Management Studies, August 2014, Vol. 2, No. 8, 548-555 D doi: 10.17265/2328-2185/2014.08.007 DAVID PUBLISHING

Using Lead Users in the Finnish Gaming Industry

Nina Koivisto Aalto University, Espoo, Finland

This study attempts to find a solution to the problem of a lack of employees and focuses on the role of the lead user in the success of fast-growing industries, especially in the field of the game industry. The computer game industry is one of the youngest and fastest growing new media industry sectors. Finnish gaming company, Rovio, is an excellent example of this phenomenal growth. The company hired up to 10 new people per week last year. However, labor shortages in the gaming industry make finding employees difficult. Utilizing lead users might be one solution for labour shortages in the gaming industry. A lead user is a user of a offering who currently experiences needs still unknown to the public and who also benefits greatly if he obtains a solution to these needs. This research describes one case where lead users in a game development process were utilized successfully. This research results indicate that lead users are a willing, untapped, and limitless source of innovation for the development process in industries where users feel passionately about the service.

Keywords: lead users, gaming, innovation

Introduction A Finnish gaming company, Rovio, is growing rapidly; the game Angry Birds and its add-ons have been downloaded almost a billion times. The number of the company’s employees has increased from 40 to 300 since January 2011 (Lappalainen, 2012a), and it has been estimated that the figure will rise by another 300 in the coming year (Lukkari, 2012). However, labor shortages in the gaming industry mean that employees are hard to find. A year ago, Rovio acquired an animation studio—Kombo, and this year the software company Futuremark’s online gaming business. Rovio has also trained young people in the game industry through its Rovio academy program and it is about to begin its Rovio trainee program. Up to 10 new employees on average start at Rovio every week and it continues to grow (Lappalainen, 2012a). Other examples of the growth of the gaming industry in Finland are Redlynx and Bugbear. The Redlynx game studio produced the motorcycle game, Trials Evolution, which is expected to reach the same download level as its demo version and has more than two million downloads. The Bugbear game studio produced a , Unbounded, with what has been reported as the third largest production budget in Finland’s gaming history and a development team of 50 people. The game has been sub-contracted to the Japanese firm and the level of cooperation could be comparable to a Finnish film studio making a big Hollywood movie sequel. Bugbear’s previous car game series sold nearly three million copies (Lappalainen, 2012b).

Nina Koivisto, Master of Economics, Innovation Management Institute, Aalto University, Espoo, Finland. Correspondence concerning this article should be addressed to Nina Koivisto, Papinmäentie 3 L, 00630 Helsinki, Finland. E-mail: [email protected].

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Because the subject company of this research does not want its name published, this article calls it “X Company” in separation of other companies mentioned in this article. The computer game industry is one of the youngest and fastest growing new media industry sectors (Boden, Cadin, Guérin, & deFillipi, 2006; Christopherson, 2004; Price Waterhouse Coopers, 2008). The game industry consists of a large number of small, independent studios, but only a few really great players (Chaston, 2008; dePeuter & Dyer-Witheford, 2009). The survival rate after the critical five-year period for new ventures is poor (McGregor & Solek, 2009). The company was started in 2001 as one of the most successful Finnish mobile game companies in the social games market, but made two-three games, which were not in any successful way. The changes in the markets and competitive strategies of large companies have increased the pressures on small and medium enterprises (SMEs) to focus on innovations, innovation in knowledge, and innovation management (McAdam, McConvery, & Armstrong, 2004, p. 200). Accelerating technological and scientific progress and increasingly shorter product life cycles have been a downright necessity for innovation in SMEs (O’Regan, Ghobadian, & Sims, 2005). In the case of a mobile game studio company, it was in the business-to-business (B2B) world and their most important customer was the game manager of a telephone operator (e.g. Vodafone). After the failure games, the surviving firm still showed value creation potential, as surviving firms that show a value creation potential are usually sold abroad (National Endowment for Science, Technology and the Arts [NESTA], 2008a, 2008b), this also happened to the company: The market leader in social games acquired the company in 2006. Currently, the company is making Facebook games and it is in the business-to-consumer (B2C) world, so it should consider how clients (e.g. Facebook groups or forums) could be used in innovation and game production. In particular, they should consider how to use lead users, since they desperately need more employees, especially employees to whom playing is familiar. Small game studios have similar growth-promoting factors and barriers to SME in general (Baron & Hannan, 2002; NESTA, 2008b, 2009). The factors can be divided into external and internal and supply and demand factors, as well as structural and individual factors (Hadjimanolis, 1999). Their interaction and degree vary according to the industry, the company’s life cycle, its location, and the orientation or skill level of the owner (Blundel & Hingley, 2001; Lange, Ottens, & Taylor, 2000; Littunen, 2000; NESTA, 2008a, 2008b, 2009; O’Gorman, 2001). The employee gender distribution in the X Company is about 25% female and 75% male. The literature increasingly considers innovation to be a key factor in the growth of the business and the business and its success or failure (Bilton & Cummings, 2010; Edwards, Delbridge, & Munday, 2005; Hadjimanolis, 1999; Isaksen & Tidd, 2006). Lead users are defined as members of a user population who have two distinguishing characteristics: (1) They are at the leading edge of an important market trend(s), and so thay are currently showing needs that will later be experienced by many users in that market, and (2) they anticipate relatively high benefits from obtaining a solution to their needs, and so they may innovate to reach it (von Hippel, 2005). The research questions of this study are: Q1: How is the company using lead users in its innovation process now? Q2: How the lead users could be used in industries that lack of employees? Q3: How could the company use lead users in its innovation process in the future? Q4: What kinds of methods would be appropriate for utilizing lead users in the innovation process? Q5: Is the success of the game to be anticipated when utilizing lead users?

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Literature Review The theory that led to defining “lead users” in terms of two characteristics was derived as follows (von Hippel, 1986). First, the “ahead on an important market trend” variable was included because of its assumed effect on the commercial attractiveness of innovations developed by users occupying a leading-edge position in a market. Market expectations are not static; they evolve, and often they are driven by important underlying trends. If people are distributed with respect to such trends, as diffusion theory indicates, then people at the leading edges of important trends will be experiencing needs today (or this year) that most of the markets will experience tomorrow (or next year). If users develop and modify products to satisfy their own needs, then the innovations that lead users develop should later be attractive to many. In 1986, von Hippel introduced the lead user method that can be used to systematically learn about user innovation in order to apply it in new product development. User innovation refers to innovation by intermediate users, that is, user firms, individual end users, or user communities, rather than by suppliers. Von Hippel (1986) observed that many products and services are actually developed or at least refined by users during the implementation and use of the product or a service. Sometimes, user innovators will share their ideas with manufacturers in the hope of having them produce a product. Tuomi (2002) further highlighted the point that users are fundamentally social, communicative, cooperative, and moderated by contact with others. User innovations, therefore, are also socially and socio-technically distributed innovations. According to Tuomi (2002), key uses are often unintended uses invented by user communities that reinterpret and reinvent the meaning of emerging technological opportunities. Empirical studies to date have confirmed the lead user method. Morrison, Roberts, and Midgley (2004) studied the characteristics of innovating and non-innovating users of computerized library information systems in a sample of Australian libraries. They found that the two lead user characteristics were distributed in a continuous and unimodal manner in that sample. They also found that the two characteristics of lead users and the actual development of innovations by users correlated closely. Franke and von Hippel (2003b) confirmed these findings in a study of innovating and non-innovating users of the Apache web server software. They also found that the commercial attractiveness of innovations developed by users increased along with the strength of those users’ lead user characteristics. A number of studies have shown that many of the innovations reported by lead users are judged to be commercially attractive and/or have actually been commercialised by manufacturers. The research provides a firm grounding for these empirical findings. The two defining characteristics of lead users and the likelihood that they will develop new or modified products have been found to correlate closely (Morrison et al., 2004). In addition, it has been found that the greater the intensity of the lead user characteristics displayed by an innovator, the greater the commercial attractiveness of the innovation that the lead user develops (Franke & von Hippel, 2003a). Studies on the motivations of voluntary contributors of code to widely used software products have shown that these individuals too are often strongly motivated to innovate by the joy and learning they experience in this work (Hertel, Niedner, & Herrmann, 2003; Lakhani & Wolf, 2005). It is clear that the enjoyment of problem solving is a motivator for many individual problem solvers, at least in gaming. Clearly, for these individuals, enjoyment of the problem-solving process, rather than the solution, is the goal. Pleasure as a motivator can apply to the development of commercially useful innovations as well.

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Lead user-centered innovation patterns are increasingly important and they present major new opportunities and challenges for companies. Most user-developed products and product modifications (and the most commercially attractive ones) are developed by users with lead user characteristics. Several studies have found that user innovation is largely the province of users who have lead user characteristics and that the products lead users develop often form the basis for commercial products. A discriminant analysis indicated that to build one’s own system was the most important indicator of membership of the lead user cluster. The studies which reviewed in von Hippel’s democratising paper all agreed that user innovations in general and commercially attractive ones in particular tended to be developed by lead users. These studies were set in a range of fields. Diaries are a research method to get qualitative data from the users. Diaries have a number of advantages over other data collection methods: Firstly, diaries can provide a reliable alternative to the traditional interview method for events that are difficult to recall accurately or that are easily forgotten; secondly, like other self-completion methods, diaries can help to overcome the problems associated with collecting sensitive information by personal interview; and finally, they can be used to supplement interview data to provide a rich source of information on respondents’ behavior and experiences on a daily basis (Corti, 1993). A group decision-support system (GDSS) is a type of computer software that facilitates creative problem solving and decision making among groups within or across organizations. It assists groups in performing group decision making by providing tools to facilitate planning, generating, organizing, electronic brainstorming, and evaluating ideas. Mainly through the (optional) anonymisation and parallelisation of input, electronic meeting systems overcome many deleterious and inhibitive features of group work (McFadzean, 1997; Nunamaker, Dennis, Valacich, Vogel, & George, 1991). Surveys can be useful when a researcher wants to collect data on phenomena that cannot be directly observed. Data are usually collected through the use of questionnaires, although sometimes researchers interview subjects directly. Surveys can use qualitative (e.g. asking open-ended questions) or quantitative (e.g. using forced-choice questions) measures. There are two basic types of surveys: cross-sectional surveys and longitudinal surveys (Babbie, 1973). The basis for lead user research is to listen to lead users’ opinions. Since this paper wanted to study methods that could utilize lead users as a solution for labor shortages in the gaming industry, it used all three of these kinds of research methods: diaries, GDSS workgroups, and surveys.

Methodology The main focus of this paper is on the role of the lead user in the success of fast-growing industries. Since this paper wanted to use both qualitative and quantitative research methods, it used diaries, surveys, and GDSS workgroups, since these represent a mixed method. It has qualities from both qualitative and quantitative methods (structured sessions and predefined themes), and since it wanted to study both what the company is doing now with lead users and what it could do in the future and what kinds of methods are appropriate and whether the success of the game is anticipated if lead users are used, two studies are needed. Study 1 was for the first two research questions and Study 2 for the last two research questions. This research was carried out in a project that took 10 months. The aim of the project was to evaluate if the future Facebook game was going to be a success and to enhance it. Lead users in the game development

552 USING LEAD USERS IN THE FINNISH GAMING INDUSTRY process are used. The lead users were volunteers who wanted to take part in the development project of a Facebook game. There were two female and 12 male lead users. In Study 1, this paper was seeking answers to the first two research questions: How is the company using lead users in its innovation process now? How could it use lead users in its innovation process in the future? Employees of the gaming company took part in four semi-structured interviews. The interviews were recorded, transcribed, and coded by themes with NVivo9. These interviews took about two hours each. The questions were about the normal process of developing a Facebook game. The aim of the questions was to distinguish how a normal development project in the company differs from this research project. In Study 2, this paper was seeking answers to the latter two research questions: What kinds of methods would be appropriate for utilizing lead users in the innovation process? Is the success of the game to be anticipated when utilizing lead users? Study 1 involved three surveys, 12 user diaries, and one workshop. The surveys were conducted at the beginning, in the middle, and at the end of the project. Three usability surveys are conducted: after the first gaming session, in the middle of the focus group work, and at the end of the focus group work. The whole focus group process took a month (from 18.11.2011 to 9.12.2011). The lead users also kept daily diaries while playing the game. At the end, there is a GDSS workshop with the lead users, after the users had played the game.

Results This paper found that even if about half of the players are female, only 25% of the employees are female and almost all the female employees work as artists. So, there is an enormous lack of female employees in the Company. “I have 20 males in my group. So even if I had a brilliant cooking game idea, you can be sure I could not convince the team” … “you must always consider the male-oriented team”, a female interviewee stated. So, the conclusion (from Study 2) is that interviewing employees is an excellent method for finding the differences between current and previous innovation processes and this paper did not interview the lead users (focus groups for that purpose are only used), since it is believed that such interviews would have been more valuable for this kind of research. The company used to make (only) mobile games. In that (B2B) world, the client was the game manager of an operator, and he decided which games were chosen to be added to the assortment. The current Facebook games results belong to the B2C world, so the company should really think how to utilize users and user groups such as Facebook groups and forums in innovating. At the moment, users are involved in the process only when they can test some features. They should be brought into the innovation process at the very beginning to test the concept and also the figures when they are on paper. The company’s innovation blog should also be updated to serve as an active feature idea generator, not just for whole game ideas and it should be distributed to lead users too, not just via the intranet. Q1: How is the company using lead users in its innovation process now? In Study 2, it was found that the company had not used lead users before at all. In general, the company was pleased with using them, but according to the results, users should be brought into the innovation process much earlier than that in this research. Q2: How the lead users could be used in industries that have lack of employees? One of the biggest problems in the company, according to the interviews, is the constant swapping of employees from the constant labor shortage. This causes the problem of tacit knowledge leaving when yet

USING LEAD USERS IN THE FINNISH GAMING INDUSTRY 553 another employee leaves the company. On the other hand, companies get new ideas, when they hire new employees. The research results indicate that lead users are a willing and untapped source in industries where users feel passionately about the service, so lead users as a concept should be seen as a HR-recruiting tool in industries where users feel passionately about the service, like gaming industry. The whole recruitment process could be seen as a game, where the winner gets the job position. Q3: How could the company use lead users in its innovation process in the future? Companies should give tools (like GDSS) for lead users to innovate, since they are a willing, untapped, and limitless source of innovation for the development process in industries where users feel passionately about the service. Q4: What kinds of methods would be appropriate for utilizing lead users in the innovation process? The conclusion (from Study 1) is that even if there are a greater number of players, faster and more efficient data gathering (now the data are got only after the focus group process), and many iterations during the development project, and both the timing of the surveys and the focus group at the end are good methods for using lead users in the innovation process, the survey still seemed to work in the past tense (Did you enjoy the graphics of the game?) and in the innovation process future tense answers are wanted (What kind of game would you like to play?), so a survey is not good for the innovation process. But the biggest insights were given in the diaries. According to this research, this paper really encourages the use of diaries in using lead users in innovation process research. The recommendations for obtaining better results in the future are as follows: first of all, map a variety of data sources: player behavior, diaries, and the performance of the game; secondly, interview players during this process; third, gather data while the game is being played, for example, by using pop-ups, and finally; and most importantly, the results should be part of the development process, so that the game would actually be changed according to the data gathered from the players. Q5: Is the success of the game to be anticipated when utilizing lead users? According to the results in Study 1, the game looks good and is playable (easy and interactive). However, it needed more challenge and difficulty and its goal and action structure should be clearer, and it still had some technical problems. In other words, it does not look like a success. A year after the launch of the game, it is known that it did not succeed in the way the company expected, even if the results anticipated so a year before. According to this, this research was a success, since utilizing lead users really did show the outcome in advance.

Conclusions The challenges in the game industry include the lack of employees, difficulties in recruiting them, and the constant replacement of employees. Only during this project, which took only 10 months, three contact persons resigned. Of course, new employees bring new ideas, but the tacit knowledge of old employees is missing. From practitioners’ point of view, companies should consider the engagement of employees carefully. It would have been interesting to study the gender issue more, but since there are only two female lead users, it was not possible. It would be interesting to study how to find female lead users and whether different genders emphasis different phases of the innovation process or, if gender influences the type of innovations. It would have been interesting to use more qualitative methods. Much richer data would have been accessible, had interviews been conducted rather than survey questionnaires being relied on. Even a GDSS

554 USING LEAD USERS IN THE FINNISH GAMING INDUSTRY workshop is predefined by its themes. The modification of companies’ innovation processes to systematically search and further develop innovations created by lead users can provide manufacturers with a better interface to the innovation process as it actually works, and so it could provide better performance. The work on the competitive advantage of nations can be extended to incorporate findings on nations’ lead users as product developers, especially in the present kind of depression all kinds of radical innovations would be preferred. An enthusiastic and motivated person performs well and feels satisfied. But how could you make everyday work more engaging and meaningful? Those who believe games think that the solution is gamification. The research company Gartner predicted that by the year 2014, 70% of the world’s big companies will use gamification as part of their activities. Game designer Jane McGonigal even argues that with gamification, people can solve difficult global problems. Gamification simply means that the familiar elements and mechanisms from games are applied in other contexts. The dynamics of games provide many key issues for motivation: experiences, the meaning and feeling of achievement, social skills, and status and making the progress visible (Retrieved from http://www.ted.com/talks/jane_mcgonigal_gaming_can_make_a_better_world. html). So maybe lead users could be used in all industries and nations through gamification.

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