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Decision Analysis: Bigpoint, Case Study Example

Pages: 7

Words: 1887

Case Study

Position Statement: in the volatile and fast paced business of game programming, things change very rapidly. Bigpoint, a pioneer in this industry, and its founder Mr. Hubertz had deep roots within the game programming field. This has been a company since its inception that has ran ahead of the industry, creating innovative entertainment while following its “free-to-play” game model to much notoriety, investment and fame.

Bigpoint has shown in the past that they can expand and innovate quickly, and now they are at another crossroads where they need to make key decisions on their organizational structure, their investments and market selections, not to mention their marketing approach and who they choose to target. With a goal of growing $1 billion in revenues within the next five years, the purpose of this paper is to define the decisions that will be made to affect their business in a positive way that will meet this goal.

SWOT Analysis: in order to properly determine decision options, an analysis of Bigpoint’s strengths, weaknesses, opportunities and threats is needed:

Strengths: Bigpoint was an early pioneer of the “free-to-play” gaming model, and they feel this is an enormous advantage because this is the model that best allows the estimated 227 million users to determine their spending level. Bigpoint’s games are browser-based, so they are not dependent on outside parties for distribution of their product, and they have to invest money in third party providers to make their games available. Bigpoint is global and has broad reach, available in 155 countries with over 1,000 partners. Bigpoint can also accept money from 150 different payment systems.

Weaknesses: there are indications that Bigpoint has outgrown its organizational structure, with too much dependence on its CEO and founder whose time is too finite to properly explore all of the substantial business opportunities available. Other highly successful companies such as Zynga had also achieved great success in game programming, and had the potential of becoming direct rivals. Bigpoint is a relatively new entry into the largest game programming market, which is the United States. Additional time is needed to further develop this market. They experienced a setback when a recently appointed co-CEO quit after being on the job for only five months.

Opportunities: opportunities are plentiful in such a fast paced and growing industry. Game programming expansion opportunities abound, but require making the right decisions. Expanding into market segments beyond Bigpoint’s core users such as casual gamers would require different products because the gamers profile was attuned to different types of games, such as puzzles and mini games. Different revenue models had potential to increase revenue, such as Zynga’s “freemium” model where a “lite” version of a game is provided free, but the full version requires investment. There is also the prospect of upselling customers, where an effort can be made to increase the amount of money users spend on gaming products. There was also the opportunity of creating a different business organization model, where more resources could be brought to bear in order to grow and expand business.

Threats: expansion can lead to revenue, but you also must be careful to protect your core business. Those customers familiar to the “free-to-play” gaming model expect it from Bigpoint, and they may view a change in format negatively. The company staff show signs of fatigue and that highlights a need for additional personnel and resources. The market itself is high paced and variable, with technological enhancements always around the corner. This fast paced environment requires constant innovation and hard work if any company such as Bigpoint intends to stay on top.

Decision Options: there are two key areas where decisions are needed. One involves organizational structure, and the other is the goal of increasing revenue by $1 billion within five years. The key factor in organizational structure is how to organize at the top, where current CEO Mr. Hubertz must decide if he wishes to hire a co-CEO, remain as CEO, hire a CEO and move into a new role, or hire a COO. As for growing revenue, the company must establish priorities on how and where to invest in order to achieve the desired goal.

Decision Criteria: for organizational structure, it is important that Mr. Hubertz learn the mistakes of history. The decision to appoint former co-CEO Clement Seidler was an immediate failure, as evidenced by his departure after only five months. Although detail is limited, we must consider whether Mr. Seidler was the wrong person for the job. Perhaps his background growing top media brands was not the right skill set for Bigpoint? Another consideration would be whether it was a mistake to appoint another person as a co-CEO, and that perhaps a different organizational structure that properly covers both Europe and the United States is required.

For investment opportunities, it is important to understand both the market segments you are pursuing and the competitive environment very carefully. Emphasis should be placed on those options that are identified as having the greatest opportunity with the most minimum risk. Bigpoint had a lull in their success back in 2008/2009 where they failed to produce a single hit product, and their productivity appeared to decline markedly in 2009 when they only released two games. In order to hit a five year goal as ambitious as $1 billion dollars in revenue, Bigpoint will need to make sure that they release hit gaming products that are both consistent and financially successful.

Critique of Options: for organizational structure, there may be a negative stigma if Mr. Hubertz chooses to try to bring in another co-CEO. The board may decide that it was the wrong structure due to the previous failure, and employees may also greet another co-CEO with resistance based on their previous encounter. The option of remaining as the CEO would basically be akin to going back to the previous structure. Unfortunately, that would mean inheriting the original issues that called for additional executive leadership that still exist at a time when the company wishes to expand and set aggressive five year goals. Another option of hiring a CEO and moving into a new role has merit, as it does not have the potential for negative stigma associated with a co-CEO role, and nor does it revert to a structure similar to the previous one where Mr. Hubertz was the only executive. The last option of hiring a COO could also have merit, though this role would be seen as somewhat lower than a CEO and may be viewed as having a lesser degree of authority.

For investment options, Bigpoint could focus on growing its core audience to increase revenue. This audience would consist of those core gamers that prefer the “free-to-play” model that is internet based. Although there is potential to increase this audience through new market penetrations and also through upselling existing customers, it may not be ambitious enough on its own to achieve the five year revenue goal. Creating a “freemium” model business segment for Bigpoint is another option, where under a different name Bigpoint could bring in a different type of game that appealed to a separate market segment. The drawbacks to this approach is that existing competition in other market segments and business models have an initial advantage as it is their core audience, and this approach would also require investment into a new name, different game programming and exploration into a less familiar market segment. Another option would be to utilize non-internet game delivery methods such as Apple, Android or Facebook. Although this has the potential to expand Bigpoint’s reach to customers that currently may not be using their products, they also need to be mindful of the taxes that are charges for the privilege of operating under their format. It is also important to note that under their delivery methods, companies like Apple control the product offerings designed for the specific format.

Proof of Recommended Option: For the organizational structure decision, the options of hiring a co-CEO and remaining as CEO are less desirable for reasons already stated. Of the remaining two options, a CEO position is typically the highest level within an organization short of the board of directors level, which Mr. Hubertz does not have full authority to influence. Although a COO position lacks the authority of a CEO, based on previous experience this remains a viable option, and would still represent the second highest position within the corporation. It is important to note how quickly the previous co-CEO failed, and how quickly subordinates began complaining about him to Mr. Hubertz. Given the founder’s formidable reputation and credibility at Bigpoint, pulling in a COO to help manage and lead would take much of the burden off of Mr. Hubertz. At the same time, this individual could be mentored by Mr. Hubertz over a period of time, and perhaps later in the development of Bigpoint this position could be raised to a higher level.

As for the investment decision, we know that a small group of extremely high frequency users contributed most of the revenues, and we also know that new heavy users tend to ramp up monthly spending by as much as forty percent over their first eight months of playing. That makes growth in these two categories essential, and different approaches may be required to reach each group. It would be advisable for Bigpoint to focus on the high frequency users and provide them additional upsell opportunities in an effort to increase the average amount that they spend. In addition, choosing a new category of gaming to prioritize and for expansion, likely under a different name, would be advisable. Bigpoint has had a successful hit game in the casual gamer category, called Farmerama. Based on this success, perhaps they can capitalize on it and create additional products for this significant market for game programming. This in turn can tap into a new group of those coveted high frequency users, and new heavy users who invest heavily into the products that Bigpoint sells. This game category also taps into a largely female audience that currently does not use Bigpoint games, as Bigpoint core users are 95%-100% male while casual users are 60%-65% female.

Recommended Decisions: for Bigpoint’s organizational structure, I would advise Mr. Hubertz to seek the right candidate for a COO position within his organization. As it is Mr. Hubertz desire to direct the expansion into the United States from the San Francisco headquarters, the COO can maintain operations in Europe.

For the investment options, I would prioritize expansion into the casual gaming market while also growing high frequency users through obtaining new heavy users and providing additional upsell opportunities to existing heavy users in an effort to increase the average monthly revenue per individual.

Action Plan: Bigpoint should begin the search for their new COO immediately, and establish their position in Europe as soon as possible so they can begin managing that office and Mr. Hubertz can once again focus on the new expansion into the United States.

For the investment options, new game development with the priorities laid out under the recommended decisions should begin immediately. Upsell products will likely be available more quickly as they are simply add ons to existing products. Additional time and effort needs to be focused on the casual market, with the express goal of repeating the success of Farmerama and creating additional hit games that will spur significant revenue growth.

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