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FLUID Report vol.1


Executive Summary This report is based on a FLUID workshop held in early December 2012 in Helsinki, Finland. Some thirty participants from music and gaming startups attended this two hour workshop and the aim was to identify current and future challenges from each company’s perspective. This report is a synthesis of the challenges and it presents solutions to the following themes: startup - consumer interaction, company matters, and knowledge sharing. The three aforementioned themes are interconnected and as such taking them all into account is crucial. This report concludes by offering a solution to taking all these three aspects into account simultaneously.


Introduction: Taking music and gaming industry to the next level! The report you’re about to read (yes, please read it - we promise there will be no boring academic jargon) is based on a FLUID workshop organized in early December 2012 in Helsinki, Finland. We had some thirty music and gaming professionals from various startups and other organizations talking about future challenges and opportunities from their company’s perspective. This report is meant to be used as a source of inspiration and learning. We have synthesized our learnings from the workshop here so that you would quickly grasp the most essential notions that arose during the discussions in the workshop. You might disagree with something we’re saying here or you might notice that we haven’t covered something that is at least as important as the issues covered here. If that is the case, get in touch with us - we’d like to hear from you (check the contact info on the last page)! Also, if you like the contents, spread the word and let us know about it. As university researchers this is one of our many ways to let people know what we are doing and how we can help others. Yours sincerely, Anna Salo and Miikka J. Lehtonen + FLUID student team PS. Our FLUID research project is running till the end of July 2014, and we’re planning on helping music and gaming companies even more. So stay tuned for more material, or get in touch with us if you want to know more already now!


The complexity of user-company interactions What sets apart the most successful technology- and design-driven companies (think of Apple or Rovio for instance) from others is their ability to tie their products/services into the personal culture of their users. “Know thy users” may be a worn-out mantra but there is some serious truth to it. Here we address some of the critical issues regarding relationships between gaming/music companies and their users. The general themes identified were “the journey from user acquisition to user engagement and retention”, “user analytics tools” and “value co-creation”. Let’s take a look what was discussed in relation to these themes. From acquisition to engagement to retention The ever-expanding start-up community is faced with a challenge: how to acquire users in highly competitive app world with only limited marketing resources? The first 200 players are critical and most challenging to attract, as one of our participants reminded. When your marketing resources are small, going viral is seen as most effective strategy. However, it is a well-established truth that we are in the midst of “viral clutter” where it is more and more difficult to stand out from the crowd. Thus, we are forced to search for alternative and creative ways to attract users and get that snowball effect rolling. What we can all agree on is that consumption has changed dramatically. For example, consumers, especially the younger generations, expect that music is free to consume. Thus, operating in digital environment has been a major challenge for music industry, whereas it is a natural habitat for dynamic and interactive games. At the same time consumption has become more and more experiential in nature. The strong communal experience created through music at gigs and live concerts is something that games find hard to achieve. Finding models to engage users is where music and gaming companies can help each other. Music brings together people; games take the experience to the next, more interactive level. Finally, once you succeed to create that “buzz” and find that engagement factor (or hook if you prefer), how do you turn it into a lifetime of value? Many eager start-up entrepreneurs fall into this category where they mainly focus on attracting new users ending up dismissing those they already have. The buzz can fade out (rapidly, since there are new players in the industry aiming to take your place in the spotlight) but emotional bonds are more difficult to break.


Getting to know your users Developing effective and comprehensive user analytics toolset equals gaining understanding on how your users employ and engage with your product/service: following what they do, when and where they use it, how they use it, what obstacles they face, what emotions evoke etc. For example, In Singapore everybody, from young to old, play games in their daily life: in metro, at bus stations, at coffee shops. There are also many differences in ways that games (and music) are consumed in Asia compared to Finland and many other European countries. In Japan only, the customs of how music is consumed differs from those of the West. Practical tip: Why not to create different personas of your users? Personas refer to fictional characters based on data collected from users. They are representatives of certain social groups with descriptions of needs, features, habits, desires and cultural backgrounds that they possess. Personas, as a method, are highly used in service and user-centered design to improve the quality of services. What is this co-creation anyway? (Or why should you treat your users as business partners) The term “co-creation� is the hot topic in current business discourses. It stems from mutual understanding that in the user-centered environment a shift has occurred from product- and firm-fixated perspective to creating personal and memorable user experiences. More importantly, users (as experts of their own experiences) have become more active, conscious and networked and thus are more than willing to share their knowledge and cocreate these experiences with companies. One way to participate users in companies’ value-creation processes is crowdsourcing. In more general terms, crowdsourcing is understood as a strategy to collect ideas for concepts from users usually through open calls. However, here at FLUID we believe in more closer and emotionally charged interactions between companies and their users. Co-creation is an ongoing process where both parties, the user and the company, benefit by learning from each other. How about organizing an event where you can at the same time meet up with your enthusiastic lead users (they are your spokespeople in the field after all) and ideate together the future of your offering?


F*** corporation bureaucracy - I just want to focus on making music! (or why you should care about company matters) When it comes to strategic and operative matters gaming and music companies seem to be close to each other. That is to say, both are dealing with challenges and opportunities related to strategy, internationalization, and copyrights issues, to name but few examples. Startups and more established companies need to devise an internationalization strategy that not only takes their internal capabilities into account, but also acknowledges the (growth) potential of various target markets. Most importantly, even the smallest details should be taken into consideration, as they can have a tremendous influence on whether the company makes it or breaks it. For example, one of the insights came from the gaming industry in Singapore: according to one of the participants games and playing in Singapore are as ubiquitous as saunas are in Finland. This insight, then, can lead to such questions as “how does this affect my company’s entry strategy to Singapore?” or “will gamers in Singapore find our game worth trying out?”. How we can generate valuable insights like this will be covered more in detail in the next section. Another thing identified as a critical issue related to platforms. Should we try to tackle them all at once, or maybe one at a time? Usually, however, the challenge is that a startup more often than not does not possess adequate resources to develop products for multiple platforms, but instead in the beginning only one has to be chosen. Currently the platforms are as follows: PC, Mac, iOS, Android, WP, and video game consoles for the gaming companies. Choosing one from this list can be a daunting task, as that decision has remarkable impact on the way your firm operates in the future. But here, again, user is the key: who is your key customer, and how does their relationship with the chosen platform look like?


Finally, perhaps a more practical issue, with nonetheless high impact value to the firm’s operations. Namely, copyright issues. Music industry is relying on an old and very complicated copyright system. For game developers to use the music and for musicians to give their music the licensing system is very confusing. Also synchronizing music with the animations of the game is not easily allowed – that always requires a direct contact to the music maker. Furthermore, Apple for example requires strict licensing agreements and one has to show the papers to them in order to get the released. What would be extremely useful is a guide for using music in digital products. In addition, it should include information about international contracts as well as copyright guidelines for game innovations.


Three challenges - and even more solutions - on learning and growth Challenge: how to establish connections between different actors within and across industries? Establishing connections can be a bit challenging for startups in situations where day-to-day activities take up most of the founder(s)’s time. However, there are solutions to tackle this problem in a way that actually adds value to the firm’s activities. Here are three of them: 1. Join professional Facebook or LinkedIn groups - especially Facebook communities such as Finnish Music Startups and Play Finland have proven track record in establishing new connections and helping people out when they face troubles. 2. Attend workshops and seminars where you can meet like-minded people and/or learn new things - one example is the workshop this report is based on. When all you need to do is show up for an event that lasts a couple of hours, what can you lose? Especially when it’s physically close to you. But remember to ask your buddies from the above mentioned groups which events to attend! 3. Get in touch with academics - ok, we’re slightly promoting ourselves here, but with good intentions! As a rule of thumb, researchers can be easily contacted via email, and (most of us) will almost always get back to you. It’s worth pointing out that we and our colleagues are looking into diverse phenomena and industries, so you’ll never know what you might learn by talking to us. (plus we are easily lured into talking with a beer or two) Challenge: how do we maximize our learning opportunities while at the same time manage our firm? A huge amount of learning takes place as one wonders in the dark unexplored dungeons so often referred to as startups. So the more you work on polishing your company and product/ service, the more you’ll learn! However, that is not the only opportunity for you to learn sometimes it also pays off to get the bird’s eye perspective to matters or to just learn what other people have done so far. Just to give you some inspiration on how one can learn new things, here’s our take on the topic through two insights: 1. Talk to your customers - this should be one of the core rules, but one can never emphasize it too much. Online, offline - anything goes, as long as you keep the interaction going on. And remember, every time someone contacts you be polite and try to answer as many questions as you seem fit (whatever you do, never delete any customer’s or fan’s posts from your Facebook page - everything negative can be turned into something positive!).


2. Talk to researchers and other companies - related to the challenge above, talking to people can give you quick wins, as long as you know who to talk to! In our opinion, and based on the workshop we held, recognizing key people can be done easily through online communities, such as Play Finland mentioned above. Those with deep knowledge about the industry (e.g. ‘veterans’) and those with a broad outsider perspective can give you valuable insights. Challenge: how can we maintain continuous renewal instead of feeling content with what we currently have? This is perhaps one of the biggest challenges a startup is facing: how do we maintain agility and growth while avoiding the pitfalls of becoming a huge bureaucratic corporation. Steve Blank’s books have been found a great source of inspiration here, but what takeaways did we get from the workshop? 1. Keep it simple - expanding to new countries in the digital era seems like an easy task, but expansion never comes without challenges or risks. As one of the participants put it, expand to one or two markets at a time, otherwise you fail to maximize learning and risk doing something wrong. Entering some countries after pulling back from there is feasible, but certain countries, especially Japan, you don’t want to mess around with. Many companies have tried a second coming in Japan, and almost all of them have failed. As far as we know only one has succeeded: IKEA. Reason? Consuming habits had changed when IKEA returned to Japan, and today they are quite successful in Japan. Allow us to repeat: minimalism is the key word here. Maximizes your learning while at the same time helps in keeping you in control. 2. Coming up with an innovative product + service is not enough, business models also need to evolve - Business models are difficult: what possibilities there might be and which one to choose? Some game developers have gotten an advice that just do the product and then choose the business model because the decision about the business model was slowing down the whole development of the product. This kind of thinking is understandable, but from a long term perspective highly disastrous. Free to play emerged as one of the main business models in mobile gaming some time ago, and adopting that is ok, but why don’t look further ahead? Drawing from our experiences from the workshop, new business models might emerge from the combination of hyperlocality and consumer engagement. And let’s not forget compelling stories - they inspire people and help in connecting your company with everyone out there!


What does this all mean for my company? Technology has enabled us to listen to music and play games almost anytime, anywhere. From the consumer’s perspective this new freedom is a fantastic idea as it ideally means a more streamlined and simplified consumption of music and games. From the company’s perspective, however, this new situation puts tremendous amounts of pressure to managing and growing a firm. Co-creating the offering with your customers, designing a winning organization, and tapping into the knowledge of your peers are all important matters and in this report we have hoped to give you some food for thought in these issues. During our FLUID research project we will be looking further into these matters, but here we would like to share an initial framework that is based on the workshop and our empirical data.

We hope this inspires you to critically reflect on your firm to take it to the next level! Contact information anna.salo@aalto.fi miikka.j.lehtonen@aalto.fi http://fluidism.info @fluid_idbm @miikkalehtonen


FLUID workshop report vol. 1