Finding and creating a blue ocean market (a business that turns non-customers into customers, rather than competing for the same customer) is about creating a new value proposition, not technological innovation.
Technology is not why Uber and Starbucks are now worth billions, they created offerings that appealed to non-customers (people not using taxis or people not going to retailers for coffee).
You thus cannot rely on your technology or R&D group to create new opportunities, instead you need to find a new value proposition.
The success of two companies highlight how you can create a blue ocean without creating a product innovation. The first example is Starbucks. Starbucks was able to take a commodity business, selling coffee, and create a new industry by focusing on the customer experience. The post also points to “JCDecaux, which unlocked a blue ocean in outdoor advertising by providing and maintaining “street furniture” for municipalities in exchange for prime stationary downtown locations for ad displays. These strategic moves opened new markets without any bleeding-edge technology.”
Even technology companies that have created blue oceans have not necessarily done it by creating cutting-edge technology. Bleeding edge technology did not make Uber into a multi-billion technology company, instead it was applying relatively straightforward technology to traditional industry and using it to appeal to new customers. Same can be said for Wikipedia, which put information online but did not need new technology to do it but by combining existing technology with a traditional business, it created a product for a new range of customers.
The post points out that value innovation creates compelling new markets, not technology innovation. “Successful new products or services open market spaces by offering a leap in productivity, simplicity, ease of use, convenience, fun and fashion, or environmental friendliness.” Thus, you need to look at your business, your customers and non-customers and create value for them, rather than relying on your tech team to come up with a game changing innovation.
A critical key to success is attracting the right talent to your team. This provides a competitive advantage over other companies.
A key element to successful recruiting is for leadership to own and drive the process, rather than relying on HR (who are a critical component, however)
The other key is proactively finding opportunities to raise your and your company’s profile to help your long-term recruiting capability, particularly speaking and writing openings.
This past summer, Duke head basketball coach Mike Krzyzewski (Coach K) led Team USA to its third consecutive gold medal under his leadership. Coach K took over Team USA in 2005 and while his accomplishments for Team USA are impressive, it points to a bigger story about the value of recruiting. In that time, Coach K has won two National Championships at Duke and coaching Duke is his primary job. Many of his fellow coaches are upset that the high profile nature of coaching Team USA helps him recruit (and succeed at Duke). Regardless of whether it is fair, it shows a clear path to success.
Recruiting is different in the US and Europe
Having worked in both the US and Europe, one clear advantage I see from US companies is their focus on recruiting. In the US, recruiting is seen as a responsibility of all management, and the more senior you are the more you are expected to bring great people into your team or company. Many American leaders are judged by the team they put together.
In Europe, although the company may actually have more employee-friendly policies, recruiting is left to the recruiting team or external placement firms, with it being a tertiary activity for leadership. While most leaders understand the value of hiring the best people, they do not see it as part of their job responsibilities.
What drives US recruiting
It is helpful to understand why recruiting is treated differently by US and European companies. There are two things that drive the US focus on recruiting:
The sports ecosystem. In the US, collegiate (university) sports are as important if not more than professional sports. While professional sports teams (both in the US and Europe) can secure talent by paying more, in collegiate sports payment is not allowed (I can write multiple posts about the reality of the situation but not important for this point). Thus, the successful teams are primarily the ones who can attract the best players.
Talent is very mobile.
As LinkedIn Founder Reid Hoffman once wrote, the US is a free agent economy. Employees often look at their job as a short-term opportunity and move on to better new opportunities frequently. This liquidity means for companies to succeed they need a constant stream of good talent with the right skillset.
Lessons from Coach K
As somebody who went to Duke and followed sports my whole life, the American philosophy on recruiting is embodied by Coach K. While you cannot have great results without being a capable floor coach, he has excelled by generating a steady and deep continuous flow of talented recruits.
There are two lessons that I learned from Coach K that can help anyone, including European business leaders, recruit more effectively.
First, recruiting must start at the top. While some university coaches rely on their assistants to attract talent, great coaches make recruiting their top priority. They show up for high school games, have dinner with recruits and their families and personally call and contact recruits. While their assistants do much of the work (breaking down film to prioritize candidates, coordinating schedules, answering questions),the great coaches take the lead in the process. In business, great leaders also do not rely on their HR team but work in concert with HR. They identify the talent, work with their coaches and players to build an environment attractive to the recruits and “close the sale,” they are not simply added to an interview list and done with it when they tell HR who they want to hire.
The second element and one that prompted this post is they use all opportunities to improve your odds of recruiting the best talent. Coach K could have spent his summers at the beach but instead he coached Team USA. What this effort did was raise his profile and give him a great unique selling point when sitting with a potential Duke recruit: do they want to be coached by the same person who is coaching LeBron James, Kobe Bryant and Kevin Durant. Additionally, every time Team USA played on television (which is effectively everytime it played), it was a long commercial for Coach K.
While in business there is no direct equivalent of Team USA, there are many comparable opportunities. At the top of the spectrum are shows like The Apprentice or Shark Tank, this exposure greatly helps the underlying business’ ability to recruit. Even if you cannot get a slot on television, speaking at conference or writing articles for trade press (or even blogging) generate exposure and a unique selling point when recruiting. The critical thing is to seek out these opportunities as part of your overall strategy to use recruiting as a competitive advantage.
The Key
The key is to use recruiting proactively, and put the necessary emphasis and focus on it, to gain a competitive advantage for your business. This effort requires that you lead the initiative, do not rely on others, and look at all opportunities as long-term ways to improve your recruiting effectiveness.
Technology changes the competencies needed to lead a team or company successfully. You need to expand your skills to be a successful leader moving forward.
Leaders need to retain their expertise and control over their tasks and processes, even when these tasks are undertaken by computers and algorithms and not individuals.
You need to adapt to adding managing artificial intelligence and digital algorithms to your skill set. You need to change from optimizing a common workday for your team to flexible schedules. You need be flexible and thoughtful in how you manage people with different preferences in how they use technology and what IT they use.
New management skills for a new era
While there have been thousands and thousands of useful articles written to improve management over the last hundred years (including some of my blog posts), they all share a common flaw, they are based on skills needed for the past 100 years, not the next ten years (I think it is crazy to look beyond ten given how quickly things change). New technology, new business models, new employer-employee implied contracts, etc., have changed the workplace. These changes mean you also need to change to remain an effective leader.
Both business leaders and employees face new challenges as we deal with changing digital technologies. An Article in the MIT Sloan Management Review, The Three New Skills Managers Need by Monideepa Tarafdar, lays out the three core competencies managers will need moving forward.
Partnering with digital colleagues
The first of these is the ability to manage algorithms and artificial intelligence as well as people. As Tarafdar writes, “Employees across a wide spectrum of industries will be working with what are, in effect, “digital coworkers” — algorithms that help them tackle a range of tasks such as answering call-center help desk questions, making financial investment decisions, diagnosing medical conditions, scheduling and running manufacturing assembly lines, and providing dashboard advice regarding important performance indicators. These digital colleagues will embody intelligence that evolves cognitively and learns continuously about the specific task it is applied to, by incorporating new solutions learned from experience and applying them to future problems.”
Putting the Terminator aside, there is a risk of algorithms disconnected from the reality of the phenomenon they represent, leading to incorrect solutions. It would not be optimal to maintain a team to oversee these digital colleagues; you would be negating the benefits. The human team would likely slow their digital partners or simply not be able to do the work, the reason it is being done digitally instead of by a person to begin with.
To prevent errors, however, leading to misguided actions (either directly by the process or decisions based on faulty conclusions), leaders need to retain their expertise and control over their tasks and processes just as you would over a human BI team. You need to provide context and recommendations for your digital employees, monitoring their decisions and actions and recalibrating when needed based on your experience, intuition and insights. Just as with human employees, you need to know when to agree, question, compromise and stretch your digital staffs
Becoming digitally mindful
Due to digital technologies, nine-to-five is becoming an obsolete workplace concept. It is much easier for people to work remotely and sometimes in different time zones. With people working remote, the reasons to abide by a 9 to 5 schedule are less compelling. There is also a higher probability you have people in different geographies, technology makes it easier to find the optimal partner. As Tarafdar writes, “current management mindsets still focus on the separation of work and nonwork time. Consequently, because managers find it difficult to establish boundaries between work and nonwork, organizations face the fallouts of “techno-stress,” technology addiction, and information overload. However, technologies will only increase in flexibility, richness, and seamlessness, and that will lead to their greater use at home for work and vice versa.”
The current skills based on managing work-home time does not account for the possibilities created by technology. Rather than staying with the current structure and simply forcing a balance, there are now opportunities to break from the old mold and create a better relationship. Again, to quote Tarafdar, “Managers should start thinking about cultivating a mindful relationship with the technology — one that embodies their individual preferences about what constitutes such flow. Rather than being troubled about work-home boundaries, which perhaps cannot be maintained in the future, organizations will need to support employees in managing the possibilities of flexibility. The paradigm should shift from conflict to flexibility, from technology detox to flow-driven use, and from the digital dark side to digital mindfulness.”
Developing empathy for others’ technology preference
Anyone who has tried to convince a colleague to go from a PC to a Mac, or to give up their Blackberry, understands how coworkers have different digital preferences. This also applies to how people use IT, some respond to emails at 3 AM while others only email at certain hours. Most managers have focused on the best technological solution for themselves and do not consider that employees or colleagues might have different needs and desires.
When people at a company clash on technology, it can often break down collaboration and teamwork. They may not share files (one uses Google docs, another uses Excel), they may not get each other’s communications (one focuses on emails, the other on texts) or they may miss appointments (one uses an Outlook calendar, the other uses JIRA), etc. Rather than forcing people to use solutions they are not adept at or comfortable with, managers need to act proactively to optimize productivity. Put people with the same preferences on the same team. Get tools that bridge the differences between preferences. The key is to be both flexible and thoughtful in how you respond to differences.
It is a new era
The key to leading into the next decade(s) is understanding things have changed. You need to adapt to adding managing artificial intelligence and digital algorithms to your skill set. You need to change from optimizing a common workday for your team to flexible schedules. You need be flexible and thoughtful in how you manage people with different preferences in how they use technology and what IT they use. Otherwise the successful leader of yesterday will become a failed manager.
The Noble Prize in Economics this year was awarded for contract theory, which shows how contracts alleviate opposing interests between parties.
As the future is uncertain, most contracts do not account for all scenarios.
The key is that contracts determine who has the power to resolve conflicts, and it is often more important to have the future power than to get your way with specific scenarios.
How the Nobel Winners in Economics can help tech and game companies
Last Monday, the Royal Swedish Academy of Sciences announced that Oliver Hart and Bengt Holström won the Noble Prize in Economics for contract theory. One important aspect of the award is that contract theory is valuable not only to academics but also for social game and technology companies. Understanding the keys to contract theory will allow you to negotiate agreements more beneficial to your long-term interests.
What is contract theory
Contract theory shows how contracts help assuage clashing interests among parties. Hart and Holström’s work focuses attention on the necessity of trade-offs in setting contract terms. Such contractual relationships can deal with anything from CEO bonuses to the deductibles and co-pays for insurance, the Royal Swedish Academy of Sciences said Monday when announcing the award.
Dr. Holmström’s work has focused on employment agreements. Companies would like workers to act as if they owned the place by working hard and controlling costs while taking smart risks. Employees, however, want to be compensated as much as possible while working no harder than essential. And performance is difficult to assess. One implication of Holmstrom’s work is that it makes sense to withhold some compensation for a time, to evaluate the results of someone’s work over time and compared with their peers (both inside and outside they company).
Holmström applied a deeper analysis to the issue of performance pay, where hard work cannot always be observed properly. His work insinuated that performance-based pay should be associated as much as possible to measures of managerial performance (such as the price of a company’s share relative to those of its peers rather than the share price in isolation). But the more difficult it is to find good measures of performance, the closer a pay package should get to a simple fixed salary.
Dr. Hart’s work begins from the observation that contracts are partial instruction manuals. They cannot specify what to do in each case. Instead, they must postulate how decisions should be made. Thus, the contract is less about specifics and more about who owns final decisions. Hart’s idea is that the very basic contract, since the future is uncertain, must spell out who has the right to decide what to do when the parties cannot agree.
A common and important thread in the work by Hart and Holmström is the role of power in planning co-operative ventures. Individuals or firms with the ability to hold up arrangements—by withholding their service or the use of a resource they own—wield economic power. That power allows them to capture more of the value generated by a co-operative effort. Contracts exist to shape power relationships. In some cases, they are there to limit the exercise of hold-up power so that a venture can go forward. In others, they are intended to create or protect certain power relationships in order to encourage good behavior: workers or firms with the right to exit a relationship, for instance, force other parties to that relationship to take their interests into account.
What contract theory means for you
There are several ways you can apply Holmström and Hart’s work to a tech or game company.
The first area is building a better compensation and bonus structure for your employees. You need to ensure that incentive bonuses (or commissions) actually reflect their contribution. For an account executive, they should be measured on how their accounts do versus the overall performance of all comparable accounts at the company. Thus if your product improves greatly, thus helping raise the overall company results, individual salespeople should not receive outsized benefits. One way to achieve this is by deferring the bonus or commission so that success can be measured holistically.
You should place a high priority on the power to make decisions in contracts with vendors/suppliers, mergers, etc., as this power often can have a greater impact than the immediate financials of the deal. Given that a contract will not cover all contingencies, rather than trying to create rules for each contingency build a rule making framework that will protect your interests.
Ensure there clear ownership and decision-making in all business relationships. If you are contracting out development of an app, understand clearly what decisions you make in the process and what decisions are ultimately up to the developer. If you are considering accepting a job offer, understand how much control you will have in reaching your bonus metrics.
If you do not have ultimate control in a contract, ensure you still have sufficient power to protect your interests and ensure the venture is successful. This can take the form to the ability to exit the relationship to the capacity to bring in an arbitrator.
The key is that you need to understand and address the importance of control and power in all business relationships, whether the contract is written or implied. Since the future is uncertain, it is often this power that proves more important than formal rules about specific situations. If you do not have control, ensure you have sufficient power to protect your interests in an uncertain future.
Creating a great new innovative products does not guarantee success, people have to find and try it.
The first key is to build something that people will search for. If there is little innovative or differentiated products, people will not even search for a new product.
If customers will not find a product via search, you need to develop cues so they will infer that the product is different and valuable to them.
One of the most frustrating results in business is launching a great game or product and then seeing it fail. Unfortunately, this phenomenon happens more often than not. In the game space, at least 80 percent of new launches (from established studios, new studios have a worse rate) are never ROI positive (that is, they never have an LTV that allows for ad spend). Even in retail, according to a recent study of 9,000 new products that generated strong distribution, only 40 percent were sold three years later.
Although I am a huge advocate of Blue Ocean Strategy, one central challenge is getting customers to adapt the new product. In the game space, many innovative and extremely fun products fail because they never gain traction with players.
A recent article in the MIT Sloan Management Review, Why Great New Products Fail by Duncan Simester, shows why so many good products fail and how you can reduce the risk of experiencing this fate. What Simester shows is that while most companies focus on customers’ needs, they do not understand how customers decide what to purchase. By understanding the customer search and inference processes, you can build a better strategy for the customer to discover a new, innovative product.
People don’t search for innovation
The first thing you need to realize is that in a market with little innovation the customer may not realize the value of looking for a better solution, they do not even think they exist. Thus, they may not find your innovative product because they do not know to look.
People Do Not Know To Search for Innovative Products
Alternatively, people may think the cost of searching for an alternative or innovation is too high despite knowing of the benefits. Somebody may realize there is a game in the App Store they would prefer to what they are currently playing but do not believe it is worth the effort to search through the thousands (or millions) of alternatives, download and test tens (or hundreds) and then find the innovative product they prefer.
Additionally, your best customers are the ones least likely to search. Research cited by Simester shows a strong relationship between the amount of prior expertise a consumer has about a product category and the extent they search for information before making a purchase decision. Effectively, the person feels they already know what is best so they see little incentive to search.
Compounding this problem is that potential customers with virtually no knowledge also will not search. They do not know what questions to ask, where to find answers or how to interpret the information if it arrives. Potential customers also do not understand the features that would benefit them. Thus, innovation would not increase the chance of a sale to this type of customer, no matter how much value the innovation adds, because the customer does not understand the value of the innovation.
Customers’ Inference Process
When search is incomplete, customers shift to forming inferences. They use what they observe to infer what is too difficult or costly for them to search for. A good example Simister uses is McDonald’s obsession with keeping parking lots clean. While customers do not really care if the parking lot is messy, if they see a dirty parking lot they will infer that the restaurant itself is dirty and go somewhere else. As Simester writes, “Although purchasing decisions are a different neural process than the visual process, a similar phenomenon occurs when customers are evaluating different products or services. Customers often do not realize they are forming inferences, and even if they do, they are powerless to stop it.”
Branding and inference
The most common cues customers use to infer product value are brand and pricing. Brands infer more than only product quality as consumers use brands to signal information about themselves.
The importance of brands differ by the market and consumer. When it is easy to search and generate information about the product, brands take on less importance. This is particularly the case with the sophisticated customers described above, as they can process the product information and make informed decisions about the opportunity. Conversely, an unsophisticated customer is likely to rely on the brand because they do not know how to process the product information.
In the game space you see very little value of brand because so much information is available to players. They can look at an AppStore description, process screenshots and watch videos to determine if they like a product, rather than care whether the game is from King.com or Supercell.
The role of the brand also varies across product features. Features that are on the spec sheet typically can be discovered by search. Other features, however, such as reliability and ease of use, are not easily available and thus it is these features where the brand’s role are most prominent. Going back to the earlier game example, a player may rely on their perception of a brand to determine how aggressive monetization will be, how often the game will be updated and how reliable the back-end is.
What you should do differently for innovative products
Given the challenges of conveying to users the value (or existence) of an innovative product, you need to build new products where customers can recognize their value. Thus, during your green light or incubation process, you should look at three aspects of the potential product.
Motivation to search. Will customers discover your innovation? An innovative offering will not succeed if customers do not discover it. First, are customers motivated to search? Are they willing to invest time to find a better option than they are currently using?
Ability to search.Can customer search effectively? Can reviews, customer or professional, help alleviate the issue.
Customer inferences. If customers cannot or will not search, you need to understand what cues consumers will use to infer the absent information. You may want to create cues to help customers with this inference process.
Innovation is not just about great products
The key is that innovation is not just about building a great product. When you are planning your new products, you need to understand if and how customers will find out about it. Build that into the product, or possibly seek an alternative if there is no clear way to educate users.
The mobile market is far from dead. The misperception that the opportunity has passed is driven by the selective memory of a better past than existed and the current focus on copying existing successful products.
The opportunity on mobile is still great, with projections of 5 billion smartphone users by 2019 and over 1 billion people on Facebook.
Rather than complain or try to create yet another slot or mid-core game, challenge yourself to think outside the box. Focus on creating uncontested market space and making the competition irrelevant.
Don’t give up, there are still great opportunities in mobile (aka make mobile great again)
I doubt a day goes by without someone whining and winging about how tough the games and mobile market is today and although it is difficult, there are still great opportunities.
Why many think the mobile market sucks
There are a few reasons people feel the market is so challenging. First, there is always a selective memory of how great things used to be. I was there when the mobile market was perceived as a gold rush. And for the first few iOS games, they did great. It was, however, always challenging. I remember at Playdom all of our failed efforts (and various heads of mobile) to penetrate this market. Playdom was not alone, as many companies (EA/Playfish, Zynga, Kabam, CrowdStar and innumerable others) lost tons of money (and users) in the mobile space. I call this the “Make Mobile Great Again” phenomenon, similar to the Americans who have a very nostalgic view of the country 20 or 30 years ago.
The second reason for the perception of the difficulty of mobile is the red ocean mentality of most of the complainers. I have written before about blue ocean versus red ocean strategy, with the latter a strategy to beat established competitors in a known market rather than expanding the market to appeal to non-users. Mobile now is incredibly difficult if you are pursuing a red ocean strategy. Players have invested months or years in existing products (Clash of Clans, Game of War, Slotomania, etc.) and getting them to switch does not mean putting out a product a little bit better but creating a game that is 9 times better ( see my blog post from 2014 on why a new product needs to be 9X better to get users to switch ).
Then add to the challenge of creating something 9X better that the competition is really good these days. Even the game companies out of favor have experienced and deep teams of game designers, product managers and engineers. They also have millions of dollars they are investing in their new games (in some cases sitting on billions in the bank) to make them better, get new users and reactivate lapsed players. They are not waiting for you to launch a new game and take away their chart position (and revenue).
The bottom line is the market is very challenging if you are just trying to compete with games already on the market (but it always sucked to compete in a red ocean). That does not mean, however, that the mobile market itself is no longer a great opportunity.
The next great platform is still mobile
A recent blog post from Greylock Partners by Josh Elman, a leading Silicon Valley VC, makes the point that The Next Great Platform is the One That We Already Have. In the world of venture capital, they also hear all the time that there are no longer opportunities in mobile (in their case, it is often that Facebook, Snapchat, Instagram, Twitter, etc. have consumed the entire market) and that they need to look at the next big thing (VR, AR, drones, IOT, insert hot new trend here).
Elman, like me, is not ready to give up on mobile. He pointed out that in 2002-2004, everyone was complaining that all of the opportunities on the Internet were over: Yahoo and AOL were the dominant portals, Google controlled search and Amazon owned eCommerce. Post 2004, however, we saw Friendster then LinkedIn, MySpace, YouTube and a small company named Facebook. So maybe the Internet was not exactly devoid of opportunity.
What is particularly interesting is that these companies (many of whom enjoy huge valuations), did not even need a technological inflection point to enter the market. Instead, they grasped the opportunity from user-generated content followed by a social and psychological shift. Even the new technologies were largely improvements on existing tech.
The opportunity now is tremendous. Billions and billions of people use Smartphones (5 billion by 2019). More than one billion people are active on Facebook and over 100 million use Instagram monthly, according to Facebook. And for those still not convinced there is still an opportunity, the chart below shows all the new apps (albeit not gaming) that rose to the top of the charts just this year.
Where the mobile opportunities are
If you are expecting me now to list some great opportunities, you have not read the rest of this post very carefully. The opportunities in mobile are not doing what everyone else is doing but understanding where you can create apps and games to reach people in a new way.
As Elman writes, “What happened in the Web 2.0 era was that some companies succeeded in creating totally new experiences, engaging consumers, and enabling them to connect with other people in a way that had never happened before online. Now that we’re in a fully mobile world, I think there is a lot of room to create new experiences and connect people. “
Rather than complain or try to create yet another slot or mid-core game, challenge yourself to think outside the box. Focus on creating uncontested market space and making the competition irrelevant. Then you can leverage the still great mobile platform.
Last night, the New England Patriots beat the Houston Texans 27-0 with Jacoby Brissett at quarterback. What is surprising to some is that Brissett is an unknown third-team rookier quarterback only playing because the star starting quarterback, Tom Brady, is suspended for four games and his back-up Jimmy Garoppolo was injured last week. What the victory so poignantly shows is that companies and teams succeed by building a good system and not letting inevitable hardships derail them.
Over two years ago, I wrote about the Next Man Up philosophy, how rather than dwelling on adversity just keep moving (not surprisingly, it was also about the Patriots). The core is that successful companies and teams focus on their goal and do not let short-term issues serve as a reason to fail.
No excuses
At its core, this philosophy is about staying focused on what you need to do to succeed, not why you might fail. It would have been easy for Patriots Coach Bill Belichick during the week to say they would “try their best” but without their top quarterbacks it will be difficult. Instead, Belichick’s message was his job is to beat the Texans, it has always been to beat the Texans and that is what he will prepare the team to do.
Companies and individuals often look for reasons why a project will not succeed or already has failed. I remember at E3 after 9/11, hearing from multiple game development companies that they ran into problems or their games did not succeed because of 9/11. The truth was they would not have succeeded regardless and most of these companies failed to ever succeed.
There will always be reasons that can rationalize why you are not successful: someone left the team, competitors are not pricing fairly, regulations have changed, blah blah blah. The reality is things never go as they are planned, there will always be unforeseen obstacles and hurdles. Good companies, good coaches and good leaders, however, do not care about the excuses and focus on the goal and how they will succeed given the circumstances. They do not make excuses when they fail, they learn from them (and avoid them).
Not rah-rah
What is also interesting in the Patriots success last night (and pretty much the last ten years) is that it was not at all driven by a great motivational speech. As well as not making excuses, Belichick did not extoll his team to play at 110% or do it for Brady. Instead, it was business as usual. We have a job to do, the variables have changed as they always do, but we will go out and do it. That is exactly what the Patriots did last night.
The press, and many people, love the charismatic, macho, inspirational leader. Rex Ryan (former New York Jet and current Buffalo Bill American Football coach) had a rabid following because he was so enthusiastic and his players loved him. Elon Musk has more fans than any businessman I have ever seen. Yet it is the Bill Belichek’s, Jeff Bezos’ and Bill Gates’ that deliver results year in and year out, and neither of them could be deemed charismatic. In fact, they are often successful because the team and the company are at the forefront, rather than their individual star.
It’s above the individual
Related to the coach not being the center of attention, the Patriots show that success is about not elevating any individual above the team or company. While the Patriots have had many great players, they have fostered a team first mentality. Even Tom Brady, New England’s injured starting quarterback who some consider the greatest quarterback of all time, celebrated on Facebook the Patriots win last night even though it theoretically could have impacted his greatness by showing the Patriots win with or without him.
This strategy also makes it easier to deal with an employee who leaves or a player that gets injured. Again, to use the Patriots example, they have now won all three games that Tom Brady has missed due to his suspension. By contrast, when the Indianapolis Colts (a traditional Super Bowl contender at that time) in 2011 lost quarterback Peyton Manning to an injury for the season, they ended up winning only two out of 16 games. In the business world, there is also almost always turnover. If you tie your success to one individual, you are much less flexible in your ability to deal with future situations.
It’s about the process
What it comes down to is building a good process to achieve your ultimate goal, whether that is hitting revenue targets or winning football matches. If you have a system that can weather external shocks you will achieve this goal rather than spending your team in a bar rationalizing why you failed and your competitors succeeded.
Key Takeaways
New England’s 27-0 victory over Houston Thursday night with a third string rookie quarterback exemplifies the concept of how a good system will help any team or company succeed regardless of the circumstances.
Good companies and teams succeed by not making excuses (either before or after the fact) but simply focusing on succeeding knowing that circumstances will sometimes be against them.
They also succeed by ensuring they build a system not centered on an individual but one that allows for success regardless of changes to the team.
One of the biggest hits in the gaming space this year has been Overwatch from Blizzard and there are several lessons game companies can learn from it. An article in Rolling Stone, Blizzard Reveals How to Make a Hit Game in 9 Easy Steps, highlights these lessons, though grossly underestimating the difficult in making a hit. I have been in the game industry since 1993 and have seen many companies do everything right but still fail. Actually, that is still the likely outcome with more than 80 percent of games failing but the expected value of a hit still makes it a (sometimes) profitable business.
By looking into the success of Overwatch, you can improve the odds of creating a successful game. Some of the keys that Blizzard’s team pointed to and that I agree with, with my prioritization:
Ditch everything that gets in the way of players. According to Blizzard VP Jeffrey Kaplan, “Blizzard doesn’t focus on reducing game difficulty across the board. Instead, it preserves a game’s ‘core fantasy’ and gets rid of friction points: needlessly complex aspects where ‘normal’ human beings will step away from the computer in a moment of frustration, but the more-hardcore will stick around.”
Blizzard looked at all the conventional norms of the industry and then asked the question of each, can they be reduced to make a simpler but still great experience. The key here, and one of the keys to great game (and product) design, is the more you eliminate, the better the product. This runs counter to conventional wisdom about always adding features.
Appeal to new players with a subtle learning curve. Blizzard’s games take a long time to master, and any product that appeals to core players will need to so they can satisfy those hardcore players. These days, however, even the most hardcore gamers will not put up with a tutorial that lasts in the days or hours (and probably even minutes). The game industry has to face the same reality as electronics or car makers, the manual (or in this case tutorial) will not be opened or at most not read carefully.
Rather than a long boring tutorial, Blizzard on boards players by controlling the early experience. “In most of its games, players start with a [short] tutorial, then play against the A.I. Finally, they start to battle other players, but in a very shallow pool amongst other beginners. They join the main group only after they figure out what’s going on. Even then, the learning process continues. In Overwatch, the “Kill Cam” and “Play of the Game” features showcase short videos that might prove instructive to beginners.”
The key is for players to get immersed in the game quickly by controlling the competition, not by teaching. Thus they are already enjoying the game when they decide whether to come back (or monetize).
Blow up your games and start over. A lot of your development efforts will fail, even if you are Blizzard or Supercell. Supercell “pops champagne” when a game fails. Blizzard has cancelled as many games as it has shipped. By canceling the games that were once promising but no longer have the magic they need to succeed, it allows your company to focus on the product most likely to succeed.
Polish and prune as you go. One thing that I have not heard from other companies but makes ultimate sense is to polish and tweak your game throughout the development process, rather than at the end. I have seen many times how the last 20 percent is the difference between a hit and a failure. This reality is most obvious in the shooter space, where so many developers have great technology it is not a competitive advantage. It is the little features that generate hits, first shown by Duke Nukem’s unexpected rise in the market in 1996. At Blizzard, “instead of blocking out the larger elements and leaving the fine tweaks for the last stages, they pour effort into polishing each step as they go.” This is a great way to ensure you have a polished product that delights players even for your soft launch.
Pick your genre. Blizzard has done a great job of focusing on a genre, allowing it to create product expertise, customer insight and brand equity. It’s titles, starting with World of Warcraft (or Diablo) and going to Overwatch, have all been markets targeting hardcore gamers. They know what these gamers want and have been able to create appealing products. This focus on a genre has allowed them to not only weather, but also thrive, during platform shifts (Hearthstone quickly established them as a leader on mobile).
Conversely, Zynga shows what happens when you do not follow this strategy. After building a great business and deep customer knowledge of the casual female player with titles like Farmville and Fishville (and anything else ville they could think of), they tried to dominate the mid-core mobile space. Three CEOs later, they are still trying to gain a leadership position on mobile (where, not coincidentally, they are seeing their biggest success in social casino, which unsurprisingly targets an older female demographic).
Give yourself a fighting chance
I would summarize the key to great game development as eliminate, eliminate, eliminate and tweak, tweak, tweak. As I mentioned earlier, at least 80 percent of game launches fail (and I’m not talking Indie, look at King or Kabam or anyone not located in Finland). By creating a game that immerses players quickly and is not unduly complicated; and by focusing on a genre where you have expertise, you will have a chance to succeed where others fail. And, as Blizzard does, do not be afraid to kill projects and start tweaking from day one.
Key takeaways
The most important key to creating a successful game is eliminating elements and mechanics that are not really necessary. Less is more and good design is not adding more features.
You need to plan the early user journey so the player gets immersed and learns the game naturally, while having fun, rather than using a long tutorial as a crutch.
Be willing to kill projects quickly so you can focus on the games with the best chance of success.
There is no shortage of theories and articles on how to grow a business, but one I recently saw — What Netflix and House of Cards can teach us about why most companies fail by Harish Abbott — does a great job of showing the key to survival and success. Abbott starts with a statement that most experienced entrepreneurs know all too well but those who have gotten their business experience from television do not grasp, “most companies fail.” These failures, however, do not come from poor ideas or even lack of demand. The key cause of failure is not focusing on your core offering.
Focus on your core offering
To not only avoid failure but also sport significant growth, you need to identify what is your core offering and build off of that knowledge. Abbott uses the example of Netflix. Netflix, once it moved from sending DVDs to streaming, realized its key value and differentiator was content. Although it needed to deliver this content in a seamless manner, the quality of the content was what would be key to its success.
Conversely, customers did not care how they received the content, as long as it was a good experience that did not actually interfere with consuming the content. As Abbott wrote, Customers don’t care how House of Cards gets to them, so long as they can watch it anytime, anywhere. For Netflix, the realization was that the streaming technology itself was not Core to their business, but still Critical. Instead of enduring a costly and distracting build out of proprietary streaming infrastructure, Netlfix turned to Amazon Web Services (“AWS”). Netflix realized that AWS was already fast, stable, and secure.”
By outsourcing elements of its offering that were not core, they could then focus on the actual core offering. Initially, that meant securing more content than any of its competitors, the content its customers wanted. Then it meant creating new content that competitors could never access, from House of Cards to Orange is the New Black to Narcos to Stranger Things. By focusing on the core offering, Netflix now enjoys a valuation of over $40 billion.
Outsource what is not primary
The corollary to focusing on your core offering is outsourcing what is not core. As I just mentioned, although streaming is critical to its users experience, Netflix did not try to build a superior streaming technology. Instead, it leveraged AWS to give its users an optimal streaming experience. Marketing is core to Coke’s business, so it focuses on doing marketing internally and using external companies for bottling even though bottling is critical in the user experience (nobody wants a flat glass of coke). Apple is great at design but let’s third parties do the bulk of manufacturing.
The key is that these great, huge companies know their core strength, build on that and use others to provide everything else. The companies that fail try to do everything themselves and then cannot leverage their true advantages.
The key to success
To succeed, you first need to identify what is the core value you are providing. You then need to figure out how to focus on leveraging this core offering while using partners and products to ensure the other parts of your product still create a great customer experience.
Key takeaways
The key to success, and survival, is understanding your business’s core offering, why your customers will consume your product.
Then focus your efforts on leveraging this core offering, making it better for your customers and more difficult for competitors to copy.
Find good third parties to provide the other key elements of your business, but not core elements, that are necessary for a great customer experience but are not your company’s strength.
I am a big fan of failure. I not only encourage my team and people around me to fail, I consider it a problem if they do not. It means we are not trying enough new things.
Even if we have a 90 percent chance of success with everything you try, if you try 30 or 40 initiatives 3-4 will fail. I argue that only trying things with a 90 percent chance of working is too conservative; you need to look at the expected return and try any that have a positive expected value, even if they have less than a 50 percent chance (if the upside is high enough). The key is if you are not taking risks, you are not doing enough to increase value.
A great article in the Harvard Business Review, “Increase Your Return on Failure” by Julian Birkinshaw and Martine Haas, adds an important layer to the thesis of pursuing failures. Birkinshaw and Haas provide a framework to learn from your failures, so that even the initiatives that do not work create value.
The authors point out that while most companies acknowledge and support the need to fail occasionally, management processes actually work against this goal. Most budgeting, resource allocation and risk control systems are built on predictability and optimizing efficiency, giving bonuses and promotions to those executives “in control.” Thus, even if you are encouraged to fail, you are incentivized to do everything possible to avoid it. The solution is to extract value from failure so you an increase your return on it, boosting benefits while controlling costs. There are three steps to raise your return from failure.
Learn from every failure
The first step to generating additional value from failure is getting people to reflect on projects and initiatives that had disappointing results. While it sounds obvious, it often does not occur. Most people find reviewing failures quite painful and would prefer to invest their time in looking forward.
A failure provides the chance to revisit your core beliefs and adjust them where needed. The authors recommend asking the following questions to understand the benefits and costs of the failed initiative or project:
What have we learned about our customers’ needs and preferences and our current markets? Should we change any of our assumptions?
What insights have we gained into future trends? How shold we adjust our forecasts?
What have we discovered about the way we work together? How effective are our organizational processes, structure and culture?
How did we grow our skills individually and as a team? Did the project increase trust and goodwill? Were any developmental needs highlighted?
What were the direct costs – for materials, labor, art and production or software development?
What were the external costs? Did we hurt our reputation in the market or with customers, or weaken our competitive position?
What were the internal costs? Did the project damage team morale or consume too much attention? Was there any organizational fallout?
What are the key insights and takeaways for the business?
These questions will help you think of everything that you and your company have learned, how it might help you move forward and all the positive side effects from the experience.
Share the lessons
The big benefit from failures is spreading the lessons across the company. You can amplify the paybacks from failures by passing between business areas the information, ideas and opportunities for improvement gained from the above analysis.
Shared learnings also increases the proclivity to pursue future initiatives. By reflecting on the positives, you build trust and goodwill and clear the path for others to take action on risky initiatives.
Review your pattern of failure
The final step to gaining value from failure is “to take a bird’s-eye view of the organization and ask whether your overall approach to failure is working.” Do you have a process to learn from every failure? Are these lessons shared? Are you using these lessons to improve both your strategy and execution?
This analysis will help you see if you are failing too much (and unnecessarily), not enough (and thus not taking enough risks) or at the appropriate level. If you are failing too often, you probably need to make the green light process for initiatives more rigorous. If not enough, you need to generate and evaluate more initiatives.
The benefit
Failure is critical to generating the most possible value. By rigorously learning from failures, you increase their return and the ability to pursue future initiatives.
Key takeaways
You need to encourage failure. Without failure, you are not pursuing enough initiatives to grow.
To get the most from failures, and subsequently prompt people to launch initiatives that can fail, you must study failures carefully and learn about the market, customers and organization.
You also need to circulate this information through your organization.
The Business of Social Games and Casino 