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The Business of Social Games and Casino

How to succeed in the mobile game space by Lloyd Melnick

Category: General Social Games Business

The keys to building a resilient business

The keys to building a resilient business

Last year, the most valuable book I read was General Stanley McChrystal’s Team of Teams and I found his discussion of building an organization to deal with a complex environment particularly useful. The world today is very complex, with events everywhere impacting severely your business, yet most companies are built for a less inter-connected, albeit complicated, world.  McChrystal showed that being complex is different from being complicated. Things that are complicated may have many parts, but those parts are joined, one to the next, in straightforward and simple ways. A complicated machine like an internal combustion engine might be confusing to many people but it can be broken down into a series of neat and tidy deterministic relationships. Conversely, things that are complex, such as insurgencies or the mobile gaming ecosystem, have a diverse range of connected parts that interact regularly. Due to this complexity, you need to build a resilient organization that can adapt to changes in the external environment.

resilience

Given the importance of resiliency, I then read a book referenced in Team of Teams, Resilience Thinking by Brian Walker. While the book is primarily about resilience in the environment, it lays the groundwork for managing resources in a business and navigating a complex environment.

At its core, resilience thinking is based on the concept that things change and to ignore or resist this change is to increase your vulnerability and forego emerging opportunities. If you do not implement a resiliency strategy, you limit your options. Additionally, Walker points out that business is characterized by dynamic change and it is as critical to manage systems to enhance their resilience, as it is to manage the supply of specific products.

Resiliency versus optimization

One of the ways that resilience thinking prompts you to take a different approach is by helping you understand the costs of optimization. I have been trained, especially in the gaming space, that the key to success is perpetual optimization (even used that phrase to help sell a company once). We always look for ways to create the most output with the fewest resources, optimize every event in a game based on ABn tests and reduce any “wasted” effort by employees, customers and other stakeholders. Walker says, “humans are great optimizers. We look at everything around us, whether a cow, a house, or a share portfolio and ask ourselves how we can manage it to get the best return. Our modus operandi is to break the thing we’re managing down into its component parts and understand how each part functions and what inputs will yield the greatest outputs.”

An optimization approach aims to get your business into an optimal state and maintain it. Walker explains, “to achieve this outcome, management builds models that generally assume (among other unrecognized assumptions) that changes will be incremental and linear (cause-and-effect changes)…. Ecological systems are extremely dynamic, their behavior much more like the analogy of a boat at sea. They are constantly confronted with ‘surprise’ events such as storms, pest outbreaks, or droughts. What is optimal for one year is unlikely to be optimal the next.” Resilience thinking shows that optimization is not a best-practice as the business ecosystem is usually configured and reconfigured by extreme events, not average conditions.

Walker uses several examples to show how these extreme events actually drive business. Sometimes a competitive product only has a minor impact and at other times it can destroy your business. In some cases a change in interest rate does not impact growth, other times it causes a crash. Resilience thinking is the capacity of a business to absorb disturbances like these and still retain its basic function and structure. Being efficient, by definition, leads to elimination of redundancies as you only keep those activities that are directly and immediately beneficial. Walker writes, “the more you optimize elements of a complex system of humans and nature for some specific goal, the more you diminish that system’s resilience. A drive for an efficient client optimal state outcome has the effect of making the total system more vulnerable to shocks and disturbances.”

Thresholds versus linearity

The most important takeaway from Walker’s book, and resiliency theory in general, is the importance of thresholds. To understand the need for resilient thinking, the first step is learning about thresholds. In non-business terms, systems can exist in more than one kind of stable state. If a system changes too much it crosses a threshold and begins behaving in a different way, with different feedbacks between its component parts and a different structure. This is not a gradual, linear progression but almost a jump between realities. Think of an airline operating in January 2020 versus their situation in April 2020.

ball and basin

Walker explains how systems, including business systems, shift between thresholds. He uses the analogy of a ball and basin.

System as a Ball in a Basin. The important variables you use to describe a system are known as the system’s “state” variables….

We can envisage the system as a number of basins in two-, or four-, or n-dimensional space…. The ball is the particular combination of the amounts of each of the n variables the system currently has-that is, the current state of the system. The state space of a system is therefore defined by the variables that you are particularly interested in, encompassing the full array of possible states the system can be in.

And it’s not just the state of the system (the position of the ball) in relation to the threshold that’s important. If conditions cause the basin to get smaller, resilience declines, and the potential of the system to cross into a different basin of attraction becomes easier. It takes a progressively smaller disturbance to nudge the system over the threshold. Figures 3 and 4 shows this using the ball in the basin analogy.

If you think of a system as a ball moving around in a basin of attraction, then managing for resilience is about understanding how the ball is moving and what forces shape the basin. The threshold is the lip of the basin leading into an alternate basin where the rules change.

Threshold

I have seen many examples of this ball and basin philosophy in the business world:

  • A mobile game company progressively tightens its economy. Product managers increase monetization by worsening the exchange rate or limiting the amount of free play. Each of these changes has a positive impact when AB tested but after six months or a year, they have to sunset the product.
  • A slots developer has a successful slot machine. They keep making small changes to the math and one year later nobody is playing the machine.
  • A company hires a new COO who cuts costs by reducing the customer service team by 10 percent. Customers only have to wait an extra 45 seconds to get their request dealt with. Initially, KPIs are unchanged but six months later they find they lost 25 percent of their most valuable customers.
  • A new CTO optimizes load time of slot machines in a mobile casino by 0.5 seconds. When surveyed, players did not even see a difference. KPIs, however, improve 30 percent.
  • A product is growing 10-20 percent annually for 5 years. They then make a series of small improvements to the way they work with customers and the flow within the product. Growth goes from low double digits to triple digits but nobody can point to one improvement.

These are all examples where small changes by themselves had negligible impact or even an opposite initial impact, but over time combined they moved the product from one basin to another, causing a tremendous shift in KPIs. Resilience thinking is about looking at the entire ecosystem rather than optimizing one or two events.

This threshold approach shows different ways to approach traditional situations. If the business is stuck in an undesirable “basin”, then it might be impossible or too expensive to manage the threshold or the system’s trajectory. In this situation you may consider transforming the very nature of the system by introducing new state variables (e.g. a subscription model).

You should also consider thresholds when making changes. Walker asks, “how much disturbance and change can a system take before it loses the ability to stay in the same basin?….Along each of these key variables are thresholds; if the system moves beyond a threshold it behaves in a different way, often with undesirable and unforeseen surprises.
Once a threshold has been crossed it is usually difficult (in some cases impossible) to cross back.”

Thresholds also suggest a different way to look at your data and products. You need to understand what thresholds lie along your variables, and knowing how much disturbance it will take to push the system across these thresholds. As Walker says, “to ignore these variables and their thresholds, to simply focus on getting better at business as usual, is to diminish the resilience of the system, increase vulnerability to future shocks and reduce future options…. A system’s resilience can be measured by its distance from these thresholds. The closer you are to a threshold, the less it takes to be pushed….There is a much higher likelihood of crossing a threshold into a new regime if you are unaware of its existence.”

You can’t neglect the environment

One of the driving forces making resiliency increasingly important compared to efficiency is the complexity of the global business ecosystem, particularly in the gaming space. Walker explains, “we all live and operate in social systems that are inextricably linked with the systems in which they are embedded; we exist within social-ecological systems. Whether in Manhattan or Baghdad, people depend on ecosystems somewhere where for their continued existence. Changes in one domain of the system, social or ecological, inevitably have impacts on the other domain. It is not possible to meaningfully understand the dynamics of one of the domains in isolation from the other.”

2020 drove home the impact of the external environment on many businesses. It is a major component of resilience thinking and an important point of difference with traditional science that has modeled the world based on the assumption that change is incremental and predictable.

Resiliency is managing shocks

Resilience is the capacity of a system to absorb disturbance; to undergo change and still retain essentially the same function, structure, and feedbacks. In cases where you have a particularly successful product or business, this resiliency even more important as you do not want to lose what you have achieved (and success is not easy in the gaming space). Walker writes, “it’s the capacity to undergo some change without crossing a threshold to a different system regime, that is a system with a different identity. A resilient social-ecological system in a ‘desirable’ state (such as a productive agricultural region or industrial region) has a greater capacity to continue providing us with the goods and services that support our quality of life while being subjected to a variety of shocks.“

Resilience thinking is about understanding and engaging with a changing world. By understanding how and why the system as a whole is changing, you can build a capacity to work with change, rather than being at its mercy.

An understanding of what is happening above and below your specific business is critically important. You should ask yourself what effect do these changes exert over the scale in which you are operating. It is also important to identify the key slow controlling variables that may move you between thresholds. While I focused previously on a combination of internal factors that could cause your company to change “basins,” it could also be due to a combination of external factors (e.g. a virus and trade war) or a few of each. Look for, and understand the drivers of slowly changing variables in your ecosystem. Also, simplifying or optimizing the system for increased efficiency reduces diversity of possible responses to disturbance and you become more vulnerable to stresses and shocks.

Recovery is key

Given all the variables that impact your business, rather than anticipating each of them, resilience thinking prepares you to recover quickly from shocks. The key to a sustainable business is capacity to recover after a disturbance. While Walker’s book was published in 2006, Covid proved how important it is to be able to recover from existential disturbances.

It is also critical that the ecosystem and the social system are viewed together rather than analyzed independently, and that both went through cycles of adaptation to their changing environments as adaptive cycles happen everywhere.

By adaptive cycles, Walker is referring to two modes, Fore Loops and Back Loops. Walker writes, “a development loop (or ‘fore’ loop), and a release and reorganization loop (or ‘back’ loop) (see figures 9 and 10). The fore loop (sometimes called the front loop or forward loop) is characterized by the accumulation of capital, by stability and conservation, a mode that is essential for system (and therefore human) well-being and …the back loop is characterized by uncertainty, novelty, and experimentation. The back loop is the time of greatest potential for the initiation of either destructive or creative change in the system. It is the time when human actions-intentional and thoughtful, or spontaneous and reckless-can have the biggest impact.”

Resilience is the capacity of the business to absorb change and disturbances and still retain its basic structure and function, maintaining its identity.

How to manage for resiliency

The first key to building a company that can navigate the complex and inter-connected world is looking outward, not simply focusing on doing what you are doing now but better. Realize that the future has a habit of throwing up surprises, a product of the complex nature of social-ecological systems.

Rather than try to simulate the future, explore different potential scenarios. Walker writes, “scenarios are not predictions of what will happen. They are an exploration ration of what might happen….Scenarios help organize information, and they are easy to understand. Scenario planning is also a good way to open discussion among different groups of people who might not otherwise interact….For this reason the scenarios should be considered together, not separately. They should be thought of as a set that provides us with a range of insights on what makes a region vulnerable and what confers resilience.”

Second, you should also put resilience thinking into practice. It represents a different way of looking at the world. It’s about seeing systems, linkages, thresholds, and cycles in both what is directly important to your business and in what that drive them. It is about understanding and embracing change, as opposed to striving for constancy.

Third, keep thresholds top of mind. Understand what are the key slow variables that drive your business’ ecosystem and although a small change might not have a negative impact, know that a series of them could push you into another state. Ask whether these variables are changing and what are the thresholds beyond which the ecosystem will behave differently. Thresholds are defined by changes in feedbacks, so understand which important feedbacks in the system are likely to change under certain conditions.

Finally, understand that resilience comes at a cost. It comes down to a trade-off between foregone extra profits in the short term, and long-term persistence and reduced costs from crisis management. Managing for specified resilience is important, but so too is maintaining the general capacities that allow your company to absorb unforeseen disturbances.

Key takeaways

  1. Resilience thinking is based on the concept that things change (both within and externally to your business) and to ignore or resist this change is to increase your vulnerability and forego emerging opportunities.
  2. The world is not linear, instead we operate in thresholds. Like a basin, small changes keep you in a certain range but then combine to pass over a threshold and move you into a completely different business situation. You need to understand what are the key slow variables that could end up moving you into a much worse (or better) position.
  3. Resilience thinking represents a different way of looking at the world. It’s about seeing systems, linkages, thresholds, and cycles in both what is directly important to your business and in what that drive them. It is about understanding and embracing change, as opposed to striving for constancy.

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Author Lloyd MelnickPosted on January 20, 2021January 18, 2021Categories General Social Games Business, Lloyd's favorite posts, Social Casino, General Tech BusinessTags Strategy, Resiliency, complexityLeave a comment on The keys to building a resilient business

Interview with Jay Powell on trends from 2020 and expectations for 2021

Interview with Jay Powell on trends from 2020 and expectations for 2021

While I hate making annual predictions, it does not keep me from asking others what they expect. I recently had the opportunity to speak with Jay Powell, arguably the most connected person in the game industry, on the key trends he saw in 2020 and what he expects this year. Jay was one of the first employees I ever hired (1998) and since then he has built relationships with thousands of game developers, publishers and tool providers. Jay at ALES 2019 - squareBelow is my conversation with

Jay:

Lloyd: You are probably the most connected person in the industry so I wanted to start by asking you what major trends or changes you saw in 2020, what were people talking about and interested in?

Jay:  That question can go one of two ways. There’s what we see at the AAA level with the Activision, Take Two, etc, then there’s the rest of the world.

Lloyd: Let’s start with the big money companies, then we’ll come back to the rest of the world.

Jay: At the AAA level we’re seeing companies (aside from Take Two) approach the streaming and subscription services with some seriousness. Stadia has stuck around, Apple has been paying guarantees for Arcade, and Microsoft has gone a fantastic job with Game Pass. These platforms are the new consoles in many ways and they can be approached for funding and distribution just like a traditional publisher. Plus, when the exclusivity ends, with some of these deals, you can still pursue more funding and distribution.

Lloyd:  Google, MS and Apple are all huge, will one of them win?

Jay: My bet is on Microsoft. The probability is still too high that Google just packs it in if they don’t get the traction they want. That’s been the primary concern with them from the beginning. Aside from the fact that they still don’t seem to understand who their customer is. Apple is under assault from multiple angles right now and Arcade is great for people with Apple devices but iOS isn’t the dominant platform in mobile.

Microsoft has built a real value with Game Pass and they’re finally out there acquiring world class studios to make it even better. Buying Bethesda was huge and I’m very interested to see who they pick up next.

Lloyd: Are the AAA devs/publishers also coming around to streaming/subscriptions?

Jay: Yes, with the exception of Take Two. Activision hasn’t fully embraced it yet, but they will. EA signed on with Microsoft (and Ubi Soft is rumored to be adding their Uplay as well) to make their subscription service part of Game Pass and the next tier of publishers (Paradox for example) already see the value in it as well.

Take Two said they don’t see streaming as a major player in 2021 but let’s face it, with GTA 5 Online, Red Dead Online and the general power of those two IPs, they don’t need it.

Lloyd: Before we leave the world of AAA, you mentioned this being the new world of consoles. What about the old world of consoles, it felt like there was more buzz with the PS5 and Series S/X than there has been for a while with a new console generation, is it a dead man’s bump or a true resurgence?

Jay: I don’t think it’s either. It’s business as usual. The pandemic has been fantastic for Nintendo and the Switch, the early adopters are still buying up XBox Series X and PS5 because that’s what they do, and Microsoft’s Series S (plus Game Pass) is a great option in the middle. We’ve got a shortage now because of the usual holiday release rush and the world went through a global pandemic, which caused supply to be even lower than usual.

Lloyd: So you don’t see the console market increasing, it’s real, it’s here but it is not entering a new growth era?

Jay: I don’t think we’re going to see Microsoft and Sony enter a new growth era with their consoles, but Nintendo’s certainly seeing one.

Animal Crossing New Horizons has sold over 26 million units this year, largely because people were home with the pandemic. All of those players now have a Switch, they’re going to be looking for new games.

Lloyd: Jumping back to the online subs/streaming, what does it mean for the non-AAA companies, how are they seeing it?

Jay: Streaming for the non-AAA companies is a mixed bag. It’s not going to be a money tree for the majority of companies for the same reason every music artist doesn’t bring in tens of millions on Spotify. The big names are always going to make more money on stream/sub services because that’s what people usually gravitate to.

That said, with Apple, Microsoft, and other companies paying guarantees to get exclusives there is a new option for a lot of developers.

Back to streaming for everyone else… Paradox has said that much of the success of Crusader Kings 3 comes from the fact that they added it to Game Pass. We’re seeing these streaming options become marketing pieces for games and many times developers and publishers are paid up front to include them.

We’re also seeing the first wave of Apple Arcade’s exclusivity agreements expire. Now we have teams who’s game (plus live content) have been fully funded but now they are free to pursue other revenue streams for those games as well.

The entire ecosystem opens up opportunities for teams that are positioned (and interested) in taking them.

Lloyd: What about Steam? That’s become the major distribution channel for non-AAA, how is this competition impacting them and thus their ability to get Indie games out?

Jay: Steam’s problem isn’t getting indie games out, it’s getting visibility for the games. More than 200 games launch every week on Steam, they aren’t having any issues releasing games.

The competition from Microsoft and Epic in particular is forcing their hand and making them change their terms for the first time in over a decade though.

Lloyd: For the better? At least better for devs?

Jay: Somewhat. Steam’s changed their terms back in 2018 but it was to the benefit of the AAA crowd, not indies.

Apple changed their’s recently to create better terms for the indies versus the AAA. It’s two reactions to two different problems. In 2018 Steam was getting pressure from Epic but their move was to try to regain the AAA releases that had left their platform. Ubi Soft have UPlay, EA had their Origin launcher, Bethesda announced they would be skipping Steam for Fallout 76, Take Two built their own launcher. Steam was losing the blockbuster games that make the bulk of their revenue.

Apple’s change came from Epic’s pressure on their revenue share and Epic’s framed their entire legal campaign as a fight for the “little guys”

Lloyd: I was always a little amused about Epic fighting for the little guy.

Jay: Epic had a hand in forcing both changes though and I don’t think they get the credit they deserve for what they’ve done.

Lloyd: I agree but not don’t think they are purely altruistic, IMHO

Outside of what we just discussed, what else were people talking about in 2020. What were the big changes (outside Covid) that grabbed their attention or worried them?

Jay:

”I was always a little amused about Epic fighting for the little guy”

– Yea, me too. But with the revenue Fortnite brings in they are the only one’s who have had the nerve (and bankroll) to do it.

and no, it’s not completely altruistic but the indie teams will take all the support they can get.

I’m not sure you can frame 2020 without Covid. It’s been a huge driving force in so many areas of our industry. Before we dive into that we need to recognize that we (as the video game industry) have been VERY fortunate this year. Covid has ransacked so many industries, companies, and families but our world has profited greatly from it. Though we may speak about the pandemic and the “good” it brought to games, it’s not a good thing and a lot of people have suffered and died. I just wanted to make that clear.

Lloyd: So true.

Jay: The big change this year was everything moving online. For the non-AAA world it has allowed developers who have never had the chance to pitch their game to publishers at GDC get the chance due to digital events. (and yes, full disclosure, I run the longest running digital conference series in the industry).

Lloyd: Has that worked?

Jay: YES.

Have people gotten deals from online conferences?

Jay: The change has forced new ways of communicating for business and marketing, as well as internal studio communication. We’ve seen new tools pop up and new opportunities as a result.

We just got the survey stats in from our most recent event and our attendees alone are forecasting millions of dollars in revenue from deals as a result of one event.

And that wasn’t even our biggest event this year. Opening communication channels with no geographic barrier of entry opens up options to developers, publishers, and tech companies across the board.

The problem is, we were flooded with these events this year and we have had a lot of “Zoom Fatigue”. Like any market, that’s going to correct itself in 2021. The traditional conference companies are learning you can’t force the same model (and revenue) from an onsite event to an online event. The smaller companies are realizing it’s harder than it looks to run these events successfully.

The advantage we’ve had with our IndieGameBusiness I events is that we got to figure out all those problems back in 2019 when we were the only one’s doing these events.

Lloyd:

The change has forced new ways of communicating for business and marketing, as well as internal studio communication. We’ve seen new tools pop up and new opportunities as a result.

What are some of the new tools that have gained traction, that devs are really using (as opposed to VC backed and just getting hype)?

Jay: Zoom got the lion’s share of the spotlight because that’s what people were using pre-Covid. Now we’re seeing more video chat options opening up and the ones that existed previously such as Hangouts, Microsoft Teams, WebEx, and GoToMeeting have been forced to improve.

Slack has grown but not nearly like Discord has and both have pushed the other to innovate. Our native app at our conferences is 8×8 which isn’t nearly as popular but works amazingly well across all sorts of systems.

Now you’re seeing a growth in virtual conference software with Hopin.to, EventCombo, and others. They’re going to push companies like EventBrite to evolve.

We’re seeing new solutions pop up in VR conferences (which I’m still not sold on).

In the game industry specifically Xsolla has launched “Unconventional” which had a good test run earlier this year. Our partner MeetToMatch will be unveiling their integrated solution at our March event and we have developers coming together to create things like IWOCon.

This is IWOCon, very cool and ambitious if they pull it off – IWOCon

Lloyd: Enough of 2020 (I’m sure others would agree), what are you expecting in 2021?

Jay: I think we’ll see the fruits of a lot of the innovation that was forced on 2020 emerge next year.

In the game industry, in particular, we’re going to see online events mature as people learn how to manage them. We’ll see some (not all) of our favorite in-person events return in a hybrid form as well.

We’re going to see more attention paid to the subscription services as each platform starts acquiring high quality exclusive content.

We’re going to see a growth in markets like South America, the Middle East, and Africa because the companies there have a much easier path to the core industry. We’re going to see more of the western markets get involved with these territories for the same reason.

Lloyd: What do you mean by hybrid?

Jay: Hybrid events will be merging the on-site conferences with online versions. We’ve done this with our event that happens alongside GDC and other conferences have tested it as well. At the most basic level you allow your attendees that are physically at an event to schedule online meetings with registered attendees who aren’t. I imagine we’ll see virtual lectures and sessions as well.

Lloyd: In the emerging territories you mention, will the growth be subscription based or more traditional game sales?

Jay: Both, each market has it’s own nuances, advantages, and limitations. The most successful companies will be the ones who know what products and games fit the right audiences.

Lloyd: What else do you expect?

Jay:  We’re going to have to see a better way for developers and small to mid tier publishers to boost their discoverability (which is still the biggest hurdle for the indie market).

We’re also going to see a lot of growth in online education both through traditional colleges and universities as well as specialized segments for markets like games.

Lloyd: Hasn’t discoverability been an issue for devs since when we first met in the 1990s at Octagon Entertainment and Merscom?

Jay: If we go all the way back to our Octagon days, we dealt with 75-150 publishers globally. Now my team tracks over 700 publishers across PC, console, and mobile.

When we were running Merscom the discoverability issue came from the casual space where companies like Big Fish were launching a new game every day (and taking 70% of the revenue). Now we see far more games launched on multiple platforms. The days of “A good game will always sell” are dead and gone.

Lloyd: How do 700 publishers make money, I can’t believe 700 devs could make money, and publishers need a suite of titles?

Jay: Well we track over 4,000 developers and I’m sure there are at least 1,000 more that haven’t hit our radar yet.

The reality is that 700 publishers don’t make money, We release our publisher list every year (new one arriving in early January) and it’s a major undertaking to keep our internal database accurate. Publishers come and go quickly but you don’t need as many hits to stay in business now if you run a streamlined company.

Lloyd: I’ve already kept you longer than I was supposed to, so thanks for the great conversation. Any parting thoughts you wanted to share?

Jay: I can do this all day.

2021 is going to see a continuation of the changes we saw in 2020. The companies that survive and prosper are going to be the ones paying attention to the market around them and can adapt as needed.

Now more than ever you need to know your audience, know how to reach them, understand their pain points, and deliver them an innovative solution. That’s going to be true for everything from the games we play, to where we play them, and the tech that runs them.

Thank you Lloyd, this was fun

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Author Lloyd MelnickPosted on January 13, 2021December 31, 2020Categories General Social Games BusinessTags 2020, 2021, SubscriptionLeave a comment on Interview with Jay Powell on trends from 2020 and expectations for 2021

Summary of posts September to December 2020

Summary of posts September to December 2020

People Analytics for Online Gaming

  • You need to align performance evaluations with the underlying factors that create success; deconstruct what leads to the outcomes you want and then assess people on those factors.
  • Some common problems when evaluating people include context (attributing results to a person when the environment drove success or failure), interdependence (assessing on an individual level a result that was driven by a team), self-fulfilling prophecies (people perform consistent with expectations) and reverse causality (we attribute causality to correlation, even though the factors may not be related or may be in the other direction).
  • You should assess how your team or company works as a network, looking at the relationships, and then encourage and grow ones that lead to desired outcomes.

Interview with the Queen of Research, Maria Cipollone

How to manage your customer service to have the biggest impact on your profits

  • Data shows that trying to create an exceptional customer experience has virtually no impact on loyalty and engagement, however, reducing the effort the customer must exert does improve loyalty.
  • The best way to measure this effort is CES score, which is based on a statement, “the company made it easy for me to handle my issue,” after which the customer is asked to answer (on a 1–7) whether they agree or disagree with that statement.
  • The keys to implementing successfully an effortless experience program are minimizing channel switching, avoiding repeat contacts, engineering the customer service interaction experience, building the control quotient, creating the right culture and optimizing the purchase experience.

The difference between great executives and everyone else

  • There are many similarities between what separates a professional athlete from an amateur and what separates a great business executive from everyone else.
  • The best executives focus on getting the best outcome, not being right.
  • The best executives accept responsibility and do not blame others.

3 Words I Hate

  • Game companies should avoid the phrase gamification, as their product is already a game and should be entertaining.
  • Whales is an insidious phrase as it describes your best customers in a derogatory way, potentially leading to treating them in a way that destroys long-term value.
  • It is misleading to use data that is directional, without statistical significance as relying on this data is like not using data at all.

Leading in a complex world: building a team of teams

  • The difference between complexity and complicated is central to building an organization that works in the 21st century. Things that are complicated may have many parts, but those parts are joined, one to the next, in straightforward and simple ways and are like an equation that needs to be solved. Things that are complex, such as insurgencies or the mobile gaming ecosystem, have a diverse range of connected parts that interact regularly.
  • Accept that you will have to deal with unpredicted challenges and threats. You then build an organization and systems that can adapt rather than erecting strong, specialized defenses.
  • Teams, while not always optimally efficient, are extremely adaptable. Teams overcome challenges that could never be foreseen by a single manager, their solutions often emerge as the bottom-up result of interactions, rather than from top-down orders. Your teams must then interconnect into a team of teams, rather than siloed organizations. Create an organization within which the relationships between teams resembled those between individuals on a single team.

Adjacent User Theory Shows How to Supercharge Your Game’s Growth

  • Adjacent users represent a great opportunity for growth. These are potential players (adjacent users) are aware of the product, maybe tried it, but are not engaged customers.
  • You solve for these players by looking at different states of your product (i.e. registration, play, purchase) and seeing who drops off at each of these states, then understand why these potential customers are dropping off.
  • You can make your product attractive by putting yourself in the place of the adjacent user, watching them use your game or product and talking to them.

What really went wrong at Quibi

  • Quibi’s failure was very predictable and these predictors provide a framework of what companies need to do to succeed in the entertainment space.
  • Quibi relied on a unique technology, the ability to watch content seamlessly in portrait or landscape mode, rather than relying on creating content people wanted. You cannot succeed in entertainment by relying on technology.
  • Other key lessons are that great entertainment companies need to deliver a overabundance of content, much more than you expect even your heaviest users to consume, and some flagship products that forces people to try your offering.

Building a strategy around doing the opposite

  • A powerful way to find a competitive advantage is to do the opposite of what other companies in the industry are doing. Mature industries tend to converge, creating an opportunity to appeal to customers who do not like the homogenous offerings.
  • To uncover the opportunity, first list the primary characteristics and elements currently in the category and then ask yourself what would an offering look like if we did the exact opposite.
  • This strategy represents a particularly appealing opportunity in the social casino and real money gaming spaces, where the offering has largely converged.

How to become successful CEO

  • Being a great CEO or leader is very hard. CEOs and others leading business units are responsible not only for their fate but the fate of their company, having to make potentially life or death decisions.
  • To meet The Struggle of leading a company, you need to rely on teamwork, think outside the box for solutions and continuously self-reflect.
  • Great leaders must learn to be comfortable doing inherently uncomfortable things. Great CEOs have to make their unnatural job feel natural.

Ways to improve your game (or product) using neuroscience

  • Neuromarketing, using brain imaging, scanning, or other brain activity measurement technology to measure a subject’s response, shows you can price more effectively by minimizing the customers pain, by not forcing them to make multiple purchase decisions, spreading out the cost or bundling items.
  • Neuromarketing also shows you can improve customers’ trust by trusting them and specifically telling them you are trustworthy.
  • It also shows that branding forms an emotional attachment you’re your customer and prompts them to recommend you enthusiastically to their friends.

Up-skillOR vs Up-skillEE

  • Recruiting candidates with the expectation you will train (upskill) them to do the target job well shows an arrogance that you think you can train them better than anyone else has.
  • Upskilling people ensures your team does not go to the next level, you set your current skillset as the ceiling.
  • You also miss the opportunity to bring new skills and experiences to your team, where the new hire can make everyone else more valuable.

Word-of-machine effect with recommendation engines

    • AI driven recommendation engines, popularized on Amazon and Netflix, have gone from being a competitive advantage in online and mobile apps to part of the cost of doing business.
    • While AI recommendations are often closer to what customers want, people trust human recommendations more when it is based on hedonic or experiential factors, and trust machines more when it is based on utilitarian factors; this is referred to as word-of-machine effect.
    • When presenting recommendations, you must be cognizant of word-of-machine effect; for recommendations around hedonistic properties try to bring in a human element (augmented intelligence) or explain that these are better recommendations.

Turn Your Company Around

  • Less than 50 percent of people are satisfied with that job, and Covid has made the situation more dire.
  • The key to improving employee satisfaction, and growing productivity, is evolving from a leader-follower approach (where you tell people what to do) to a leader-leader approach (where people control their decision-making.
  • To move to a leader-leader organization, you need to empower your team (including asking them how to empower them better) and encourage deliberate action where they vocalize what they are doing rather than ask what to do.

The Power of Content

  • Disney has enjoyed phenomenal growth with Disney+ and last week announced it’s plans to accelerate this growth, showing what is critical to the success of an entertainment brand.
  • The first pillar of this strategy is to release a plethora of new content in 2021, more than 25 new television series plus multiple movies, showing how critical new content is (especially telling as Disney has the strongest back catalog of content in the world).
  • The second pillar is to rely on its franchises (Star Wars, Marvel, Disney characters) for this new content, showing the value of Forever Franchises in the entertainment space.

2021 Pre-Mortem: What went wrong in 2021

  • Rather than trying to guess (predict) the future, conduct a pre-mortem, where you put yourself in December 2021 and look back at what went terribly wrong for your business. The exercise will help you identify the biggest risks you face.
  • Some of the areas you should look at include the impact of Covid, spread of Real Money gaming in the US, challenges to RMG in Europe, the new gaming consoles and how work from home is changing the workplace.
  • You also need to realize that risks come in many forms and some are impossible to anticipate. You need to detect these quickly and respond with improvisation, speed and an iterative approach, since not every action taken will work as intended.

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Author Lloyd MelnickPosted on January 6, 2021December 26, 2020Categories Analytics, General Social Games Business, Social Casino, General Tech Business, behavioral economicsTags 2020Leave a comment on Summary of posts September to December 2020

2021 Pre-Mortem: What went wrong in 2021

2021 Pre-Mortem:  What went wrong in 2021

While it is impossible to predict the future — Chaos Theory shows that even very small events can have a huge impact — you can still prepare for likely scenarios. The uncertainty principle, a key tenet of quantum mechanics (as popularized by Stephen Hawking), postulates that perfect predictions are impossible if the universe itself is random. Thus, I do not believe in predictions (outside of State Fairs), but I am a strong advocate of pre-mortems and thought a pre-mortem on 2021 for the game industry would be useful. A pre-mortem is a meeting held before a major decision where all those involved in making the decision imagine themselves six or twelve months after the decision was taken, assume it turned into a debacle, and then explore why it was a disaster. The value is not predicting exactly how 2021 will turn out but preparing for events that could have a major impact.

For 2021, I want to take a similar approach and put my readers in December 2021 looking back at the year and understanding what went wrong. I have put together several ideas to consider for your pre-mortem but as every company has a different risk profile, you should focus on those that could most impact your business.

We underestimated the headwinds created by Covid-19

At the end of 2021, we may look back and regret not seeing the disruption Covid would cause to our industry. With many people unemployed or seeing lower earnings, spending in iGaming and social gaming could deteriorate sharply. If you made investments or acquisitions based on continued growth, you may find yourself in a difficult position.

covid

We overestimated how quickly revenue would revert to pre-Covid levels

There is also a possibility that when 2021 is over, you may regret anticipating that the impact of Covid would be short lived. Instead, the phenomenal growth many social and iGaming companies experienced could continue or even accelerate, as more people see the value of online gaming. Thus, you may have underinvested in growth expecting a weaker market.

We missed the impact of the new consoles on social gaming

Generally, it has been mobile and free-to-play games that have impacted the console gaming space (see THQ and Acclaim) but in a year we may look back and realize that the launch of the PS5 and Xbox Series X/M significantly impacted the mobile and gaming businesses. With the strength of the new console launches, particularly Sony’s, there is a possibility that these consoles pull users from other forms of gaming. I have always said you should not look at your direct competitors but consider the entire entertainment space (gaming, streaming media, television, etc.) as potential competitors, so discounting console gaming is something you may regret.

PS5

Real Money Gaming happens faster than expected in the US

The last year has seen the move to online accelerate (just ask most brick and mortar retailers) and this acceleration may spread to the US real money gaming industry. While the valuation of several iGaming companies have exploded because of the US opportunity (Draftkings anybody), most companies still assume the majority of the US will not legalize real money gaming in the short term. While the process has been slow, often disruption manifests itself initially slower than expected only to hit an inflection point that surprises people with the speed of the transformation (ask a movie theater owner). Changes in the US market would not only impact real money gaming operators but could change the playing field for social casino companies (for better or for worse).

Piratees

The European Real Money market shrinks significantly

While the US real money market is the opportunity everyone is looking at, the industry could experience very material changes in the markets that generate virtually all of the current profits. Evolving legislation in many European markets is impacting companies’ ability to compete and to maintain profitability. Changes always create challenges and opportunities and that is likely to be the situation in Europe’s real money market.

IDFA has a major impact on acquisition ROI

While there has been much hand-wringing and chatter about Apple’s planned IDFA change, most companies are operating under the assumption that Apple will not make a change that causes apocalyptic destruction. While that is likely the case, there is the possibility that the change will be as damaging as some warn, making it unprofitable for many game companies to acquire players. You may regret not building up a strategy that reduces your dependency on performance marketing and instead increase your competence in cross-sell and monetization (if players cost more, you need to make more from them). You also may regret what genres you pursued, as some will be more resilient to an IDFA change than others.

M&A market drives non-profitable behavior

In the last year, the M&A market in both social gaming and iGaming has heated up, with 9 and 10 figure deals commonplace. You often see in a strong M&A market that companies focus more on positioning for a sale than profitability, which cascades across the entire industry. If valuations are driven by new user growth (say the US sportsbook market), companies will bid up prices for new players and give incentives to attract customers from competitors (sometimes with a negative ROI). For businesses focused on profitability, you may find that your previously sound approach did not work in 2021.

Your “supply” lines are disrupted

Over the past five or ten years, most game companies have shifted to a model where various functions are outsourced. You may have moved your game design to India or your art to Nebraska or your sound/music to Kuala Lumpur, which has allowed you to harness the best talent in the world and potentially reduce costs. While these changes have increased elements of your resiliency, they also provide new risks. In 2020, Covid made it harder (and in some cases impossible) to travel, Brexit creates questions in how the UK will collaborate with other European countries and new trade wars potentially impact the ability to work across borders. You may find that critical functions turn into bottlenecks that slow or halt your content stream or new products.

Work from home changes the nature of the workforce

Many people have forecast how the workforce will change in a post-Covid world but, as I said earlier, predictions are not my business. Instead, you should be aware of potential shifts that could have a dramatic impact on your business in 2021:

  • Major tech companies move to a permanent part online model, thus increasing their recruiting reach worldwide. While in the past you may have considered your employees safe if you were in Belarus or Sri Lanka, you may now be competing with the world’s best companies to keep these employees.
  • People might want to return to an office. If you have moved to a pure or primarily WFH situation, you may lose employees who want to be back in an office.
  • Work from home has a negative impact on your team’s mental health.

There are many ways that work from home can evolve and you should anticipate changes in the macro-environment impacting your business.

Something happens that you never saw coming

You also need to realize that risks come in many forms. While you can anticipate some, there will be risks that come out of the blue from complex combinations of typical events or from unprecedented massive events (i.e. Covid). You need to detect these quickly and respond based on the event, rather than trying to fit it into your anticipated risk bucket. This response should be improvisational, rapid, iterative, and humble, since not every action taken will work as intended.

What to do

While I can’t (and, really, neither can you) predict the future, you need to look at possible outcomes and build up a risk adjusted strategy to optimize your growth. Do not rely on the ones listed above, but look at your business and understand what external factors could have a significant impact next year. Keep in mind, a pre-mortem is meant to look at and avoid potential disasters so while many of the above scenarios are negative, hopefully most (if not all) will never materialize. If they do not, great, it’s better to have an insurance policy you never use than needing one you do not have. You also need to be ready to react quickly to unanticipated challenges.

Key takeaways

  1. Rather than trying to guess (predict) the future, conduct a pre-mortem, where you put yourself in December 2021 and look back at what went terribly wrong for your business. The exercise will help you identify the biggest risks you face.
  2. Some of the areas you should look at include the impact of Covid, spread of Real Money gaming in the US, challenges to RMG in Europe, the new gaming consoles and how work from home is changing the workplace.
  3. You also need to realize that risks come in many forms and some are impossible to anticipate. You need to detect these quickly and respond with improvisation, speed and an iterative approach, since not every action taken will work as intended.

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Author Lloyd MelnickPosted on December 22, 2020December 13, 2020Categories General Social Games Business, General Tech Business, International Issues with Social Games, Social CasinoTags Covid19, IDFA, Mergers and Acquisition, pre-mortem, real money online gambling, Work from home1 Comment on 2021 Pre-Mortem: What went wrong in 2021

The Power of Content

The Power of Content

While even I take what I say with a grain of salt, Disney’s announcement last week about their 2021 strategy puts an exclamation point on the overriding supremacy of content (both quality and quantity) over every other variable in the entertainment industry. In April, shortly after the launch of Disney+, I expressed concerns with its lack of new content once customers got past the Star Wars/Marvel/Disney back catalog. These concerns did not impact Disney+ in the short term, as it announced 86.8 million subscribers as of 2 December (effectively the populations of Italy, the Netherlands and Switzerland combined).

The announcement

The most insightful announcement, though, was Disney’s plans for 2021. Disney announced “a blitz of new projects” including ten series from the Star Wars universe, fifteen Disney branded movies, a ”cluster” of shows from Pixar and ten Marvel series, all for Disney+. The power of this announcement is the voice behind it, Disney is the largest and most successful media company (brand) in the world and it is folly to argue that anyone knows entertainment better than how they understand it. Unpacking Disney’s strategy shows two keys to success in the entertainment space.

star wars

You cannot avoid the content treadmill

To become dominant in streaming, Disney’s move showed that a pillar of their strategy needed to be a constant stream of fresh content. Rather than relying on the best back catalog in the entertainment industry, or a few popular new series, Disney move showed you need a constant and robust stream of quality content. Launching 25 or 50 new series is neither easy nor inexpensive, yet Disney feels the need to devote these resources.

Many companies in the gaming and entertainment space have looked at various tactics to avoid the need to create fresh content regularly, what is often referred to as a content treadmill. Companies try to add new features, roadblocks to slow content consumption, incentives to reuse existing content and cloning of existing IP to avoid creating new content. A company with Disney’s resources and sophistication would not commit to such a large content stream, however, if there were less costly alternatives to creating new content.

The power of Forever Franchises

The second lesson from Disney’s strategy is the power of powerful franchises. Zynga has reinvigorated its business, becoming the largest mobile game publisher, based on a strategy it refers to as “Forever Franchises.” In Zynga’s case, they have grown internal franchises (Zynga Poker and Words with Friends) and also acquired additional games (CSR, Toon Blast, Toy Blacks, Empires & Puzzles and Merge Dragons) to build a stable of Forever Franchises that each generates over $100 million/year, which they can then leverage into future growth. The strategy of coupling internally built franchises with the acquisition of new franchises has resulted in Zynga’s share price nearly tripling over the last four years.

merge

Disney’s announcement confirms this strategy as the way to become and remain a leader the entertainment industry. Disney was never shy about acquiring franchises, the acquisitions of Pixar, LucasFilm and Marvel, were some of the biggest achievements of Disney. Disney’s plans for Disney+ further confirm the importance of Forever Franchises.

Hawkeye-Header

With Disney+ the most important component of its future strategy (there was very little talk about Disney’s parks, cruise or even film business during the 2021 discussion), it was telling that the strategy to add rocket fuel to its subscriber growth centered on Forever Franchises. Virtually all of the new content coming to Disney+ builds on its core franchises, Star Wars, the Marvel Universe, the Disney characters and Pixar. While it is not easy, or cheap, to develop or buy Forever Franchises, they are critical to building a leading position in the entertainment space.

What it means

Even if you are not Disney (or Zynga), these two lessons are critical for any gaming or entertainment company. To maintain and grow your business, you need a constant stream of strong content. You also should focus on trying to build franchises, these are critical if you hope to dominate your space.

Key takeaways

  • Disney has enjoyed phenomenal growth with Disney+ and last week announced it’s plans to accelerate this growth, showing what is critical to the success of an entertainment brand.
  • The first pillar of this strategy is to release a plethora of new content in 2021, more than 25 new television series plus multiple movies, showing how critical new content is (especially telling as Disney has the strongest back catalog of content in the world).
  • The second pillar is to rely on its franchises (Star Wars, Marvel, Disney characters) for this new content, showing the value of Forever Franchises in the entertainment space.

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Author Lloyd MelnickPosted on December 16, 2020December 13, 2020Categories General Social Games BusinessTags content, Disney, Disney+1 Comment on The Power of Content

Turn Your Company Around

Turn Your Company Around

During these chaotic times, many companies that have previously enjoyed high employee satisfaction are now finding themselves in an unfamiliar situation, dealing with an increase in employee churn and employee dissatisfaction. Some leaders who prided themselves on building great and collaborative teams are finding that team health issues are becoming their primary focus. A colleague recently recommended David Marquet’s Turn the Ship Around, a book about Marquet’s experience as a US nuclear submarine Captain, where he turned around the performance and morale about the USS Sante Fe.

turn the ship around

Although the book was written several years before the pandemic, Marquet highlighted that team health and job satisfaction were already critical issues facing business. He writes that from 2004 to 2012, less than half of US workers were satisfied with their jobs; while a 2009 survey showed worker satisfaction to be at its lowest rate ever. Dissatisfaction is also very costly, as he shows that it led to lost productivity of up to $300 billion in the US alone.

The crux of the problem

One of the strongest drivers of workplace dissatisfaction is that most organizations are built for workflows that made sense 50, or 500, years ago but have not kept up with the time. I found this insight particularly strong coming from Marquet, as the military has traditionally embraced very hierarchical leadership structures (though it echoes what General Stanley McChrystal describes in Team of Teams).

Marquet explains that most companies are structured on a leader-follower approach, where decisions are made by a boss and carried out by the workers. This design works great if you are trying to build a Pyramid, or even during the Industrial Revolution, but not for jobs that are dominated by cognitive tasks and decision-making. While the leader-follower approach creates great Pyramids, it does not lead to efficient attack submarines or gaming companies.

Moving to a leader-leader organization design

At the root of Captain Marquet’s success turning around the USS Sante Fe was empowering workers and overhauling the idea of leadership. Marquet argues that to create a satisfied, empowered workforce, you need to move to a different leadership structure, a leader-leader system.

The difference between a leader-leader and leader-follower approach is exposed by the way decisions are made. In a leader-follower structure, information is sent up the chain of command, and a decision is made only once the information has reached and been digested by those at the top. In a leader-leader system, the power to make decisions is distributed throughout the chain of command, allowing individuals to act even on newly arrived information.

Marquet uses an example from his navy career to highlight the difference in approaches. “A navigator realizes his submarine is off course and in very shallow water. Instead of alerting his commander first, he jumps into action, rectifying the problem safely and effectively. “

Building a leader-leader system by giving up power

To move to a leader-leader system, and thus improve both productivity and team health, you need to recreate the building blocks of your organization. The first step is to ensure that decision-making involves employees and is sustainable. To do this, however, you may need to give up some of your perceived power.

There are several ways to empower better your team;

  • Talk to everyone and ask them how you could better empower them.
  • Encourage deliberate action. By deliberate action, ask your team to pause, vocalize and gesture toward what they were doing before they did it. In the case of the Sante Fe, Marquet used a simple three-word phrase to involve actively the entire crew in the running of the submarine. The phrase was: “I intend to…”
  • Change your emphasis from briefing to certifying. When briefing, you can only ensure the competence of the person giving the brief. Those being briefed often daydream or stop listening halfway through, as the task is a familiar one, and they’ve heard it before. Rather than just giving information, certifying makes your team members answer questions about the task you assign to them.

Develop and communicate core values

I wrote several months ago about best book I read this year, General Stanley McChrystal’s Team of Teams, not coincidentally also by a military leader and he and Marquet share a very important common learning. Both Marquet and McChrystal saw the need for core values to keep your organization united and productive. When you are empowering your team, you set them up for success by conveying the company’s values and strategy. This information helps everyone make decisions that drive your company forward.

It is also important to align the culture, with your words and rewards, towards these values. Marquet understood that praise had the greatest impact when good performance was recognized immediately. He also believes that the way rewards are structured can have an impact on an organization’s productivity. Man-versus-man rewards, where employees are encouraged to compete against each other, are unproductive. Man-versus-nature rewards, though, pit employees against an external enemy, which helps build camaraderie and a stronger work either among workers.

Turning your ship around

To improve your team’s culture, as well as productivity, Marquet shows that a traditional leader-follower approach to leadership is ineffective and does not tap the natural leadership abilities everyone has. Changing to a leader-leader structure entails a reassessment of the way you lead but the benefits of such a switch will benefit both your team health and your productivity.

Key takeaways

  1. Less than 50 percent of people are satisfied with that job, and Covid has made the situation more dire.
  2. The key to improving employee satisfaction, and growing productivity, is evolving from a leader-follower approach (where you tell people what to do) to a leader-leader approach (where people control their decision-making.
  3. To move to a leader-leader organization, you need to empower your team (including asking them how to empower them better) and encourage deliberate action where they vocalize what they are doing rather than ask what to do.

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Author Lloyd MelnickPosted on December 9, 2020December 6, 2020Categories General Social Games Business, General Tech BusinessTags leadership, management, teams1 Comment on Turn Your Company Around

Up-skillOR vs Up-skillEE

Up-skillOR vs Up-skillEE

There are several critical business decisions that are driven, often subconsciously, by arrogance; one of the most critical is around recruiting and hiring. I often write about Blue Ocean strategy but despite its proven higher ROI, companies still regularly pursue a Red Ocean approach driven by overconfidence that they are simply smarter than their competitors (your competitors also think they are smarter). Recruiting is another area where overconfidence and arrogance can not only lead to sub-optimal decisions but also inhibit growth.

The mistake is rooted in the belief that they can train someone to fill an open position so the person would out-perform a candidate with experience. Thinking you will do a better job of training the person than a previous employer is an example of arrogance, unless you have a proven and reputation as being the best of the best, it is unlikely you can actually train someone to be the best of the best. More importantly, you neglect a tremendous opportunity for your company.

Slide1

Up-skilling your company is more important

One of the biggest opportunities when recruiting is improving your company’s skillset. One of the very best people who ever worked for me, who has now gone on to achieve much bigger and better things, taught me never to hire someone who did not bring a new skill or attribute to the team. When he interviewed candidates, he not only ensured they had the skills for the target position, he would reject anyone (and it did make recruiting challenging often) who did not add something to the team. If we had a bunch of great producers, he would hire another producer who was not only fantastic at production management but might have design skills our team lacked. If he was hiring a designer, rather than take another strong artist, he would wait for an artist who was not only talented but may have come from a different industry that had a unique take on UI.

What his approach showed me (and the results were incredible) was that the real value in hiring is not filling a need but up-skilling everyone on your existing team and making them better. You can look at it mathematically:

  • Candidate A is brilliant. You can train her to be a great performer. She will deliver 100% value * X (where X is output) after you train him, thus the ultimate value to the company is X.
  • Candidate B is very good and but also brings a new skill (i.e. live operations management). She will be very good at her job (maybe a little weaker but I am not advocating accepting weaker candidates), so 90% * X. Other people on your team will also learn live ops management from her, making them all 10% better. Even if that is only 5 people, that adds 5 * X *.1; .5X. The total value to the company of this hire is 1.4X (so 0.5 better), not even considering the training costs avoided with candidate A.

Although this example is an over-simplification, it shows the leverage in hiring an experienced candidate and bringing their skills to your organization rather than focusing on developing a great employee from scratch.

You may not be ready to train to be the best

Unless you are truly the best in the world at something, you will not be able to train someone to be the best. At most, you will train them to be as good as you. If you are a Designer, you might believe you can train a designer who is coming straight out of university to be great. The reality is hiring a Designer who worked at Apple and was trained by Jony Ive is likely to yield a better designer than you could ever develop.

In effect, you are capping the new hire at the skillset of the person or people who will train them. Very few people are the best in the world, so assuming your company can do a better job training someone than anyone else could train them reflects arrogance rather than farsightedness.

You are missing a critical indicator of performance

Another problem with hiring with the intent to teach the candidate the job is your missing during the recruitment process the best indicator of how they will perform. While “past performance does not guarantee future success,” as anyone who has ever read an advertisement for a mutual fund knows, it is a damn good indicator with job candidates. As I previously wrote, interviews, personality tests, reference checks, etc., create an illusion of validity when evaluating candidates and are highly inaccurate. Conversely, work samples and experience are most predictive of success in a role. If you are hiring someone who has never had a similar role, with the plan to train them, you increase greatly the chance of a bad hire.

Experience is not an excuse for mediocrity

One important consideration when hiring someone is that experience should not be an excuse for accepting mediocrity. While there are benefits to bringing on someone with experience, it does negate the need to hire a great candidate. Someone with a mediocre track record probably has a low ceiling; they will be perpetually mediocre and not help your organization significantly.

You should also not equate a big name company on someone’s resume with great experience. There are both good and bad people at big (and even great) companies, it is actually often easier for these people to hide their weaknesses at a big company (their great colleagues can compensate for their weaknesses). You need to assess whether they did a great job at the position you are hiring for, not whether their company had great results.

Internship programs are great

This post should not be seen as a black and white blueprint for hiring, as there are many great opportunities to hire people with little or no experience, particularly creating an internship program. There are certain positions where experience is not needed or helpful. There are junior positions where it is quite easy to train people (though you still miss the opportunity to bring in people with different skills or experiences).

Finally, and most importantly, bringing in younger interns generates cognitive diversity. They will probably bring a fresh way of thinking to your team, challenge some conventional wisdom and potentially make everyone better.

Recruiting moving forward

The next time you are recruiting, particularly if it is for a somewhat senior position, look beyond the position and see how you can best help your organization. Realize you cannot train the person to be better than you. Understand the opportunity to bring new skills to your team. Hire the best, but make sure you know what best looks like for you.

Key takeaways

  1. Recruiting candidates with the expectation you will train (upskill) them to do the target job well shows an arrogance that you think you can train them better than anyone else has.
  2. Upskilling people ensures your team does not go to the next level, you set your current skillset as the ceiling.
  3. You also miss the opportunity to bring new skills and experiences to your team, where the new hire can make everyone else more valuable.

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Author Lloyd MelnickPosted on November 24, 2020November 23, 2020Categories General Social Games Business, General Tech BusinessTags hiring, recruiting, Up-skill1 Comment on Up-skillOR vs Up-skillEE

Ways to improve your game (or product) using neuroscience

Ways to improve your game (or product) using neuroscience

Earlier this year, I wrote a post that highlighted ways behavioral economics could be applied to gaming, and I recently read a book that provided additional opportunities by layering on neuromarketing. I read Brainfluence: 100 Ways to Persuade and Convince Customers with Neuromarketing by Roger Dooley and while not the perfect book (it was more a collection of articles and many were not truly neuromarketing) it did provide some strong tidbits that you can use to optimize your product.

Brainfluence

Neuromarketing is the science of studying the brain to predict consumer behavior and decision making in different situations. Neuromarketing includes the direct use of brain imaging, scanning, or other brain activity measurement technology to measure a subject’s response to specific products, packaging, advertising, or other marketing elements. Researchers use these tools to measure changes in activity in parts of the brain and to learn why consumers make decisions.

Based on this science, Dooley shows multiple applications not only for marketing but product design.

Neuroscience can help with your pricing strategy

Neuromarketing is particularly powerful in driving pricing strategy. Successful pricing strategy minimizes the pain caused in your customer’s brain while amplifying the pleasure. There are many areas of pricing where you should apply a strategy that minimizes this pain:

  • Dooley shows that absolute cost (a high price) is not the only variable that causes pain. Instead, it is the perceived fairness or unfairness of the deal that creates the reaction. Noble Prize winning behavioral economist, Richard Thaler, showed that thirsty beachgoers would pay nearly twice as much for a beer from a resort hotel than for the same beer from a rundown grocery store.Thus, the price you charge must be perceived as fair. If it is more expensive than competitors, explain why it is a premium product.
  • People do not weigh the current gratification versus future gratifications. Instead, they experience an immediate pang of pain when they think about the cost of an item (whether virtual or real). Dooley asks, “[w]hy do people love to prepay for things or pay a flat rate for things? Again, it mutes the pang of pain.”Thus, to minimize this pain you do not want to constantly be asking your customers to make purchases. According to Dooley, [t]he worst-case alternative is when you pay for sushi and you’re paying per piece. Or watching the taxi meter; you know how much every inch of the way is costing you….Selling products in a way that the consumer sees the price increase with every bit of consumption causes the most pain…. Avoid “drip-drip-drip” pricing structures that punish the buyer every time she does something.”
  • Another way to reduce the pain caused by a purchase decision is moving the cost to the future and breaking it into smaller bits. A credit card reduces the pain level by transferring the cost to a future period where it can be paid in small increments. Dooley writes, “not only does a credit card enable a consumer to buy something without actually having the cash, but it also tips the scale as one’s brain weighs the pain versus the benefit of the purchase.”
  • Bundling is another strategy to lower the pain that purchases cause for consumers. Cost is relative, it is not simply the cash value but it is the context around the deal. People can spend hundreds of dollars on accessories when buying a car with little pain, but a vending machine that takes 75 cents and produces nothing is very aggravating.Auto luxury bundles minimize negative activation because their price tag covers multiple items. The consumer cannot relate a specific price to each component in the bundle (cruise control, power steering, metallic paint, etc.) and thus the customer’s equation will change in determining if it is a fair deal or whether each item is worth the price to them.
  • According to Dooley, “if you find yourself in a situation where, for cost or other reasons, the price of a product is likely to produce an “ouch!” reaction from your customers, see if some kind of a bundle with complementary items will dull the pain.”
  • Another area of pricing strategy relevant to gaming is priming. Priming occurs whenever exposure to one thing can subsequently alter behavior or thoughts. Research conducted by my favorite behavioral economist, Dan Ariely, showed that by getting subjects to think of a random number, in this study it was the last two digits of their Social Security number, the price they were willing to pay was impacted by that random number. A higher random number led to higher prices. Thus associating the price of an item with a high number would make the virtual good or item you are selling appear cheaper.
  • Another application of neuromarketing to pricing is by offering huge potential reward for a purchase. According to Dooley, a “Stanford University study shows that big potential rewards produce big responses, even if they are unlikely outcomes. In other words, our brain is very responsive to the size of the reward and far less sensitive to the probability of actually receiving that reward.The clear message is that it’s the magnitude of the grand prize that is the most important factor in a giveaway. When choosing a topline prize, think big—even if the odds are lower, people will respond better if there are more zeros at the end of the number. Here are a few ways to maximize the prize value: Concentrate the prize budget on one prize. Use a play-off system or other approach to permit a huge prize with tightly controlled probability of awarding it.”
  • Pricing not only impacts monetization but customer satisfaction. A higher price frequently assists customers in percieving a product as being higher quality. According to Dooley, studies found that “wine thought to be more expensive really does taste better at the most fundamental level of perception. The important aspect of these findings is that people aren’t fibbing on a survey; that is, they aren’t reporting that a wine tastes better because they know it’s more expensive and they don’t want to look dumb. Rather, they are actually experiencing a tastier wine.”

Creating trust

In many businesses, including iGaming, building trust is critical. Neuroscience points to several techniques that can help create this bond with your customers.

The first is reciprocity. Dooley writes, “[w]ant your customers to trust you? Show that you trust them! The concept revolves around that seemingly magical neurochemical oxytocin, which is a key factor in forming trust relationships.”

You also need to stress that you are trustful. According to Dooley, “[r]esearchers found that placing the following statement at the end of an ad for an auto service firm caused their trust scores to jump as much as 33 percent! — ‘You can trust us to do the job for you.’”

Neuroscience research also showed listening to customers directly increased their perceived trust. The customer needs to believe his or her concerns are being heard, and you can accomplish this not only face to face (which is impractical for customers of most games or apps) but with phone calls or web chats.

Building this trust also insulates your business. Almost every customer relationship is tested some time. For customers and players to not only work through the issue but still promote your company, you must invest the time in cultivating the relationship before that relationship is put to the test.

Asking your customers what they want is counter-productive

Dooley begins by showing how neuroscience confirms the challenges with market research. I have written about The Risks of Market Research and better research options, and Dooley explains that neuroscience investigation has shown that 95 percent of our thoughts, emotions, and learning occur without our conscious awareness. Given that customers do not know why they make choices 95 percent of the time, research efforts asking them questions are doomed. Dooley writes, “although there are conscious and rational parts in most decisions, marketers need to focus first on appealing to the buyer’s emotions and unconscious needs.”

Neuromarketing to build a loyalty program

I have always been a big advocate of loyalty programs, having started two at game companies that both vastly exceeded expectations, and Dooley shows how neuromarketing can also help improve the performance of these programs. Dooley points to several factors needed for an effective program:

  • The underlying product or service must be at least comparable to the competition
  • Neuroscience also points to the need to show people progress. The mere illusion of progress caused people to buy coffee more frequently. In one study, the group that started with apparent progress on their card bought coffee more frequently than the empty-card group. When building your program, you should not only allow players to progress to better tiers but also give them a head start on their first goal.
  • The rewards offered must be attractive to the consumer.
  • Brand preferences and other factors may undermine loyalty programs. “Switching costs” may increase loyalty to the current brand and reduce the impact of competing loyalty programs.
  • Purchase frequency must be high enough to keep customers engaged.

Neuromarketing research shows that even when the value of loyalty points is less than the value of a real-money price difference, the consumers are often persuaded by the loyalty points (this fact is reflected in airline frequent flier programs valued at more than the underlying airlines).

Brands Matter

Another key learning from neuromarketing is that brands matter. As marketing, especially in the gaming industry, focuses on performance marketing (advertising where you pay based on a customer’s specific action, such as downloading your game), opportunities with brand marketing are often neglected. Dooley, however, presents data that branding does have a strong impact on customer’s perception of your game. If your customer believes a product is better, it will be better.

He shows that a lack of action or even attention does not mean an ad has no impact. The presence of familiar things, even if the customer (or potential customer) is unaware of the exposure, makes them feel better when they see or play the product. Dooley writes, “the key point for marketers is to keep your brand visible even when people don’t seem to be paying attention.”

Additionally, branding increases the social value of your product, both generating more usage and more referrals. According to Dooley, “[i]n neuromarketing terms, our brains are hardwired to want to be in one or more groups. Brands that can be positioned to put their customers into a group will find that their efforts will be enhanced by their customers’ own need to belong…. [Neuroscience experiments] led to the theory of social identity, which states that people have an inherent tendency to categorize themselves into groups.”

Branding that drives social identity then drives passion. Passion brands are those with which consumers form an emotional attachment and recommend enthusiastically to their friends. Your customers can sense the passion of your people, even if they don’t process it consciously.

Neuroscience also shows that branding should not be confined to one sense, ie. the written word, but should appeal to as many senses as possible. Research cited shows that brands that appeal to multiple senses will be more successful than brands that focus on only one or two. While it is hard for a gaming product (or any app) to appeal to all five senses, by thinking in multiple sense you can create stronger branding. For example, you may want to associate songs or sounds with your product. Dooley writes, “consistency is the key in building the sensory aspects of your brand. Consistent use is the key to effective audio branding. Constant repetition breeds familiarity, whether it is a cell phone chirp or a variation on Rhapsody in Blue.”

Use neuromarketing to improve your advertising creative

Branding is not the only area neuroscience helps marketing. Neuromarketing provides multiple ways to create more effective copy.

  1. Use a familiar feeling visual. If you present a viewer with a familiar image or situation, that person’s brain will automatically predict what will happen next. This will allow your customer to fill in the story.
  2. Do not use a familiar feeling visual. Conversely, if you insert an unexpected image, word, or event, it will grab the audience’s attention to a much greater degree than had the predictable occurred.
  3. Use a word or phrase in a new way.Just as you can jolt someone’s attention by using an image in an unexpected way, you can do the same with copy. Take a word that people know, and use it in an unexpected way.
  4. Create a savings message. A study found that exposing consumers to a “savings” message caused them to spend more than when they saw a “luxury” message.
  5. Numbers over percentages. The brain reacts stronger to real numbers, not percentages. Rather than 25 percent off of a $100 item, say $25 off.
  6. Use the word Free. According to Dooley, “FREE! is more powerful than any rational economic analysis would suggest. If you want to sell more of something, use that power. I often see department store offers such as, “Buy one pair of slacks at regular price, get a second pair for only one penny!” That may sound clever — ’ Wow, pants for just a penny!’ — but I think free will outperform the penny offer. Want to spark sales of a product? Try offering something free with it. Want to get the widest possible sampling of a new product? Use a free sample.”
  7. Use the word New. Neuroscience has shown that the appeal of NEW! is hardwired into our brains. Novelty activates our brain’s reward center.
  8. Create personal stories. To engage potential customers, write a vivid story involving your product or brand. Include action, motion, dialogue, and other aspects that will activate different parts of your customers’ brains. Turning a testimonial into a personal anecdote will greatly increase its impact. Adding a name, a face, and a story will play to the way our brains evolved and be more convincing and more memorable.
  9. Strategically decide between simplicity and complexity. Asking customers to make simple decisions work out best if you are selling a complex product like an automobile, give the customer a simple reason to buy your product.

Fonts are critical

Another area where neuromarketing helps is in appearance. The way people perceive information can be affected intensely by how simple or complex the font is. In one experiment, readers of a promotion in a simple font were more likely to make a commitment than if the font was complex. In a similar experiment involving a sushi recipe, subjects who saw the instructions in a simple font believed that preparation would take 5.6 minutes, while those who read the directions in a more complicated font, expected it to take 9.3 minutes.”

Font can then drive your conversion rates. As Dooley writes, if “you need to convince a customer, client, or donor to perform some kind of task, you should describe that task in a simple, easy-to-read font…. Since the perception of lower effort is related to the concept of cognitive fluency, you should also make the type size easy to read and use simpler words and sentence structure.”

Simpler is not always better, though. If you are selling a costly product, describing it using a hard-to-read font will suggest to the viewer that more effort went into creating that product. Further neuroscience research shows that the additional effort required to read complex fonts leads to deeper processing, and ultimately better recall.

The important point is that the font you choose should support what you are trying to achieve. It may not be obvious if a simple or complex font is best, so test both, and understand what drives the desired behavior.

Use images of people

Neuromarketing also reinforces the value of incorporating images of faces in your product and marketing. According to Dooley, a “face in your ad will attract attention, but be sure the face is looking at what you want the viewer to see — your headline, a product image, or whatever is key. Viewers will examine the face, and then subconsciously be drawn to what the eyes appear to be looking at.” Images are another area where testing makes a huge impact, different images, different looks will have varying impact; it is worth the effort to test various images and angles to optimize influence.

Tactics for optimizing your landing page or website

Neuroscience can help you design your website or landing pages. Dooley writes, “[r]esearchers … were stunned to find that showing users an image of a website for a mere 50 milliseconds — that’s just a twentieth of a second — was sufficient for them to decide how appealing a website was. 1. The 50-millisecond rating for visual appeal correlated highly with ratings given after much longer exposures. 2. The visual appeal rating was found to correlate highly with other ratings—whether a site was boring or interesting, clear or confusing, and so on.”

Part of the impact on getting the website correct is confirmation bias. Confirmation bias amplifies the power of the first impression. Once your minds forms an opinion, you easily accept new information that agrees with that opinion but reject contradictory information.

Reciprocity also impacts effectiveness of websites. Requiring a user to give up contact data before viewing good content is a reward strategy. Most users, however, will not complete a form even for a reward. Instead, a reciprocity strategy can work better; give people something they want prior to asking for their information.

Neuromarketing shows where not to put important items. Dooley writes, “what’s the worst place to put your logo, and where do advertisers most often put their logo in print ads, TV spots, and direct-mail pieces? The answer is the same: the lower right corner, an area dubbed the corner of death.” Thus, it is critical to understand what parts of your site customers are likely to notice and which ones they will ignore.

Finally neuroscience shows that your website or landing page design should incorporate the age of your customers. According to Dooley, using “fMRI scans to examine younger and older adult brains during memory tasks, … both young and old brains were able to activate their brains effectively for building memories but the older brains were far worse at suppressing irrelevant information…. [F]or marketers hoping to appeal to baby boomers and seniors: Keep the message obvious. Use an uncluttered layout for copy and images. Include some white space around the message. Avoid distractions like running screens, sounds, and animations.”

Key takeaways

  • Neuromarketing, using brain imaging, scanning, or other brain activity measurement technology to measure a subject’s response, shows you can price more effectively by minimizing the customers pain, by not forcing them to make multiple purchase decisions, spreading out the cost or bundling items.
  • Neuromarketing also shows you can improve customers’ trust by trusting them and specifically telling them you are trustworthy.
  • It also shows that branding forms an emotional attachment you’re your customer and prompts them to recommend you enthusiastically to their friends

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Author Lloyd MelnickPosted on November 18, 2020October 24, 2020Categories behavioral economics, General Social Games Business, Social Games MarketingTags behavioral economics, brand marketing, neuromarketing, neuroscience, pricing1 Comment on Ways to improve your game (or product) using neuroscience

How to become successful CEO

How to become successful CEO

Many people write about how to be a great leader or CEO, but very few of them have actually achieved it. Ben Horowitz is one of the few whose credentials live up to his advice. He cofounded and was CEO of Opsware (formerly Loudcloud), which was acquired by Hewlett-Packard for $1.6 billion in 2007. Before Opsware, he was vice president and general manager of America Online’s (AOL) E-commerce Platform division and also ran several product divisions at Netscape. Even before joining Netscape in July 1995, he held various senior product marketing positions at Lotus Development Corporation (the father of the spreadsheet). Given this great track record, I put significant credence in Horowitz’s book, The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers.

hard thing hard things

Horowitz rightfully focuses on the difficult things that leaders need to do to succeed. CEOs and others who are leading business units (BU) are responsible not only for their fate but the fate of their company or BU, having to make potentially life or death decisions daily (either for the business or for the individuals involved). Based on his experience both running BUs and actively involved in growing others as a VC, Horowitz provides some key principles on how to be a great CEO.

What is The Struggle

The greatest challenge a CEO faces is reality. Horowitz refers to the challenges in leading a business as “The Struggle,” which occurs when dreams of success meet reality. It is also an inescapable element of leading a company, and it consists of the stress and seemingly impossible decisions that come with the territory. The stress and weight of The Struggle will probably affect the CEO’s entire life, from their mental and physical well being to their career choices and social relationships. The CEO is responsible for negotiating the challenges the company faces, and thus it is the leader who will get credit for successes or be let go for failures.

Meeting The Struggle

Horowitz suggests several strategies for leaders to manage The Struggle. Among the most important is not trying to face it alone but assembling a strong team to face each crisis. While the burden will fall primarily on the leader, you should not try to bear it alone. Instead, include as many people as possible to face a crisis. When Horowitz’s Opsware faced a crisis caused by the dot-com crash, he got the entire company together in an offsite meeting and told them honestly and directly that unless they overhauled entirely their product they would not survive. As mentioned earlier, he eventually sold Opsware to HP for over $1.5 billion, so it worked.

The second approach to dealing with the Struggle is to get creative. Rather than business as usual, think out of the box for potential solutions. When Horowitz was leading Loudcloud and they were missing their revenue targets, he decided to take the company public to raise the funds he needed.

Horowitz’s third approach to dealing with The Struggle is self-reflection. He points out that dealing with your own psychology is the hardest challenge any CEO faces and it is often lonely. To overcome this challenge, he uses the analogy of a racecar driver. Successful drivers concentrate on the road ahead not on the potential hazards and track walls. Leaders must emulate this approach and focus on the solutions ahead, not the problem.

Intellectual honesty is critical

Another key element for successful leadership is being honest about problems and bad news. He admits that nobody likes to give bad news. He explains, however, that when you are the CEO and your company is dealing with challenges, discussing them openly and directly with your team (not just leadership but entire team) is critical for success.

Horowitz points out that bad news spreads very quickly, whether or not you disclose it. Thus, there is no sense in trying to contain it. Moreover, secrecy can be very damaging because it makes the bad news unexpected when it does surface. Sometimes this secrecy comes from good intent, what Horowitz refers to as the “positivity delusion,” the idea that their employees cannot handle the truth but need to be coddled. The reality is the opposite; employees usually deal with bad news better than the leader, in part because they can blame the leader for the problem.

Instead of keeping quiet, the leader should preemptively head off the bad news by divulging it as soon as possible. This allows the company to focus on a solution and stops gossiping (I would actually say slows gossiping, as gossip never stops). By disclosing problems as soon as you can, a great leader or CEO helps put those problems in the hands of the people who can solve them as quickly as possible.

Take care of your people

Horowitz has learned while building multiple companies that to achieve greatness you need to take care of the people in your company by training them well and creating a good human resource structure. He suggests you ensure you have a dependable HR department as it can give you valuable insights into problems invisible to you.

Second, he shows it is vital to invest in training your people to fit better their roles. He points out that every company has its own procedures and tools and no outsider can pick them up without training. He also stresses the training should be functional, proving employees with the experience and skills they need to succeed in their job and hit their goals.

Hiring based on strengths

In Horowitz’s experience, leaders succeed by hiring people based on their strengths, not their weaknesses. When recruiting, a CEO’s first priority should be hiring people for their strengths, not rejecting based on weaknesses, as the strengths will determine if the person excels at their job.

The second key when hiring executives is to make sure their experience matches the size of the company. In large companies, executives tend to have a lot of incoming work, which makes them have to adjust and review existing projects. In small companies, executives create their own projects and design their own work. These discrepancies can result in mismatches in rhythm, meaning the expected working pace and skill set.

Get rid of politics

Horowitz writes that if you want to build a company where people want to work you have to dispense with politics. By politics, he largely means the maneuvering that some people employ to get an undeserved promotion. The best way to avoid such politics is to only hire people who are ambitious in terms of the entire company, not simply their careers.

Another tool to mitigate politics is the implementation of strict processes that mandate regularly spaced performance evaluations, compensation scales and promotion schedules. These fixed timelines and processes make it more difficult for anyone to get an undeserved promotion.

A final step to eliminate politics is to communicate to all employees what their work is and how their work is valued. Make sure that your hierarchy of titles means something and is understood throughout the organization. One caveat that Horowitz points out is the need to avoid the Law of Crappy People, which states that the most incompetent person who holds a given title determines the value of the title in general. This leads to other title holders feeling undervalued and demotivated.

How to deal with redundancies and layoffs

Horowitz points out that nobody wants to lay people off, but if necessary, it should be done quickly and fairly. When layoffs are needed, it is critical to act fast. Once the decision is made, CEOs should take action, as delaying the inevitable that everyone knows is coming is like letting a wound fester.

It is also important to treat outgoing employees fairly, which is often a challenge as layoffs are frequently the result of deteriorating business conditions. Thus, there is an incentive to support the business rather than the exiting employees. Instead, you need to give the outgoing people decent severance packages and good references. These actions not only help the morale of those who stay but also makes future recruiting easier, not to mention it being the right thing to do.

Finally, the leader needs to be transparent and honest when explaining why they are making the layoffs. Horowitz gives two reasons to take this approach

  1. An admission of failures helps to solidify trust between the remaining employees and the leader
  2. Everyone should understand that the company failed and must now find its way forward and move on.

Own having to replace an Executive

While a company may have to make redundancies when dealing with challenging times, CEOs and other leaders sometimes also must fire members of their leadership team. Horowitz explains that having to let go of a leader is more difficult and serious because there is much more at stake for the company both financially and culturally. Horowitz suggests the best way to approach replacing a leader

  • As the CEO or leader you are responsible for having hired the wrong person and you need to explain this either to the Board or your CEO. Figure out why you made this hiring mistake and how it can be avoided the next time.
  • Prepare thoroughly for the conversation with the executive you are letting go. Include thinking about the kind of language you will use and how you will formulate the severance package. You never want to humiliate the person. You also should not be discussing performance with the outgoing executive, it is not a coaching session but an ending.
  • Treat the outgoing executive fairly and respectfully. This will help morale and performance of the other executives, which will also help ensure smooth operations after the executive has left.

When letting go of an executive, Horowitz stresses that the primary issue is to maintain business continuity (both actual and perceived) despite the departure. The leader has to do what it takes to keep the affected part of the business running normally, including in the short term becoming a temporary replacement for the departed executive.

Set the direction

The key to leading a company or business unit is knowing what to do and getting the entire organization to do it. Horowitz points out that great leaders and CEOs find the right direction for the company to follow. Then they have to articulate that direction and get the rest of the company to follow them. There are thus three critical elements

  1. Articulating the vision.
  2. Being authentic and motivational.
  3. Getting the company to execute on your vision.

Both define the path and execute on it

While some leaders are excellent at defining a direction and others are very effective at execution and performance management, the truly great CEOs and leaders combine the characteristics of both. Some leaders focus on defining a path for their organization to follow rather than implementing it. These leaders have a compelling long-term vision for their company, like Bill Gates did at Microsoft. Sometimes companies led by this type of leader become disorganized and chaotic.

The other type of CEO prefers the execution and performance management aspect of leadership over research and planning. They do not like to make big decisions. With leaders such as these, it can slow down the company as important decisions are delayed or avoided.

Great CEOs and leaders combine characteristics of both. They are like the latter in that when it comes to overall corporate decisions, they like to focus on execution rather than planning the company’s path forward. Where they are different, however, is that when it comes to their own area of responsibility and expertise, they act as planners (the first category). The implication of Horowitz’s view is that no matter which type of leader you are, you should continue to work on skills outside your comfort zone to arrive at the ideal combination.

Slide1

Becoming great

Horowitz points out that becoming a great CEO will initially be uncomfortable. CEOs and leaders grow into the job (unlike the television stereotype of the Homelander-type CEO who comes into the job with superhuman skills) and must develop the right characteristics and abilities for that particular role. You should always strive to be authentic and true to your personality and style.

Horowitz explains another skill to master in becoming a great leader is knowing how to give good feedback. He refers to the shit sandwich where the most unpleasant topic is sandwiched between two positive comments (though even this approach, you do not want to appear rehearsed and insincere).

Most importantly, Horowitz says, great leaders must learn to be comfortable doing inherently uncomfortable things. Just as boxers train themselves for initially unnatural feeling footwork, great CEOs have to make their unnatural job feel natural.

Key takeaways

  • Being a great CEO or leader is very hard. CEOs and others leading business units are responsible not only for their fate but the fate of their company, having to make potentially life or death decisions.
  • To meet The Struggle of leading a company, you need to rely on teamwork, think outside the box for solutions and continuously self-reflect.
  • Great leaders must learn to be comfortable doing inherently uncomfortable things. Great CEOs have to make their unnatural job feel natural.

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Author Lloyd MelnickPosted on November 11, 2020October 11, 2020Categories General Social Games Business, General Tech Business, Lloyd's favorite postsTags communication, leadership, recruiting2 Comments on How to become successful CEO

Building a strategy around doing the opposite

Building a strategy around doing the opposite

One of the most important issues any business founder or leader must tackle is how they are going to differentiate their offering. Everyone in your industry is trying to build a better mousetrap, counting on doing the same is not a wise move. Your competitors are looking at ways to be more efficient. They are looking at offering new features customers want. They are looking at pricing strategies that will give them an advantage. It’s the height of arrogance to think you are going to succeed along these attributes by being smarter or more creative, there are a lot of very smart people at your competitors.

Part of the answer in addressing this situation is to pursue a Blue Ocean strategy, which I have written about several times. The core of Blue Ocean Strategy is that rather than trying to win against entrenched competitors you find and target uncontested market space where the competition is irrelevant. Red oceans are a known market space with many competitors where you fight for market share. In red oceans, it is all about beat the competition and exploiting existing demand. Blue oceans is an unknown market with few competitors where you are creating market share.

Another, or complementary, way to approach building a competitive advantage outside the red ocean is by doing the opposite. A blog post by Growth strategy legend Brian Balfour, Doing the Opposite, highlights the opportunity with this approach. As Balfour writes, “categories tend to converge on value props, features, messaging, and even design over time. It’s why every SaaS website looks exactly the same. This means you need to reinvent yourself on a consistent cycle.”

As sectors mature, it leaves opportunities for doing the opposite. Balfour points out “[w]hen a category converges, there tends to be an audience looking for something completely different. One of many ways to find this open space is to ask what the opposite is….”

Slide1

Finding the opposite

To address this opportunity, there are two steps. First, you should list the primary characteristics and elements currently in the category. Then ask yourself (or your team), what would an offering look like if we did the exact opposite of each of these characteristics. It could be pricing, target market, marketing creative, key features, look and feel, platform, etc.

From this analysis, determine if there is an opportunity to penetrate a different market that current companies are not appealing to. Balfour uses the example of a gym. While most of the companies in the space were promoting “X-minute abs,” there was an opportunity to focus on experienced professionals at a high price point who did not like inflated claims (i.e. look like Chris Hemsworth in three weeks).
hemsworth

Applications in social casino and iGaming

Doing the opposite is a tremendous opportunity for both social casino and real money gaming companies. The space is largely defined with all competitors competing in almost exactly the same manner. They increase the number of slot machines, improve in-product events, and add in some progression and social features. While the space has grown, in part a shift away from land-based gaming due to Coronavirus, it has not appealed to “adjacent users.” By looking at ways to do the opposite, a company can find a much less competitive space with a potentially huge untapped market.

Key takeaways

  • A powerful way to find a competitive advantage is to do the opposite of what other companies in the industry are doing. Mature industries tend to converge, creating an opportunity to appeal to customers who do not like the homogenous offerings.
  • To uncover the opportunity, first list the primary characteristics and elements currently in the category and then ask yourself what would an offering look like if we did the exact opposite.
  • This strategy represents a particularly appealing opportunity in the social casino and real money gaming spaces, where the offering has largely converged.

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Author Lloyd MelnickPosted on November 4, 2020October 11, 2020Categories blue ocean strategy, General Social Games Business, General Tech Business, GrowthTags blue ocean strategy, competitive advantage, Opposites1 Comment on Building a strategy around doing the opposite

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Lloyd Melnick

This is Lloyd Melnick’s personal blog.  All views and opinions expressed on this website are mine alone and do not represent those of people, institutions or organizations that I may or may not be associated with in professional or personal capacity.

I am a serial builder of businesses (senior leadership on three exits worth over $700 million), successful in big (Disney, Stars Group/PokerStars, Zynga) and small companies (Merscom, Spooky Cool Labs) with over 20 years experience in the gaming and casino space.  Currently, I am on the Board of Directors of Murka and GM of VGW’s Chumba Casino

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by Lloyd Melnick

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