History lessons will quickly remind us of corporate giants of the past that once seemed unstoppable, but today are barely remembered.

When me and my thesis partner, Kjartan Olafsson, did our research, we were also determined to uncover current examples of practices at game developers that supported our findings. While various of the developers we investigated and interviewed showcased isolated practices that matched our conclusions, one developer stood out as almost a picture-perfect representation of the conclusions. Conclusions that determined an organizational and strategic framework for creating a game development company that is built to last decades and paradigms.

That developer was Valve.

While they did not match our conclusions in every aspect – most significantly, they lack the kind of hierarchical dynamics between those determining the strategy and vision and those executing and gathering data – their organizational setup and subsequent success was utilized to backup many of our claims and conclusions. At the time of writing the thesis, the role-less structure of the company was debated, where many refused to believe that Valve’s statements were more than smoke and mirrors. “Everyone fits a role – if you’re a programmer, you’re not suddenly an artist the next day”, many said.

While there is always a great distance between idea and execution, using luck or the unique circumstances of the company as an explanation is just plain silly.

In fact, Valve’s statements on their own organizational structure is often questioned; is it really 100% true what they say or is it merely intentions or ideals? Can only they do it because they created a big hit game, have continuous income through Steam and now possess some of the best talent in the industry? Have they just been really luck that this method worked for them?

It’s always easy to question, be sceptical and doubtful, and even use luck as an argument. But while there is always a great distance between idea and execution – not everyone can just take Valve’s methods and make it work – using luck or the unique circumstances of the company as an explanation is just plain silly. After the recent “leak” of their employee handbook, they have once again been subject to both praise of their radical way of doing things, but also been dismissed as a unique case of something that shouldn’t work but works.

Valve works because of a few key factors, which I am going to explain in the chapters below.

• They answer only to themselves and their customers
• They are not afraid of failing
• They have a clear vision and strategy
• They have only hired the right people and fully trust them

Answering to yourself and your customers

Valve is self-funded and has always been. In their employee handbook, when answering the question of why not every company has done this since it works so well for well, they say:

Although the two arguments are separated, they are closely knit. In many cases, companies are made with the natural intention to earn money. Nothing wrong with that. Some people, though, are short-sighted and hope to make a good buck sooner rather than later. Others become controlled by outside forces. Investors, shareholders and many other stakeholders, who care for little else than seeing your company making a constantly better profit. Once that happens, you start to answer to your “owners”, not your customers. This happens a lot. Almost all the time. And unless these “owners” have the best interests of the company at heart – which rarely happens – decisions will often be short-term and not focus on building strong, long-lasting relationships with the cusomer.

You could just see there were a bunch of decisions that were not ‘how can I keep my customers happy for the next ten years’, and were instead ‘how can I make a giant pile of money as quick as possible and get out of my position as fast as I can.


- Gabe Newell

In a recent interview on the subject of the current influx of social gaming companies, Gabe Newell (Valve’s co-founder and current head poncho) explained how the focus on an impending, or at least a distant IPO has controlled the decision-making process, not strengthening the long-term customer relationship, but narrowly focusing on squeezing the lemon the hard as possible for as long as it lasts.

For Valve, they believe in the long term. What this means is that they create a basis for succeeding for decades. Their aim is to have a customer that returns throughout their lifetime because they were satisfied with their purchase. During our interview with Valve’s Erik Johnson in our thesis, it was even explained how Steam came about to reduce the friction between Valve and their customers, which was often cluttered by both publishers and retail. If Valve were to deliver the intended Value to their potential customers, they saw no other option than to built a platform that allowed direct contact (Innovation-Driven Development, p. 237-238).

I mean, who else would allow you to gift a game to another use, if you use a redeem code for three games (Orange Box) and already possess one of the games (Episode 2) on your account?

This also allows them to move in new directions, as they go wherever their customers go. Steam was likewise a direct result of that. And due to their flat and self-directing structure of their company, they also go in the direction their employees want to go. Something like DOTA 2 is a direct result of that.

Not being afraid of failing

This factor is twofold.

First, when Gabe Newell and Mike Harrington founded Valve in 1996, they came hot of the heels of Microsoft’s flaming success. I don’t have any insight into their personal finances, but they probably weren’t low on money. Why is this important? Well, for one, they weren’t focused on making tons of money fast (see above). Second, if Valve wen’t to the gutter, their life probably wouldn’t crash and burn. While this does not a great company make all by itself, it can make you more confident and less likely to go off track if things seem frightening for certain periods. As the Valve Employee Handbook also states on why this works for Valve:

So you need to be strong and confident in your ideas and beliefs. This is always easier when fear of failing is not there to push you around.

Providing the freedom to fail is an important trait of the company [...] Even expensive mistakes, or ones which result in a very public failure, are genuinely looked at as opportunities to learn.

- Valve Employee Handbook

Secondly, Valve has built a culture of embracing failure. They understand that failure is necessary for learning and that they are important to make. Employing the kind of flat, free-form structure that they do, will allow for failures to flourish – and that’s not a problem. The problem will only arise if they failures are not: a) caught as soon as possible to rectify the mistakes before they spread, and 2) used as a basis of learning by facilitating a process of evaluation and reflection.

As they state in the employee handbook, there are bad ways to fail: repeating mistakes, not listening to customers and/or peers, ignoring evidence etc. Experimentation, prototyping and many agile methods are built exactly to be able to constantly test assumptions in a practical way and facilitating a process of continuous evaluation and adaption. Valve has been able to employ this model beautifully. Many say they embrace failure, but it only seem to a certain extent and still try to avoid it for all costs. At Valve, you should fail – you should just do it the right way.

A clear vision and strategy

I don’t think I’ve ever seen a mission or vision statement from Valve. This would also seem contradictory to their organic product creation process. At Valve, new products are created because someone gets an idea, rallies people to join his course and start working on it. There’s nothing coming from the top. It’s hard to believe. And I think most people secretly believe that somewhere behind the scenes, Gabe Newell and other key people make a bunch of decisions that decide the future of the company.

It doesn’t matter what you “say” is right; words are cheap and useless. What matters is what you spend your hard-earned time on. That is often true value, and if you realize that whatever you work on is not valuable, you will either often leave it be or find yourself alone since everyone else left the sinking ship.

While Valve’s organizational structure differ from the framework put forward in our thesis, I do respect the way they have decided to do things and I understand how this can work – although the fourth factor below is crucial for this to work. Valve do have a strategy and a vision, but it’s just extremely intangible and open for interpretation. Their goal is to deliver the most value to their customers by removing any obstacle there should be in their way. Steam was one example of a product that differentiated from the core of the company, but arose from this vision. It’s also interesting to observe their work on the Team Fortress 2 animated movies as an attempt to deliver entertainment to their fans in other mediums, although Gabe Newell recently stated they’d rather give the film-making tools for their franchises to their fans than make it themselves (or have some Hollywood hotshot do it for the money). But if someone at Valve could rally people to a course which had the agenda of creating a feature film for Half-Life, no one would stand in their way.

So isn’t it dangerous to believe give that kind of power to every person in the company and make their faith a matter of democratic principles? The answer is, under the right circumstances, no.

One of the areas somewhat extensively covered in our thesis was user involvement. During the 2000′s, it seemed like many game developers sought to step down from their ivory tower, connect with their customers and have they tell what they really wanted to play. This method led to many failures, and the result is that user involvement today is a mixture of metrics/data collection and playtest observations. In Innovation-Driven Development, we determined how plain out asking people is often the least informative method, because you rarely know what you want and don’t need to put any effort into speaking your mind. So the method of Watch & Observe, usually employed today, is a lot more insight. But the best method of them all is Development & Implement, or often known as Lead-User Involvement.

The Hierarchy of User Involvement

This theory largely stems from the open-source communities, where the direction of a piece of software is determined by the collective decisions of its contributors. The best way to gain insight into the needs of users is to make them create the solution for their own needs. Valve has been very supportive and attentive to mods, which is a prime example of how lead users often contribute with the best innovations, since they both possess the need and the solution. In fact, most of Valve’s products – Counter-Strike, Team Fortress, Portal, the upcoming DOTA 2 and even Left 4 Dead to some extent – are all the result of the work of lead users.

Why is this relevant to Valve’s internal organizational structure? Essentially, everyone in the company is treated like a lead user with the empowerment and abilities to choose themselves what they work on. It doesn’t matter what you say is right; words are cheap and useless. What matters is what you spend your hard-earned time on. That is often true value, and if you realize that whatever you work on is not valuable, you will either often leave it be or find yourself alone since everyone else left the sinking ship. You must constantly consider if your time is well-spend, scrutinizing whatever is being worked on from the inside.

It is the force of creative majority. One of the most powerful and valuable forces known to mankind. Having build this culture and environment of organic development is the most strategy Valve will probably ever need.

Hiring the right people – and trusting them

The fourth and final factor is perhaps the most critical, but also difficult one. Quite simply because it deals with one of the most fundamentally difficult challenge a human being could ever face: trust. Handing over your soul with complete faith in someone else.

When we’re kids, we’re naive. We easily trust. As we grow older, this trust is often misplaced. We trust someone who disappoints us or hurts us, which reduces our ability to trust a little bit every time. By the time we’re adults, most of us don’t trust most other people than ourselves and maybe family and some close friends.

One of the most widespread problems at any company is that they hire extremely clever and talented people, but cage them under the cover of goals, meetings, documentation and so forth. What is actually happening in many of these cases though is a lack of trust. Many people, including managers, fear that this person will not do the right things. We are afraid they will let us down and down the road hurt us, whether it’ll be professionally, financially, personally or something else. So we don’t trust them. We manage them, control them and guide them.

In the employee handbook, Valve puts an extreme amount of emphasis on the importance of hiring people:

If Valve had not been self-funded, it would probably have had much higher growth targets early on. During growth, they would need to hire more and more people at an increasingly rapid pace. During this process, you often loosen your requirements and criteria. You focus on getting the extra hands to continue your growth. And during this process, it’s easy to hire the wrong people.

Who’s right and who’s wrong for your company can be very different. Valve focuses on hiring people who are both world-class experts on a single subject, but also has a wide range of knowledge on many subjects without being an expert (a T-shaped individual). They focus on hiring people who can be their own boss and work well in teams, dynamic conditions or loose structures.

Valve doesn’t hire just anyone, because they need to put their complete faith and trust in everyone they hire. This is where it breaks for many companies. They simply don’t have the balls to do that. Understandably so, because it’s extremely scary and risky. But executed in the right way, it can pay off – especially in the long run. In the thesis interview with Erik Johnson, he emphasized their retention rate: “We have virtually non-existent turnover. There are three or four people which have willingly left the company, in its history. People just don’t leave. And two of those people actually came back.” (Innovation-Driven Development, p. 243).

In conclusion…

As I wrote early on, there’s a long road between idea and execution. Doing what Valve has done is not easy. My point with this entry though was to portray that it is not a case of luck or unique circumstances that cannot be reproduced by other companies. That’s the easy excuse. The difficult one is that what Valve is doing is scary as hell. The ideas may seem nice and beautiful on paper, but are quickly deemed idealistic when it comes to execution.

Valve succeeded in many ways because they dared and because the didn’t steer off the road if the goings got tough. Why their situation works is not some black box of magic. It is a compilation of proven and somewhat logical practices, that often seem counter-intuitive or naive. Their ways are not right for companies that are built for the quick buck or to serve external investors. But their ways serve, in my opinion, the absolute best basis for a company that is built to last. Over time, I am confident that Valve will make more money than most of its competitors, because it will continue to be dominant and continue to grow in an controlled fashion. And they will continue to embrace new paradigms, making them continuously relevant, because as Erik Johnson said in the interview:

INTERVIEWER: OK, but just to sum it up: You are generally considering new business areas, as long as it’s… ERIK JOHNSON: As long as our fans will get value out of it. That’s the only thing we care about.

With the recent rise of mobile and social games, I think the comparison to the movie industry falls short.

When games are compared to or aligned with another medium to describe tendencies, developments etc., the movie industry often takes the place as its sibling. The logic seems reasonable. The movie industry is very blockbuster-driven, just like games. It can stage big releases, but also finds it space for smaller, more weird productions, just like games. And although a lot of content is produced, the primary portion of the focus from the consumers are put on just a few products, just like games.

Or so it used to be.

With the recent rise of mobile and social games – and by social, I’m primarily referring to the likes of Facebook games – I think the comparison to the movie industry falls short. Games like FarmVille and CityVille, Angry Birds and Draw Something can’t really be compared to that of a blockbuster Hollywood movie.

Instead, I believe that games in that respect can be much more comparable to both that of music and books.

They look down upon these games as too “stupid” to be worth their attention.

Games like CityVille and Angry Birds are not liked by many of the more passionate consumers. They look down upon these games as too “stupid” to be worth their attention and instead seek fulfillment in the larger, more elaborate productions such as the triple-A console games. The same can often be said of both music and books. In music this is often described as the Pop genre. A definition I’ve often found stupid, since it refers more to the popularity of the piece rather than the actual content. Pop music today spans pretty much all genres, but their common trait is that they are rarely so daring that they turn off the majority of potential consumers. Some Pop hits are created with a pure purpose of gathering huge amounts of listeners, while other tracks rise to Pop fame more from coincidence.

And there’s nothing wrong with that.

But as with music and books, there’s both good Pop and bad Pop.

When someone like Adele comes along and rises to the top of the charts, it’s not so bad.

I believe the same can be said about games nowadays. Games like CityVille and Angry Birds are there to pleases the masses. They are not overly complicated, they don’t try anything new, they just find the right formula and execute it to near perfection. It turns off some advanced, passionate users, but collect the love of the wide mainstream audience, drawing in larger crowds than most other games could ever dream of. While critics easily write off boy bands and teenage sensations, when someone like Adele comes along and rises to the top of the charts, it’s not so bad. They might not call it Pop, since it’s more of a word reserved for the less solid music, but as soon as something becomes enjoyable in the eyes and ears of the mainstream, it is by definition Pop.

The difference is often hard to describe, using such words as quality and intent, but maybe that’s ok. Often it boils down to whether or not the creator of the content tries to move boundaries and do something new. While not easy, it’s rarely acknowledged as brilliant if someone just does something already well-established to perfection. Justin Bieber tracks are spot on, but it’s tough to say that he and his team of song writers and producers are doing surprising new stuff. They play it safe and just do it really, really well. Rely more on execution than the risk of innovating.

Pop grows the overall pool of potential consumers

But in these times of industry turmoil, I think it’s clever how these other entertainment industries easily share their consumer-base. The less mainstream-oriented content have in many cases found their own niche audiences and over time they have grown to be very powerful, allowing them to push boundaries for an audience that expects to be constantly challenged. But that audience probably came from a Pop origin, and that’s why Pop is an important part of any medium; it grows the overall pool of potential consumers.

That’s never a bad thing. Ever.

Many big companies make stupid decisions in hindsight that at the time seemed logical to do.

I largely agree with Cousins, not the least because his arguments follow many of the same principles I developed in my thesis, Innovation-Driven Development. Even down to the reactions from many observes, who find it hard to believe that the inferior platforms and models can ever take over the space which seems to have been dominated by consoles forever (the fact that consoles have only been a dominant factor for the past 20-25 years is something that is easily overlooked or forgotten). It is the exact pitfall – or let’s call it challenge – that allows the corporate world to continuously change and evolve, as many big companies in hindsight make stupid decisions (or are simply too paralyzed to handle change) that at the time seemed logical to do.

While I completely agree with and back up Cousins in all of these areas, I am still doubtful as to why mobile and/or free-to-play should emerge as the future paradigm of gaming.

First of all, I believe it’s extremely important to sharply divide these two definitions:

1. “Mobile” defines a platform for games, which not only defines gaming in a portable state, but also gaming on multi-functional devices such as smartphones and tablets. It is different from traditional portable gaming consoles in the sense that they are not dedicated to just gaming, but serves several purposes.
2. “Free-to-Play” defines a business model for games, where any up-front purchase is removed in exchange of either a in-game premium subscription or unlockable content, functions and features that must be purchased. By this definition, it does not include the current dominant business model on Mobile; micro-purchase apps, as they contain an up-front cost, although a solely ad-driven game where the user can pay to disable ads can also be considered Free-to-Play.

I am still doubtful as to why mobile and/or free-to-play should emerge as the future paradigm of gaming.

Cousins’ historic examples and arguments primarily focus on the platform, Mobile, where comparisons are drawn to the typical characteristics of a disruptive technology or innovation. Mobile gaming shares most of these characteristics, as it creates a change of consumer needs away from demanding ultra-realistic graphics and advanced gameplay to a convenient, always-available and cheap experience, where quantity can be more important than quality at times. It has also entered the market “from below”, meaning that Mobile gaming started with a focus on low-demand use, focusing on simple games offered on better conditions, but quickly gaining mass momentum which results in faster technology advancements – and now it’s closing in on high-demand use (although it’s not quite there yet).

Free-to-Play, on the other hand, does not really receive the same attention. This paradigm is mostly backed up by recent examples of success stories, such as Valve’s change of Team Fortress 2 from a purchasable product to Free-to-Play. There are enough current examples of Free-to-Play games generating significant revenue streams to consider it the next paradigm, but in my perspective, that would be to keep a narrow focus on a yet to be defined future.

Cousins is also clever to so outspokenly define it, as one statement and action at a time helps to shape the future as he intends.

There are always many different versions of the future in play, all trying to be defined as the present by implicit and explicit forces. There can be little doubt that Cousins’ agenda and vision is a Mobile and Free-to-Play future since that is the vision of his company, ngmoco, and he is also clever to so outspokenly define it, as one statement and action at a time helps to shape the future as he intends.

But there are many forces at play. One must not forgot movements such as streamed gaming (Onlive, Gaikai), multi-functional TV-connected devices (Apple TV, the rumored next-gen Xbox lite), the next level of physical gaming (Kinect, Move), augmented reality, games-as-a-service (often part of free-to-play games), all-you-can-eat subscriptions (think Spotify for games) and so forth. Yes, few have currently solidified or proven themselves as well as both Mobile and Free-to-Play, but both of these paradigms were once insignificant newcomers as well.

So what’s my own take on it? These are my personal predictions of how gaming will look in 5-10 years:

1. Multi-functional devices, like smartphones, tablets and TV-boxes, will become advanced and user-friendly enough to remove the need for dedicated gaming machines. The next-gen Xbox and PlayStation consoles will be very geared towards multi-function purposes with a complete multimedia suite, app stores and deeply integrated cloud connectivity.
2. Several form factors will still exist – ie. there is a place for both a smartphone, a tablet, a TV box and a PC – but they will become more seamlessly connected (the cloud connectivity mentioned before) and in many cases, combined form factors will gain traction and win mass consumer preference, such as the idea of a tablet that can connected to the big-screen TV and a game controller easily on a wireless connection.
3. No one business model will be considered dominant. Up-front purchasable games, micro-purchase apps and free-to-play will exist side by side and be accompanied by all-you-can-eat subscription services and more “pay early, pay less” games such as Minecraft and Kickstarter-like productions. Certain games will fit certain business models better, but they will all become more of a service – continuously updated and taken care of by the developer – than they are in still many cases today.

What will this mean for the current top players of today’s game industry? I do believe many companies will suffer, from retailers to publishers to developers. We can already see many signs of who will make it through in better states than others, where Electronic Arts, for example, have been very pro-active in terms of many of the mentioned future platforms and business models mentioned above. Others have been slower to react, especially a lot of established Japanese publishers and especially a lot of recognized developers worldwide, and even though they may try to react now, it will in many cases be too little, too late. Essentially, it all comes down to whether or not they can completely embrace the new rules of the battlefield, and often establish market players cannot, often thinking that they should still play by the old rules on the new battlefield.

And what of the big three: Microsoft, Sony and Nintendo? I deeply fear for all of them. Especially Nintendo, but that may be because they have revealed the most of their next-gen console. Current Wii sales show how that tendency is spiraling downwards and I have little faith in the 3DS in the long run; it simply offers to little in comparison to a modern smartphone. And their WiiU concept clearly shows how reluctant they are to embrace many of the current tendencies, especially concepts like apps, micro-purchases and free-to-play.

It all depends on how they embrace and allow emerging and newly-established business models, such as Free-to-Play.

Microsoft and Sony both have a chance to make things right, but it all depends on their vision for next-gen consoles and their execution. As mentioned in my last blog post, implementing anti-piracy mechanisms, for example, would only hurt their situation, where they are desperately trying to defend and salvage a perishing paradigm. Microsoft has the best chance to do things right. They can build a TV box that is deeply connected to both Windows 8 and Windows Phone 8, offering the seamless transition between devices, and allow a multi-tude of functions on the TV box – and since they now know gaming, they can built the right setup to offer much stronger advantages in comparison to something like a next-gen Apple TV or even a Bluetooth-connected iPad. But it all depends on how they embrace and allow emerging and newly-established business models, such as Free-to-Play.

The only thing we can conclude at the moment is simply that the present is always changing, but so is the future. We can always know that established paradigms sooner or later will perish, and every case of evidence points towards a paradigm shift in the near-future (3-5 years). But the future can still establish itself in a multitude of ways, and the smart players on the market know that they must act – not react – now to define this future based on their vision and strategy. It’s logical, really: the battle of the future is much more easily won if you yourself define the rules of the battlefield. That’s exactly what Apple did with their paradigm for mobile devices in iOS. And we can all see how that went…

These statements definitely raised some eyebrows. Are mobile games really poised to overtake the platforms that almost seem like have been there forever? For many gamers, this seems impossible. How could a mobile phone or tablet ever compete with the advanced tech, controls and setup of a dedicated console? How could free-to-play ever offer the same quality and uncompromised experience as an traditional boxed game?

While Cousins may be biased due to his job (although there is no doubt the decision to move away from EA and to start up ngmoco Sweden was fuelled by his beliefs), the point is not without reason. His historic examples speak the truth and one that most people seem to forget time and time again, although this actually happens fairly often, with several paradigm changes happening within the lifespan of a human these days. While we cannot yet be sure that it is actually mobile gaming and free-to-play that will become the new paradigm, signs are showing of a dying breed, showing classical examples of feeble, desperate attempts to salvage themselves.

According to many innovation scholars, old paradigm holders often utilize one of two strategies once they realize that their undefeatable strategy and paradigm is suddenly quite vulnerable and is losing momentum:

1. Try with small and not fully committed efforts to launch experiments into the new paradigm. These companies try to accomodate to the new, but their efforts are too weak and lacks true vision and belief from the upper management.
2. Throw everything they got into protecting their old and crumbling paradigm. These companies are desperate and protective. They fear a future that is different and will defend the old paradigm until the very end.

It will especially be interesting to follow how the current three big platform holders of the current, and soon to be obsolete, paradigm – Nintendo, Sony and Microsoft – act and not the least react on the current development.

The release of the PlayStation Vita showed Sony primarily sticking to their guns, creating an über-powerful dedicated gaming device, although it sports modern paradigm features such as social connectivity and an app store, which would land them somewhere between number 1 and 2. Nintendo and their 3DS, on the other hand, much more closely resembled the second type of strategy, one that often leaves a company completely crippled in the new era.

And then there’s the rumors of the next-gen consoles from Sony and Microsoft. A recent rumor now pin them both to include an anti-used-game feature, which would be implemented to avoid the increasing revenue loss when consumers trade in copies of their games, which are then re-sold to a lower price without the publisher and developer benefitting. If this rumor turns out to be true, it could have catastrophic consequences and will be the most explicit example yet of the console paradigme coming to an end. The move would, quite simply, be an act of desperation and frustration.

Preventing consoles from playing used games – at least without consumers having to pay a price to then use the re-sold copy – might seem logical from a business standpoint. But the clever way to go about the problem would be adapting. Instead of fighting the trends – which is naturally impossible – companies must adept to them and find new ways to create revenue streams. The high up-front price of console games created the desire to sell and re-buy games, and in this change of consumer habits, the mobile apps and games found a new way to entice consumers; offering either free and ad-driven, or micro-purchase content. Even if it was possible, who would ever really want to trade in a $2.99 game?

Free-to-play exploited the same change in consumer habits, essentially offering a free entry and then charging for premium content and features. Once these new business models and platforms launched, it naturally strengthened the tendency; with an abundance and an increasing quality of either completely free, low-cost or free-to-play games, fewer people would feel like a $50 or $60 game was justified. Solution? Purchase fewer games and trade them in for a quick profit once they had ceased to entice the consumer.

If Microsoft and Sony end up implementing the anti-used-game mechanics for their next consoles, they will have nailed their own coffins. It will only lead to frustrated consumers, being attracted to the cheaper and less restricted environment of mobile and free-to-play. The cost, both in terms of dollars and effort, of using consoles will become too high. It is the same results enforcing DRM will create; pushing people away and towards less restricted spaces that embrace new ways of offering content and doing business.

You can’t fight the future once it has been set in motion. You can only try to foresee it, embrace it and exploit it in the best possible way. And then if you’re really good, you can try to shape it…

Their Ville series – including famous FarmVille, Facebook top-ranking CityVille and their most recent runaway hit CastleVille – have without a discussion changed the face of gaming and dominated the way we think of and define social games today. While they did not invent the mechanics, they refined them and diffused the innovations to the wide masses – in a larger way than most game developers care to consider – making it, in many ways, the new public face of gaming.

A main summary of their game mechanics would probably include:

• “Energy”-based actions, of which the player must wait or buy more energy after running dry in order to continue playing and progressing
• Active player recruiting as part of the game progression and gameplay
• No considerable gameplay challenge besides using resources in the optimal order and fighting your own impatience
• An ability to skip any action and quest through hard currency – primarily acquired through purchase

While many have expressed harsh opinions against these games, calling them unethical and plainly bad, I can understand how some people see entertainment in their rather banal approach, where progression happens within a tightly controlled flow. And even though it makes me rather annoyed that active recruiting of other people to the game can be a necessary gate for progression – unlike the necessity to purchase, which is more of an option and bonus – their games are still free, after all, and provide quite some value for no down payment.

The real question and debate is rather: are they games?

While the debate for what a game really is and how it can be defined has not come to conclusion, I personally view the Ville-model as a pure instance of Gamification, which in short is applying certain game principles to non-game contexts.

Do we jump to the conclusions that gamified services etc. are actually games? No, that is why the term gamification has been coined. So why do we confuse Zynga’s “social games” with games? In reality, they share very precise characteristics with an ideal implementation of gamification:

• Every action is tracked and added to a progression tree, constantly rewarding the user for life-time commitment.
• Few features and possibilities are available initially. Instead, they are unlocked over time through an accumulation of actions and engagement.
• It is rewarded to spread the word and invite more friends to the cause.
• It is possible to achieve all, or at least by far the most features and rewards over time with just standard engagement (which requires commitment and persistence though).
• It is always possible to “jump ahead” and skip any wait by paying.

If you take the Ville-based model and remove these mentioned characteristics, then I would say we end up with nothing more than a pure simulator.

Now, can that not be a game? Surely we have plenty of simulator games on the market, mostly in the racing genres and other real-world imitations. The key difference, though, is that these simulators often contain implicit or explicit goals that a player can complete – and even if not, like the case of Sim City, they at least contain states of failure and success, providing the player a challenge to overcome, if he or she so choose to take on the challenge.

The Ville-based model is instead based on the philosophy of only rewarding the player, taken to the highest extreme, where few things can ever go wrong – and if they do, it’s because you didn’t spend enough time in the game, didn’t recruit enough friends or didn’t pay. Which boils the player type in Ville-games down to three types:

1. The patient, where it is fun to wait
2. The recruiter, where it is fun to get friends to join the cause
3. The spender, where it is fun to buy

If you view either of these three as a fun and challenging context, then I guess Ville-games could be fun. But I doubt many would argue both 1 and 2 is much fun – for 2 it is especially true if the cause is not a passion of your own (such as volunteer work).

And there’s 3; spending money. I guess most people enjoy that. We enjoy it almost no matter what we buy. It feels great to buy. But we see one other area, where spending money is framed as the activity in itself, with a very bad yet attractive value proposition: gambling.

That is why I see most Zynga games, predominantly their Ville-model games, as little more than a gamification of gambling, with an even worse yet maybe even more attractive value proposition: while you can’t win any money, you can almost always get bigger, better and more beautiful in the game – not the least compared to your social circle.

Is that a bad thing? Or even unethical? Not really. But should we be careful in calling it games and let it shape the way the general public perceive gaming?

Yes.

The collective power of the indie game community was also recognized by Microsoft, initially through the release of their somewhat successful XNA Game Studio Express development suite. The easy-to-use tools for creating a relatively complex game quickly garnered traction, while having suffered loses to even more user-friendly development environments like Unity lately. But the ability to compile games for a console for the first time created a strong interest, and with the release of the Xbox Live Community Games service in late 2008, Microsoft hoped to establish an App Store similar for games on the Xbox 360.

More than 2 years have gone by, and it’s hard to say that the service, now called Xbox Live Indie Games (XBLIG), has created the success that both Microsoft and aspiring indie developers had hoped for. The service can still only be accessed from a limited range of countries, the marketplace is well hidden within the Xbox 360 dashboard and the games are often overshadowed by the bigger, fancier and more promoted Xbox Live Arcade titles. Recently, many developers have begun reconsidering XBLIG as their platform of choice, even despite the well-made toolset XNA offers.

This can really come as little surprise in the light of Microsoft’s efforts on the matter. In reality, Microsoft have shown little enthusiasm for the service on anything but a shallow level. While the intentions might have been good, the actual willingness to push forward an valuable indie marketplace has seemed rather lackluster. Much like Nintendo and their WiiWare, it has been released and abandoned with a mentality of “they will figure it out themselves”.

While this is not a far-fetched strategy for a market that is used to do everything itself, one must consider the implications of a sit-back-and-watch strategy on a rather narrow and closed platform. Microsoft have a big say in the visibility and features of the XBLIG titles, still lacking Achievements integration, search functions in the interface, international outreach, easy sharing and promotion opportunities and much more. Despite the best of intentions of developers, they find it difficult to create an attractive and even sufficient revenue stream, forcing them to new pastures.

While lead users are often capable of and willing to innovate on their own, it is a strict requirement that freedom of innovation is enabled. This requires open environments and full sharing, as well as a tight and rapid feedback and development process, where the company and the lead users can innovate collaboratively and rapidly. But XBLIG has remained a rather enclosed service within Microsoft, taking little input from its lead users and allowing little freedom to innovate outside the set perimeters that is the actual games.

If Microsoft truly want XBLIG to blossom, it must let it rise to a level where it can actually compete with the Xbox Live Arcade game. While this may create an internal fear of service cannibalism within Microsoft, it should only be because it displays that these two services should be unified to create one, shared digital distribution interface, where everyone has access. And it must allow that indie developers have access to all the same tools and features that do professional developers, such as Achievements, special promotions and so forth. And even better, they should open the development of their development tools and services to the lead users, who can help shape an even better marketplace, interface, distribution and promotion strategy for tomorrow.

If one wish to harness the truly great and relatively cheap power of the indie game community, one must learn that it requires true passion, true commitment and true collaboration. These are people who are pouring hours upon hours of their free time into products that could eventually turn one’s own product or service into the dominant factor of the market, and they must be treated with the same heart that they develop games with. Anything else is hypocritical and bound to fail.

Cloud Gaming was introduced to the world with OnLive in June 2010 and, despite a fair amount of skepticism, the entrant competitor has proven to be a force to be dealt with, receiving attention from a still greater sum of investors.  The idea of the Cloud is a major buzzword today, being wildly attractive and in everyone’s interest, but the fact that most cloud solutions mainly revolves around data storage and certain server-side calculations, OnLive has taken a major step forward in the true Cloud-isation of at least gaming.

Technologically, the feat is nothing short of incredible. The main concept is incredibly simple, but still seems sci-fi to most of us. The fact that the client computer just sends input – keystrokes, mouse movements, touch and so forth – to a powerhouse server park and receives pure audio/visual data to display may not seem like a big deal, but when it all happens at around thirty frames per second, processing complex graphics and artificial intelligence, and sends it all back and forth within seconds, its breathtaking.

I first had my go with OnLive last fall , when I suddenly found out that it wasn’t region-locked anymore. While I expected fairly heavy lag as a result of US-only server farms, I was pleasantly surprised. Extreme speed games like Unreal Tournament 3 and general mouse behavior felt a little too off to truly enjoy, but keyboard-controlled games played like a breeze, and I quickly became occupied with defending my cores in Defense Grid Gold. It ran perfectly smooth.

Most people today seem to ignore Cloud Gaming as nothing more than a niche, as they believe that the lag time, no matter how small it may be in reality, will still sufficiently annoying to allow for a switch between local processing to cloud processing, at least in regards to games. But in my eyes, the technological leap that has been made within the last year proves that, while services like OnLive might initially appeal to certain niche markets and demographics, it will over time come to be the preferred way. Simply because it already offers features that far outshines local processing – such as high and frequent hardware costs – and over time will reach satisfactory performance in every aspect for 99% of the gamers out there.

It follows perfectly in the footsteps of Clayton Christensen’s model for disruptive innovations, initially delivering worse performance in some regards, but will be appealing to certain niches that have suffered from performance oversupply. If we think of the amount of netbooks and low-spec computers  that populate both less tech savvy people in the western world and most of the developing countries, demanding games are simply not an option. OnLive services as a perfect service for those that want to move past light, browser-based games and into rich and compelling 3D universes.

While the future for Cloud Gaming may be fuzzy – will OnLive become the dominant player, who else will enter the competition, what are the optimal business models, et cetera – I cannot but see it as the future. For some players, for some genres, for some game experiences, client processing may always be the only solution, but for the mainstream, the majority of consumers that shape the development of any industry, Cloud Gaming will become the de facto standard as I see it. But it is a future that takes a strong amount of  confidence to see… and I for one am excited to see, which of the current dominant competitors in the industry are brave and open-minded enough to see it in due time.

Today when I boot a newly bought game for my Xbox 360 I’m prompted on the first day for an update. It might not weigh more than a couple of megabytes, but it’s there and something in my game is changed (although that information is rarely highlighted). Just recently, I put on FIFA 11 and despite being half a year old and only on the shelf for about a month, it had received an update. Now, according to the doomsday prophecies of 2005, this should mean that the initial release was garbage and full of errors. But today, I feel more enjoyment from patching than I’d ever thought.

In this day and age where the internet has washed across everything in existence, the idea of a “static” object has begun to vanish. Products are released in early phases and slowly formed by their use. A recent example in the world of games is Minecraft, which has benefitted hugely from its organic development approach. We see Google constantly releasing new beta products, where any infant problems and quirks are overshadowed by the fact that you get access to new and exciting technology. And every time our smartphone is hit with a new shadow, we rush to try it out.

I’ve always enjoyed updates. I’ve always been one of those people that didn’t mind eventual problems that would follow from being a first-mover. As soon as I saw an update for windows, a new driver for my hardware or a new patch for a game, I instantly downloaded and installed it. And today, more than ever, I feel we have moved towards a patch generation of players. We love updates. And we cannot get enough.

Are we less tolerant of the content that is initially released? Probably not. Going out and buying a game for $50 or $60 still employs a high quality bar for most players, but we’ve almost come to expect a regular rollout of updates, depending on the popularity of the game. One, single release simply isn’t enough anymore. Both in terms of the often-debated Downloadable Content and the always free patches – mostly containing fixes and minor additions and enhancements, rarely any new content – many players have turned away from looking at post-release update with anger, being excited instead.

I had no clue what the FIFA 11 update the other day was for. But it didn’t really matter. More than anything, it showed that the game was still alive “out there” and work was being put into it. And maybe that’s enough. The centuries-old Diablo 2 recently received a long awaited patch – maybe the oldest patch in history of single-player games – and more than anything this patch is a signal of commitment and caring. Even if the changes were minor, it could still make me return to a game just to feel the impact.

While Downloadable Content has now become part of any serious post-release strategy for games, I still feel that patches can be neglected as a burden and a necessary evil for the developer, not providing anything valuable. But really, the signal value itself – we have made changes because we care – can create many deeply loyal fans that always will come back for more, patches and new releases alike. And that’s valuable!

Yet, according the findings of my Master’s Thesis, Sony is heading down a catastrophic path. While the NGP may perform well in the market – although not become a breakaway hit like Wii or Kinect – it will be a costly failure for Sony in the long run, losing even more ground to new players and even their strongest competitor, Nintendo.

In the thesis-developed framework for strategic innovation, Innovation-Driven Development, we defined a innovation-assessment matrix, which defined four categories of innovations based on their level of radicality and disruptivity. The least attractive and profitable of these are “Pushing the Envelope”, which are radical innovations with little to no disruptivity. While they can garner much attention from their groundbreaking technology, they are resource-heavy and expensive innovations, merely pushing the envelope of the existing paradigm – which may already be on the verge of exhaustion. As history shows, paradigms are often destroyed by newer and more exciting paradigms, which may initially appear less attractive in many regards, but carry a promise of a better future. The current switch from fluorescent lights to LED is one such example.

The Nintendo Wii effectively introduced a new paradigm in the console space. They surprised everyone, especially Sony and Microsoft, but introducing new value propositions through a motion-based control scheme and a low entry price, while ignoring the race of state-of-the-art graphics and all-in-one media features. After the sales success was obvious, Microsoft and Sony fumbled to catch up with Kinect and Playstation Move, but while Microsofts counter-attack as effective by establishing a new paradigm, Sony became an obvious follower. A signal of downfall.

The same can be said in regards to the NGP. While it boasts many attractive and state-of-the-art features, it does not bring anything new to the table. Conflictingly, it displays a lack of focus, pulling together as many currently hot trends and features as possible, old and new. Front and back touchpads, analog sticks, more social features than you can imagine, a super high resolution screen, the best mobile processor available, and much more. But none of this carries a new and unique vision. None of this breaks any paradigms. It is a pure example of a stumbling reaction to competitors, trying to overdo everyone, but only reacting. Leaders don’t just react, they show new ways.

Not that there’s anything wrong with incremental and radical innovations and improvements and reacting to the competition. Leaders must still do this, but when the current paradigm is showing weaknesses – PSP have not faired particularly well outside of Japan and the mobile gaming space is on a trajectory to becoming the dominant player – the solution is not to continue pushing the envelope. Nintendo, at least, is trying to differentiate themselves with glasses-free 3D – an aspect that Sony despite their 3D push in the living room have neglected for NGP. Essentially, the NGP is a classic example of a dominant player slowly losing its grasp on a market, and instead of trying to be clever and create a competitive advantage through a disruptive innovation, they use heavy resource spending to try and stay ahead of competition.

In one of the books used in the thesis, Competing for the Future by Prahalad & Hamel, a very illustrative metaphor were used to describe this exact case. Despite being military superior in almost any way, the US still lost the long and exhausting war in Vietnam. The reason, according to Prahalad & Hamel, was simple: because the US had the resources, they fought back against the unexpectedly hard resistance by pouring more and more of the same at the enemy. More soldiers, more advanced weaponry, more machinery etc. Little did it help. The Vietnamese opposition, on the other hand, having few resources, used the abundance to their advantage; they changed the face of warfare by using the jungle and simple, but clever tricks to fool the superior american army. It wasn’t expensive or difficult. But it required that you looked at warfare differently and not necessarily believe that more is better.

While the Playstation Suite announced at the same conference may be a sign of clever thinking at Sony, the NGP is one of the strongest example of a failure in the making. It may contain anything any gamer would ever want today, but it does not carrier its vision of tomorrow. Instead of trying to be simple and clever and discover new directions, Sony are, just like the american army in Vietnam, merely throwing more of the same at the market. It didn’t work with the PSP. It won’t be any different for PSP2.

So now I’ve settled with this theme. It might not be perfect, but hopefully it will improve over time, and now, besides finishing my thesis of course, I will focus on producing all the content. Which means a detailed Curriculum Vitae and full descriptions of all the various games I’ve developed over time.

Deadline: end of February.