At E3 2010 there was certainly sufficient buzz regarding the growth of digital distribution of video games to warrant opening the strategy deployment playbook and move beyond theoretical opportunities to real economic value realization.
In my strategy deployment model, I introduce the five elements of strategy deployment: Push Point, Fulcrum Point, Lift Point, Marketplace, and Business Intelligence Feedback Loop. And, my current role, transforming a video game developer/publisher from a physical distribution operation to a digital distribution operation has become an ideal strategic change initiative to practice my strategy deployment model.
We all know that a strategic initiative on paper is worthless unless there is equal or greater emphasis placed on tactical execution of the strategy. Below is a summary of each of the five strategy deployment elements, accompanied by tactical execution considerations for each element, related specifically to moving from a physical distribution operation to a digital distribution operation.
Push Point – where executives communicate strategy and influence its effective deployment:
Executives must skillfully communicate to all constituents (shareholders, customers, employees, vendors and other partners), how the company plans to navigate the transition from physical to digital distribution, and what role each of these constituents is expected to play in the transition. They must balance the need to preserve their existing physical distribution methods, partners and channels; while cultivating new methods, partners and channels… throttling between being proactive and reactive as the transition evolves. Executives must also understand and support the activities addressed in the other four strategy deployment elements… while bringing seasoned vision, wisdom and inspiration to their youthful, energetic, creative team - which is the hallmark of the videogame industry.
Fulcrum Point - where people, process and technology meet to enable strategy deployment:
Opportunities to re-deploy people, process and technology during the transition from physical to digital distribution are abundant, and promise to return tremendous benefits in terms of productivity and profitability. Digital distribution holds the promise of a lights-out (fully automated) order-to-cash process. Business systems applications must be configured for b2c and b2b electronic commerce and transaction processing. User interfaces must be intuitive and robust. Content and distribution partners must collaborate on EDI (electronic data interchange) protocols, and develop system rules to handle all processing scenarios. Whether to use off-the-shelf common practices and tools, or to re-engineer and use game-changing best practices and tools to run your operation is something to be considered. Keeping to a steady/moderate program of continuous operational improvement is always good advice, particularly when marginally value added improvements become necessary because of the ever broadening landscape of regulatory compliance obstacles.
Lift Point - where products and services are designed, developed, marketed and delivered according to the strategy:
As supply chain, logistics and brick & mortar retail constraints disappear, and the dependency on component availability, manufacturing processes, shipping and shelf space also fades away… the paradigm of long tail economics takes hold. Blockbuster hits, with their extended development cycles and outsized budgets, hold the promise of high initial sales volumes, tremendous profitability and very long life cycles – resulting in perpetual economic value as a “greatest hit” and/or “classic”. Of course swinging for the fences also comes at great risk – as failure can be quite costly, both short term and long term. The decision to create blockbuster versus mediocre content, must be weighed carefully in digital media strategy. Fortunately, with digital distribution, one blockbuster can be used in bundling strategies to create lift, and raise the appeal and market performance of a mediocre product. Hence, using “bundling-on-the-fly” promotional strategies will help video game publishers maximize the return on their entire product portfolio. Also in play with digital media, like all media, is the love/hate co-dependency between content creators and content distributors. The increasingly common, public, spats between creators and distributors – whether it be production studios versus cable operators, FM radio versus satellite radio, or the battle over net neutrality – is sure to continue, and result in consolidation and vertical integration within the industry.
Marketplace – where opportunities and threats from innovations, customers, competitors, regulators and the economy influence strategy
It’s surprising how slowly some technologies come to market. And, once a technology becomes mainstream we all seem to say “why didn’t I think of that”. After all, the capability to burn CDs onto a PC hard drive was available some ten years before Apple’s iPod was introduced. And, long before myspace and facebook, AOL’s slogan “you’ve got mail” and “chat rooms”, were all the rage. Introducing and marketing technology innovations for economic success is more art than science. To lead or follow is a prominent question in today’s media industry boardroom. With content, intellectual property/capital is important, but doesn’t guarantee commercial success. Especially when protecting your property rights alone can be costly. With today’s volatile marketplace… fickle consumers, content pirates, litigious partners and competitors, special interest regulators - you name it… a company might even consider deploying a “market teaser” strategy, where you introduce a technological innovation, then let your competition imitate - only to fail by misunderstanding some nuance, then you jump in behind them with the commercial benefit of hindsight. Digital media, including video games, compete in such a dynamic marketplace with an exciting mix of risks, opportunities and threats, making precise and timely tactical execution of brilliant strategic initiatives, the winning combination.
Business Intelligence Feedback Loop – where performance measurement facilitates learning and continuous improvement, to enable strategy realization
Knowing what to do and when to do it comes from the business intelligence feedback loop. Capturing the right data, as soon as it becomes available, from many sources - internally, externally, locally, regionally and globally – then synthesizing this data into information that can be used to tell you how to improve everything from marketing to pricing to staffing to budgeting and so on and so forth. A carefully crafted data mart with its dynamic links to all data sources should be accessible through a robust dashboard with not only key performance indicators to provide insight, but also enough intelligence to provide predictive foresight. With digital distribution, there is no longer a sell-in and sell-through component where the supply chain collaborates to plan and optimize. Everything is sell-through, and collecting/understanding consumer consumption, electronically, has become an innovative specialty all its own. Digital distribution and consumption has accelerated the experimental/experiential input/output feedback loop, whereby the one with the most data/information and the best tools to use it comes out the winner.