When life gives you urine, you make lemonade: You are one of my readers, a dystopic manticore, part of the rare and alluringly terrible sub-percent of games industry executives who wants wildly impeachable and sometimes actionable insights accompanied by shock-humor allusions that aren’t torrid, but fucking foul. You’re an indelibly splattered canvas of entrepreneurial management, big ideas, and screw it: To make this worth reading, you’ll need to see the name of Jack Welch dropped into the same sentence with the words “semi-translucent salty string.”
To be perfectly fair, you’re me, the most-spectacular failure in games industry history, the first mouse, neck-snapped in the trap. Welcome to my web log, wrongfully accused of being one of the best game design blogs out there. Here we don’t give a backflip in midair about the fact that 70% of internet readers drop out after page-two of an article. Today, dear diary, we’re in for a three thousand word treat.
Why are both me and me so underrepresented in the games industry? Well, for starters, there are only so many Irish to go around the breakfast table. (Four-point-five million Irish, roughly, and I prefer mine creamed.) Fondness for freckled face fricassee aside, there is something else, something other than heavy gray matter and an almost childlike impatience for shanking social norms that canyons the gap. Heavy red matter: Right there, that gurgling in our chest cavity, brush away the model log cabin made of cigarette butts and you’ll find our people radar, our pipelining empathic processor - you’ll find heart.
No, there is a difference between having heart and having a heart - everybody has a heart. Each of the thought leaders and pro forma tinkerers scattered throughout the intellectual history of business had a heart. Apparent from their works, quite a few of the Brooks Brothers-clad corporate cannibals that ruled and refined this world of spreadsheets believed that the ends justified the means; perhaps the most heart-full keynote speaker in business history, even Karl Marx misled economists to forever define “the means of production” as “everything other than people.”
Now, in the year 2012, there are over one million items listed in “business books” on Amazon.com. Over ten thousand business books are printed each year. A shameful waste of trees that could have been rolling papers, as the second-to-last truly great business book was published in 1997, not very long after Amazon.com was founded.
In 1997, Harvard Business School Professor Clayton Christensen put into the conference ether The Innovator’s Dilemma, a three-hundred-plus-pages discourse composed of entirely one sentence, about hard drives, repeated over and over (and over) again …
“The leader in hard drives has difficulty innovating because innovation doesn’t fit within the leader’s organizational value framework, and so the leader risks being unseated by bottom-up market disruption.”
That one sentence was so powerful that it would crib-kill the quality of business books for over a decade, until a man named Eric Ries came along with The Lean Startup, the first great business book published in this century - the definition of the “Lean Movement,” a cult leader’s charismatic take on Managing For Results, which was put to print in 1964 by Peter Drucker and his Big Blue Ox.
Fun fact: Eric Ries’ grandmother is Al Ries, who helped coin the phrase “market positioning,” in addition to (in 1996’s Focus) putting forth the thinking that what businesses need are less good ideas on which to execute, not more. Eric Ries took grandma’s advice and economized, filling all 336 pages of his book with only three words, which are probably three of the four most-important words that a businessperson can know.
“Build. Measure. Learn.”
What’s the fourth word that a businessperson needs to know? Here, find a tale of two hearts.
I was raised by wolves: Japanese business wolves. And the Japanese business wolves howled home the concept of “kaizen” (改善), “continuous improvement.” Always be improving; always be improving.
How do I know that there have only been two worthwhile business books in the last 15 years? I have read them. All. And, after all of that reading, I have a hard time of rationalizing the aggregate intellectual history of business as anything other than damn-near autistic.
Today, games industry is becoming more and more industrial, with new avenues for raising game development and launch funding appearing every day. No longer are the drives of Sand Hill Road - the heart of venture capital investment in Silicon Valley - barred to gaming hows and whos. And there are a lot of advantages to taking venture investment: The general partners in a venture fund want to see your company succeed, even if a game launch or two fails. But, those are double-edged dollar bills: There should be a sign outside of Sand Hill Road that reads, “Abandon equity, all ye who enter here.”
A venture fund takes a piece of the company, not of the game, and the general partners in that venture fund will want you to sell your company at a high-multiple return on capital invested, eventually.
I’ve always said that the field of Mergers and Acquisitions, the buying and selling of business assets, is like sticky and sweet lovemaking: Everyone thinks that they are competently skilled, but few truly are - especially when it comes to the selling of your own company. Whether buy-side or sell-side, Mergers and Acquisitions work is better left to the investment bankers, the porn stars of the world of finance.
Lately, I have been thinking that maybe I have to back away from that “porn star” simile a little bit: While investment bankers are, in fact, the best-equipped big-swinging suits to manage the buying and selling of business assets, it’s hard to think of them as “porn stars,” because sticky and sweet love making has a strict operating requirement of at-least one human being. Taking a quick look at the tools and models used to evaluate assets, those tools and models are, in fact, mostly devoid of human-factor.
You put your spreadsheet in; you take your spreadsheet out; you put your spreadsheet in and you shake it all about. You do the Excel Pokey and you turn yourself around; that’s what it’s all about!
What is a company or business unit worth? Well, we could do a discounted cash flow analysis of free cash flow against some mathematical smudge tool of a discount rate (which we make up) to determine what we feel the asset will appreciate to over a somewhat arbitrarily procured growth period (which we make up). Or we can really get our make believe on with a synergistic analysis that models the rewards of leveraging buyer and seller activities across each other (with enough smudge tool to make Gerhard Richter jealous - because, you know, Gerhard Richter is a somewhat famous artist that smudges stuff). But, really, unless you’re buying intellectual property, you’re buying people, either customers or employees, and what does “0.4 Weight Talent” really mean, anyway? (Seriously, can somebody please tell me? My email is to the right of this article.)
Theses recent years have been the frothiest in games memory with Mergers and Acquisitions activity: Games companies buying other games companies. And, it would be quite glib of me to assert that there is no account whatsoever for human hearts in the world of Mergers and Acquisitions, as many of the recent purchases have been “acqui-hires,” as the craze has called itself, or “talent acquisitions.”
When it comes to the “acqui-hire,” the purchase of a company to obtain the employees who work and drink bad coffee within, there actually is a fairly sophisticated model with which to value an organization: “Some dollars, plus five hundred thousand dollars per engineering heart, minus five hundred thousand dollars for each business development heart.”
And, flawed by lack of people-focus as valuation models are, front end business planning - the thought-work that goes into the founding and formation of a company long before the investment bankers ever get the mandate to sell - is so arrhythmic as to make the investment bankers all look heartened like horses by comparison. The Excel Pokey that goes on at the front end of the investment and exit process is so arrhythmic as to be comically hallucinatory.
Being the most-spectacular failure in games industry history, there is one most-asked question, the albatross, the spiked bat dipped in salt that I am beaten silly with whenever I introduce myself: “What the fuck? N-Gage?” “Side talking!” “The digital taco!” “No landscape screen!” “You have to take the battery out to put a game in!” “What the fuck?”
Okay, already, I’ll write about the failure of N-Gage - but only, dear diary, because you put a curse word in your request. Before we go spelunking into failure, let me be perfectly transparent about the fact that I am not a bitter ex-Nokia employee: In fact, I feel infinite fondness for Nokia and all of the friends made there - and all of the opportunities taken from global company life have become like diamonds, impressively valuable and they cut through shit.
All of that said, who could deny that the N-Gage was a spectacular failure? A “failure,” because, today, there are more people who own my self-produced album of J-Pop lounge-covers, Sakura Scotty, than own N-Gages. A “spectacular” failure, because there wasn’t a man, woman, nor publisher-side producer in the games industry that didn’t see it fail.
The logic of Nokia’s games strategy was so straightforward as to be un-ignorable, “We are Nokia, the largest handset manufacturer in the world, absolute masters of sourcing and logistics, capable of buying component parts for cheaper and putting the products for sale in more places than any other organization on the planet. The games industry is worth billions, and when we throw our winter cap into the ring, we will take a piece of that market.” The logic was also terminal due to a very straightforward lack of heart.
To their credit, the management at Nokia realized that they would need to build or acquire games competencies to compete in the games market, and they chose to do both. My first young brush with Mergers and Acquisitions came at Sega after the close of the Dreamcast era. I was part of the management team that packaged and sold our online games platform business to Nokia.
Yes, Mergers and Acquisitions is like sticky and sweet lovemaking, and, just like sticky and sweet lovemaking, the aftermath can be AIDS: Sometimes, the cultural antibodies of the acquired cannot hold out and, eventually, the culture of the acquirer subsumes and destroys any value that was there in the first place. Nokia did not inoculate the Sega acquisition from the Nokia culture.
The first thing you have to understand about failure is that failure is most-often a non-linear distribution (i.e. failure is rarely one bad atom but usually a gestalt of many bad atoms working in unison to cancerous effect). The second thing that you have to understand about failure is that, when it comes to failed business strategies, there is almost always one clump in the distribution that is acrid and dark, like one of Satan’s bowel movements. That nauseous clump is born of the immutable fact that no business strategy can be applied to an organization whose culture is not conducive, and, just like in hell, lighting a match does nothing to cover the smell.
Apple is a design culture with engineers and MBAs. Google is an engineering culture with designers and MBAs. Microsoft is a MBA culture with engineers and designers. The old joke goes that, “Your product design telegraphs your org chart,” and, remember, dear diary, that your org chart is corporate culture’s ugly little birthday cake.
Nokia was a sourcing and logistics culture, and every last element of their personnel, process, resource, and risk management reflected that fact. Of course, a sourcing and logistics culture could never succeed at interactive entertainment. Of course, signing up partnerships with game developers is not the same thing as purchasing batches of microprocessors! “Why should we pay this established game development studio a lot more money to make this game for us when we can get a new studio somewhere else in the world to make the game for us? We must reduce costs!” (Oh, how I wish I could write with a stiff, Finnish accent - bigotry makes everything funnier!)
I’ll never forget when Nokia hired world-famous design firm IDEO to develop the concept behind the second Nokia N-Gage. (Yes! Believe it or not, there really was a second Nokia N-Gage!) IDEO’s tab for the project came to six hundred thousand euros, and there was no cost-center in the Nokia profit and loss sheets to account for that bill, which resulted in a bunch of Nokia executives sitting around a conference table, playing a game of, “Not from my budget!” Does that sound like a design culture to you?
You cannot escape your corporate culture, and, just like Jack Welch’s semi-translucent salty string left out on the table for a few hours, after starting up, your corporate culture becomes fairly inflexible, fairly fast. Following your first year of operation, you’ll have most-likely pivoted your strategy a few times, but pivoting your culture is a near-warlike task - war being nowhere close to the fun that Call of Duty makes it out to be.
By this point, my cynical reader is thinking, “Way to go, genius: We all know that if the culture doesn’t match the strategy, the strategy cannot work. That’s why large companies create culture-insulated silos when entering new markets. Why don’t you tell us something we don’t know, like where to find a good article to read?”
Excellent question, cynical me. Here is the counter-question: If culture is so effing paramount, dictating everything your company does and everything your company is capable of doing, why don’t you see “culture” in any of the new startup business plans that get passed around San Francisco like your girlfriend gets passed around to truckers? It’s because entrepreneurs, by and large, don’t have a strategy for forging corporate culture. And, if you don’t have a strategy, you can’t fail, because you weren’t trying to accomplish anything in the first place.
It’s true, I suppose, that all business plans are stained brown and smelly from the start: Nobody can see to the future, and anybody who tells you that he can should probably see you laughing at him incredulously soon after. Another old venture capital half-joke that I sometimes charge people for listening to is, “Investors skip straight to the team bios.”
What is of paramount importance to investors is that you have the ability to execute on that which you say you can. This is the fallacy of business plans: The investors know that your plans are pretzel inner tubes floating on streams of beer; you know that too; it’s just nice to know that you have been thinking about these things.
You put your spreadsheet in; you take your spreadsheet out; you put your spreadsheet in and you shake it all about.
Building a business plan and projection is a fundraising exercise which is both unavoidable and masturbatory. And, thanks to “build, measure, learn,” that unavoidable, masturbatory fundraising exercise just got a lot leaner.
These days in Silicon Valley, you can’t shake a PowerPoint slide deck without hearing the rattle of a “Lean Canvas,” a one page diagram detail of your business operation, meant to be malleable over time, mutated by the outcomes of your “building, measuring, learning.” This Lean Canvas was never intended by its ultimate progenitor, one Alexander Osterwalder, to be all-inclusive; alas, never underestimate the basic laziness of people before handing them tools. (The causation behind having tools in the first place is that we are, ultimately, one lazy-brilliant species!)
Dwight D. Eisenhower once mused that, “Plans are nothing; planning is everything.” Plans are nothing because the human brain is tuned for optimism - and ignorance, as we don’t know what we don’t know. It’s this first point for which the Lean Canvas exists at all: Why waste time predicting a future that none can see? Why not, instead, “build, measure, learn?”
Planning is everything, because probability is dictated by intention: If you do not intend for a course of action, the probability that you will find yourself along that course is diminished. It’s this second point which leads me to the belief that, for all of its virtues (and there are many), the Lean Canvas is one of the most unintentionally cruel and pernicious jokes ever played on the money of Sand Hill Road.
After “build, measure, learn,” the fourth word that every businessperson needs to know is “culture.” No business strategy can be applied to an organization whose culture is not conducive. After starting up, your corporate culture becomes fairly inflexible, fairly fast. And, nowhere on the Lean Canvas will you find a cute little box labeled, “Culture.”
A tale of two hearts.
We have always known in the games industry that the heart of the customer is of white dwarf-like gravity. “Build, measure, learn,” has shown us an impactful and innovative approach to avoid more wasteful swings of the scalpel in pursuit of the customer’s heart. If “design is law” in the games industry, then we must now accept “customer insight” as the supreme court. The surest way for a game to become big business is for design-driven development to get in process behind insight-driven design.
The revolution facing our industry at the dawn of The Price-Elastic Age Of Gaming is that every product team must now have a grinning, MBA douchebag; the biggest danger facing our industry at the dawn of The Price-Elastic Age Of Gaming is that every product team must now have a grinning, MBA douchebag.
Do you think that Nokia employees didn’t know that having to take the N-Gage battery out to put a game in was a painful customer experience? Do you think that Nokia employees wanted to be seen side-talking in public? (No. We always wore our handsfree headsets.) Do you think that Nokia employees did not sing to each other, with operatic inflection, “What the fuck N-Gage?”
There is a second heart that must not go unrequited, and that is the heart inside of your organization; it is the heart of your employee. Listen to your heart. Think before you dismiss that heart as a five hundred thousand dollar poker chip to be pushed around. Just because the toto intellectual history of business is damn-near autistic doesn’t mean that you have to be.
Do you let the heart inside of your company beat? Or do you beat the heart inside of your company? What is your culture? Who is your customer? Do you insist upon a culture of inspiring the heart of your employee to beat as one with the heart of your customer? When those two hearts beat together, you get true love, and, something even better; you fall madly, deeply into profit.
I don’t allow comments on this blog: There’s just no way to control the quality. Besides, if you have something to say, you can easily obtain your own blog. In the absence of comments, I’ve gone out and solicited opinions from both the former head of N-Gage, and, you know, a giant robot dinosaur.
@FAKEGRIMLOCK is a giant robot dinosaur whose deeply insightful (and always amusing) thought-leadership on entrepreneurship puts wordier pundits - like me - to shame.
ME, GRIMLOCK, WRITE COMMENT!
THIS PAGE HAVE LOTS OF WORDS. WORDS ABOUT 2 THINGS.
THING ONE, BUSINESS BOOKS STUPID. BECAUSE WRITTEN BY BUSINESSPEOPLE. NO ONE KNOW LESS ABOUT BUSINESS THAN PEOPLE WORK THERE.
THING TWO HUMANS. EVERYONE FORGET BUSINESS MADE OF HUMANS. COMPANY? MADE OF HUMANS. TARGET DEMOGRAPHIC? HUMANS. SERVICE OR PRODUCT? STILL HUMANS.
HUMANS NOT FIT IN SPREADSHEET. HUMANS NOT PART OF DATABASE. ONLY WAY UNDERSTAND OTHER HUMAN IS BE ONE TOO.
EVERY BUSINESS FAIL WHEN FORGET IT HUMANS.
Sometimes it is difficult writing about the obvious. Heart? Yeah yeah - we know we know heart is important. Now cue the HR motivational video ...
However, if we all really do understand that heart is important, why do the majority of us spend our time doing things that our heart is not even remotely in sync with? Is it the 24/7 worship of the almighty god Mammon? Why are we so busy being little Mierenneukers (look it up) in our business lives in order to mitigate risk and please our superiors? A fascinating question, and the realm that Mr. Foe delves into. Not an easy task, but one done with passion and aplomb. A good article forces you to take its measure and your own, and this one does. Simply put, whether you call it passion, love, or heart, a measure of both your happiness and your success will be found in the tale of your two hearts that Mr. Foe lays out in the end of his piece. And might I say, in life as well as business.