Strategy Deployment Model => Applications in Digital Media Distribution of Video Games...

At E3 2010 there was certainly sufficient buzz regarding the growth of digital distribution of video games to warrant opening the strategy deployment playbook and move beyond theoretical opportunities to real economic value realization.

In my Strategy Deployment Model I identify five elements of strategy deployment: Push Point, Fulcrum Point, Lift Point, Marketplace and Business Intelligence Feedback Loop.

Below is a recap of the applications and considerations for each strategy deployment element, related specifically to moving from a physical distribution operation to a digital distribution operation, within the video game industry:

Push Point – where executives communicate strategy and influence its effective deployment:

Executives must skillfully communicate to all constituents (shareholders, customers, employees, vendors and other partners), how the company plans to navigate the transition from physical to digital distribution, and what role each of these constituents is expected to play in the transition. They must balance the need to preserve their existing physical distribution methods, partners and channels, while cultivating new methods, partners and channels. They must fluidly shift between being proactive and reactive as the transformation evolves, and must understand and support the tactical activities necessary to achieve strategic objectives. Finally, executives must bring vision, wisdom and inspiration to their youthful, energetic, creative team - which is the hallmark of the videogame industry.

Fulcrum Point - where people, process and technology meet to enable strategy deployment:

Opportunities to re-deploy people, process and technology during the transition from physical to digital distribution are abundant, and can return tremendous benefits in terms of productivity and profitability. Digital distribution holds the promise of a lights-out (fully automated) order-to-cash process. Business systems applications must be configured for b2c and b2b electronic commerce and transaction processing. User interfaces must be intuitive and robust. Content and distribution partners must collaborate on EDI (electronic data interchange) protocols, and develop system rules to handle all processing scenarios. Whether to use off-the-shelf common practices and tools, or re-engineer to use innovative game-changing practices and tools, requires careful consideration. Keeping to a steady/moderate program of continuous operational improvement is generally good advice, particularly when marginally value added process changes become necessary due to the ever broadening landscape of regulatory compliance obstacles.

Lift Point - where products and services are designed, developed, marketed and delivered according to the strategy:

As supply chain, logistics and brick & mortar retail constraints disappear, and the related dependencies on component availability, manufacturing processes, shipping and shelf space also fades away, the paradigm of long tail economics takes hold. Blockbuster hits, with their extended development cycles and oversized budgets, hold the promise of high initial sales volumes, tremendous profitability and very long life cycles – resulting in perpetual economic value as a “greatest hit” and/or “classic”. Of course swinging for the fences also comes at great risk – as failure can be quite costly. The decision to create blockbuster versus mediocre content, must be weighed carefully in media strategy. Fortunately, with digital distribution, one blockbuster can be used in bundling strategies to create lift, and raise the appeal and market performance of a mediocre product. Hence, using “bundling-on-the-fly” promotional strategies will help video game publishers maximize the return on their entire product portfolio. Another consideration with digital media, like all media, is the interdependency between content creators and content distributors. Creative solutions in cooperative advertising and promotions, in-game product placements, virtual currencies, virtual incentives, and microtransactions, should all be evaluated within the context of digital distribution.

Marketplace – where opportunities and threats from innovations, customers, competitors, regulators and the economy influence strategy:

It’s surprising how slowly some technologies come to market. Then, once a technology becomes mainstream we all seem to say “why didn’t I think of that”. After all, the capability to burn CDs onto a PC hard drive was available some ten years before Apple’s iPod was introduced. And, long before myspace and facebook, AOL’s slogan “you’ve got mail” and “chat rooms”, were all the rage. Introducing and marketing technology innovations for economic success requires both art and science. To lead or follow is a prominent question in digital media boardrooms. Intellectual property protection is critical, yet having great content doesn’t guarantee commercial success... especially when protecting your property rights becomes costly. So, with today’s volatile marketplace - fickle consumers, content pirates, litigious partners and competitors, special interest regulators, and so on - a company might even consider deploying a “market teaser” strategy. With this strategy a company might consider introducing a technological innovation, let their competition run with it and fail by misunderstanding some nuance, then jump back in ahead of their competition with the commercial benefit of hindsight.

Business Intelligence Feedback Loop – where performance measurement facilitates learning and continuous improvement, to enable strategy realization:

Knowing what to do and when to do it comes from the business intelligence feedback loop. Capturing the right data, as soon as it becomes available, from internal and external sources, then synthesizing this data into information that can be used to tell you how to improve everything from budgeting to marketing to pricing to sourcing to staffing. A carefully architected data mart with its dynamic links to all data sources should be accessible through a dashboard with not only key performance indicators to provide insight, but also enough intelligence to provide predictive foresight. With digital distribution, there is no longer a sell-in and sell-through component where the supply chain collaborates to plan and optimize. Everything is sell-through, and collecting/understanding consumer consumption, electronically, has become an innovative specialty all its own. Digital distribution and consumption has accelerated the experimental/experiential input/output feedback loop, whereby the one with the most data/information and the best tools to use it comes out the winner.