We know from previous Chapter that consumer thinking and new expectations on how one works are all part of the new framework for corporate operations. Good start, if I do say so myself—and I do.
But I’m going to tell you a story about the PC and video game industry, which is the prototype of the new business model. Based on that story, I’m going to extract the characteristics so that you can see what kind of business model has been so successful and, hopefully, how it applies to you. Then we’re going to take a look at what to expect from it—advocates or at least loyal customers—and the current ways to measure that.
Get into the Game:PC/Video Games as a Prototype of the New Model
The Ambiguity of Play, Brian Sutton Smith says something that deserves to be immortal:“The opposite of play isn’t work. It’s depression.”
The integration of work and play is why we have a game industry (as opposed to a gaming industry) that raked in $25. 4 billion in 2006, blew that number out with $41. 8 billion for combined PC and video games in 2007, and is expected to do $68. 4 billion in 2012 according to PricewaterhouseCoopers’ game industry 2008 annual report.
The growth of high quality consoles like the XBox360,PS3, and Nintendo Wii and the games that go with them is certainly one of the reasons why the industry has skyrocketed to one of the most substantial on the planet. But there is another major explanation for this vast growth. Participation by the customers—the gamers—in the creation of their own experience. This is not only not trivial, it is perhaps why PC and video games are the cash cow they are. Everyone plays them—including 59-year-old me. The best way to understand how this can be is to talk about the mod community and the prototypical new business model.
The Mod Community:Hacking Is a Good Thing
Mod doesn’t mean “modern” like it did in the sixties. It means “modification. ” It applies to a specific way of configuring video or PC games. Rather than accept the product out of the box as is, you can actually alter everything from look to gameplay. The game becomes something you want rather than merely something you bought. There are groups of gamers devoted to nothing more than producing these mods. The experience is multiplied because there are very large global online communities working to sculpt changes to the games, which are then made freely available by the mod creators, often on the sites of the game producers.
This all began in 1996 when John Carmack, then president of IDSoftware, published his now classic game Doom. Prior to Doom, he had released another classic first-person shooter, Wolfenstein, which was hacked right away and new gameplay, characters, and levels wereintroduced. Rather than freaking out over the unauthorized hacking of Wolfenstein, Carmack decided that this was actually a pretty cool use of the game. As he said in an interview in 1999 on Slashdot:
Based on that the hacking in Wolfenstein, Doom was designed from the beginning to be modified by the user community . . . after the official release I did start getting some specs and code out.
The original source I released for the bsp tool was in objective-C, which wasn’t the most helpful thing in the world, but it didn’t take long for people to produce different tools.
I still remember the first time I saw the original Star Wars Doom mod. Seeing how someone had put the death star into our game felt so amazingly cool. I was so proud of what had been made possible, and I was completely sure that making games that could serve as a canvas for other people to work on was a valid direction.
A Doom/Quake add-on has become almost an industry standard résumé component, which I think is a Very Good Thing. The best way to sell yourself is to show what you have produced, rather than tell people what you know, what you want to do, or what degrees you have.
This triggered what has been the largest and most advanced customer company collaboration in an industry. The fans of any particular game are routinely creating modifications so that they and their own fans in their communities—have a personalized version of the game that suits their style of play.
The idea of customer participation reached a new level in mid-2008 with the release of the Spore Creature Creator. Spore is a game produced by Will Wright, one of the legendary game designers. The Creature Creator is an authoring tool that lets gamers create their own creatures, using a rich feature set of virtually functional body parts—meaning which hand with claws you choose will affect how the hands are used throughout the game—and a set of social characteristics and behaviors. That creature is then placed in an environment where it can evolve. You can create an infinite number of different creatures or clone an infinite number of the same creatures.
One of the unique features of the game is the Spore community catalog, a community repository for all the creatures sculpted by individual gamers. They can be plucked up and put down in each gamers’ unique Spore universe so you can see how well they adjust to an environment and what effect they will have on the environment over the centuries the game encompasses.
In a brilliant move, Electronic Arts released the Creature Creator months before the full game’s September 2008 release date. This allowed the aspiring Spore gamers to create their creatures and place them into the community repository (and locally on their own PC) before the game’s full environment was available. The Creature Creator retailed at $9. 95—which is above and beyond the retail price of $49. 95 the full game sold at. The expectation was that there would be a million creatures created by year-end 2008. Here are the real numbers for the first month to July 18, 2008 at 4:00 pm, directly from the Spore community site—one month after the release of the Creature Creator:
This is staggering, and it proves the benefit and value of the mod community as a new business model:
Here’s is first Spore creature
More Mod Please
This is only one example of countless mod community success stories. One of the key factors in that success is that the game production companies are co-participants and active supports of the mod communities. Many game companies host fan sites where the mods are available for download and forums discuss the finer points of anythingnfrom coding to the history of the mod. This involves a major effort on the part of the modders themselves. Their participation is passionate and their involvement deep. Yet they are not compensated for their efforts by the game company. What the game company does is providethem with tools to do the modification and visibility into the source code, with resources that will help them publicize the mods—such as forum locations, storage for the mods themselves, and downloading tools. That’s pretty much what the modders get for what is often months and even years of work. But remember, this isn’t a typically mercenary effort. This is a labor of love and play, which, incidentally, is every bit as much value to a customer as revenue is value to a company.
This all goes back to what customers value. It isn’t necessarily what the companies value. There is value for the game’s fans in the actual experience of creating the mod and value in the community participation. There is value in the mod being made available for free. There is value in the input the modders give the company about the tools and the changes in the game that they are looking for, whether as code changes or new features or functions.
One particularly crisp example revolves around a game called Rome:Total War, a runaway hit that opened a game franchise when it was released in 2005 by Sega for the PC. In fact, it was so popular that IGN, a gamer rating service and publication, named it number four in the Top 25 PC games of all time.
The game was loosely based on Roman history. You adopted a faction and historical leader and attempted to conquer Rome. A group of committed fans decided that the historical accuracy wasn’t sufficient, and in 2006 they began to create a mod that they called Rome:Total Realism. What made this remarkable was the level of effort, the team that built it, the remarkable discussions, and the number of downloads. The team that built version 6. 0 of this mod consisted of the following positions (some individuals had multiple positions):
Remember, these are unpaid, passionate fans devoting their time to creating this mod, which was downloaded over 800,000 times in its first year of existence. If you didn’t know that, you’d think this was a full-blown professional development team working for Sega. The level of detail involved was astounding. Discussions went on in the forums about arcane points of Roman history to make sure that a uniform had the proper color for a barbarian army. Take a look at this one of thousands of changes to the gameplay.
Changed Parthian stables. Now Tier 1 builds Horse archers, tier 2 Huvaka, tier 3 Persian cavalry and tier 4 cataphracts.
Whatever that means.
But there is another case. What happens when you care about your products, but you don’t really care much about your customers?
Sony Does It Wrong, Again
Sony produces excellent hardware. They have an engineering culture that is defined by a view of the customer that says “if we build it, they will come. ”This means, we’ll figure out what we want to produce, produce it, and the customer will buy it. Pretty much like Oracle was until the last couple of years.
Sony builds a product like the Bravia TV or the PSP or a Blu-Ray player and while people attracted to the hardware will buy it, it never seems to sell at the expected level.
Why is this? Because the customer not only has little to say about the development of the product in an era where product development has entered the customer’s domain, but Sony actively has discouraged customer participation and stays invisible (or opaque, if you prefer) to their customers when other companies are struggling with how to be more transparent. Sony considers its intellectual property entirely sacred and makes every effort to prevent any encroachments on it, unlike the open source approach taken by the John Carmacks or the Segas of the game world.
A case in point was their handling of the first crack in the PSP firmware. In its earliest days, the Sony PSP (the handheld game unit that Sony has been producing since 2005) was hacked. There was a game called Wipeout Pure, which, if you reverse engineered it, would provide an Internet browser, in violation of Sony’s agreements. Sony’s response? They created an Internet browser for the PSP owners and then closed off the hole by updating the firmware so the product couldn’t be hacked. Unlike much of the game community, which releases the source code and even best practices guides on how to modify the games, Sony thinks this is a dangerous thing and remains a closed, somewhat arrogant environment. Their lack of customer involvement is also why as early as 2005, they lost the number one position in consumer electronics to Samsung, who very much involves their customers and external expert networks in their planning, development, and problem solving.
Much of the game industry, even including its multi-billion dollar giants like Electronic Arts, supports the open source approach that has driven much of its success. Their approach supports the contemporary customer’s outlook without trying to subvert it. It accepts the peer trust that exists and at the same time is able to institutionalize practices that will both cede control of the environment to their customers and still profit from it, because they give the customers the ability to participate in the creation of a highly personalized experience that also drives sales. This is borne out by data from IDG Consumer Research Report on the game industry which found that, as far back as 2006, even before all the social networking had become prevalent, only 17 percent of gamers actually found official publisher game sites useful, while 70 percent of gamers got game-specific info from forums, game fan sites, and third-party news websites—which were often sponsored or supported by the game companies!
Most important, what kind of business model can be extrapolated from this example?
Characteristics of the New Business Model
Traditional business models are rapidly losing their oomph. The kind of business organization that sees itself as a producer/distributor of products or a service provider and then sees its returns based strictly on products or services sold, is becoming the coelacanth of the 21st century—a weird looking specimen in a fossilized state.
While the game industry has been a great lab for a new business model, it is gaining credence throughout multiple sectors, far beyond just games. The model is intermeshed with contemporary social CRM and customer engagement strategies. You can’t have one without the other, though you can build toward either or both incrementally. There are some distinct characteristics that define this model:
Social CRM Business Model, in Sum
Social CRM’s business model is based around one central premise. The company moves from being a producer of products and a provider of services to an aggregator of products, services, tools, and experiences that give the customer the means to meet their own agendas.
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