Overview
Sean Timarco Baggaley
<stimarco@bangbangclick.com>
It is common to hear of the great successes in our industry: the celebrities who have made millions from games and produced strings of hits. Yet, success is often not a good teacher. Many early game developers were successful as much through blind luck and serendipity as through judgment and management skill. In the 8-bit days, when development teams could be as small as one person, "management" was a dirty word, and formal business practices, aside from hiring an accountant, were rare.
Today, the industry has changed beyond recognition. Even the smallest of mainstream games can cost millions of dollars, and a developer wishing to go it alone is embarking on a dangerous path.
Success is well advertised, but failure hires no PR companies. This is a shame as many of the mistakes made in our industry—and others—get forgotten in a rosetinted haze of hype. Yet, without being aware of the mistakes, it is difficult to learn from them.
The statistics—only one in five new businesses, regardless of industry or market, succeeds—speak for themselves. The games industry today is already a risk; going it alone adds even more.
And yet many people still do it for the same reason why people play national lotteries: the rewards might be rare, but when you win, you can really win.
Success speaks for itself, so this article highlights the mistakes, the traps, and pitfalls that can beset the unwary.
Doing It Yourself
Managing any business is very hard work and is not for everyone, and there's no shame in deciding against setting up on your own if you feel that it is not for you.
If you've decided to forge ahead, you must first look at the basic rules of business management that apply to all businesses. Surprisingly, many managers have never run a business before. There has to be a first time for everyone, but this is not an excuse to just dive in at the deep end to see if you know how to swim.
Do Your Homework
If you want to run a business, or even if you've been asked to do so, it is your responsibility to learn how to do it. This isn't as onerous as you might think: contrary to popular belief, there's no real mystery to being a good manager. (Being a great manager takes talent, certainly, but "manager" is a very broad job description. Great managers tend to specialize.) As with most jobs, the craft can be learned. Most adult education institutes offer courses in this area. If you have little or no formal training in the subject, a course in management and business studies is well worth the investment.
You should also take a class in basic book-keeping and accounting. Although you will want to hire a dedicated accountant, it does help if you can understand what he's doing for you. (This ties in with the Golden Rule of Management, which we'll come to shortly.)
After you have done your research and studied the craft, you will have a far better grasp of what you're getting yourself into. The theory behind good management practices is easy to learn, but it can take a lifetime to master fully.
Make no mistake, running your own codeshop is a massive responsibility. Your own livelihood depends on your abilities, and so do any employees you hire.
Knowledge Is Power
Discounting the obvious issue of luck, about which little can be done, it is simple ignorance that causes most new—and even some venerable—businesses to fail.
Ignorance does not mean "stupidity," although it is often mistaken for it. Ignorance means "lack of knowledge."
It is clearly impossible to know everything about everything, but it is your duty as a manager to know what you need to know. Of course, finding out what you need to know is your first task, and many a startup has collapsed because of a failure to perform even basic research into your industry's market status.
The Golden Rule of Management
Management is primarily about herding people. In reality, most people are generally nice, but they will often have their own agendas and desires that might not always match up with yours. It's your duty to understand how this behavior will affect your business.
The key to this is also the key to mastering management in any industry:
Learn enough about all aspects of your chosen field of management to be able to recognize when something's not right. This is the First Golden Rule of Management, and it means you never stop learning.
Now, it might seem like you need to be an expert in everything related to computer games, but this is not necessarily the case. A good manager knows when and how to delegate: only rarely will the CEO of a company also wear the lead programmer and game designer hats. Instead, your job will be to hire people who can take care of the details for you, leaving you free to work on the big picture.
Case Study 2.1.1: A Brief History of MS-DOS
When IBM came to Digital Research's door, looking for someone to write an operating system for their new
"IBM Personal Computer," they were turned away. It was to Microsoft to whom IBM turned; a software company that, until then, had no experience with building operating systems whatsoever.
From that moment on, Digital Research's days as a colossus of the IT industry were numbered, whereas Microsoft, then just a tiny company in Seattle making versions of BASIC for home computers, has become the behemoth of the personal computer world.
But the moral of the story is not "Digital Research's managers were stupid." They might have been ignorant, certainly—but they weren't "stupid."
No. The strangest act was to follow when IBM effectively signed away their crown jewels to Microsoft, agreeing to MS's request—and it was only a request at the time—that MS be allowed to license their own version of MS- DOS to other companies. IBM's use of off-the-shelf products to build their "Personal Computer" made the likelihood of clones appearing on the market very high. If IBM's lawyers had understood more about the IT industry, they would have tried the patent route, but they didn't. Along came the clones ... and the rest is history.
Bill Gates wasn't being nasty or even immoral: Microsoft was a very small fish at the time and most likely didn't expect IBM to be quite so shortsighted. However, when someone hands you an entire market on a silver platter ...
Microsoft's success didn't just make Gates rich: many of the developers at Microsoft at the time became millionaires as a result of Bill Gates' astute management decisions.
If you're setting up a large development studio with multiple projects, you will probably be dealing not with leads, but with producers who are in charge of those leads. In a small-scale venture, you might have to wear the producer hat as well as your manager hat. In each case, you will certainly need to have a firm understanding of exactly what is involved in game design and development.
In the games industry, this rule is applied by understanding what those programmers, artists, musicians, testers, and game designers actually do for a living. You don't have to be an expert in these fields, but you do need to know enough to manage the Second Golden Rule:
Communication! Communication! Communication!
Interfaces
As soon as two or more people have to work together, the problem of communication arises. A major aspect of effective management is managing the lines of communication within your business.
In very small development teams, it's usually possible to just turn to your colleague and ask him a question directly. As teams get larger, this becomes less workable: too many people talking to each other make for a very noisy and distracting environment. A lead designer can't design if he's being constantly assailed by department heads to discuss this or that trifling detail.
Viewing a business structure in terms of interfaces is a useful analogy.
The interfaces in your business are the lines of communication between employees, as well as those to the outside world and other businesses. Managing and maintaining your business' interfaces are your
responsibility. Get these wrong and faulty lines of communication will introduce "noise" into the system. Noise is interference of some form—just like in a TV or radio signal. This can be concrete interference or abstract interference.
Concrete Interference
Concrete interference is usually visible and tangible. It represents the more obvious communications problems, such as people having to shout across an office because there is no internal messaging system.
Another example is environmental obstacles: an office that's too hot (or cold) to work in comfortably will affect performance and morale.
Abstract Interference
This type of interference is usually not clearly visible. It manifests itself in the form of effects with no obvious cause. For example, morale might be gradually dropping for no visible reason. Chances are that there's an unsubstantiated rumor about the company going around the office. This type of interference can have an insidious effect on productivity, but can usually be countered by improving the flow of information between management and the people at the front lines. (Of course, if the company's stated plans make no sense to your employees, this can also have a detrimental effect. This is why good communication skills are required of all managers.)
Interference of any kind will cause disruption. Your job is to eliminate all interference—all noise—from your business processes. The more transparent the communication, the easier it is for everyone to see what's going on. People are naturally wary of information-hiding or obfuscation. If you're deliberately interfering with your employees' jobs, they won't thank you for it. Morale will fall. Good people will leave. More nạve people will stay a little longer, but ultimately, no one will stay to the bitter end.
Ultimately, all business management can be boiled down to interface design—or more specifically, communication. You have to know how to communicate with your own colleagues and employees. Your business needs to communicate with its customers—both game players and publishers. Your business needs to communicate with marketing people, magazine reviewers, Web site-building fans, new job applicants, and so on. If you're not good at talking to people, run, don't walk, away from any and all management roles: you won't enjoy them. Even famous musicians hire PR people and agents when they can't face talking to people
themselves.
Reputations: Part 1
Word-of-mouth marketing—also known as "viral" or "memetic" marketing in some circles—is the most powerful form of publicity available to you. The technique has the huge advantage of inherent trust: people lay a lot of store by their friends' recommendations, so if you can get those friends to recommend your game, you're onto a winner. You might not necessarily see first-week sales records smashed, but you can certainly ensure that your game maintains long-term interest. This makes word-of-mouth publicity particularly suitable for games with long shelf lives. This covers any game that doesn't rely primarily on cutting-edge technology to make it attractive to players: shareware card games and puzzle games are a classic case in point.
Of course, this form of marketing requires that you have a good game to sell. People simply won't recommend a lemon to their friends. (If your game is truly dire, they might not even recommend it to their own worst enemies.) Another problem this form of marketing poses is that it requires building a critical mass of support before you can see its effects. It takes a while after the initial release of your game for the recommendations to build up any noticeable momentum. Exceptions to this occur when someone with many useful contacts—and the means and desire to communicate with them—gets wind of your game. Many games developers will have been told about two of the most original games designed in recent years, Balasz Rozsa's Elast-O-Mania and Chronic Logic's Pontifex, through their own contacts. Neither was advertised in the traditional way, but relied on word of mouth to build up that critical mass of support. It is often argued that this type of sales technique might be the future of many independent developers.
The power of the Internet has made this type of marketing by far the most effective for smaller developers.
Hotmail, for example, grew from zero to several million accounts solely by attaching its "free email" offer to all e- mails sent from its users. For larger developers, who are more concerned with making a big splash, the
problem lies not with games players, but with the fact that you can't sell hot air: the games mentioned in the last paragraph were essentially self-funded, which is fine if the game is small in scale, but far harder to do if you're working on a multi-million dollar project.
There is also a lot to be said for starting small and working your way up the scale. id Software did this in their shareware days: Doom simply wouldn't have been possible if they hadn't had the income from their earlier games to fund it.
Reputations: Part 2
The games industry is a small world in which to work. It's fair to say that pretty much everyone worth knowing knows everyone else worth knowing. Word gets around the industry grapevine very quickly, so you need to make sure that the words that concern you and your business are good ones. This means that word-of-mouth marketing also applies in your business-to-business relationships. If you build up a solid reputation for your company, you will attract more attention from traditionally conservative publishers.
If you plan to play with the major players, rather than start with smaller, cheaper games, you'll need to look to publishers or other major sources of funding. This has the unfortunate side effects of (a) making them your customers, and (b) giving the funders a huge chunk of control over your business.
Giving away control is not always a bad thing, but as with most options in life, it needs to be analyzed in context. If you have absolutely no way of getting your game off the ground without funding, you will simply have to bite the bullet and sign. However, if you can recruit a board of directors full of savvy financial executives who know your business, they might be of great help to you—especially if this is your first attempt to run a business.
Covering Your Assets
A certain amount of "paranoia" is healthy in any successful endeavor, meaning that while you are basking in the glow of your success, others might be viewing your business with jealous eyes.
In the games industry, as with most other storytelling media, the concept of intellectual property (IP) plays a huge part in your company's success. Your company's value is measured as much by its IP as by its physical assets. Peter Molyneux and Les Edgar became millionaires because of the IP that Bullfrog owned. IP is valuable, but its value can be diluted. In Bullfrog's case, the IP was as much in the branding. At its peak, a Bullfrog game was almost guaranteed high sales solely through the power of the name.
As Bullfrog became increasingly successful, producing a string of hits, Electronic Arts became more interested in the company. Eventually, they bought it lock, stock, and barrel. They paid the original owners and key personnel a lot of money to stay with the company, yet it was clear almost from the beginning that the magic had gone. From the point of view of Bullfrog's IP, the buyout was a failure, since the end result was the end of Bullfrog and the gradual erosion of the brand's value as IP. Soon, the name "Bullfrog" on a game no longer had the cachet it once did.
While the managers did well from the deal financially, they were clearly uncomfortable with what Bullfrog became after the buyout. Consequently, very few of the original members of the company remain there today, yet the original management team is still in the business, having set up new companies.
Top Three Ways to Get It Wrong
Hindsight is a great teacher. It is easy to point fingers and laugh after the event, but it is unfair to those who at least tried. They made the effort, and that takes a lot of courage. The following is a short list of common mistakes that bring down most businesses, and not just those in the games industry.