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 racing game, Ridge Racer 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 Namco 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]. USING LEAD USERS IN THE FINNISH GAMING INDUSTRY 549 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? 550 USING LEAD USERS IN THE FINNISH GAMING INDUSTRY 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.