CASE #3: Game Not Over, Not Yet

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CASE #3: Game Not Over, Not Yet

Although their expertise lies in creating games, it’s definitely serious business for the video game industry. The computer and video game industry has struggled over the last couple of years as game makers look for new sources of revenues and work to hold down costs. One company, Electronic Arts (EA), exemplifies the challenges of this industry, in which customers are fickle and demanding and competition is intense. As one of the world’s leading video game publishers, EA lives and dies by its innovations. Its product lineup includes more than 100 titles such as

Def Jam Vendetta, The Sims, Madden NFL Football, The Lord of the Rings, and Harry Potter. The company has created more than 50 best-sellers (each with more than 1 million copies sold) since 1998. In 2006, revenues were $2.9 billion, down 5.7 percent. And although net income was still $236 million, it was down 53 percent. Although the company has a record of accomplishments, paranoia is a critical part of its success. A top game title takes anywhere from 12 to 36 months to produce and costs between $5 million and $10million.

That’s a significant investment risk riding on the company’s ability to be innovative. John Riccitello, the former president and chief operating officer who left the company in 2004 to start a private equity firm and who returned to the company in early 2007 as CEO, guided much of the company’s game design accomplishments. He said, “The forgotten aspect of creativity is discipline.” The hard part, and the part that EA pursues relentlessly, “is identifying the right idea, assembling the best development team, solving the inevitable technical problems, creating a game that people want to play, getting all of the work done on schedule, getting it to market at the right time, and knowing how to generate buzz about it in an increasingly crowded market.” How does EA do it? It starts with the discipline of understanding ideas. Game designers try to identify the creative center of a game—what they call the “creative x”—so they understand what the game is about. Then, it’s the discipline of understanding the customers by using focus groups to pinpoint desires and likes and dislikes. And it’s the discipline of sharing best practices and technologies through the company’s intranet library. As one employee said, “If somebody develops a better blade of grass in one game, that grass will be in somebody else’s game the next day.” Then, there’s the discipline of developing the next generation of creative leaders. The company’s “emerging leaders” program gives participants firsthand experience in departments outside their own. And there’s the discipline of studying the competition. Employees are encouraged to know the features of competitors’ products. Then, it’s disciplined project management. Riccitello, known for his strict discipline, said, “If you’re working on a game and you miss your deadlines, you won’t be working here very long.” Although the discipline of creativity is important at EA, you can’t overlook the passion of the company’s game designers. Nearly everyone at EA

grew up playing games. They love what they do and are inspired to look for new and creative challenges not only for the hard-core gamers, but for the casual gamers, as well.

Discussion Questions

1. Describe EA’s competitive advantage from each of the three perspectives on competitive advantage. 2. Does EA exhibit the critical success factors for the new business context? Explain.

3. Describe the types of resources EA appears to have. Do you think any of these resources might be unique? Explain.

4. What stakeholders might EA have to be concerned with and how might those stakeholders affect EA’s strategic decisions and actions?