the health strategist
institute for strategic health transformation
& digital technology
Joaquim Cardoso MSc.
Chief Research and Strategy Officer (CRSO),
Chief Editor and Senior Advisor
September 27, 2023
One page summary
What is the message?
The gaming industry, a $178 billion giant set to reach $225 billion by 2025, holds valuable lessons for CEOs, product leaders, marketers, and entrepreneurs.
In this article, we explore three key lessons that every business can adapt and apply from the gaming world.
These lessons revolve around creating personalized user experiences, minimizing risk in innovation, and effectively leveraging network effects to drive growth and engagement.
Key Takeaways:
What are the three lessons?
Personalized User Experiences:
- Gaming excels in designing experiences tailored to user behavior and daily rhythms.
- Lessons include adapting experiences to fit into users’ busy lives, creating core and meta loops for user engagement and progression, offering personalization through virtual goods and currencies, and maintaining polished user interfaces.
Minimizing Risk in Innovation:
- The gaming industry follows a systematic approach to launch games in phases, reducing risks.
- The five-step approach includes paper prototyping, bug testing beta launches, monetization testing alpha launches, full launches with PR and customer acquisition, and continuous improvement in live ops.
- A data-driven decision-making culture is pivotal throughout the innovation process.
Leveraging Network Effects:
- Gaming integrates social interactions and community building into its design, fostering network effects.
- Network effects can be facilitated through social features, cross-platform interaction, live-streaming, and competitions.
- Expanding across platforms and offering spectator experiences or leaderboards can stimulate growth and engagement.
Statistics and Examples:
- The gaming industry is valued at $178 billion and projected to reach $225 billion by 2025.
- Gaming industry experiences include adapting to users’ daily rhythms, creating core and meta loops, and offering virtual goods.
- Systematic game launch phases involve paper prototyping, bug testing, monetization testing, full launches, and continuous improvement.
- Data-driven decision-making is fundamental in the gaming industry.
- Network effects in gaming result from social interactions, cross-platform functionality, live-streaming, and competitions.
In conclusion:
The gaming industry sets a high standard for personalized user experiences, innovation risk management, and network effects.
By adopting these lessons, businesses across various industries can gain a competitive edge and enhance customer engagement and growth opportunities.
DEEP DIVE
Three lessons from the gaming industry that every CEO should learn
BCGonTech
Giorgo Paizanis and Ernesto Pagano
April 14, 2023
The gaming industry has been wildly successful over the past two decades. It has surpassed all forms of entertainment to become a $178 billion behemoth and is on track to reach $225 billion in 2025. Game developers have been the pioneers behind many disruptive technologies, such as online payments, multi-sided platforms, and digital goods. Whether you’re a Fortune 500 CEO, Product Leader, Marketer or entrepreneur, you can adapt and apply many lessons from the gaming industry to your business.
Many industries are grappling with adapting to fundamental changes in consumer behavior and expectations. Users want social interaction on platforms, personalized user interfaces, low-cost or free versions of a product — the list goes on. In most cases, the gaming industry has led the way in embracing these changes, even spearheading some of them. In particular, this industry has excelled at designing great experiences, systematizing the innovation process, and leveraging network effects. In this article, we’ll unpack all these three lessons and the implications for other industries.
1) Gaming industry designs great personalized experiences
Great games are built with a deep understanding of customer behavior. They adapt well to the time-based rhythms of their customers’ lives. For example, a mobile game will enable short bursts of play that users can easily accomplish while taking the subway or during a lunch break, complemented by longer strategic activities done once a day during the evening. Adapting to customers’ daily rhythms means finding easy ways to fit sessions into their busy lives while still maintaining the option to spend hours on end when they have time to kill. All industries should design their experiences around the customer journey and ensure that what customers are asked to do fits snugly into their calendar rhythms.
Great games also create an experience that make users want to return to the product again and again through a “core loop” and “meta loop” structure. A “core loop” is a series of familiar actions that users log in to do daily. The “meta loop” is where users make progress over time and unlock more features and complexity, thus upgrading their experience. Together, both of these loops keep the experience fresh while building a sense of growth and commitment. This concept can be applied to most service and product experiences. Social media platforms, for instance, do a version of this: They create a news feed that users can browse daily, while also providing options for users to enhance their experience, such as filling out profiles and curating the list of people they follow. Great games also do not bombard their users with presenting all their complex features immediately, but allow users to “unlock” them over time. Similarly, Apple does brilliantly in their advertisements for iphones by highlighting one feature at a time, such as camera quality or Facetime.
The gaming industry also engages customers through virtual goods and virtual currencies. These features enable a great deal of personalization and choice. Players can buy or earn currencies that enable them to acquire a great deal of unique items and, over time, fully customize their experience. These technologies have evolved into cryptocurrencies and NFTs, which are now making their way into a variety of industries. Many customer products and services can benefit from gamified currencies and virtual goods, whether through a customer loyalty program or introducing social competition.
Last but not least, the best games have incredibly polished user interfaces and characters. This polish removes unnecessary distractions and allows the player to “get lost in the experience” and fully immerse themselves. While it is not always possible or necessary to achieve the level of polish in the best games, good experience design should never be an after-thought. Confused and distracted people will not stick around long enough to learn what is good about your product. Make it as easy as possible for them to accomplish their goals without having to read a manual.
2) Gaming industry minimizes risk in the innovation process
The gaming industry has an incredibly agile, systematic approach to launching games in phases that de-risks different elements of the business.
This is the typical five-step approach:
1. Paper prototyping: Before writing a single line of code, most game developers will start with a paper version of the concept, which they will play test among the team and with selected end-users. This allows for maximum flexibility to tweak the experience before locking in technology and design choices.
2. Beta launch #1 (Bug testing): Gaming companies launch their games with limited set users without monetization and iterating to ensure the experience is flawless.
3. Alpha launch #2 (Monetization testing): Afterwards, companies launch their games in a limited geographic region in order to fine-tune unit economics. They typically focus on revenue per user, retention, time spent, and cost of acquisition. In general, game companies are focused on maintaining a healthy LTV:CAC ratio. Since the incremental cost for an additional user is so low, the best games can achieve profit margins of 30% or higher.
4. Full launch: This typically involves a big splash including PR and a large customer acquisition budget to maximize awareness and achieve viral growth of the user base.
5. Live Ops: Following the full launch, modern games tend to go into a “live operations” phase of continuous improvement with frequent (daily/weekly) content updates complemented by larger (quarterly/annual) major feature updates. This stage can progress for years. 80 out of the top 100 grossing mobile games are now 3+ years old.
If this approach sounds a lot like the ideas in Lean Startup, that is not a coincidence. That book was written by Eric Reis as he was designing the virtual social world and game, IMVU. By applying a similar process to your business, you can systematically de-risk your innovation and product development cycles while preserving the potential for a huge launch.
It is worth noting that throughout the whole process, gaming companies rely heavily on data to drive their decision-making. Since games are digital products, the only way to know what is going on is to monitor the data. This naturally results in a data-driven decision making culture where each team has their KPIs and optimizes toward higher level goals that contribute to the overall performance of the business.
3) Gaming industry effectively leverages network effects
The majority of games infuse social interactions and community building into their design. Their social features can be as simple as an “add a friend” mechanism or much more integrated with the game through real-time chat and “player vs. player” competition. Game developers have learned that by integrating social elements, players can create their own content which increases retention and creates a virtuous cycle. Beware, however, that this cycle can become “toxic” if certain players make the social experience worse for others. Thus companies make major investments into maintaining a healthy community through community engagement, moderation, and/or ambassador programs.
Consider if your business could build network effects by enabling your customers to interact in ways that positively affect their experience or encourages others to join. If there are already social network effects, then stay laser-focused on the health of your community to ensure that existing customers (or churned customers) are not detracting from the experience and turning new joiners away.
A key enabler of network effects is multi-platform or cross-platform interaction. As new platforms emerged — from arcades to mobile devices and now AR/VR — developers have found innovative ways to either replicate an experience on new platforms or create a cross-platform experience that allows users to pick up where they left off on any device. By expanding across platforms, games increase the likelihood that people that users talk to about the game will have a device that enables them to play, thus maximizing the potential for network effects.
Consider a platform-centric approach to growth. By enabling people to interact with your business in any way they choose, whether through a mobile app or streaming TV experience, you maximize the points of entry and potential for growth.
Lastly, gaming industry excels at live-streaming and sparking competitions. In traditional sports, someone may play football in high school but transition towards mostly being a spectator once they start working busy jobs. The same dynamic has played out in games: People grow up, get busier and have less time to master games, so they switch towards watching others play. It is no surprise that 15% of videos on YouTube are related to video games.
Consider whether you can offer a spectator experience or leaderboards to spark some healthy competition among customers. Some e-commerce businesses, such as QVC, have adopted this practice, offering live-stream shopping where spectators can watch a limited amount of items sold right before their eyes.
Overall, the gaming industry has raised the bar for what users expect from their products and experiences. Not only are virtual goods significantly normalized, it’s commonplace for customers to expect social interaction, personalized interfaces, and multi-platform functionality. By adopting these three main lessons from the gaming industry, you can gain a significant edge in your own industry.
Originally published at https://medium.com/bcgontech/three-lessons-from-the-gaming-industry-that-every-ceo-should-learn-57b8d2870945
