GDC09: Red Ocean or Blue Ocean

This talk was all about a theory of innovation/finding new markets known as Blue Ocean Strategy, from a book published in 2005. I first came across this book/theory when I joined NCsoft a few years ago (apparently, the CEO and board in Korea were very keen on it), which is quite ironic given NCsoft’s international activities of the past few years.

It was a good talk overall, with lots of honest and insightful comments from the panellists. The best bit was probably Q&A at the end – which I had to miss :(. Not everything they said was great, there were some dodgy bits, and I missed most of the second half, but it was clearly worth going to.

Bear in mind, though, that on the morning of this talk I was already considering an opportunity I’d seen that seemed to replace traditional games publishers and was looking like it might work extremely well. So … this talk was accidentally of a lot more relevance to me than I’d realised it would be :).

My own commentary in [ square brackets ], any mistakes/misunderstandings my own fault :).

Recap of Blue Oceans

John Welch – co-founder of PlayFirst, started at Shockwave.com.

Red ocean = bloody mess, sharks fighting each other, no innovation other than drop costs or increment company value, no product innovation.

Blue = a market you create by changing the rules.

Example brands that took Blue strategies (whether or not deliberately)

Southwest Airlines,
NTT DoCoMo,
etc

blue = aligned around differentiation AND low cost, where red oceans only choose one OR the other.

“Give customers BOTH increased value AND decreased cost” (== blue).

[ADAM: not sure why NCsoft didnt buy a copy for every employee. Oh well]

Innovation is when you simultaneously reduce or eliminate costs, and “raise” or “create” value.

Southwest/

Eliminate: Got rid of reserved sets
Reduce: downsized the amenities

Raise: increased frequency of departures
Create: aimed to make “flying” an alternative to driving

[example: showed an advert for SW saying “why drive when you can fly for $59 or less one-way?”]

Application to MMO

Eliminate: big up-front retail cost, big fat binary that has to come on DVD
reduce: production values
raise: more diverse gameplay, more avatars customization
create: ease of trial + viral features

[ADAM: interesting coincidence there – “reduce production values” was the same conclusion I came to for last year’s ION/LOGIN conference, where I advised people that the next generation of MMO’s should be made with the mantra “Don’t worry, be crappy”, and “quality” should be explicitly and deliberately thrown away]

tier 1: soon-to-be customers
tier 2: refusing non-customers who choose against you
tier 3: unexplored – noncustomers in markets distant from yours

“casual games for women in 2000” == tier 2 / tier 3

Sebastien @ Playfish

What was a red ocean experience of yours?

“the entire videogame industry”:
– our MO has always been to “create hits”
– we aim to increase costs and investment to try and drive bigger and bigger hits
– GTA4 was taken as a point of pride but is perhaps a failure in that it’s extreme red-ocean
– success formula == quantity * price

What was a blue ocean experience of yours?

“wii” (an “almost” blue ocean)
– targetted non-customers. Advertising in Elle magazine, right outside the typical market
– …but: the success formula hasn’t changed

“Social games” [ADAM: ie: what Playfish is focussing on]
– CREATE: a new gamestyle, “playing with real-world friends”
– ELIMINATE: distribution costs (pure viral marketing)
– REDUCE: flash, web, etc
– RAISE: the monetization potential by giving more ways to pay [ADAM: this sounds to me like misunderstanding the blue ocean?]
– Success formula == V * E * M (virality, engagement, monetization)

[ADAM: unlike the first one, that formula doesn’t work, neither in a simple logical way, nor in a complex mathematical way. This is nonsensical. I would advise completely ignoring the VEM thing]

learnings?
[ADAM: none cited]

Dan Prigg @ Real Arcade

What was a red ocean experience of yours?

1st: Acquiring Gamehouse
Pre-“casual games” as a label, we thought that it was all going to be about digital distribution (DD). We saw it as a blue-ocean, but we didn’t really know who the consumer was going to be. We were throwing up stuff like Team Fortress, when in fact it was Bejewelled that would be the huge success.

We had chased the wrong consumer segment. [ADAM: I guess they failed on the “attract new customers / markets” part?]

2nd: Acquiring Zylom
Pretty much the same effective action as with GH, yet again we pursued a digital-distribution strategy (created huge dominance in Europe DD, overnight).

How many people think that the casual market is a red ocean right now? [about 2% of the audience]. From my perspective, the casual PC market is still a blue ocean, BUT … what we’ve done as an industry is pursue red-ocean strategies inside this blue-ocean. We all targetted stuff around a consumer that we didn’t understand.

We’ve just been damn lucky in making a huge market without having to do much of the clever work.

[ADAM: I think that was the most succinct piece of valuable insight I heard at the conference this year :)]

No-one has really gone after the casual-industry NON customers yet. 60 years ago TV was taboo, it was thought it would mush your brain, and now it’s part of everyone’s lives. We need to understand more about how we’re going to make the same transition with games – maybe “games” isn’t even the best label for us to use going forward.

JW: I’d say that the distribution is entirely red, making a red-ocean imposed on all developers who can’t sell into the blue ocean potential area because they have no distribution that will let them get there.

[ADAM: this is the traditional “thing that has defined the entire publisher/developer relationship” in the games industry for the past 20 years. Sidestepping traditional distribution strangeholds – whether that’s the exclusive contract with retailers to sell games on store shelves, or whether it’s the portal front-pages and the top 3 slots on the deck on mobile network operators systems – has always been the best way out]

I really want to question our core-practices as an industry – how we actually market and promote to our customers. Part of what you see in blue oceans is explicitly and primarily working around these fears and prejudices in customers – making them stop rejecting the product outright, thereby converting them into new customers that only *you* are currently marketing + selling to.

JW: how is that we look at Playfish and all those slides … yet we’re still seeing basic time-management games in the mainstream casual industry? We’re still seeing match-3?

JW: I’m shouting out to the developers in the audience who work with RA that Dan wants you to help him – by innovating in your games that they publish – to change this industry where he says he wants it to change.

QUESTION: how do you persuade C-level execs to move to a blue-ocean when there’s no market research or stats to prove it?

You don’t – you start your own company.

QUESTION: users co-invest in the social gaming market; they upload their private data, and that gets used by the applications to “do more” for the customers. Meanwhile, in the old download world, the distribution side has refused that kind of sharing. What is needed to change downloads so that this can be unlocked?

Sebastien: I think for a long time the customers have been cut off from the process. The only input they got was to choose to “buy game X, or not buy game X”. And that, inevitably, leads to nothing other than encouraging sequelitis.

Sebastien: If you run your game as a service, not a product that is fire-and-forget .. then you co-opt them into the process. Empowered users are much happier.

Over: we power gamechannel with myspace and the one thing that’s clear is that the availability of better SDK’s for developers would massively help us move to a place where the deverlopers can do more with their users. I think it’s happening, but it needs those SDK’s to come out first.

JW: I think it’s the mere existence and effectiveness of playfish et al that is forcing the traditional casual games companies like RA to have to change how they work.

DP: I think we did innovation and small teams in the very early days, but we didn’t keep it up long enough, as we grew larger we grew away from that.

Daniel Berstein, sandlot games

[ADAM: I started to write up Dan’s section, but I had to leave after a couple of minutes and the notes I ended up with were too garbled to keep. I had to leave at this point, this session had already been going for an hour, and I had a different session or a meeting I had to get to. Sorry!]

4 thoughts on “GDC09: Red Ocean or Blue Ocean

  1. Pingback: T=Machine » GDC 2009: all transcripts / liveblogs

  2. Steven Davis

    There is an interesting question as to what within the “casual market” is actually a blue ocean… sometimes what you thought was an ocean turns out to be a rather small puddle.

    Do you “make a market” or discover it?

    Is anyone really doing anything interesting to grow the casual market?

    Embedding games in Facebook was probably the “last big thing” – are standalone portals like Kongregate growing in a blue ocean manner or are they serving up more of the same to the same people?

    If we move away from portals (including Facebook) towards developer-centric sites & services, how will we market (I’m kind of intrigued by MyBrute except it doesn’t provide “viral tools”, only a legal pyramid scheme with no monetization strategy)?

    Is the brilliance of the iPhone actually the AppStore which finally broke the carrier stranglehold on mobile apps?

    Why doesn’t Windows have an AppStore? or even Apple (for its computers)? Is the real blue ocean the monetization and marketing engine or the applications themselves?

  3. Diane

    Thanks a lot for posting it Adam! It’s interesting to hear about that as a conference, very often applying a blue ocean strategy mean that your industry stops taking you seriously (until they have to if the strategy is successful)..
    I would guess it’s a lot about breaking categories and finding who your real competitors are and where you’re fitting from a customer perspective (eg for an online game, you are competing for attention with other forms of online entertainment – if it’s too long or painful to get into your game, the players will be off doing something else, not necessarily playing one of the games you would consider being your competition).

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