Gaming is big business. Industry experts estimate that there are now 2.3 billion gamers across the world, meaning that 30% of the world’s population play digital games. Consequently, the gaming industry is no longer a niche market, it’s a leading global business.
According to market analyst Newzoo, the global games market is estimated to grow from $137.9 billion in 2018 to $180.1 billion in 2021. Drivers behind the growth include, among others, advances in digital technology, mobile gaming, virtual reality, and internet penetration – not to mention hugely effective marketing strategies.
For game developers and entrepreneurs, this means that gaining visibility is tougher than ever.
“The gaming industry is intensely competitive. You have to fight with the big guys, and when you don’t have the same resources as them, you really need to think how you can compete in that space,” says Dr. Shailendra Vyakarnam, Visiting Professor at the Bettany Centre for Entrepreneurship at Cranfield University and one of the instructors in Aalto ENT’s Game Executive program for game companies seeking exponential growth.
One of the major challenges that upcoming game companies face is the sheer amount of money it takes to get a new game to the marketplace. Take Rovio, for example, which experimented with dozens of games before finally making a hit with Angry Birds.
The gaming industry is intensely competitive. You have to fight with the big guys."
“It’s so hit-or-miss. Everyone is looking for the blockbuster to make real money from their game,” says Dr. Vyakarnam.
He likens the world of games to the world of apps where thousands of new products are launched every single day.
“You can succeed if you get really lucky or manage to solve an actual problem that people have, like Uber and Airbnb did. But how do you get visibility for yet another fitness app is another story altogether. It might have been different for games ten years ago, but now it’s exactly the same. There are no barriers of entry anymore.”
Why strategy matters
If you just want to launch a single game, you can get by with product launch methods and metrics, but if you’re trying to grow a business around that game, a powerful strategy is vital, Dr. Vyakarnam says.
“And for building a business, you need to understand a typical innovation journey. Broadly speaking, there are three phases. In the first you need to prove that the customers ‘get it’ and that your product does what it is supposed to do. This gets you traction in the market and an understanding of what works and what does not. The next phase arises when you reach a point where you have to make multiple complex decisions about how to grow the business – not just how to launch more products. And finally, when you have passed this phase you have to work out how to be a global player and consider yourself to be one of the big names.”
Dr. Vyakarnam has written about these thoughts in detail in The Scale-up Manual: Handbook for Innovators, Entrepreneurs, Teams and Firms, co-authored with Dr. Uday Phadke.
As companies grow, they may find that the big players can be agile when it comes to product development, but slow to adapt their business strategy. This is where the entrepreneurial smaller firms can win. For gaming entrepreneurs, agility is key. That’s what differentiates them from the industry giants.
Do you want to develop your products for this environment, or do you want to change the market in some way?”
According to Dr. Vyakarnam, who has mentored entrepreneurs and held non-executive directorships of small firms in addition to developing growth programs for SMEs over several years, typical strategies for young companies include finding an innovative brand name or pricing model or creating a unique user experience. But they are not enough. What he suggests, instead, is identifying the sweet spot of competitive positioning to differentiate from the competition.
“I’m talking about blue ocean thinking, of course. Rather than heading to the red ocean where all the sharks are, search for the blue ocean and see what opportunities are available to you over there,” Dr. Vyakarnam says.
The majority of game companies these days compete in the red ocean. Dr. Vyakarnam compares the situation to a farmers’ market where all the local producers gather to sell food and vegetables, competing mainly on price.
“Games have become commodity products. My question is, do you want to develop your products for this environment, or do you want to change the market in some way?”
Role models are good for your mindset
Learning to think strategically begins with widening your horizons and developing your mindset, Dr. Vyakarnam says.
“You need to ask yourself whether you want to develop cool games or build a business.”
When you’re launching a new game, you most likely spend your time on raising attention for your game, fine-tuning the game’s operational details to get it to work smoothly, preparing launch plans, and building revenue streams. When your goal is to create a business, however, you need to start thinking like a CEO.
You need to ask yourself whether you want to develop cool games or build a business.”
“That means, for example, articulating a vision, building a world class team, being clear about your markets, customers, and routes to market, deciding how to generate the resources you need, and working out the operational details as well as being in the right location. You will also need to know where you want your company to be in, say, the next one to three years. I’m not saying the product itself is not important, but you need to have a clear vision of what you’re trying to achieve.”
In addition to acquiring the tools and techniques needed for building a business, Dr. Vyakarnam says it’s a good idea to find role models to emulate.
“Start looking at companies and entrepreneurs you admire. Get inspired, read about them, and try to understand their values and the way they operate and develop their businesses. And don’t limit yourself to the gaming industry. Step out of the box and look elsewhere, try to learn something, for example, from aviation or the auto industry.”
Does your company culture foster innovation?
The gaming industry is changing rapidly, and the rules of strategy are being written as the industry evolves. Dr. Vyakarnam believes that game companies are now exploring opportunities to leverage next-generation networks to leapfrog ahead of their competition, particularly in terms of multiplayer experience.
“There’s a new trend where gaming is part of a growing spectator event industry. This creates individual gaming stars and attracts large audiences and participation with big prizes. The question is, who’s going to play in this space, and will it become the way that new games and companies get into the industry?”
Other developments include reduced latency, and better user experience and look and feel. Companies that can come up with ways to quickly monetize these new technologies and advantages are the ones that will succeed.
Another key aspect of company strategy is finding the best people to work with, says Dr. Vyakarnam.
There’s a new trend where gaming is part of a growing spectator event industry."
“You need to build a team and a team culture that fosters innovation and agility while also being very practical and pragmatic. Where can you find those people and how will you pay them? That’s something to think about.”
It all comes down to the purpose
Being a game entrepreneur is a learning journey. You must be able to change and adapt, especially when things don’t go as planned.
“There’s a fine balance between being persistent and being stubborn. You must know when to follow your vision, but also when to stop or change course.”
“Entrepreneurship is thought to be risky, but by using the principle of affordable loss you can decide how far you go to put your relationships, finances, and reputation on the line before you realize that you may need a change of direction. But this principle can also give you the strength to pursue your vision and purpose,” Dr. Vyakarnam says.
Dr. Vyakarnam is one of the instructors in Aalto ENT’s Game Executive program; a renowned program, exclusively designed for game companies seeking exponential growth. During a six-day intensive training period, Game Executive aims to transform your learning experience into professional and personal development. Read more about the program.