Darkened Software

Tag: Contracts

Companies, aim for the win instead of aiming to just stay alive

by on Sep.06, 2011, under Industry, Lessons, Start ups

Here is a hypothetical question, imagine that you own a small game company that is just getting started, and you have been offered 2 contracts.

First contract: Standard 1.5 year slightly aggressive schedule to take an IP from company X and do something with it at basically cost plus a small profit.  It is pretty safe, the publisher needs to have something out with the movie / book / whatever and thus it is almost guaranteed your company will have the money to survive for contract period.  If you play it right you might build a relationship with the publisher and even have more work lined up for when this contract is over.

Second contact: Not so standard 4 month very aggressive prototype to see if you can either take or create and IP that the company can use to fill one of their publishing slots.  This will take everything your little company has got and when it is over if the publisher does not pick it up you are 95% likely to go under as there is really not enough time to line up anything else up.  If you succeed in impressing them with the demo they have the resources and are willing to go big with it which could make your company a known entity.

Many CEO’s would take the first contract as they believe it less risky, they know they will be able to pay their employee’s for the next 1.5 years and keep the company afloat.  They will not have to go through the painful process of laying people off or shutting their doors and all those other fears that keep CEO’s up at night.  The sigma of having to close down your studio is often too much and most CEO’s will take many tradeoffs to ensure the long term survival of their company.

Few CEO’s would take the second contract as they believe it is reckless to take such a high chance they will be shut down in 4 months.  While true it might not be the contract a CEO would want to take if they just signed a 5 year office space lease and put their house up as a deposit.  It’s higher short term risk is more than made up for by its much lower long term risk.  Now, how to back up this theory.

A pattern I see over and over again is small companies start out with tons of energy as they believe they are going to take over the world.  That first project is tough as they are just starting out and have a shoe string budget that they make up for by putting in their blood, sweat and tears.  Now that first project is a safe project which is much more likely to not sell 3 million copies ( > 90% don’t ) and does not make them all billionaires.   So the company starts their second project but this time it will not be with nearly as much energy.  The tools and tech are still just as crappy this time around but with the new found reality check from shipping a dud this time it really starts to bother people.  People quickly get upset that things are not vastly improved this time around and they are still being asked to put in a lot of hours to compensate / compete with bigger budget development houses.  Its not that people don’t want to fix things but the company does not have the money or means to do it so everyone is forced to live in frustration.  Soon people start to leave and the churn just makes the situation worse.

How many good people are still working there after the second project also fails to sell crazy numbers and the third project starts?  It is typically a very small number.  So the big risk is not so much starting a company and going under in 4 months when everyone can still get jobs again.  The real big risk is starting a company and struggling in misery for 8 year before finally going under because even college graduates know better to work in your sweat shop.  When you own a small company your only goal is to get from broke to well funded before all the good will of your employees is used up.  In the highly competitive game world that means going after the high risk but high reward situations that can get you to the big time.

As much as I dislike the term it is very true, the game industry needs to learn to “Fail Faster”

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