How to Build a Business Model
What is a great game developer without a great business model? Most likely not a game developer that will survive for very long.
While most game developers are in the business because of their love of the medium, there is no denying that it takes money to keep the wheels turning at even the most humble of indie developers. Cup noodles costs money too.
Because a sound business model is one of the most important aspects for any startup game developer embarking on the long journey towards their first game, Interactive Denmark had chosen the business model as the theme for the first of the Growing Games workshops in the new 2015 season.
Seated in one of the meeting rooms at the PwC offices just north of Copenhagen was one of the biggest turnouts yet for the Growing Games Workshops. Here, a broad selection of Danish interactive startups had found their way to receive an introduction to how you build not only a great game or interactive product, but also a viable business.
The main event of the day was the presentation by PwC partner and specialist in Strategic Business Development, Nils Henrik Wegener, who introduced the attendees to the basic idea of how a business model works, and how it’s elements affect each other, based on the recently published book “Business Model Generation”.
In his presentation, Wegener pointed to how game developers often are creative visionaries, who pour all of their creativity into the game they are creating and focus only on their product or the experience that it gives the players. But to remain competitive, they also need business models that are both flexible and scalable.
After the presentation, Nordic Game Bits caught up with Nils Henrik Wegener, and he agreed to share some of his expert advice on how to build a good business model – especially if you are a creative business. Advice, that he sums up in seven specific points.
# 1 It’s the team that makes the difference
You need a team of different profiles to succeed. In addition to the creative forces, you also need people who are good at building relations with partners, who can help translate creative development to financial success. Being able to communicate product, potential, and needed resources, and making deals with external partners is vital for your progress. So make sure you have people on your team who can do that.
Often we also see creative persons not getting the commercial breakthrough until commercial players take over management. And we see creative people who have a hard time letting go or accepting others, with more commercial skills, onto the team, which limits the potential in a business model.
Creative businesses are often run by creative teams in the initial phase, and they can have problems turning that creative element into a commercial success. My advice is to seek out others in your network who have experience with negotiating with other parties in the business. An Advisory Board of experts from within and outside of the industry can be really useful here.
# 2 You have to be effective
One of the issues I often encounter in the creative business models is a lack of efficiency. It’s more fun to develop, than to maintain a business model. But if you’re not on top of money mattes, quality assurance, projects, and deadlines, it can easily kill an otherwise sound idea and development work.
So my advice would be to have a tight control of both development and commercialization. If no one on the team are good at project management, get someone in from the outside. Project management can be learned but use someone who has a passion for it. But it’s a balance. You don’t want to tie down the creativity behind the business model either.
# 3 Focus on relations early in the process
Strong relations to the end user can mean the difference between success and failure. The fans are the worlds best and cheapest salesforce, when they are spreading the message of your products in communities and on social media.
So my advice is to work specifically to build up relations and to include end-users as early in the process as possible, to also test the user experience. Ratings and reviews at launch are ruthless, and many years of work can be wasted if the users wishes have been ignored in the process.
# 4 Ground yourself with your customers
At the Growing Games Workshop I talked about value proposition, and this is about that. It’s very important to know exactly who are delivering what to whom, and what kind of user needs characterizes different game genres.
So it’s a good idea to become an expert in your user group and adjust your product so it fits. And you also want to pay attention to which technological trends will be supporting this best in both the short and medium term.
Also be sure to test your product on user groups, and discard the stuff that doesn’t work as early in the process as possible. You might want to use pretotypes (mock-ups) to visualize your idea and test the business case. It might take 10 tries to finally ‘ground’ yourself with your customer segment or stumble upon the right business model.
# 5 Keep strategically flexible
The key to succeed as a startup with limited funds is maximum flexibility. Hold off large, uncertain investments and spendings until you have a good basis for making that decision, and remain strategically flexible in the growth phase. You will encounter many unexpected challenges, setbacks, and changes that will have strategic significance.
My advice is to keep lean and make sure you have a low burn rate, and use your network and an open partner strategy. Especially the partner strategy is something we often find is the key to adjusting and scaling creative business models.
We have seen several successful business models made up of just one founder, who then teams up with strategic partners as an alternative to employing their own people. It may sound simple, but do what you are good at, and find the right external partners, who are good at what they do.
# 6 Think about innovation across industries
In the intersection between the exponential digital evolution, new business models and the demand for experiences in the group of end users, there are some great opportunities for game developers. Both in the games business itself, but also in other industries, there is a need for expert knowledge within the fields of interaction, entertainment, 3D and visualization that drives the search for new ways to create user experiences on digital platforms.
The trends in open innovation across industries, where it’s about pulling in knowledge and experts from outside, can create completely new opportunities and solutions for game developers. Here it’s all about thinking across business models and looking at what lies just ahead and behind the value chain you are operating in now.
My advice would be to use the design of the business model in your analysis of other companies or other businesses to discover new possibilities in a market as competitive as the games market.
# 7 Seek inspiration & knowledge
Innovation and the creation of new products and business models in a broader perspective can be a huge opportunity for game developers and others active in that field.
The inspiration for how you can innovate your business models can be sought out in networks such as Growing Games or in literature, as in the book Business Model Generation.
The next Growing Games is scheduled for May 8th and will be about Go-to-market, sales and monetization.