To build a successful game, developers and publishers must master both
the art of game creation and the science of selling games at a profit.
These two are like the heart and the lungs of our industry; both are critical
On the art side, the last two decades have seen great strides in the
craft of building immersive, imaginative games. Art is more expressive,
programs are more powerful, and games are ever more sophisticated. On
the business side, the game industry continues to grow annually, many
years ago surpassing even motion picture box office revenues. However,
the techniques and processes for creating diverse, profitable
products has actually decreased in the past two decades. Less and less
of the game-playing public is interested in playing major, hard-core epics,
yet industry practices and business models support making only those types
As development costs escalate and household penetration stagnates, it
becomes much more important to create both titles with a high chance of
success and that appeal to untapped audiences. The focus switches from
getting a game out the door to building the right game, one that
appeals to a receptive audience and has a high probability of contributing
positive income to the company's game portfolio.
The current situation
Most publishers and developers are trapped in an archaic pitching and
greenlighting system that punishes rational risk taking, does little to
predict the market success of titles, and is poor at tapping into new
market segments. No one really knows what makes a hit, so those in charge
use mystical heuristics, gut checks and unreliable expert opinions. The
result is a large numbers of questionable titles are developed at considerable
cost, only to fail financially in the market place.
This practice has both financial and human costs. On the money side,
resources are wasted, publishers face instability, and accordingly, value
is not efficiently passed along to the customer. On the human side, teams
get burnt out, and job insecurity and team churn are commonplace. And,
on the product side, innovative games as a category go unexplored. In
the face of great uncertainty, the industry uses the crudest of measures
to predict success – all future games are required to look exactly
like recent hits.
The irony of all this is that many of these problems have been studied
for decades in other industries to improve their new product success rates.
The New Product Development (NPD) process has been studied extensively
for at least fifty years, and these practices have made companies like
3M, Corning Glass, IBM, Visa, Proctor and Gamble and Guinness into blue-chip
This article will:
- Highlight current poor business practices that contribute to the glut
of poorly aimed titles on the market.
- Provide an overview of techniques such as the Stage Gate process that
can improve success rates.
Are we any good at making profitable games?
A publisher considers themselves lucky if 20% of their launched titles
turn a profit. 80% will break even or lose money and perhaps 3% will be
hits that make enough money to keep the publisher afloat.
Depending on how these numbers are interpreted, they are either very
reasonable – or quite poor.
- These numbers are far below the 67% average success rate for products
tracked across multiple industries. The best companies consistently
reach 80% success rates, four times the rate of the games industry.
- It is exactly in line with average 20% success rate for the software
industry, which is expected for such a similar discipline.
- Games are immensely more successful than the single-digit success
rates for commodity media products such as books or CDs.
Retail games are not
While the industry can boast better overall financial successes than books
and audio CDs, on closer examination, games are a completely different
class of product, requiring different metrics of success.
Music, novels and comics possess low costs of production and minimal
entry barriers. Anyone with a few spare moments can write a novel or record
a CD. Most do it solely for the pleasure of the experience and are hurt
little if their product fails in the market.
Each year, hundreds of thousands of new media products flood the market.
Customers cherry-pick the few that are most accessible and pertinent to
their entertainment needs. Publishers exist primarily as a marketing and
distribution mechanism for titles with proven appeal. They take on very
little product development risk and are willing to launch hundreds of
titles in the hope of gaining one hit. This hit can provide a constant
stream of revenue for decades.
Some indie game efforts fall into this category, but most commercial
games do not. Modern retail games are released in limited numbers and
are the efforts of large, well-organized teams. They require vast human
and monetary resources to build and the cost of failure is high. By almost
every economic and business measure, games do not look like commodity
Historically games, being entertainment products, have been misclassified
as commodity media. Much of our industry's cultural value system
is focused on releasing numerous, artist-driven products in the hopes
that one will be a hit. Unfortunately, due the core business differences,
applying either the development or publishing lessons from these industries
ends up being a rather bloody and expensive mistake.
A better benchmark
A better benchmark for measuring success are similar products that require
high development and deployment costs. These operate under a different
set of constraints and prefer very different development strategies than
commodity media that better reflect the realities of the game industry.
If you consider the business factors, retail games match up most closely
with traditional products like consumer electronics, Post-it notes, and
boxed cereal, not music, comics or books. This is not to say games lack
creativity, far from it: movies fall into this category as well.
of launch failure
numbers of low cost products with highly variable success rates
numbers of high cost products with predictable success rates
numbers of high cost products with predictable success rates
creative / business relationship
between creative and business concerns.
between business and creative concerns
between business and creative concerns
Often one person
through purely aesthetic means. Hit products are usually the 'hot
on meeting under-served customer needs that include utilitarian,
emotional and aesthetic concerns.
on meeting under-served customer needs that include utilitarian,
emotional and aesthetic concerns.
By the standard of traditional New Product Development, games are doing
quite poorly. 80% of our resources are at the best being underutilized,
under-appreciated, or at worst, wasted. On the positive side, the NPD
perspective provides analytic tools that help us understand what is doing
poorly and how it can be improved.
that feed failure
A tremendous opportunity exists to improve overall financial return in
the games industry by comparing it to other, more profitable industries.
First, we need to examine the root causes that limit success rates. A
few factors are external, and therefore out of the direct control of developers
and publishers; but far more are internal.
Much has been made of the external factors that affect the profitability
- No long tail: Games often have a very small window, a few years at
most, before they are technologically obsolete. Slow burn, niche products
often stop working before they turn a profit.
- Limited distribution channels: Limited diversification of distribution
channels means a game has a finite number of chances to find a prospective
Internal factors dominate
The primary factors that influence success are internal and controllable
by both developers and publishers. The game industry has immense control
over the games it releases. They choose the theme, the target audience,
the budget, the marketing, the timing, and of course, the game design.
Internal factors are the strongest predictor of market failure.
- Lack of customer focus
- Lack of reliable shared success criteria
- Lack of business expertise
- Outdated Practices
Lack of customer focus
Generally, companies fail to make games that appeal to their target customers.
This is, in many ways, the cardinal sin of commercial product development.
- Cowboy culture: Designers, business development and
producers will often use themselves as the ultimate judge of a products
appeal or quality. They rely on inaccurate ‘gut checks'
that typically do not reflect the real needs of their audience. Very
often they choose products and designs that they personally desire,
even when this conflicts with existing data. In this swaggering, opinionated
stew of ill-informed decision making, reputation is the single largest
influence on which games get made, not actual customer value.
- Testing is focused only on functional issues: Teams
rarely test the appeal of new designs with external groups, especially
at early stages. Formal human factors engineering and usability testing
is uncommon. Testing programs that do exist tend to look for functional
flaws instead of problems with the product's underlying value
- Too little information, too late: What market testing
does occur often happens at the very end of a game's production,
either in the form of betas or actual product launches. At this point
there is little opportunity for making changes based off the inevitable
customer feedback. Radical changes to setting and core mechanics are
nearly impossible in beta. Yet typical preproduction is a completely
inward looking activity that provides no opportunity for feedback from
- The wrong people are doing early evaluations: Often,
business people who know little about game design or technology will
be asked to evaluate a pure gameplay prototype. They lack the knowledge
to give the early stage product a fair and objective evaluation. Similarly,
game designers will often be asked to make critical decisions about
their target audience when they lack basic marketing training.
Lack of reliable, shared
The lack of customer focus is allowed to persist because very few groups
in the industry actually know what makes a successful game. We have little
ability to predict if a game will succeed or fail in the market. In the
absence of science, superstition reigns unchecked.
- Testing the appeal of new game designs is hard: Nontraditional
game designs are expensive to prove. Typical techniques such as paper
documentation and videos are at best ‘hand waving'. Prototyping
shows great promise, but it takes a long time to bring many prototypes
to a testable stage. Productive prototyping techniques are just starting
to be established at forward thinking developers, but have yet to be
widely adopted or accepted as necessary. Without evidence that these
methods are cost-effective method, publishers are reluctant to ‘foot
the bill'. The overall result is that funding is scarce.
- Poor data collection methods: Games are rarely evaluated
for their market appeal except during a brief green lighting stage.
After this point, it is assumed that they will be a success. What data
exists is rarely in any format that is useful for deriving success criteria.
Even retrospective evaluation of products is difficult as teams tend
to dissipate rapidly due to the high turn over rate
- Over-sensitivity to perceived trends: Without useful
data, developers and publishers magnify and misinterpret even the slightest
market indicator and incorporate it into their decision-making heuristics.
For example, if Gears of War had chainsaw guns, then future hit titles
should also have chainsaw guns. After all, it worked for the shotgun
in Doom; so this heuristic of selecting games based off their most popular
weapon must be pure gold. Such heuristics fail to predict market success.
Lack of business expertise
Often, publishers and developers lack the business training necessary
to fix the situation in which they find themselves. Some people realize
that there is a problem, but they don't know the terminology or
resources available that may provide a solution.
- Designers lack basic financial fundamentals: Only
rarely do you see an informed business plan referenced by a game design.
In this age of brands, sequels, expansion packs, subscription models
and item driven economies, most design decisions have a critical impact
on the economic success of their product.
If game designers fail to master the tools of business at a relatively
deep level, they are unable to design and build games that maximize
profit. It simply doesn't occur to them that they could spend
$100,000 to A) add an item-based system that drives another $2 million
in lifetime revenue, instead of B) adding another expert level at the
35 hour mark that will be viewed by 5% of the purchasers.
- Publishers lack basic business fundamentals: Common
concepts taught in almost every business school in the nation such as
product portfolio management, use of cross-functional teams and metrics-based
management are rarely practiced or discussed. The number of MBA in game
publishing is surprisingly low, in part due to the early cowboy nature
of the industry. Our heroes are people who never went to school or read
even the slimmest book on the dirty concept of business. The preference
is to hire interns in the mold of Horatio Alger, not people with degrees.
The thought is that ‘book learning' never released a hit
game. It is possible to learn these concepts without getting a formal
degree, the important factor is to make use of the basic business fundamentals
and resources available, which are better utilized in other industries.
A final symptom is that the practices in the game industry are outdated
and resistant to change. Much of what we do has been passed down in a
fragmented manner from one mayfly-like developer to the next. The collected
superstitions are practiced as a form of mysterious craft by both publishers
- Reliance on waterfall methodologies: Most games have
a rigidly defined preproduction, production, testing and deployment
phase. Upon green lighting the team is launched towards a target date
and scope with little opportunity for feedback. More agile and iterative
techniques are still only practiced occasionally.
- Siloing: Games live and die by the intricately connected
contribution of many different disciplines. Yet companies insist on
placing test, engineers, artists and marketing in different organizations,
buildings and even countries. These groups lack shared goals and communicate
by tossing limited artifacts over a very high wall. It is easy to imagine
each silo as an ancient isolated guild, blindly following their handed
down rituals while fighting off the heathens from other silos.
- Primitive green lighting process: The poor customer
focus, lack of success criteria, and lack of business expertise culminate
in the dreadful green lighting process.
how we select successful new products
Systemic problems require
This litany of ills may seem overwhelming. However, our goal is to demonstrate
that there is no single person or group that is the root cause of the
low success rate facing our products. It is not just about the publishers
or the developers. We have systemic issues that are deeply rooted in the
history and culture of game development.
The good news is that the majority of our difficulties are completely
under our control. By adopting a systemic solution that alters how we
evaluate and choose products, we have a clear opportunity to drastically
improve the success rate of the titles we release onto the market. Any
solution will require both developers and publishers working together,
but the rewards of higher profitability and greater stability are deeply
valued by all parties.
Game productions have long pre-production cycles that can be better used
to gather high quality of data about potential customers. In some cases,
the actual hardware that the games are played on can be controlled. The
keys to success are imminently achievable.
The tools exist
Very few of these difficulties that cause so many products to fail and
force a lack of design diversity are unique to the games industry. Most
manufacturing companies ran into the same issues two decades ago when
switching from traditional engineering practices to lean manufacturing.
The past twenty years has also seen the rise of a field called NPD, or
New Product Development, that focuses on solving what they call the "fuzzy
front end" of generating, choosing and implementing new product ideas.
The result is a vast body of knowledge of best practices that have been
successfully adapted to a wide range of markets ranging from consumer
products to financial services and pretty much anything in between. As
long as there exists measurable customer value, the techniques of NPD
can help increase a company's product success rate.
Many proven tools are available:
- Value stream analysis: How do we identify and remove
unnecessary processes that do not contribute customer value?
- Ideation techniques: How do we generate strong new
ideas that capture the customer's unspoken needs?
- Constraints-based product requirements: How do we
keep our options open to encourage necessary learning and exploration?
- Onsite Customers and Quality scorecards: How do we
establish rapid feedback cycles and communicate the results with the
team so that we know exactly how close our product is to success at
- Small Cross-functional teams: How do we build efficient
problem solving teams that solve production problems immediately instead
of letting errors persist and snowball?
These techniques and many others have been proven to slash time to market,
increase product quality and improve success rates.
One widely adopted technique called the Stage Gate process can act as
a framework for the other tools listed above. It provides a master unifying
system that encourages companies to steadily and consistently improve
both their portfolio of products and the techniques by which they choose
them. The Stage Gate process can be used to increase customer focus, define
success criteria, create a common business language across disciplines
and eliminate outdated practices. (In fact, the Stage Gate process can
be applied not only to evaluating game concepts, it can be applied to
evaluating game features and mechanics as well!)
To understand the power of the stage gate process, it is interesting to
compare it with the existing greenlighting process used by most companies
in the game industry.
Most publishers receive product pitches in a wide variety of different
forms. Some are simple ideas from a reputable developer. Others are pre-rendered
presentations that capture the feel or theme of a game. Sometimes, publishers
receive complete design documents, and on occasion, a working demo. Recently,
more and more have licenses attached. And all too often, they're
in the form of a previously-released game with an ever-iterating Roman
The game ideas are then evaluated by the ubiquitous green light committee.
Typically, this involves an in-person pitch and an evaluation of key criteria,
- Does the team have the ability to execute on the design?
- Does the publisher have the money to fund production, and is its preliminary
return on investment robust?
- Does the game meet the "gut check" of the expert evaluators?
- Does the game meet the current hot-list of fashionable heuristics
that the publisher is currently pursuing? (For example, does it have
a chainsaw gun.)
Overall, the focus has a lot to do with execution and has very little
thought put into whether customers would actually want such a title. In
fact, original titles without a narrowly-defined, already-proven market
segment have little chance of advancing beyond this point. Occasionally,
if the publisher doubts the reputation of the team, they will request
the development of a demo or vertical slice. This happens rarely because
neither party really wishes to pay for such "extra" activities.
In the end, if the simplistic greenlighting criteria is met, a handful
of products end up being fully funded. The rest are rejected and their
assets and ideas are typically discarded.
But – once something passes this stage – a fascinating thing
occurs: the greenlighted products are now assumed to be future successes!
Otherwise, the logic goes, they wouldn't have been greenlighted.
Development teams make plans to fully staff for a 12 to 18 month production
cycle. Some publishers go so far as to put the revenue from the greenlighted
games in their financial plans with the assumption of 100% success rate.
Even when strong evidence emerges that the product will fail in the market
place, decision makers still gamble that releasing the products may manage
to "recoup development costs." In a market where launch costs
can equal development costs, it typically results in tossing money down
the drain. Though the occasional producer who pushes a bad product onto
the market is venerated for his gutsy move, in general this practice reflects
poorly on the overall success rate of the portfolio.
When the games reach market, the customers end up deciding that only
1 out of 5 is actually worth their money, meaning 80% of the resources
that the publisher and developers have expended is at best under-appreciated,
underutilized, or at worst, lost.
A stage gate comparison
The stage gate process uses a different strategy. The company continually
measures the product against ever-stricter sets of release criteria and
kills those projects that will probably not succeed. Instead of having
only one greenlighting stage, there are many.
The stage gate process is straightforward.
- A product starts out as a simple idea and moves through several production
stages before release.
- Each stage has clearly-defined, objective exit criteria,
spelled out well in advance, in the form of a kill gate. At the kill
gate only the products that meet the success criteria are allowed to
move on to the next development stage. Other products are killed at
this point and receive no further investment.
- Products that move on to more advanced stages receive both increased
funding and stricter success criteria.
- The process continues until a few, highly vetted products are released
into the market.
This is an options-based decision model where options are kept open as
long as possible, at as low a cost as possible until good information
is brought to bear that it is wise to proceed. Compared to the greenlighting
process, the Stage Gate model offers some great advantages.
Each gate uses strongly validated success criteria. The company studies
hundreds of games and identifies potential success criteria. As they release
more titles, they are constantly tuning their success metrics. The success
criteria for each stage are written down in advance and are made available
to both developers and gate committees from the very start of the project.
The good news is that a lot of work has already been done in this area.
Numerous studies across multiple industries have identified many areas
that should be invested in as a matter of course in order to increase
the likelihood of success.
For example, Robert G. Cooper's latest studies list the following
as important factors:
unique, superior & differentiated product with good value-for-money
for the customers
strong market orientation - voice of the customer built in
early, fact-based product definition before product development
up-front homework - doing front end activities like market analysis
cross functional teams: empowered, resourced, accountable, dedicated
- Where the project builds on business's technology and marketing
attractiveness - size, growth, margins
of the launch effort: well planned, properly resourced
competencies and quality of execution of technology activities.
Each one of these items is readily quantifiable and measurable. Cooper
breaks out the first criteria in the following check list:
- Offers unique features not available in competitive products
- Meets customer needs better than competitive products
- Has a higher relative product quality
- Solves a problem the customer has had with a competitive product
- Reduces a customer's total costs
- Innovative: First of their kind in the market.
Even at the concept stage, it is possible to ask some of these questions
and receive clear and concise answers. During later stages, the specificity
around items such as quality and competitive comparisons is increased.
Killing products is
Unlike the traditional greenlighting process, the stage gate process is
very good at killing projects. This is important because resources that
are spent on failing late stage projects could have funded the exploration
of dozens of seed concept, which in turn might yield a successful title.
The opportunity cost of not killing projects is huge.
Also, a well-organized stage gate process allows for a concept bank to
store old projects components for reuse by other teams. The cross-fertilization
that occurs when a team has access to hundreds of older projects can help
accelerate new product development substantially.
Evolving the process
When an organization starts using stage gates, the initial kill gate definitions
may be uncertain, and will certainly be untested. But by measuring which
projects made it through all of the gates, observing different aspects
of their market success, and attributing those successes back to the gates
through which they passed, the gate definitions can be continuously refined
as best meets the need of the organization.
There are numerous other benefits that the stage gate process yields.
- Higher profitability: By spending more money vetting
a wide variety of options in a low cost manner, companies end up producing
successful products for less overall investment.
- Predictable revenue: Success becomes more predictable
for later stage projects.
- More diverse designs: Designs thought to be too experimental
may pass early gates and receive important consumer feedback required
to make them qualify through later gates.
- Shorter time to market: Efficiencies that come from
understanding the target customer clearly allow targeted products to
be updated more quickly. The short development cycle of a product like
Brain Age is a good example of how this might happen in the game industry.
- Aura of success: The projects that clear the gates
and are released into the market are generally more successful than
those that did not benefit from such a process. The brand trust therefore
increases, as well as customer loyalty.
- Pursue innovative products as a portfolio strategy:
Once the appropriate success criteria is in place, more flexibility
is gained in allocating a percentage of a product portfolio to innovative
new-to-the-world products. Best-in-class companies typically generate
30% of their revenue from product lines created in the last five years.
- Increased flexibility: Since more ideas are in production
at any one time compared to the traditional game development model,
it is much easier to accelerate (or delay) certain ones as market conditions
Implementing a successful stage gate process requires widespread cultural
change, and as such, is rife with situations where the spirit of the process
can be corrupted by old thinking.
- Failure to kill projects: There may be a strong tendency
for the old greenlighting teams become the new gate teams. Politics
and relationships can take precedence over data-driven decision-making.
The result is that weak products still make it out onto the market.
Encouraging the use of public and transparent checklists as a decision
making tool can help alleviate some of this issue. Everyone from the
top of the company to the lowest production worker should know what
ideas in different states of production are being scored on, and how
the results are interpreted.
- Use as a command and control method: The stage gate
process aligns goals and helps all parties succeed. However, the extensive
data gathering and rigid gates also can be used as an oppressive reporting
and control system.
Often this requires a shift in the priorities of top management such
that they empower their production teams to make decisions. Training
on the use and application of the gate criteria before the projects
hit the gate is of critical importance.
- Bureaucracy: All the checklists and data collection
can rapidly build up to a crippling amount of paper work.
Regular postmortems and the use of techniques like value stream analysis
can help streamline the process. New adopters often implement a more
cumbersome system with fixed gates. However, as they gain experience,
the process rapidly evolves into a more agile system with increased
Everybody – designers, developers, and publishers alike
– want to release profitable games. Money, for all its ability to
corrupt, also is the lifeblood that allows the people fortunate enough
to be in the industry to spend their lives creating this amazing new form
of art. We've looked at four key issues that prevent us from creating
successful games. We have also identified a proven framework in the form
of the stage gate process that yields solutions to these issues. Stage
Gates can be widely adapted and can be used in weekly, monthly, and annual
Winning at New Products: Accelerating the Process From Idea To Launch,
3rd edition Robert G. Cooper, copyright 2001.
Success of software 20%: Page 93; Failure rate of industrial product
67%: Page 11, Winning at New Products, survey by Kleinschmidt