Friday, February 12, 2016

Looking at Amazon and Lumberyard a bit more.

Last time I wrote about Amazon and gaming and since that post Phil Trease produced a very nice map on Lumberyard which I've blatantly stolen and added here.

Figure 1 - Phil Trease's map

Now the beauty of a map, is that I can challenge it e.g. the assumptions made, the components used. I also happened to listen to @Cheeseplus provide some very useful commentary. So, I decided to have a bash myself and redo that map.

A few things :-
1) the user need really should start with entertainment which of course needs access to a means of providing it.
2) content is actually a pipeline from the brand new and commissioned games to the somewhat tired and older titles.
3) many of the items seem more commodity than displayed on the map above, so I've used my cheat sheet to determined how evolved the components are. 

Figure 2 - Evolution by Type.

Figure 3 - My cheat sheet for Evolution

So, I've now created two maps. My pre-Lumberyard map and my post-Lumberyard map. Lets go through each.

Figure 4 - Pre-Lumberyard

In this map, access to entertainment is provided through the device and there are two main forms either immersive 2D (including 3D like experience though a 2D screen) and 3D immersive (e.g. VR / AR). This obviously depends upon content and there's a pipeline (in blue for this) on which I've guessed where most 3D content is (approaching useful products but still mostly under development).

Now content requires a delivery mechanism (e.g. App Store and a gaming platform) and also commissioned games require someone to commission and build them e.g. a Creative Games Studio. I've then marked on a whole bunch of underlying components.

Do remember, the amount of experience that I have in the gaming world is zero hours. This map is from a complete outsiders view, derived from Trease's map and it took about 30 minutes. So lets modify the map by moving pieces to represent where I think Lumberyard is taking it (see figure 5).

Figure 5 - Post-Lumberyard

So, a couple of points to note with this map. First, in the bottom right hand corner you have all those components related to gaming (i.e. design tools, gaming engine, environment) being industrialised to more commodity components by Lumberyard. I talked about this extensively in the last post with endless mocking words of encouragement for Gaming CEOs. But there are some other potential impacts here.

From the map above, I've displayed creative studios as having constraints (e.g. access to good designers and access to the components needed to build big games). By industrialising these components then you're likely to see both more game designers and creative studios as the barriers to entry tumble. Hence you're also likely to see a much faster throughput of game in the pipeline.  So, it's not just companies involved in game components that'll take a hit but those big name studios will. Of course, in the early days those creative studios will probably support Lumberyard as a way of reducing cost, almost oblivious to the impact that by doing so they will increase competition in their own market. This is what we call Fool's mate and it's surprisingly effective and easy to use. It relies on competing CEOs being blind as a bat caught unaware by random change

Of course, if studios weaken due to reduced barriers to entry then the reason why people will want to work for a studio will not be because it has access to kit but because other "great" designers work there. So, these changes would likely lead to even more superstar game designers (just in case they weren't already) along with superstar teams and less emphasis on the creative studio.

Another impact could well be the separation of artistic direction from creative studios. This may already be happening, I wouldn't know as I don't know anything about gaming and I'm simply basing this on a map which is probably wrong because I don't work in the industry. However, in this speculated environment then commissioning and artistic direction is provided by the channel (e.g. the app store owner) and creative studios are simply commissioned to provide work. The app store literally becomes the gaming "channel". So between superstar designers, artistic direction set by the channels and increased competition then big name studios might find they are in for a rough ride. Of course, all the time Amazon could be mining meta-data to find new things developers and consumers find useful under the old ILC model which means you have two Hopes - Bob and No - and Bob has left town.

Finally, under the map a big area to watch is in the 3D immersive (AR/VR) space. With more content being produced, more designers, a change to commissioning models, weaker creative studios then control is about the app market and hence also the device. So, don't be surprised if later on Amazon makes a play into this space as well.

Is this correct? Well, I know nothing about gaming and I spent 30 minutes on the map. So, no this is not right. I'd expect someone with experience of gaming to be able to quickly make the map better.

Do gaming companies have maps? Well, given gamers have been using maps and advanced forms of strategic play for a long time then you'd hope someone in the executive suite has gone - "Oh, that's a good idea". Chances are they haven't which is why they'll be unprepared, full of inertia and ultimately lose this space. 

Can Amazon be counter-played? Of course. How? Alas, I'm far more interested in watching another industry implode as it gives me a useful data point for my own research than I am in helping save them. I'll just warn you what I suspect is going to happen, I'm not going fix it for you nor tell you how to fix it. That's your CEOs job, not mine.

Tuesday, February 09, 2016

What to do about Amazon and Gaming

So Amazon has finally launched Lumberyard (its own gaming engine). This should come as no surprise to anyone as Amazon has been signalling for the last four years that it was building up to get into gaming. Actually, when I say signalling, I mean flashing thousand foot neon signs blasting out the words "We're getting into gaming" ... it has been that subtle.

Of course, I'm sure some execs in some gaming companies are bound to be surprised. They shouldn't be. If they are, they should be truly stunned that they've been getting paid for obviously not doing their job. This would be such a pity given the high calibre and wealth of strategic talent that gaming companies have had access to. However, that said lets go through the basics.

I've previously talked about the use of mapping, how everything evolves and common economic cycles such as peace, war and wonder. The basic structure of peace, war and wonder is as follows (taken from Jan 2013 Revolution post).

The Basics

Peace - the time of products
Competition is between suppliers of products with constant feature improvement. Whilst disruptive change and new entrants do occur (e.g. a new component of the value chain appears and former products are substituted), the majority of change is gradual and sustaining of those competing companies. It is a time of high margin, increasing understanding of customer needs, the introduction of rental services and relative competition i.e. a jostle for position between giant competitors. 

Because of success, inertia to change builds up within those giants whilst the activity itself continues to evolve becoming more widespread, better understood and declining in differential value. In the latter stages customers can even start to question whether they are getting a fair benefit for what they are paying but overall, this is a time of peace in that industrial ecosystem.

War - the shift from products to commodity (+utility)
In war, the successful activity has now become commonplace and "well understood". It is now suitable for more commodity or utility provision. It is suitable for industrialisation and the appearance of these more "linear" solutions i.e. the volume operations of good enough through standard interfaces. However, the existing giants have inertia to this change and so it is new entrants that are not encumbered by pre-existing business models that introduce the more commodity form. These new entrants may include former consumers who have gained enough experience to know that this activity should be provided in a different way along with the skills to do it. 

This more commodity form (especially utility services) is often dismissed by most existing customers and suppliers of products who have their own inertia to change. Customers see it as lacking what they need and not fitting in with their norms of operating. However, new customers appear and fairly rapidly the benefits of high rates of agility, innovation (as in genesis of new higher order activities) and efficiency spread. Novel practices and norms of operating also co-evolve and spread. 

Customers who were once dismissive start to trial out the services, pressure mounts for adoption. A trickle rapidly becomes a flood. Past giants who have been lulled into a sense of gradual change by the previous peaceful stage of competition see an exodus. Those same customers who were only recently telling these past giants that they wouldn’t adopt these services, that it didn’t fit their needs and that they needed more tailored offerings like the old products have adapted to the new world.

The new entrants are rapidly becoming the new titans. The former giants have old models that are dying and little stake in this future world. There is little time left to act. The cost to build equivalent services at scale to compete against the new titans is rapidly becoming prohibitive. Many past giants now face disruption and failure. Unable to invest, they often seek to reduce costs in order to return profitability to the former levels they experienced in the peace stage of competition. Their decline accelerates. This stage of competition is where disruptive change exceeds sustaining, it has become a fight for survival and it is a time of War with many corporate casualties. This period of rapid change is know as a punctuated equilibrium.

Wonder - the time of genesis.
In wonder, the activity that is now provided by commodity components has enabled new higher order activities and things that were economically unfeasible a short while before now spread rapidly. Nuts and bolt beget machines. Electricity beget Television. These new activities are by definition novel and uncertain. Whilst they are a gamble and we can’t predict what will happen, they are also potential sources of future wealth. Capital rapidly flows into these new activities. An explosion of growth in new activities and new sources of data occurs. The rate of genesis appears breathtaking. For an average gas lamp lighter there is suddenly electric lights, radio, television, teletyping, telephones, fridges and all manner of wondrous devices in a short time span. 

There’s also disruption as past ways of operating are substituted – gas lamps to electric lights. These changes are often indirect and difficult to predict, for example those that are caused by reduced barriers to entry. The fear that the changes in the previous stage of war (where past giants fail) will cause mass unemployment often lessens because the new industries (built upon the new activities we could not have predicted) will form. 

Despite the maelstrom it is generally a time of marvel and of amazement at new technological progress. Within this smorgasbord of technological delights, the new giants are being established. They will take these new activities into the peace phase of competition. It is a time of Wonder, growth and of bountiful creation of the novel and new.

This pattern of peace, war and wonder repeats throughout history whenever activities evolve to become commodity components of other higher order systems.  In the case of gaming, many of the components of the value chain are suitable for industrialisation to commodity (+utility) components. 

The time of war is upon us in gaming

The time of war is upon us in gaming and many components of the gaming value chain are ripe for shifting from product to commodity (+utility) forms. Amazon is a master of this game. A master? Yes. There is a specific ecosystem model called Innovate-Leverage-Commoditise (ILC) that is designed for use when an activity shifts from product to commodity (+utility). It's incredibly powerful, about a decade old and you can read about it here. Amazon appears to be an expert at this. The net effect is always rapid increases in efficiency, innovation and customer focus.

So, what does this mean for a gaming company? Well, if you're a game designer then it's fabulous - this is going to make your life so much easier and give access to a compelling market. For the independents, the small company players and the users it's going to be great because it's going to become all about the gameplay and the content. You'll see an explosion of new ideas, new & shared content, new forms of gameplay and the barriers to entry will come tumbling down. Whoot! I look forward to the day that the AI which I fought in one FPS follows me as I switch into a space simulation. There's so much potential.

But if you're a gaming company CEO which depends upon on or sells a differentiated game engine (Unity technologies, EA's Frostbite, Autodesk's Stingray, Epic's Unreal Engine, ShiVa, Havok's Vision Engine)  or gaming middleware or any of those others who've relied on barriers to competition (access to compute resources, license costs, access to customer base, visibility of game) then it means your company is toast.

This doesn't mean you can't make money but you've lost this game already and you need to adapt to either designing games on AWS or finding another route. However, what's most likely going to happen is that you're going to first dismiss this move by Amazon and for the next 10 years you're going to be convinced that you were right as Amazon grows to about 3-5% of the gaming market. You're going to see new practices emerge in gaming (co-evolution of practice) but you're going to keep on telling yourself how your gaming engine / middleware / whatever is better. In the following five years everything is going to go to hell in a hand-basket. There is almost nothing you can do, your company will have huge amounts of inertia to the change, your execs will be convinced of their rightness and you are going to lose. Of course, if you plan to retire before that point - well fair game. Your shareholders lose and that's their lookout.

Now, whilst I say there is nothing that YOU can do about this, doesn't mean there is nothing that can be done about it. Problem is, unless you've already got a counter play ready to launch then to get yourself into this position clearly indicates you lack the ability to anticipate which means you certainly don't have situational awareness and gameplay down pat. You may have done well in the past but that was up against equal competitors. You're no longer up against that, Amazon will tear you to pieces. You've never faced a beast like this.

I know every exec wants to fight and feels that they are a chess master but if you were then Amazon wouldn't be playing this game against you. This doesn't mean however that you can't still make oodles of money but you've got to be honest with yourself. First a couple of things not to do and then we'll get onto what you should do.

Don't run off to emerging markets: parts of your industry are getting industrialised into commodity components by a platform play. Running away into emerging markets will only lay the groundwork for those markets to be industrialised next. You'll just waste lots of cash.

Don't try to out innovate Amazon : forget it. You won't be fighting Amazon but Amazon and its entire ecosystem. You might have good engineers and designers but your gameplay will be nowhere near the level you need for this. You'll just waste lots of cash.

Don't build a cloud / digital service to rival : forget it. By the time you get up and running, especially if you try to work with others in your industry (who will all try and differentiate by bringing a product mindset to a commodity war) then your ecosystem will be far behind Amazon. Even skilled players who are on the ball like Microsoft struggle against Amazon. Even Google have a torrid time. You're almost certainly not Google. You'll just waste lots of cash.

Don't cut costs : when it gets gloomy later on people often try and do this. It almost always kicks off the death spiral. If you get to this point then either you or someone before you has really messed up badly.

Ok, there's actually lots of things you don't want to do but the above are some basics. Don't try and innovate, don't run off to emerging markets, don't cut costs and don't try and build a cloud / digital service to rival. You'll be tempted to. Consultants and your own people might well argue for it. This is not where you want to go. You will lose. You need to understand that you're no longer in a peacetime race and a constant yo-yo between the top players, you're in an all out war and past success is not your friend. This is the bit where peacetime CEOs make all the wrong moves, you need a different type of focus.

But where should I go then?

Rule 1: Ditch the ego! You have to get over any ego and accept you're out. Now the question is how to get out of the game in the best way and I'll assume you want to remain at the helm.

Rule 2: Don't panic! You've got ten years before the punctuated equilibrium really kicks in and everyone starts noticing which means you've 2-4 years to extract yourself from the problem before questions start appearing and life gets a little more difficult.

Rule 3: Find a mug sucker future visionary! You certainly want to be putting effort into marketing and PR to promote your company and increase sales. You're going to flog divest the company so you want to make it look as though it's the future promote its future credibility. The good news is there is always a bigger mug future visionary out there somewhere. By all means talk up emphasise the importance of building a digital / cloud rival and emerging markets and then "reluctantly sell your future facing company" to another who can drive it off the cliff maximise the opportunity. Don't leave it too late, you don't want to do an EMC as opportunity waits for no-one.

It's way better to ditch the problem now and maximise the return, possibly then reinvesting capital into creating a new game company designed to run on Amazon than it is to think you can fight this change. You could tell yourself you'll adapt to using Amazon but parts of your own organisation will fight you all the way. Many good companies with even stronger dominant positions and vast revenue streams have stood where you are standing - IBM, HP, Dell, Cisco, VMware - they hit the same play, they were warned and they fluffed their lines followed a different path. They're not daft people and they had brilliant engineers but they lacked the gameplay. Unless you are ready (i.e. right now) with your counter because you planned this years ago then you're already losing future ground.

There is nothing special about your market, there is no magic way to differentiate, it's not a unique relationship business, you don't know your customers better, it's not your brand and there is nothing special about this play. You're either ready or not. If you're not, follow the rules and get out.

Alas, the chances are that you won't. You'll convince yourself that you're different, that you can play the game, that you do understand your market better and ... in ten years I'll be using you as an example of what happens when you get it wrong. BUT what about steam? Well, if you give up all pretence of differentiation, work together in unison, focus on building on SteamOS, focus on using Source 2 ... then maybe ... just maybe ... this time.

Nah, you'll never do it. You'll just try and start differentiating again. It's a tough game, play it well or at least, play what you can as well as you can.

Saturday, February 06, 2016

From purpose to leadership and back again.

I haven't written in a while, so I thought I'd put down same rough notes on managing an environment. Contrary to popular belief, management isn't some linear game of planning but a highly iterative cycle. It's best described (in my opinion) in the following diagram by combining Sun Tzu with John Boyd.

Figure 1-  Tzu and Boyd.

The first part is to understand your purpose i.e. your scope and your moral imperative (the reason why others follow you). Your organisation consists of value chains but it operates in the value chains of others. So you need to understand what you are and who you interact with. This is the game that you are playing in for the time being. Please note that the process is iterative i.e. your leadership and action may well change the game you are playing in. There is no such thing as core to a company, it's all transient i.e. Nokia's purpose changed from when it was a paper mill to when it became a telecommunications provider. You are, in the words of Deng Xiaoping, "crossing the river by feeling the stones" or in other words, the best you can do is to have a direction and be adaptive.

Now, once you have a scope you need to understand your landscape. This is what we call situational awareness and it requires a map. To create a map you need several things. First you need an anchor (e.g. in chess it's the board, in a physical map it's the compass). Then you need the position of pieces relative to the anchor (i.e. the co-ordinates on a chess board for the queen or this unit is NW of this position in a map). Finally you need movement i.e. where the pieces have been and where they can go.

To do this in business, you can use a Wardley map. The anchor is user needs. Relative position is given in a chain of needs anchored on the user. Movement is provided by evolution. Be careful here, I often see utter howlers with people using diffusion as a replacement for evolution. They are not the same thing. An example map is given in figure 2.

Figure 2 - An example map.

There's a lot of things which call themselves maps but without position and movement, they're not a great deal of use for learning. There's another concept worth noting called flow i.e. flow between components (whether information, risk or money) but that's a little bit advanced for this post. It's also one that people regularly make a hash of by making ineffective flows more efficient

One you have a map, you need to understand the climate. Fortunately from the use of maps or boards, you can infer the rules of the game over time. You can do the same with Wardley maps. There are many rules in the business climate. For reasons of brevity, I'll just mention 13 of the simplest.


1. Everything evolves : due to supply and demand competition.

3. No one size fits all : whether project management (agile vs lean vs six sigma) to purchasing to outsourcing.

4. Efficiency enables innovation : it's faster to build new things with pre-existing components than to start with everything from scratch.

5. Increased stability increases agility : an effect from componentisation.

6. Higher order systems create new sources of wealth : e.g.  standard electricity enables TV.

7. Capital flows to new areas of value : either the more commoditised form or moves up to the higher order systems. This is a key part of creative destruction.

8. No choice over evolution : the Red Queen effect.

9. Change is not always linear : known as a punctuated equilibrium

10. Success breeds inertia : There are in fact at least 16 different forms of inertia each with their own tactical plays to resolve.

11. Co-evolution : e.g. practice with activity, see DevOps.

12. Inertia kills : e.g. Blockbuster, Kodak. Neither of these companies were taken out by lack of innovation (they both out innovated the market). It was there pre-existing business models that hit them.

13. Disruption comes in multiple forms : there are many different forms but the two worth knowing about are predictable and non-predictable.

Once you understand the basic rules of climate (i.e. the rules of the game) including the various forms of cycles (e.g. peace, war and wonder) then you can do a pretty reasonable job of anticipation by using the map. But you need to know how to organise yourself around the map. Here we're into context free doctrine. By this I mean doctrine that applies in almost all situations regardless of the context (i.e. the environment). There are many of these but again for brevity I'll just mention seven.


1. Focus on user needs : start with transaction and then onto customer journeys. It's essential to focus on the user need and you won't be able to map without it.

2. Use appropriate methods : i.e. use agile or six sigma where appropriate

3. Remove bias and duplication : you can use multiple maps to do this fairly easily. 

4. Fast, Inexpensive, Simple and Tiny : go read up on Lt Col Dan Ward and FIST.

5. Use small autonomous teams : e.g. cell based structures, think Two Pizza (AMZN) or Haier. 

6. Think aptitude and attitude : e.g. pioneer, settler and town planner. This is still an area we're learning about

7. Eat your own dog food : i.e. don't sell what you're not prepared to use yourself.

At this point, when you're playing the game then you should have a good understanding of your purpose, your landscape, the climate and doctrine to be used. At which point we can add gameplay. Alas, there's a vast array of different forms of context specific gameplay that I'm now aware of. It's a bit like Chess or Military combat where there is all sorts of standard moves depending upon the context of the board or map. When playing the game you often use multiple at the same time.

There are lots we could go through but I'll just mention one as an example in business - the use of fool's mate - which is to attack an underlying part of the value chain when you wish to shift a higher order part of the same value chain.

The combination of the map and anticipation (from climate) gives you multiple points of attack (i.e. multiple wheres, see figure 3) and the use of context specific gameplay helps you determine why to attack this space over another. That's the key about strategy, the why is relative as in why here over there. You never start strategy with why, you always start with WHERE.

Figure 3 - Multiple Where

Of course, this is the decision point and your action can impact the game, your purpose, the landscape and so on. It's all iterative. A constant cycle of observe, orientate, decide and act. Except in most business it isn't.

Most business have no idea of the landscape they exist in. Hence they can't possibly hope to learn the rules of the game (i.e. the rules of economic climate). They certainly can't distinguish between context free doctrine and context specific gameplay nor do they have any mechanism for learning context specific gameplay. In most business, leadership is an exercise of writing down a purpose and jumping straight to strategy by copying what others are doing or gut feel or the use of verbal reasoning such as SWOT diagrams. It's a mess of memes normally. But then, that's not really surprising because if you can't visualise the environment in some form then how are you going to observe changes to it (you have nothing to compare to) and how can you orient around that? As figure 4 highlights, what could strategy be other than meme copying and gut feel? Is it really any wonder that corporate strategy documents tend to be a tyranny of action statements (how, what and when) with only the most vague notion of 'why' when we can't see where to attack or learn from our play?

Figure 4 - Lack of a map

However, that doesn't mean people are daft or can't change, the problem is they've been playing a game of chess without ever seeing the board or understanding that a board exists. I see this all the time. I run a workshop in which I take groups of LEF members through a scenario (using SWOTs, reports and financial analysis) in which they choose a set of strategic options and then later on they map the same scenario and discover (almost uniformly) how utterly mistaken their first attempts are. It's amazing to see and especially those lightbulb moments when they realise how they've been playing the game in their existing business. As one CIO of an enormous environment (think in the billions) said to me recently - "once you've mapped, it becomes so obvious that you wonder why you weren't doing this before".

Of course, you can learn to map in a day and do remember that all of this is creative commons. When you get good you can normally map an environment, work out the gameplay and determine how to attack a given space within a day or so. The trick is getting good and that, like Chess, takes practice. Many years of it. However, that's down to you. The only people who can map an environment and play the game are the people who work / live in that environment. You can't hand this off to consultants. You have to put in the effort.

Oh, but what about culture! That's another topic wrapped up heavily in doctrine with context specific elements and impacted by purpose and your choice of strategic play. However, given most people can't do the basics, I don't even think it's worth mentioning other than pointing out that you need more than one. But "culture eats strategy for breakfast" I hear some people cry. That's a soundbite which appears as popular as it is flawed. It has the accuracy of "the key to strategy is execution" or "you can't manage what you can't measure". But these are all more complex topics, better left to another day.