Strategic risks and opportunities May 11, 2014 cliffski I’m sat in an airport lounge sipping tea and typing business strategy on a laptop. I am a walking cliche. Having said that… it might be helpful to share my brain dump on the future risks and opportunities I see for my company. First the risks (I am, after all a pessimistic brit). Risk 1. Price war and collapse for PC games. This would change things dramatically, not only because I might just earn a lot less, but because many of my strategies are price-point-dependent. You cannot break even advertising a one-time $5 purchase. Probably not a $10 one either. I have to make games that command a $20+ full price tag. I actually am not too worried about this happening. Not for original, interesting, polished high quality games with marketing. For shovelware sure, but that’s not me. Risk: 5% Risk 2. Royalty collapse / publishers go evil. Steam could demand 80% royalties, and everyone could copy them. That would be pretty crushing. I find this incredibly unlikely. Steams market share is big, but there are enough other players ready to take over the minute something like this happened. Plus, the more people at steam I meet, the less likely this seems. Risk 5% Risk 3. Everything shifts to Mac / Linux / Tablets / VR. This seems much more likely. It’s mitigated by Microsoft getting a new boss, so maybe they will stop fucking up. On the other hand the rise of the tablet/phone seems unstoppable. I now know that VR is awesome and not far off. The upside here is that I can cope if this happened. Learning OpenGL wouldn’t kill me. I reckon I could make games that are designed for tablet first if I needed to. Risk 20% Risk 4. I am out-competed. There are a lot of smart young developers in India / Russia / Brazil / China who are going to kick our asses. I live in one of the priciest countries in the world. I am 45 years old and need sleep now and then. The only thing I have that lets me compete with a 17 year old kid in Vietnam is my experience, but as they age, and senility kicks in for me, plus I’m stuck in a C++ era, that will be less effective. I can compensate by actually hiring people from these countries, but that still leaves a big risk of competition. Risk 25% Risk 5. Critical employee. If I get hit by a bus Positech is dead. I pretty much *am* the company at a strategic sense. My eyesight could fail, I could have health problems etc. This is obviously a different kind of risk. I can at least mitigate this with a healthy diet and exercise. Theoretically. Risk 1% So there is the doom and gloom. How about exciting future stuff? Opportunity 1. New countries. For the first time I have a game where I actually own 100% of the translated versions (Democracy 3 in German and French). I think they have made money, and also more importantly acted as a first step to understanding how to do this right, as I did EVERYTHING wrong. In an ideal world, every future game of mine has built in language support and unicode. This is unlikely but I’m heading there. Is piracy rife in some of the biggest markets out there? Yup, but the numbers are huge. Opportunity: 35% Opportunity 2. Expansion. I find this so difficult, but my current system is to expand by publishing games. I tried this with redshirt, and for a first attempt at this idea, if worked pretty well. Enough that I’m doing another one (details to come…). This is a very simple way for me to expand. I may eventually get an actual employee, and if I didn’t have such a nice home working environment I’d likely already have done this and had an office. Opportunity: 30% Opportunity 3. Investment/ Diversification. I don’t have to expand in games. I thought long and hard about starting a solar farm business. Positech even SOUNDS like an energy company. I lack expertise here, so at the moment I’m just content to have invested in existing solar farms. Maybe eventually I’ll make the leap to setting one up. Opportunity: 20% Opportunity 4. Education / Biz software. I think the education market is under-served. Democracy 3 is a great teaching tool, and there is vast potential here. I sometimes toy with the idea of hiring someone full time to push Democracy 3 into schools and to further develop it as a proper teaching tool, or also as a business tool. I can make a very convincing argument here. The problem is I’m not massively into spending my time talking to school district managers and big business committees. Plus there is the problem of getting people to take a games company seriously. Opportunity: 20% ======= If I was 25 years old, I’d probably be hiring a bunch of people to expand on all those fronts right now. I’d have some trendy office in some trendy part of a big city and be high-fiving fellow entrepreneurs over lunch in whatever sushi bar has the best wifi. I’d actually know how to use uber. I’d have google glass. As it happens, I find myself to be a relatively quiet tea-sipping forty-something, keen to get back home to his cats and the English countryside, and to shave. (One thing I learned this trip is that security people confiscate shaving foam.) I balance this out knowing I’m happy, have a good life and really love what I’m working on. Ultimately that surely is the goal.