maandag 22 juli 2013

Why Microsoft might have already lost the next console generation.

And why the is Julie Larson-Green a gamer? is relevant for determining Microsoft’s future success.

On July 12th 2013, Microsoft announced a reshuffling of their management. The gamepress, gamedevelopers and some hardcore gamers were all anxious to learn who is going to replace Don Mattrick, who left his position as head of entertainment to work for Zynga, the troubled social gamemaker. Surprisingly, their new head, the person the XboxOne team will have to report to is Julie Larson-Green. Many people on twitter and on games forums responded confused. But... she’s no gamer? How can they pick someone who is not even a gamer? Opinions differed. Maybe it doesn’t matter that she’s not a gamer? I think it does. And I’ll explain why.

There is no proof that anything I say in this article is a fact. But I do hope my thoughts and explanations will challenge you as a reader to think about the subjects of matter. I will analyze the people at the top of the big companies that rule our industry. The goal is to understand whether or not these companies will thrive in the coming years. We can make a distinction between two types of CEO’s: leaders and managers. Leaders have a different angle to make strategic choices than managers do. What kind of executive does Microsoft need to survive in the game-industry? 

First of all. What is the current state of the game-industry? Economists are not very optimistic. Worldwide, studios have to shut down, we’ve seen some big publishers fall and this is all because hard- and software sales have declined the over the last few years. Our industry has always been dynamic and it has witnessed a crash leading to a situation that was worse then the one we find it in right now. Nowadays more then a few major technological changes make it hard to see what strategies will lead a company to success. The shift from physical to digital media shows that physical media sales will continue to decline, although gamer’s response to the XboxOne might indicate we won’t see physical media disappear either. Another big change is the the fact that almost anyone carries a game-playing device with them at all times. Smartphone owners have an argument not to by specific game-handheld devices because of the angry birds-playing device in their pockets. The last two years, we have seen so many unsuccessful introductions of new devices: the Playstation Vita, the Wii U. It is even hard for many gamers to imagine why we would need the device we craved for last summer: the OUYA. And who still anticipates the arrival of the XboxOne? All these products share at least one resemblance. The products are the results of countless decisions and ideas of top executives of their respected companies. The CEO and his subordinates form a strategy that guide the ship. In doing so, we can tell whether these captains are leaders or managers.

A small effort of research brought me to the conclusion that Julie Larson-Green has the profile of a manager. Not a rare type of captain on the Microsoft ship. Managers are often graduates of a study related to economics or business. Larson-Green is a graduate of ‘business administration’ at the Western Washington University and according to some sources (including her wikipedia page) she is a self-taught programmer. Even though she might be able to write functional code, her career seems to consist of general management functions on various levels. A manager is someone who will look at products and services as a means to make profits and please shareholders. This manifests itself in talk about ‘the consumer’ rather then ‘the user/player’. A manager might be able to explain the value of their product in a way shareholders understand, but they probably won’t have any idea what the value of is for the player. A gamer understands the emotional value of a game. Understanding the value of a game means caring about the product in a way that related to the intentions of their designers. It means that you step inside the magic circle and become a player, wanting to rescue the princess or save the world. A manager will only think about how much money he or she can make in the average amount of time it takes for the player to saving the world, after which hopefully a new world is ready for sale. A manager thinks in rational economic terms. Role models for these kind of managers are: Steve Ballmer (CEO, Microsoft), Mark Pincus (former CEO of Zynga) and Kazuo Hirai (CEO Sony corp.).

My idea about a leader is that one started his career as a craftsman. A leader is driven by passion for the industry in which his company resides and that passion is related to an affiliation for the product that his company creates. Many leaders in the games-industry started their career as a game-developer and it is very likely they started developing games because of their love for games as a player. Very few people in this industry choose to devote their lives to developing products they do not love and become successful at it. Leaders have a vision. They understand what the emotional value of their product is to a player and they will try and innovate on that value, and not necessarily on a product. That is why companies with this kind of leader will present (often successful) innovative products. Companies with leaders will often define their audience as ‘players’ or ‘users’ instead of consumers or customers. Well known leaders are Steve Jobs (Apple Inc.), Satoru Iawata (Nintendo), Larry Page (CEO Google), Gabe Newell (Valve).

When you work in the game-industry for more then 5 years, it’s very likely you’ll recognize the difference between leaders and managers. I have worked in the industry for 6 years as a game,- and interaction designer and I recognized and defined the two different styles of leadership based on my own experience. After writing the first draft of this article and showing it to my father (who is an expert on leadership and change in organizations) for suggestions and inspiration, he  pointed out that my theory shares many similarities with a the work of Warren Bennis. In 1989 Bennis defines the difference between managers and leaders in his work: ‘Becoming a leader’.

– The manager administers; the leader innovates.
– The manager is a copy; the leader is an original.
– The manager maintains; the leader develops.
– The manager focuses on systems and structure; the leader focuses on people.
– The manager relies on control; the leader inspires trust.
– The manager has a short-range view; the leader has a long-range perspective.
– The manager asks how and when; the leader asks what and why.
– The manager has his or her eye always on the bottom line; the leader’s eye is on the horizon.
– The manager imitates; the leader originates.
– The manager accepts the status quo; the leader challenges it.
– The manager is the classic good soldier; the leader is his or her own person.
– The manager does things right; the leader does the right thing.

So why is there a bigger chance for strategic failure for companies in the game industry with managers at the top? The strategic decisions represent the companies values, mission statements or philosophy and need approval of their CEO. Companies with leaders will asses these decisions and the resulting products and wonder: why will our product matter to a player? Why is he or she going to love what we create? And most important: How is our product going to be unique? This last question is not something that can only be answered by a consumer or consumer demand research: If Henry Ford would’ve asked people before the invention of the car what better way of transportation they would have liked they would have told him to create a better horse. Apple is of course a great example of a company that innovates. Whenever Apple introduces a new product, there is a big chance it will be able to do a lot of things that other products can not. But there is an equal chance that the product will not be able to do a lot of things that people expect from products they find most similar. For example: the iPad has no SD-card slots or USB ports. It was a deliberate choice. Apple realized that the core value of the product was the ease of use, an experience of, briefly checking your mail or watching a movie or browsing the web: all while sitting comfortably on the couch instead of behind a desk. Other peripherals might be a distraction to that core-experience and so their value is insignificant to the value of portability. So Apple said no to SD-card slots and to USB ports... (although they later offered peripherals to those who can not live without them, but those have no impact on the core-experience of those that are using an iPad after they’ve bought them). Apple is very clear about innovation: it is about saying no. Nintendo, likewise often knows how and when to say no. No Dvd player in the Wii. No to extra horse power for great graphics. Those features were not essential to the core experience that the Wii had to deliver: Motion-controlled fun. The Wii-motes and Wii sports were the only necessities to deliver that core-value to players. How convenient that they all came bundled in one box. These kind of decisions are based on a sound understanding of the emotional value of a product to the user or player, made by leaders. 

A CEO with the profile of a general manager, like Julie Larson-Green, will make different strategic decisions in similar circumstances. Managers focus on short-term (financial) success or will asses consumer demand and they will try and find a way to capitalize on that demand. When a manager is trying to cater to a wide audience, it can be hard for them to define the specifications for the product they’re developing. A wide range of consumers want a lot. One of the best examples of a group of managers that struggled to make the right decisions for the design of their product is the Sony management at the time of the development of the Playstation 3. It had the most powerful hardware specs on paper, but it’s architecture made it very hard for developers to work with. And there must have been very few ‘no’s’ during the design process because when the Playstation 3 was announced it had an amazing list of features. The new Playstation was something was just like the previous success, the Playstation 2, but with everything consumers wanted at the time from a futuristic gameconsole. The first specs of the Ps3 listed various possibilities for physical media playback: PsOne games, Ps2 games, Audio CD, DVD, Dual layer Dvd, Playstation 3 DVD and Blu-ray and lots of other formats. It also had 6 USB ports, a Memory card Pro Standard and Duo slot, an SD and SD-mini card slot, 3 ethernet ports, two HDMI ports, Analog AV output and digital AV output. Everything the consumers said they wanted. When the system launched, Sony had dropped some features, but the list was still impressive. All these features came with a price. And not all consumers were willing to pay this price. Because what most people actually wanted was just to play games or watch a movie. But not when there's a 500 to 600 dollar price tag on it. Certainly not when they could get a similar experience on other platforms for less money. Lucky for Sony, the industry was still relatively stable in 2007. Sony had time to learn what it was that people loved about the Playstation 3. They reduced the feature set to include only the necessarily elements and introduced various revised models since, increasing the success of the system and the value it had for players and developers.

Companies with managers at the top were able to learn from their mistakes like that. Managers are able to control a business in a stable still expanding market. In a stable economy there are enough patterns to follow or repeat to keep a company in good financial condition. However, it has become apparent that our industry is far from stable at the moment. Patterns are broken. The industry is changing constantly. Old successes are now crumbling failures. The only companies that will continue to achieve success are the ones with leaders. The ones that innovate. Sony has now found a great leader in Mark Cenry. His first innovation is an x86 based console that allows developers to create the kind of games they would love as a player. No wonder the Playstation 4 is the most anticipated next-gen console, already loved by AAA developers, Indies and gamers. Indies, who are leaders on their own, are able to take chances make daring decisions can come up with new innovations that thousands of players will love (Minecraft, Super Meat Boy, Ridiculous fishing). 

With the industry in it’s current state, companies with managers at the top will find it hard to succeed. Microsoft is a striking representative of a confused, struggling giant. They struggle to keep up in industries they dominated when the economy was stable. Whether it is the smartphone-, tablet- or even pc market. Microsoft does not seem to understand the core-value of these products to their users and developers. It seems hard to believe that the type of manager in command of all things Xbox, Julie Larson-Green, will  be able to make decisions that will result in products that we developers and gamers love. That is a big loss for gamers who loved the first Xbox and all the innovations the team introduced at the time (great online service, a Harddisk and long controller cables to mention a few). It is also sad because Microsoft, with all their money and power could have brought great innovations to our industry in the years to come, if only they had a great leader to guide them.