of your company’s core values. “Cohesion and dissent sound contradictory, but a combination of the two is what brings novel ideas to the table—and keeps a strong culture from becoming a cult.”

A critical tool is to build a framework for choosing between conflicting opinions and allowing the best ideas to win out. When companies fail to prioritize values, performance suffers. Values should be rank-ordered so that when employees face choices between competing courses of action, they know what comes first.

Another tool that runs counter to conventional wisdom is to solicit problems, not just solutions. Although you probably love when employees come up with solutions, there’s an unintended consequence: Inquiry gets dampened. If an employee is always expected to have an answer ready, they will arrive at meetings with their diagnosis complete, missing out on the chance to learn from a range of perspectives.

Another tool to help create a stream of original ideas is that rather than appointing a devil’s advocate, find one. To have impact (rather than simply go through the motions), the devil’s advocate actually has to hold a dissenting opinion and the group has to believe that the dissent is real. Only in this situation will the group seriously consider the dissent and evaluate the idea more critically.

You should also encourage people to challenge you in the open (rather than the my door is always open cliché). If employees see open dissent, and see that it is viewed as a positive, then they too are likely to express their true opinions. You can also get people to challenge you by broadcasting your weakness. I will often tell my team I am not a game designer and encourage them to challenge me on design issues.

Ideas are the first step in innovation

If you build a culture that generates many ideas, and then have a process in place to evaluate them critically and move on the best, you are more likely to innovate. These new ideas can keep your company from stagnating and help you stay above the competition.

Key takeaways

The first step in innovating successfully is generating a overabundance of ideas from your employees.
Rather than having people focus, encourage them to generate many, many ideas from asking individually to running contests to bringing back the suggestion box.
It is then critical to evaluate the ideas effectively, primarily by having those with the best track record in innovation making the choices (or having their opinions weighed higher) than a purely democratic process.

You need to create a great cross-platform experience

While most game companies talk cross-platform, they really mean putting their product on multiple platforms rather than optimizing play for customers who want to play on different devices at different times. They are missing an important opportunity, or alienating their users, by not focusing more effort on creating a great experience across platforms. I came across an article on Adweek’s SocialTimes, Study: Customers (Especially Millenials) Hate When You Fail To Deliver Cross-Platform Experiences, that provided great data on what happens when you do not have a good cross-platform user journey.

Surprisingly strong activity across devices

More than half users switch devices mid-activity. The number is highest for Millennials, where 90 percent switch devices mid-activity. With GenXers, it falls to 76 percent and with those 55 or older, it is 58 percent. What is striking in these numbers is that even with the lowest number, more than 50 percent still switch devices mid-activity.

When it comes to playing games, the number falls but is still quite significant. 14 percent of all US customers change devices mid-activity. 25 percent of US Millennials change devices mid-activity while playing games.

What it means for messaging

You thus need to craft messaging that is relevant for a player or user who started on one device and is now playing your game or shopping on your site on a different device. The article quotes an Adobe analyst as saying, “that means digital marketers have a unique challenge of being able to really understand that a Web visitor who shows up on a smartphone is the same customer four hours later on a tablet, or seven hours later on a desktop. They have to piece that experience together in order to craft a consistent message to that one consumer, regardless of which device they use.”

What it means for games

While many games now allow you to share your balance across devices, there is an opportunity to please better your players be integrating further. There are several steps a game company can make to create a great cross-device experience.

A player should be able to pick up a game in the exact same place on a new device simply by opening the app. If they are in a tournament or raiding another player, they should pick up that raid as if they were on their original device.
When they first install on the other device, the journey to synching their accounts should be seamless and as few steps as possible.
The interfaces should be optimized for each device (let’s not make an inferior product in the drive for standardization) but consistent and familiar for players moving from other devices.
Players on one device should not have a gameplay advantage (or disadvantage) on different platforms.
Ensure your CRM is consistent across devices and not redundant (do not hit someone with the same message three times when they use three different devices in a short time period).

The benefits are worth it

I have written many times about satisfying your customer and catering to their multi-device activity is one of these instances. If you do not create a great experience, a competitor will and you will start losing players. Moreover, these are probably your most engaged customers, so the cost of replacing them is even greater.

Key takeaways

More than 50 percent of all users change devices mid-activity, with this number increasing to 90 percent for Millenials. With those playing games, 14 percent change devices mid-activity, rising to 25 percent for Millenials.
To leverage this situation, you should build your game so it is easy to play across multiple devices, keeping a familiar interface, sharing a wallet and keeping the game fair.
Your CRM also should reinforce a consistent message across devices without the messages stepping on each other.

How to become a growth company again

In February, I discussed the challenges companies have dealing with a changing business environment and a corollary to that challenge is how to reignite growth once your company has stagnated. Chris Zook and James Allen tackled this problem in an article, Reigniting Growth, in the Harvard Business Review. In the article, the authors point out that almost all companies eventually face stall-out, “a sudden large drop in revenue and profit growth or a collapse of once high shareholder returns to well below the cost of capital. Stall-out occurs when the growth engine that powered a company to success stops working. This rarely happens because the business model has suddenly become obsolete—a common misconception. Rather, [their] research shows that the business has almost always become too complex, most often owing to bureaucracy that slows the company’s metabolism, or internal dysfunction that distorts information and hampers managers’ ability to make rapid decisions and take swift action on them.”

There is a consistent theme when looking at big companies that have stalled-out. They talk about being swamped with bureaucracy, overwhelmed by Powerpoints and an inability to act decisively even on great opportunities. While competition impacts your growth, success hinges on remaining fast, perceptive, innovative and adaptable. 94 percent of leaders of companies with $5 billion plus revenue believe internal dysfuntion was the main barrier to growth, not competition or lack of opportunity.

The authors identify three qualities that can help overcome stall-out. By rediscovering your insurgent mission, obsessing over the business front line and instilling an owner’s mindset, companies can reignite growth.

Rediscover your insurgent mission

The first key is to regain the focus and mission that drove your company’s growth. When stall-out occurs, it is almost always connected to creeping complexity. The authors suggest companies experiencing stall-out need to liberate resources, narrow focus and harness the vigor that drove early growth. The company should shed noncore assets and businesses. Then attack complexity in the core processes. Finally, your company should focus on reducing product complexity.

Part of the problem is the democratization – or socialism – of resources. As companies grow, internal budget processes spread resources evenly across businesses and opportunities. While this may feel fair to the management team, and all employees, it impacts growth and drives the company to mediocrity. Successful leaders instead make bold budget decisions to redifferentiate the company, usually establishing a major new capability that set off waves of growth.

Even after growth is reignited, companies need to renew their approach as being business insurgents. Companies should view their customers as underserved and their industries as setting insufficient standards, and should constantly emphasize what is special about themselves. Bold goals—not just the aim of living to fight another day—will sustain growth.

Conversely, you should not be scared to shrink your company to become more efficient and focused. By cutting back, it forces your company to focus on what is most important and reduce bureaucracy that does not increase value. It also allows you to dedicate more resources to growing your company.

Obsess over Your Businesses’ Front Line

The second key to reigniting growth is focusing on the front line of your business. As Zook and Allen write, “this obsession, which can often be traced back to a strong founder, shows up in three ways: an elevated status for frontline employees, a preoccupation with individual customers at all levels of the company, and an institutional curiosity about the details of the business.”

Usually, this obsession is what generated growth initially and the layering of bureaucracy chipped away at it. Other companies likely responded to the weakening relationships and provided better customer relationships and hired your best employees. By moving the focus back to what built the company, you can reignite growth.

Instill an Owner’s Mindset

The final component to overcoming stall-out is instilling an owner’s mindset throughout the organization. This is not just P&L responsibility, but giving employees personal responsibility for their actions and deployment of resources. Allow, and encourage, your employees to take risks. Eliminate the bureaucracy (think risk committees or really any committee) that takes decision making out of their hands. Allow them to partner with external companies. Encourage people to form internal teams to test new ideas. The key is give people the power to get things, important things, done.

Preempt stall-out

While the article focused on how to overcome stall-out, more importantly it also implicitly shows how to avoid stall-out. Rather than reaching a situation where growth has stalled, if you leverage the three keys above while still in a growth stage you should continue to grow rather than have to deal with a turnaround.

Key Takeaways

Most successful companies eventually face a sudden, large drop in revenue or growth, stall-out, that is largely caused by an increase in bureaucracy.
To overcome stall-out, companies need to focus on what made them great initially, obsess over their customers and front-line employees and instill a true owner’s mindset where employees are empowered to make key decisions.
In addition to overcoming stall-out, these practices can help growing companies avoid the problem altogether.

The oft-neglected Arabic market

I am always on the look-out for new markets with good potential and a recent article on AdWeek’s SocialTimes caught my attention about the Arabic-language markets. Most of the buzz in the last year or so has been around sub-Saharan Africa, and while that is an intriguing markets most of their economies still lag significantly, and even more so technologically, behind the Arabic geographies.

The article quotes a study from Northwestern University in Qatar that a disproportionately high number of the top Facebook pages, YouTube channels and Twitter accounts are in Arabic. Saudi Arabia actually leads the world for YouTube viewers on mobile (50 percent of videos consumed) and the United Arab Emirates also posts impressive numbers (40 percent).

Games and entertainment represent a particularly interesting opportunity. When you breakdown the regions traffic, entertainment is first or second in every market (jockeying with interest in brands). The UAE, in particular, is a strong consumer of entertainment content.

I am not saying that you should pivot to focus on the Arabic-speaking market but you should look at it as a serious opportunity. Test user acquisition in the key markets (UAE, Saudi Arabia, Qatar and Kuwait). If you see traction for your app, consider translation into Arabic and potentially further localization of your content. In today’s hyper-competitive world of user acquisition, you cannot neglect potentially lucrative markets.

Key takeaways

The Arabic speaking markets represents an emerging opportunity and should be in the same conversation as sub-Saharan Africa.
Entertainment content, and thus games, is particularly successful in these markets.
You should test user acquisition in the key Arabic markets and then consider translation and localization if you generate traction.

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Learn from every failure

Share the lessons

Review your pattern of failure

The benefit

Key takeaways

Share this:

Like this:

Generate a plethora of ideas

Developing a sense for good ideas

Cultivating both cohesion and dissent

Ideas are the first step in innovation

Key takeaways

Share this:

Like this:

Surprisingly strong activity across devices

What it means for messaging

What it means for games

The benefits are worth it

Key takeaways

Share this:

Like this:

Rediscover your insurgent mission

Obsess over Your Businesses’ Front Line

Instill an Owner’s Mindset

Preempt stall-out

Key Takeaways

Share this:

Like this:

Key takeaways

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Like this: