One issue that is likely to haunt some of the high-flying tech and game companies that are currently doing wonderfully is their reliance on data and analytics can inhibit innovation. Clayton Christensen, the esteemed Harvard professor who wrote the seminal work on innovation, The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail, explains how deep customer understanding works against strong firms keeping up with innovators in their space. The use of data and analytics to understand and anticipate customer needs is now the driving force behind most of the exciting tech and gaming companies. This strength, however, could leave these companies vulnerable to new competition and turn today’s stars into tomorrow’s duds.
The Innovator’s Dilemma
To understand the situation data reliant companies will find themselves in it is important to understand first the innovator’s dilemma. Although I will blog about it in more detail this year, (I will not try to capture all the nuances of Christensen’s book; I strongly recommend you read it for yourself), the underlying thesis is that often great companies fail to be the disruptive innovative force in their industry because they have such a deep understanding of their customer’s needs they do not see disruptive opportunities that initially cater to other users. Instead, they continually create better products for their customers, which sustains technology but cannot disrupt. Disruptive companies come in with a simpler technology that aims at a different market, gains traction there and then encroaches on (and eventually destroys) the established firms. This cycle has been repeated in multiple industries. As Christensen writes, “blindly following the maxim that good managers should keep close to their customers can sometimes be a fatal mistake.” Continue reading “Data and analytics: the enemy of innovation”
Happy New Year!!! Rather than make predictions, which I find as valuable as reading tarot cards, I wanted to look back at some of my favorite posts from last year. Below is a list of the ones I felt were most useful:
Last year I recommended the ten professional books that I had found most valuable. I recently finished reading Contagious: Why Things Catch On and found it incredibly enlightening. The author, Jonah Berger, is a Wharton professor who is probably the leading expert on generating word of mouth.
Word of mouth is one of those black boxes that many growth or marketing professionals resignedly claim is a matter of luck. Berger, who has spoken to Google and Facebook among others, shows the fundamentals of creating a product that will generate word of mouth (the growth of which is not necessarily marketing, but rather integrated with building your game the right way). I will write more about Berger’s work in the future but you should put it at the top of your holiday reading list.
I get many questions on how to raise money, and in the current business environment the best strategy is growing your business through cash flow. Institutional investors who are open to the game industry are primarily looking for companies that are at a later stage, have significant cash flows and customer bases and are already close to an exit. In fact, the venture capital environment has shifted for almost all enterprises, with a typical A-round (the first round of institutional investment) now primarily going to more advanced companies that already have traction. A few months ago, I wrote about Turning Your Customers into Venture Capital and the importance of that practice has been magnified in recent months.
You do not need investment to create a billion dollar company
I recently read Hamdi Ulukaya’s article in Harvard Business Review on how he grew Chobani (the Greek yogurt maker) into a $1 billion business without any external capital. This article drove home that financing from cash flow could not only be a way to create a nice, profitable lifestyle business but also create a billion dollar business that could IPO if it wanted to go that route. If you are not going to rely on a huge investment to build your company, though, you need to do everything the right way since you cannot just fall back on a big pile of cash. As Ulukaya wrote, “Too many entrepreneurs believe it’s impossible to scale a business without relying on VCs or other equity investors. That view is wrong. If I could grow a company from zero to $1 billion in less than a decade in a capital-intensive industry, many other businesses can too.”
One of the biggest problems I see in the San Francisco/Silicon Valley area is the fallacy that fast following is a way to build a successful business. For those not familiar with this concept, it is identifying a successful business model or product, replicating it quickly and bringing the new company or product to market. There are some successful examples, none probably worth more than Microsoft’s fast following of WordPerfect with Word, Lotus 1-2-3 with Excel and Freelance Graphics with Powerpoint. This strategy generated hundreds of billions of dollars for Microsoft and its shareholders. This example is the exception rather than the rule, as fast following is more likely to sub-optimize or fail.
A strategy built on arrogance
A key indicator that fast following is a flawed strategy is that it is built on arrogance. Fast followers are saying they can take an idea or product and do it better than the original company or anyone else. The question then arises, “Why are you going to be better?” Continue reading “The dangers of fast following”
It all comes down to one word: simplicity. This sounds very easy but creating a simple game experience is one of the most difficult elements of game design. In the social and mobile space, the games that are most appealing to the mass market are those that are very straightforward, simple experience. You can understand the game and start playing in the time it takes to get a latte at Starbucks (and often for less money). If you think of the games that have defined casual and social gaming, including Bejeweled, Farmville, Angry Birds and Candy Crush Saga, they are all easy to begin playing and simple to understand. Yet how many thousands of companies have unsuccessfully tried to quickly follow these successes with disappointing results?
Have fun fast
The key factor is that the player should be able to start playing and having fun immediately. They should not have to memorize an intricate system or go through a long tutorial. No long manuals, no Google searches, no emailing friends for instructions should be needed, or even considered, by the player. First, the player needs to be exposed immediately to the core game loop, that is the underlying mechanic the makes the game fun and keeps the player coming back. The quicker the player gets engaged with the core game loop, and not distracted by other features, the better. This engagement is seldom achieved through a tutorial, a convoluted story or mini-games. Design your game so the player can start playing quickly and understand what they are doing and their goals without it being explained to them. Continue reading “The secret of creating a hit game”
Great article about the importance of thinking about your customer when growing your product.
A recent article in the Harvard Business Review, “Three Rules for Making A Company Truly Great,” pointed to three elemental rules that were consistently followed by exceptional companies. There are a lot of hyperbole and clichés about how to create great companies, but the research by Michael Raynor and Mumtaz Ahmed (in the HRB article) shows that three fundamental principles are the keys to success. This finding was based on a statistical study of thousands of companies, so it is much more analytic than what business book happens to be at the top of the charts in a particular week. It is also apparent that these principles apply to social and mobile game companies.
Continue reading “Three rules for becoming a truly great game company”
The big buzz phrase in the Bay Area the last year or so has been “growth hacking,” and the ideas behind it can help significantly game companies. The underlying principle in the phrase is that modern start-ups should be focused on using the new tools available via technology to grow rapidly their user base rather than relying on older, sometimes outdated, marketing techniques. Growth—unlike marketing—usually encompasses multiple aspects of an organization, with the growth team not only bringing in users but also working with the product team to optimize the product for growth. It stresses the importance of product to growth and how the two should work together rather than having marketing set aside in a corner. The phrase itself was coined by Sean Ellis, CEO of Qualaroo and the first marketer at many great tech companies including Dropbox and LogMeIn.
What is a growth team?
A quora post from Andy Johns (currently on Quora’s growth team and one of the early members of Facebook’s growth team) described the typical people an early stage company would put on its growth team: Continue reading “Growth tactics for mobile game and social media companies”