Innovation management in the Massively Multiplayer Online game industry Master Thesis

Copenhagen Business School 2013 CM – SOL Strategy, Organization and Leadership Hand in date: 14.10.13 STU 180.009 Pages: 85

Supervisor: Niels Bjorn Andersen Thorkell Olafur Arnason

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Abstract The video game industry had its start in the 1970s where it began as few amateur programmers creating video games over the span of several weeks. Today this industry has revenues of billions of dollars in the United States alone and its projects are larger and create more revenue than the movie industry. The consumers are no longer boys in their teens but rather men and women in their 30s. One part of the video game industry is a different from the rest, with games focusing on team-work and socializing in a persistent world. This is the Massively Multiplayer Online game or MMO. Millions of people pay subscription to play these games, to access the world of the game. But as these games are ever changing the developers must continually iterate on these games and innovate in order to keep the player interested. In this industry I look for an answer to the question: “How does a Massively Multiplayer Online game company manage the innovation of a product?”. To answer this question I begin by applying Van de ven et al.’s Process Model to the innovation process of a new MMO. This new MMO is Dust 514, the latest game from CCP Games, the developers and publishers of EVE Online, an MMO that came out in 2003 and is still growing every year, with 500.000 players in 2013. I conducted interviews with some of the most important decision makers for the game and compare their stories to the findings of Van de Ven et al. (1999) and to the common practices in video game development. From the analysis I hypothesize that there are 5 Critical Success Factors in managing the innovation of an MMO: Manage Scope, Shorten Period of Ambiguity, Openness to Innovation, Balance Leadership Roles and Reduce Outside Dependence. I conclude that what is most important in managing the innovation process of an MMO is to retain the decision-making power over the entire process by minimizing outside dependence.

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Table of Contents 1.0 Introduction .................................................................................................................................... 5 1.1 Taxonomy of games ................................................................................................................... 6 2.0 Methodology .................................................................................................................................. 8 2.1 Research setting.......................................................................................................................... 8 2.2 Data gathering ............................................................................................................................ 8 2.3 Meta-positioning ...................................................................................................................... 11 2.4 Contribution ............................................................................................................................. 12 2.5 Limitations ............................................................................................................................... 13 3.0 Theory .......................................................................................................................................... 13 3.1 Theoretical basis....................................................................................................................... 13 3.2 Literature review ...................................................................................................................... 14 3.3 Learning during innovation ...................................................................................................... 16 3.4 Leadership during innovation................................................................................................... 18 3.5 The Process Model ................................................................................................................... 21 4.0 Company Profile .......................................................................................................................... 31 4.1 History of CCP ......................................................................................................................... 31 4.2 What is EVE Online? ............................................................................................................... 33 4.3 Learning from EVE .................................................................................................................. 34 4.3.1 Empowerment .................................................................................................................... 35 4.3.2 Project Management .......................................................................................................... 36 4.3.3 World-Wide ....................................................................................................................... 36 4.3.4 Change ............................................................................................................................... 37 4.4 What is Dust 514? .................................................................................................................... 38 4.5 How is Dust 514 different? ...................................................................................................... 39 5.0 Analysis........................................................................................................................................ 40 5.1 The Process Model of Dust 514 ............................................................................................... 40 5.2 Initiation Period ........................................................................................................................ 40 5.2.1 Gestation................................................................................................................................ 40 5.2.2 Shock ..................................................................................................................................... 41 5.2.3 Plans ...................................................................................................................................... 42 5.3 Developmental Period .............................................................................................................. 44

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5.3.1 Proliferation ....................................................................................................................... 44 5.3.2 Setbacks Occur Frequently ................................................................................................ 46 5.3.3 Shifting Innovation Performance Criteria ......................................................................... 48 5.3.4 Fluid Participation of Innovation Personnel ...................................................................... 49 5.3.5 Top Management Involvement and Roles ......................................................................... 50 5.3.6 Relationships Frequently Altered ...................................................................................... 52 5.3.7 Industry Team Playing....................................................................................................... 53 5.4 Implementation/Termination Period ........................................................................................ 54 5.4.1 Adoption ............................................................................................................................ 54 5.4.2 Termination........................................................................................................................ 55 6.0 Critical Success Factors ............................................................................................................... 55 6.1 Manage Scope .......................................................................................................................... 56 6.2 Shorten Period of Ambiguity ................................................................................................... 57 6.3 Openness to Innovation ............................................................................................................ 59 6.4 Balance Leadership Roles ........................................................................................................ 61 6.5 Reduce outside dependence ..................................................................................................... 63 6.6 Critical success factor’s model................................................................................................. 66 6.7 Discussion ................................................................................................................................ 68 6.8 Conclusion................................................................................................................................ 72 7.0 Bibliography................................................................................................................................. 78 8.0 List of interviews ......................................................................................................................... 86

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1.0 Introduction Video games are a big part of popular culture today; they are a popular past time activity that has usually been associated with children and teenagers. In recent years though, video games have become an ever larger industry that today rivals the movie industry and the numbers are staggering. The fastest selling video game ever, Grand Theft Auto 5, had almost four times the revenue ($800 million), in its first day, than the movie Marvel’s The Avengers, which had the highest revenue opening weekend of any movie (Hinkle, 2013, 18 September; All time box office, n.d.). The Entertainment Software Association, in 2013, records that the average age of a video game player in the US today is 30 years old with 36% of all players being older than 35, making video games clearly no longer the realm of children or teenagers (Essential facts, 2013). The sales of video games in the US reached $14.8 billion in 2012 with a $1.05 billion spent on online video game subscriptions (Essential facts, 2013; Peterson, 2013). The largest such online subscription video game is The World of Warcraft, which at its height had over 12 million subscribers (Reilly, 2010). Although various studies have been done on video games it is online video games that have increasingly become the subject of research, and one may speculate it is due to their unique characteristics of having “populations” exceeding that of many countries. But, where a lot of research has focused on marketing related to online games (Park and Lee, 2011; Hamari and Lehdonvirta, 2010) or motivation for playing online games (Lee and Tsai, 2010; Park and Lee 2012), this paper will focus on a unique innovation project in an online video game, where a new video game was created and added into an existing online video game world, to coexist with the original video game. The importance of innovations to the success of companies has been accepted since Drucker’s influential book in 1985 (Drucker, 1985), showing that innovative organizations outperform non-innovative ones in both profit and growth (Geroski and Machin, 1992). Researchers have done extensive decades long research into the nature of innovation (Van de ven et al, 1999), underlining the importance of the topic. With the dwindling of subscribers to the iconic World of Warcraft (Karmali, 2013), one has to wonder whether innovation isn’t equally important to the MMO industry. One MMO has been growing every year since its release in 2003, with its fastest growth in the most recent years, that game is CCP games’ EVE Online. CCP was founded in Iceland in 1997 with the intention of making EVE Online, an MMORPG game set in the distant future in the world of “New Eden” where players would fly, build and battle spaceships. A novel idea as the first ever 3D MMORPG had only been released the previous year (Edwards, 2007).

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They released EVE Online in 2003 with about 20-30.000 players subscribing, in 2013 they have now 500.000 subscribers, meaning that New Eden has more than 50% more inhabitants than the company’s country of origin, Iceland (Founder). With the success of EVE Online they decided to make a second MMO called Dust 514, where players play as mercenaries on planets’ surfaces. The game will take place in New Eden as well and will allow players in EVE Online and Dust 514 not only to communicate with each other, but to interact with each other. Not only will this all happen in two different video games in real time, but on different platforms as well, with EVE Online being played on the PC and Dust 514 on the Playstation 3. Neither this linking of two interacting MMOs nor games between two platforms has been done before. My purpose with this paper is to look at the innovation process of this new game. The problem statement I seek to answer is: “How does a Massively Multiplayer Online game company manage the innovation of a product?”. An innovation is a difficult process in itself but the continuous development nature of the MMO makes for an interesting challenge. To answer this question I will look at three sub-problems, whose answers can help me find the solution to my problem area. The first one is “What research framework can be used to analyze the innovation process?”, wherein I will search for a framework to use in the analysis of the data. The second sub-problem is “application of the research framework”, which is the application of my research framework in the analysis of the data collected from CCP. Finally the third sub-problem is “suggestions for the design of the innovation process”, where after the analysis using the research framework I will draw from it what I have learned and create Critical Success Factors, which can be used to design an innovation process and ultimately answer the problem statement “How does a Massively Multiplayer Online game company manage the innovation of a product?”.

1.1 Taxonomy of games Classification of game genres is no small task since, unlike movies, the general setting of a video game has less effect on the characteristics of the game. A cowboy movie shares a lot of similarities with another cowboy movie, while two cowboy games could have absolutely no similarities in controls or objectives of the video games. A game could simply be classified as a “cowboy game”, but using this sort of classification gives no indication of how the game is played. This type of classification only describes the story or theme of the game. For that reason there are two general

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schools of thought on video game taxonomy. On one hand there are those that want to define games, much as movies, by their narratives or theme. On the other hand you have those that would like to define them by gameplay, how the game is played, called ludology”. In his description of this Clearwater (2011) notes: “Ludologists have argued that gameplay is paramount. The role of the player and his or her decisions and actions distinguish videogames from any other medium…elements such as rules, goals and outcomes are held to be more important or more central than story character, theme or meaning”

Nonetheless genres are used for video games and one will often see them in descriptions of games or as categories on video gaming websites. A very traditional classification is mentioned by Bakie (2005) where he mentions what he considers some important genres: Adventure, Action, Actionadventure, Platformer, Fighting, First-person shooter, Real-time strategy, Turn-based strategy, RPG, MMORPG, Stealth, Survival horror, Simulation, Racing, Sports, Rhythm, Puzzle, Mini-games, Traditional, Educational and Serious. These genres can overlap where one game might be a “stealth first-person shooter” or a “rhythm puzzle game”. This author notes however that classifying all “massively multiplayer online” games as MMORPG does not capture games like Second Life, where there is little RPG element but still an MMO element. As such I would simply use MMO as a genre and combine it with RPG where appropriate. Whalen (2004) argues that all MMO games should be classified together as “massive” no matter if they are “shooters” “roleplaying games” or “real-time strategy” games, as their modal modifier of MMO: “…because the fundamental sensibilities of the gaming experience are fundamentally shifted as play becomes public and failure has more (social) consequences than simple frustration and repetition.”

This is a valid point and an interesting observation, but would be closer to a narrative description then a ludology description and as such suffers from the same kinds of limitations as classifying a game as a “cowboy game”. But these classifications can easily be combined, describing the story/setting/theme as well as the gameplay aspect of the games. In doing so, using a narrative- ludology classification we could first define Dust 514 by its gameplay which is a combination of “roleplaying game” (RPG) and “first person shooter” (FPS), making it an RPGFPS and then by its genre “sci-fi”, making it a “sci-fi RPGFPS”. RPGs being normally games where the character progresses with time and/or effort, while FPS is a shooting games from a first-person perspective. But a major aspect of the game is

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that it literally takes place in New Eden, the world of EVE Online. It interacts with, affects and is affected in real time by EVE Online, who by using our narrative-ludology classification would be described as “sci-fi massively multiplayer online space flight simulation game”. As such we would add the MMO definition to Dust 514, due to this massive multiplayer nature, making an accurate description of it with the narrative- ludology classification: “sci-fi MMORPGFPS”. Although one can drive tanks and cars as well as fly planes in the game, what might be called “simulation” games, these can simply be considered optional mini-games in Dust 514.

2.0 Methodology The purpose of this chapter is to describe my choice of methodology, its limitations and possible alternate approaches. I will outline my choice of theory and describe the design and setting of my research as well as my method of data collection.

2.1 Research setting My research took place at CCP China’s office in Shanghai, which is where I conducted the interviews and participated in the in-house playtests of Dust 514. The office was opened in January 2006 with the purpose of opening a door for CCP into the Chinese video game market. In 2007 they started the development of Dust 514 and since then it has been the major development site for the game, with a few elements of the game being developed in other studios. It started out small but has been steadily growing and today employs between 140-160 people, with both local Chinese and foreigners working there.

2.2 Data gathering As the end result of this paper is to give managerial recommendations to CCP about Critical Success Factors of innovation in the MMO industry, I chose a qualitative approach, using data collected through interviews and discussions with CCP staff members as my primary data. The approach I used was based on the idea of Grounded Theory where the problem and thereby the

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relevant theory is emerging from the situation (Lee, 1999). As such, the interviews I conducted were unstructured and I asked general questions about how the innovation process of Dust 514 had been and what had affected it and how, allowing the interviewees to talk and guide the interview as long as it was providing me with useful data, occasionally directing them back on topic or probing further on issues that seemed relevant. These interviews were explorative, unstructured, intended to generate theory as well as my primary data (Lee, 1999). The main body of the empirical data was collected through interviews with several of the top ranking individuals at CCP Games that are involved in the development of Dust 514. On the 20 March 2013 I conducted interviews with the Global CEO of CCP Games, the COO of CCP Asia, Executive Producer of Dust 514 and Creative Director of Dust 514. In addition I had met with one of the founders of CCP Games and discussed Dust 514, EVE Online and CCP with him over coffee, dinner and taxi rides between 19-20 March. I also interviewed a Development Director on 7 May 2013. During the several months of my research and writing of the paper I would regularly attend in-house play-tests of Dust 514, at CCP’s Shanghai office, testing future content for the game. There I would play with various CCP’s developers and staff members. During these I would participate in and overhear discussions of the game and gameplay mechanics. In my interviews I sought to elicit stories from the interviewees and to remain silent myself as much as possible. With this I wanted to have the interviewee himself tell me what were the important events and factors that related to my questions. Having the interviewee tell me what was most important to him subjectively, as it is difficult to gather what were the most important factors to the organization objectively. This however meant that I had to decide myself what I thought were the most important statements from each interviewee, again meaning that my subjective interpretations may have influenced the interpretation of the data. Just as they would each tell me of their subjective experiences I needed to use my own subjective evaluation of what was an important factor for the organization. There is also always the possibility that I was not told of all of the problems that CCP faced in the innovation process, which is perhaps not surprising as I am an outsider to the company. Which begs the question if there were other difficulties not mentioned that might be relevant; one interviewee mentioned casually that the CFO had been against the idea of making Dust 514 when we were out of the meeting room, perhaps a minor issue, perhaps a major one. I also interviewed almost solely the top management at CCP Games and the interviews themselves were all arranged for me by CCP, which makes one wonder whether the programmers

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and those working further down the organizational chart would tell a different story. But all of my interviewees were a lot more open and honest than I was expecting them to be. They talked about some very sensitive subjects that I had intended to dance around before venturing into, but the CEO himself brought up the subject. They openly admitted to mistakes and oversights and talked about how they could have done and planned things better. Overall I believe the information collected to be reliable and to give a good insight into the innovation process of Dust 514 and the inner workings of CCP, as such I believe the information I collected is valid. While I was still working on this paper the release of Dust 514 was announced, I was not privy to any insider information about the release date however. Had I known about this the nature of this paper might have changed as it would open up the possibility of seeing how or if the development of a product in continuous innovation might change after its release. But I believe despite its limitations the chosen method of research offers a valid and valuable insight into understanding the challenges an MMO company faces in managing the innovation of a new product. Material such as articles and books used in this paper mostly comes from the book The Innovation Journey by Van de Ven et al. (1999). The book itself was my main source and it contains references to hundreds of books and articles on similar subjects and many of those were retrieved from the internet from the EBSCO Host database to be used for this paper (www.ebscohost.com). In addition I used the book Introduction to Game Development (2005) to find data on the video game development process, common practices and similar topics to better understand the video game industry; this is used mostly during the analysis. Several articles though, mostly on the topics of crowdsourcing and several different video game topics were found through general searches on EBSCO Host. Outside the material I found on EBSCO Host I also read articles from various video game blogs and news sites that discussed EVE Online or Dust 514 and CCP’s websites for both of the games. Additionally I used different industry or information websites to gather information about the state of video games and online video gaming nationally or internationally. Finally, some information comes from video recordings from CCP’s annual fan festival in Iceland, Fanfest 2013. These recordings are from presentations held by CCP staff on the current state and future plans for Dust 514 and also contain some of the general game design philosophy of CCP’s games as explained by their developers (Olssam62, 2013, 26 April). To understand better CCP’s games I regularly played both EVE Online and Dust 514 during the months of writing this paper, and as mentioned previously, played at CCP Shanghai’s offices playtest of Dust 514.

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2.3 Meta-positioning This paper adopts a social constructionism approach, believing that organizations are socially constructed. As such, reality is viewed as socially constructed by organizational actors, reality cannot be viewed as objective and discernible but at the same time there will be multiple realities as they are perceived. If an employee feels he is not being motivated, while management feels they are doing a good job of motivating him, there is a difficulty in describing the objective reality. This is more along the lines of dialogic than diagnostic organizational development as described by Bushe and Marshak (2009). As such the human element must be taken into account, people will engage in sensemaking (Weick, 20011) in order to make sense of how things have developed or to justify their actions to themselves. Because of this, answers during interviews cannot simply be viewed as the full and complete objective reality from each and every interviewee. The researcher must use his own judgment in interpreting the answers from each individual, especially when it comes to combining the answers from all interviewees in order to create a more holistic image of how events and situations described transpired. An innovation process is a time of ambiguity, and technically radical innovations, like Dust 514, are more disorderly than others (Pelz, 1985). As such it is possible that interviewees engage in sensemaking, as Weick (2001) puts it: “We take seriously people’s accounts of how they accomplish interpretation, mindful, however, that retrospective sensemaking involves biased reconstruction of antecedents since outcomes are known at the time reconstruction occurs.”

This means that all answers must be evaluated and this to be taken into account when it comes to interpreting answers. But by using good judgment and by viewing the answers from all interviews together as a whole it is possible to see commonalities in the stories and piece together a realistic image of how the innovation process transpired.

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2.4 Contribution The field of video game studies is still in its infancy, we see psychological studies on effects of games but they are not really a study of games themselves. As of yet there has not been created a unifying taxonomy for games, which we might see as a fundamental building block to the study, one can only imagine film studies without genres. But then the type video game being studied in this paper does not follow the traditional standards of a video game, as it is an MMO, a field that has been gaining popularity for researchers. This paper aims to extend innovation studies into the realm of video game studies, focusing on the MMO, in an integrating effort. Applying the Process Model (Van de ven et al., 1999) supplemented with literature on video game development, to the innovation process of an MMO. Grantham and Kaplinsky (2005) hold that formalization and professionalization of innovation management is so important for the video game industry that it is a key to its survival. Furthermore, the literature on video games seems to be more interested in the way video games are made, and project management rather than organizational design for video game companies. Video games are technically very complicated and have a strong artistic function as well, as they need a compelling story and pleasing visuals in order to make the best game. This balance is very complicated and needs a strong leadership in order to be achieved. The industry is also differe nt to what one usually sees in product or service industries. It can be likened more to the music industry in the sense that development studios often work like musicians do, they create the product, while the publisher pays for the development, retains the rights to it and takes care of the business side by selling, promoting and advertising the product (Sloper, 2005). The effects of this management side, both the leadership within a company and the developer-publisher relationship has not been covered much in the literature, but will be in this paper. The integration of Dust 514 into EVE Online is a first in video game history; this integration offers an insight into a new way of innovating for current MMO game companies. There have been examples of MMO companies making a second game using their game-world but only by recreating the entire game world anew for the new game. What CCP is doing however may add another dimension that they had not thought possible before. The development of The Critical Success Factors presented in Chapter 6.0 could also be adapted to be used in the analysis of innovation processes in the video game industry or used as a building block in creating a larger, more comprehensive model. The case study of CCP’s development of Dust 514 does not offer revelations 12

not known to researchers before but hopes to add valuable information to the literature, with a positive discussion as well as a normative one.

2.5 Limitations This paper looks at the challenges an MMO company faces in managing the innovation of a new product. The cornerstone of this research is embedded in the neat categorization of the multi-year innovation process (Van de ven et al., 1999); such categorization is difficult to genuinely accept as a fact. This categorization is what I believe to the best one available at this time and as such the best way of dividing the long innovation process, for easier studying. Whether the best way to examine problems encountered during an innovation process is to conduct interviews when the product is 2 months from release is doubtful. The best way to examine this would naturally have been to be there from the beginning and to visit and do interviews regularly over the several years of the innovation process. But this naturally was not possible for this paper, I did however attend regularly the weekly in-house play-tests at CCP Shanghai in order to see how Dust 514 was progressing and to see if they had changed anything that users on their online forums were discussing or complaining about. But with the short timeframe available to me I was unable to notice major changes. I did however manage to get some insights from these visits and believe they did offer some insights into the processes of CCP that complement the interviews. But a possible problem with using interviews as a main source of data is the possibility of action rationality, where the interviewee will rationalize his choice as the best choice, rather than the best choice according to the information available at the time of the decision. But as noted above, CCP was very honest and admitted openly to making mistakes.

3.0 Theory 3.1 Theoretical basis My intention is to research the innovation process of a new product within the video game industry. The book The Innovation Journey by Van de Ven et al. (1999) looks into the nature of the

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innovation process and the various parts and elements of it such as the roles of leaders, the nature of learning during innovation and mapping of the journey itself. The book is based on 17 years of research, by the Minnesota Innovation Research Project, on 14 different innovation projects. This extensive research is the theoretical cornerstone of this paper, I also draw on several other books and articles that Van de Ven et al. (1999) use. Various other authors have written about different topic related to innovation, such as Jelinek and Schoonhoven (1990) on innovatio n in high technology firms, Song, Song and Benedetto’s (2009) staged service innovation model and Tschang (2005) on video games’ development as experiential products. Any of those could have made for a good theoretical basis for my research, but none were extensive enough to cover or combine as many topics as I wished to discuss. The topics explored in Van de Ven et al. (1999) related best to my research and allowed for a fuller exploration of the innovation process than for me trying to unify disparate elements from different authors. Using various elements from different authors may offer different ways of exploring this topic, but for the sake of a more developed theoretical approach I chose Van de Ven et al.’s (1999) Process Model as my main guide for analysis.

3.2 Literature review The topic of innovation is not a new one and there have been many books and papers written on the topic, today it is viewed as an important part of business, especially so in the technology sector. It is hard to discuss innovation without mentioning one of the most principal theorists on modern innovation: Joseph Schumpeter. What is probably his most famous contribution is the term Creative Destruction, although he did not invent the term himself, where he tells of how growth in capitalist markets is governed by internal destruction of the old way of doing things with the introduction of new and improved ways (Schumpeter, 1942). He describes this by saying that the fundamental impulse that drives the economy is the introduction of new goods, production methods, transportation, markets and industrial organizations. These internal effects revolutionize the economic structure by creating a new and a better way, in doing so it destroys the old ways, being thus a Creative Destruction, he says: “…capitalist economy is not and cannot be stationary. Nor is it merely expanding in a steady manner. It is incessantly being revolutionized from within by new enterprise, i.e., by the intrusion of new

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commodities or new methods of production or new commercial opportunities into the industrial structure as it exists at any moment.” (Schumpeter, 1942)

In Schumpeter’s opinion economic change is achieved through this process, as opposed to Adam Smith’s invisible hand. He believes that real competition comes not from competing at the margins, but in the creation of the new, he puts it this way: “…it is not that kind of competition that counts but the competition from the new commodity, the new technology, the new source of supply, the new type of organization…competition which commands a decisive cost or quality advantage and which strikes not at the margins of the profits and the outputs of the existing firms but at their foundations and their very lives. ” (Schumpeter, 1942)

His ideas still remain with us today, what he called Creative Destruction is very similar to what we call Disruptive Technology or Disruptive Innovation today, coined by Bower and Christensen (1995). Disruptive Technology is technology targeted at a new group of customers that changes the way of doing or thinking about a certain aspect of technology. It was described by Christensen as: “Generally, disruptive innovations were technologically straightforward, consisting of off-the-shelf components put together in a product architecture that was often simpler than prior approaches. They offered less of what customers in established markets wanted and so could rarely be initially employed there. They offered a different package of attributes valued only in emerging markets remote from, and unimportant to, the mainstream”. (Christensen, 1997)

This creates a paradigm shift where the new innovation creates a novelty in the market not seen before. In his book The Innovator’s Dilemma (1997) Christensen looks at companies that failed because they were unable to react to the disruptive innovation. He focuses on the disk drive industry which saw a shrink in the size of computer disk drives going from 14 inches and with time all the way down to 1.8 inches (Christensen, 1997). Being too slow to react and commit themselves to the new market, former market leaders in the larger disk drives they fell behind and eventually failed to keep up with the changes. This is at its core what Joseph Schumpeter had called the Creative Destruction, the new product of 8 inch disk drives destroys the companies that make 14 inch and don’t respond to the changes in the market place. But innovation does not change and before we know it there are 5,25 inch disk drives that have the same effect on those that continue to only make the 8 inch drives. Where there is a market there will be innovation, with innovation can come unexpected innovation, a Disruptive Innovation, when companies do not respond they will die with

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the old market and the new market will continue till the next Disruptive Innovation, this is the Creative Destruction. But innovation is not about destroying but about building, it is those that are unable to change or innovate that get left behind. Those that innovate are at the forefront of the race, at least that is what Peter F. Drucker tells us in his influential book Innovation and Entrepreneurship (1985). Kaplan and Johnson’s (1987) book Relevance Lost, also discuss the importance of innovation tying it directly to an organizations value and being a key factor in the. Innovation has been discussed in the context of who works on it, with the topics of crowdsourcing (Busarovs, 2011) and co-creation (Cheng, Marsden and Zhang, 2012). As well as who implements it, with topics on adopting innovation in a large organization (Burgelman, 1983; Kanter, 1983; Nord and Tucker, 1987) and how to help people accept the changes (Marks, 2003). Video games are however a much newer subject of analysis, as the industry was nonexistent before the 1970s. Usually the focus of books and articles have been on psychological effects such as violence (Dill and Dill, 1998; Griffiths, 1999), gender differences (Bryce and Rutter, 2002; Kennedy, 2002; Yang, Chiu and Chen, 2011) addiction (Elliott, Ream, McGinsky and Dunlap, 2012) and games and learning (BECTA, 2002; Amory, Naicker, Vincent, 1999). Different business topic have also been explored related to video games, such as buying behavior (Ho and Wu, 2012; Park and Lee, 2011) and innovation (Tschang, 2007; Grantham and Kaplinsky, 2005). Topics more related to the industry itself have also been explored, whether it is general development of games (Llopis, 2005; Sloper, 2005) and the type of employees needed (Zackariasson, Styhre and Wilson, 2006).

3.3 Learning during innovation When an innovation begins the end result usually has not been decided on, even if it has been decided there are many ways to reach that point and quite frequently goals and ambitions for an innovation will change as this process can last several years. Innovators will gradually learn during the innovation process where they want to or should take the innovation, this can be due to external factors changing their previous assumptions, such as advances in technology, or internal factors like

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changes in market strategies or aspirations. Furthermore, an innovation by its nature is the pursuit of a novel idea, the more radical an innovation the more disorderly the process (Pelz, 1985). It is not enough to imitate or to plan your process because of its uncertainty, there are no routines and future predictions are not reliable (Chakravarthy, 1984; Mintzberg, Raisinghani and Theoret, 1976). Learning during the innovation process is divided into two phases the first one is Learning by Discovery and the second one is Learning by Trial-and-Error. During innovation an organization must first progress through the ambiguous phase of Learning by Discovery before it can begin the phase of Learning by Trial-and-Error (Harrison and March, 1984). It has often been believed to be a random process but Van de Ven et al. (1999) show that it is dynamic and nonlinear, but not a random process.

Figure 1: Learning model to guide the innovation journey (Van de ven et al. (1999)

In the beginning there is a real sense of discovery and goals may be vague, actions are taken and outcomes are seen as positive or negative, then actions are changed or continued. In this process a negative outcome will give little or any value as the options and possibilities are unknown to the innovators and all it does is eliminate one possibility; they still don’t know what to do. A positive feedback however will tell them they are moving in the right direction and to continue what they are doing (Van de Ven et al., 1999). Environmental events as well as top management intervention can change the course of the innovation or its outcome. There was no learning during times of high ambiguity according to Van de Ven et al.’s (1999) discoveries, and it was not until the innovators had entered Learning by Trial-and-Error that learning started to take place. This is due to the

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chaotic links between action and outcome, but it seems as though this period, although innovators do not learn during it, does progress the innovation process. It also sets the stage by converting tacit knowledge to explicit knowledge of actions and performances by creating a more stable setting for testing needed for the phase of Learning by Trial-and-Error (Van de Ven et al., 1999). The innovators will lack certain basic elements needed for trial-and error in the discovery phase: they will first need to understand what other alternative courses of action are available to them, they will then need to decide on the outcomes they wish to achieve. The innovations will need resources from resource controllers, this will influence the innovation process by enabling (expanding) or constraining (narrowing) the branching of ideas and freedom of pursuing different pathways. In the beginning they will be given more slack time to allow for the discovery period but as time progresses top managers will increasingly demand return on their investments in the form of results (Van de Ven et al., 1999). This self-organizing process of learning what desired action-outcome possibilities to pursue and external institutional constraints will transition the innovation process to the Learning by Trial-and-Error phase (Van de Ven et al., 1999). This transition happens during the Developmental Period, when investments and efforts are required to transform vague inventive ideas into concrete reality. The source of ambiguity in the innovation process is the often the long temporal lag between the development and implementation of the product. Before implementation and feedback of the product the innovation team will have to rely on subjectively constructed targets without knowing entirely what the customer wants from their product, having to rely only on their own evaluations of outcomes and shifting development accordingly. Once this treacherous period of Learing by Discovery, the period of Learning by Trial-and-Error can proceed and a more stable environment is created for the development of the innovation which allows innovators to learn from their actions.

3.4 Leadership during innovation Leadership has been a subject of research for thousands of years with Sun Tzu and Plato being some of the first well known authors (Giles, n.d.; Jowett, n.d.). More recently research has been varied, from the traits of a leader (Carlyle, 1849), the behaviors of a leader (Blake and Mouton, 1964) or the exchanges with his followers (Dienesch and Liden, 1986). But in the case of innovation the subject isn’t how one man behaves, but rather how the behaviors of all leaders work with or against each other and how the roles of leaders involved balance against each other (Van de 18

Ven et al., 1999). Van de Ven et al. (1999) adapt an older model from Angle and Van de Ven (1989) to demonstrate the observed roles that they see management take during the innovation process.

Figure 2: Leadership roles in innovation development. (Van de ven et al. (1999) The 4 roles of leadership they observed were: Sponsor: Also known as the “champion” is an advocate of the innovation in the corporate and investor circles. He helps push the innovation idea at executive levels and procure resources to facilitate its continuance. He is the most risk-taking of the four leadership roles, advocating change. Mentor: This role is that of counseling, coaching, supervising and advising the innovators. Usually performed by a more experienced innovator, mentors can serve as role models for the innovation team leaders. Together with the Sponsor they guide and support the innovator. Critic: Often seen as the “devil’s advocate”, applies hard-nosed business criteria to the innovation. Challenging assumptions and making sure the innovation is a viable enterprise to undertake. He tends towards a role of monitoring and coordinating. This is the most risk-averse of the leadership roles, taking a cautious approach to the innovation. Institutional leader: An executive, often not in the heat of things when it comes to the innovation. His role is that of balancing the influences of all roles for the innovation as well as framing the innovation project itself and granting it legitimacy as well as breaking vicious cycles. He is a director that initiates the innovation and gives it structure; this is a very goal oriented style.

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These leadership roles work together to lead the innovation process, a lack in one of these roles during an innovation was shown to have adverse effects on the process (Van de ven et al, 1999). All roles are needed to balance against each other for the best result.

Figure 3: Proposition on balance and timing of leader roles. (Van de ven et al., 1999)

But not all roles are as influential at all times, in the beginning all roles have a similar value but this changes with the development of the innovation process. In the early stages the Critic can force the team to look at all alternatives and make the best choices, resources and momentum will accumulate towards a particular direction, making the right choices early on important. This role is less influential with time and applying the role of the Critic in the later stages can lead to a total reevaluation of the project and terminations rather than the early stage course corrections (Van de Ven et al., 1999). The Mentor however is most useful in the later stages when his experience can be of use for the team. The Institutional Leader’s influence vanes during the Developmental Period as during this time he must rely on the innovators’ reports on matters and how they are dealing with any problems as he is rarely a floor manager. It is in the Initiation Period and Implementation/Termination Period when he is most influential. But although these are presented as 4 roles, it does not mean that these are performed by 4 people. Van de Ven et al. (1999) found that these roles are performed by many different managers and any and all of them could assume any of the leadership roles. This is related back to Baveles (1960) who

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recognized leadership not as a personal quality, but rather as an organizational function. Furthermore, he recognized that distribution of leadership can be wide, performed by many, or narrow, performed by few or if narrow enough by a single person (Baveles, 1960). Katz and Kahn (1978) similarly describe leadership as acts of influence, suggesting that any individual in an organization can act as leaders by exercising influence. These views resound well with the idea of the organization as socially constructed, showing us that leadership is not only performed by those that are defined as leaders but as anyone who acts as a leader. As previously mentioned these acts of influence can be enacted by anyone, resulting in a Pluralistic Leadership, meaning a leadership enacted by many, although they need to have the influence in the organization to be able to be effective. This type of leadership is helpful in ambiguous times like an innovation process; a Pluralistic Leadership reduces the chances of oversight as there are more people involved in the decision making processes and in directing the innovation, as well as increasing technological foresight. Katz and Kahn (1978) linked the sharing of leadership with organizational effectiveness because the sharing of leadership increases the quality of decisions and suggest that the more widely acts of influence are shared the more effective an organization will become. Pluralistic heterogeneous leadership will increase Learning by Discovery, a difficult phase during the innovation process, as it encourages the expression of different perspectives (Van de Ven et al. 1999). A unified homogenous leadership is more effective for Learning by Trial-and-Error as it is a more stable environment with incremental advances in learning. This sort of leadership may be effective for more stable environments for following an existing strategic vision, but is unsuited for the ambiguous nature of management of the innovation process (Levinthal, 1997).

3.5 The Process Model The theoretical cornerstone of this paper is Van de ven et al.’s (1999) Process Model, a model of the process an innovation goes through over its lifetime, from a vague idea to a completed product. I will introduce the 12 Process Characteristics of the model, as described by Van de ven et al. Since I will use this model to analyze the development of Dust 514, I will assign to each Process Characteristic both positive and negative implications. This will make it easier to anticipate problems they might have encountered, and as such help identify whether problems encountered

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were what to be expected according to Van de ven et al. (1999), or if they encountered different ones in developing Dust 514. This will aid in the development of the Critical Success Factors and help in understanding the influence of each of the Process Characteristics. The Process Model is separated into 3 periods, which are in chronological order: Initiation Period, Developmental Period and Implementation/Termination Period.

Figure 4: The Process Model. (Van de ven et al., 1999)

The Process Model is divided into 3 periods, the first is the Initiation Period; when the idea for the innovation comes to the innovator and a plan is made to make it into a reality. The second period is the Developmental Period; when the idea for the innovation is made into a reality. The third and final period is the Implementation/Termination Period; this is the end of the process when the innovation is either abandoned or implemented.

The Initiation Period Process Characteristic 1 – Gestation Usually an innovation will have a gestation period of several years, meaning that there is a vague idea that a person has been thinking over. Then, after seemingly coincidental events occur, such as 22

the recognition of a technological feasibility or simply a need for change, the stage will be set for an innovation to begin. But during this period the idea remains just that, an idea. Positive implications: Alert people will recognize an opportunity that has not been explored yet; their idea can lead to the beginning of an innovation. Negative implications: This cannot be managed, an idea will either form or it will not.

Process Characteristic 2 – Shock Shocks occur within the organization that triggers the initiation of the innovation. These shocks might be a change in leadership, product failure or a predicted loss or similar events of necessity, opportunity or dissatisfaction. These shocks can influence an organization in starting an innovation. The idea becomes feasible and the innovator recognizes this as a point in time where this could move from being an idea into becoming a reality. Positive implications: Mobilizes the organization and sets the stage for an innovation to be acted on. Negative implications: In some cases these shocks are negative situations for the company such as a product failure, market share loss etc. meaning that an innovation might be necessary to enable the company’s survival.

Process Characteristic 3- Plans The end of the Initiation Period is when plans are made for the innovation and resource controllers are lobbied for resources to launch the innovation. The innovator makes concrete plans for how his idea can become a reality. An innovation is simply an idea project until it passes this Process Characteristic and reaches the Developmental Period.

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Positive implications: Making plans means resources are allocated and the real work on the innovation can begin. Negative implications: Commonly people will take personal risks and provide inflated goals in order to influence internal or external resource suppliers, creating unattainable performance expectations for the innovation.

The Developmental Period Process Characteristic 4 – Proliferation An innovation rarely remains a single idea and many versions or alternatives spring out from the original idea. Many innovations are parts of larger systems so this sort of divergent progressions of ideas is to be expected as different possible ways of continuing with the innovation. This is the beginning of the divergent-convergent cycle that an innovation will go through. The four most common reasons for proliferation mentioned are: 1. Innovations are an ambiguous and an uncertain process so one does not know which innovation will yield fruit; as such different routes must be explored. 2. An innovation is seldom a single product but usually a family of products or a part of a larger system. 3. To leverage risk with diversification of the innovation. By making several versions or possible alternatives it allows to hedge against failures. 4. Different logics or mechanisms govern the proliferation. If the innovation is governed by both internal and external logics fx. R&D internally and requirements set by governmental agencies externally. For a video game this can mean adding options or aspects to the game with more features. This can lead to over-proliferation, with too many side projects if not properly managed. An aspect of this is frequently mentioned as a problem during development which is feature creep, where a new feature

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is added to the video game during development (Tschang, 2005). This is somewhat of a paradox as proliferation is beneficial, but too much can become a hindrance. Positive implications: The innovation diverges into several parallel projects in an attempt to figure out what is the best direction for the innovators to pursue. This also leverages against risk should some of the projects fail as there are still parallels to pursue. Negative implications: If there is too much proliferation the project becomes exceedingly complicated and too difficult to manage. Adding features constantly as well can mean delaying the game continuously.

Process Characteristic 5 - Setbacks occur frequently Plans will not work as intended and/or unanticipated environmental factors will affect the innovation process, whatever it may be there will be setbacks. Adjustments will be made to accommodate for this “grace” period. Although not as common as one might expect, setbacks can often occur, despite this, Van de Ven et al. (1999) reportedly did not see many cases where setbacks led to budget overruns or missed schedules or deadlines. The danger here is rather that there will be spill-over effects of failures in the first innovations into others. As innovations diverge onto several parallel paths, if a problem occurs in the original one it can spill-over into others as well, leading to problems in several innovations, this can spiral out into a vicious cycle. Positive implications: Problems encountered will either be too severe to be fixed or they can be solved, this will eliminate innovation projects that are too problematic to fix. This allows innovators to focus on projects that are more viable. Negative implications: Due to ambiguity, an innovation which develops a problem can have spill-over problem effects into other divergent innovations, spiraling into a vicious cycle of aggregate problems.

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Process Characteristic 6 – Shifting Innovation performance Criteria During the innovation process, the criteria for successes and failures will often shift, and can also be different between resource controllers and innovators. Comparing the responses to outcome criteria, or goals, Van de ven et al. (1999) noted a divide between the responses of innovators and that of top management. This is most notable in the beginning and ending stages, where early on innovators have short-term goals of getting the innovation off the ground and top managers have long-term goals of future profit from the innovation. These positions switch at the ending stages where innovators will have more long-term goals where the innovations will be able to justify themselves, whereas resource controllers will be looking to gain return on their investme nts, Van de Ven et al. (1999) call these views outcome criteria and input criteria for long-term and short-term respectively. It is during the middle period that goals converge more; there is difficulty in establishing impartial performance measurements due to the ambiguous nature of innovations. Top management and resource controllers do not really know how things are going with the innovation on an operational level and need to rely more on innovators for updates during that period. Innovators will assure them that any problems can be solved and that they simply need some more time. After this period of ambiguity has passed and the status of the innovation is clearer Van de Ven et al. (1999) noted that there would be a strategic shift in resource controllers to more short term goal oriented results. Positive implications: This will align the strategy of the innovation to goal based on the accurate status of the innovation. Negative implications: Due to ambiguity during the middle period of the innovation process top management does not know how the daily running of the innovation is going. There will be a strategic change afterwards when the top managers realize the actual status of the innovation to realign their strategies to new goals, meaning a disruption to the current course of the innovation.

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Process Characteristic 7 – Fluid Participation of innovation Personnel Personnel participating in an innovation within an organization tend to be involved in it only parttime and to have high turn-over rates. Organizations will commonly have people working part-time on their innovation projects, having people bring technical skills to the innovation, although often being inexperienced in innovating. Van de Ven et al. (1999) found that seldom would you see many of the people that began the innovation project, still working on it at the end of the project. This can have beneficial effects such as a steady influx of new ideas to the project; however this can also result in a brain-drain effect with departing people taking away some information on the innovations as they leave. Innovation projects were seen as less secure, than traditional permanent positions at companies, as routines are not as established. For this reason people would often let their work on the innovation suffer in order to make sure they were performing well in their permanent positions Positive implications: Introduction of new personnel brings in new ideas and fresh perspectives to the innovation. Negative implications: If innovation is not a priority in companies people working part-time on the innovations will not be fully committed to the innovation. People will focus on performing well in their permanent position and will allow work on the innovation to suffer as it is not as important to the company as their “real” job.

Process Characteristic 8 – Top management involvement and roles Many top managers will be involved in the innovation process during the Development Period and will perform contrasting roles, often shifting, which serve to create a Pluralistic Leadership for the innovation team. They will often involve themselves in the innovation and intervene in matters by breaking vicious cycles or changing the development directions. Decisions they made were not only according to plan but rather according to current conditions. Van de ven et al. (1999) divide leadership into four different roles, any of which a leader may perform as leaders were often found to demonstrate any or all of the four roles. These roles would serve as checks and balances to each

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other creating a more heterogeneous leadership, this reduces the risk of competency traps, oversight and increases foresight (Van de ven et al., 1999). These roles are described in detail in Chapter 3.3 Leadership During Innovation, these roles are: Sponsor, Mentor, Critic and Institutional Leader. An imbalance in these roles can lead an innovation project astray. With too much championing of the innovation without properly applying real-world business criteria to it, you can end up ignoring all “naysayers”, real or otherwise, and continuing with an impractical and ultimately a failing innovation. On the opposite end of the spectrum, if the Critic role is allowed to dominate it may be hard to get any innovation idea into development as success cannot be guaranteed. Positive implications: By having equally strong leadership roles the top management is able to apply different and often conflicting goals to the innovation. The Sponsor helps marshal resources and communicate with top management, the Critic assures that business feasibility is taken into account, the Mentor lends his previous experience to the project while Institutional Leader intervenes when necessary, gives the project its structure and balances the influence of all roles. Negative implications If there is poor balance of leadership roles then viable projects might never be initiated or difficult projects might simply be cut short too early without fully exploring their possibility. Poorly planned projects may be developed or a project may simply end in a vicious cycle that is never broken and the project is cancelled.

Process Characteristic 9 – Relationships frequently altered Organizations or innovators will often times develop relationships with outside organizations, engaging in transactions necessary to continue the innovation process. The nature of innovation is novelty and as such organizations may look outside of their own pool of resources in order to acquire the skills or resources that they need. A company or entrepreneurs will often enter into a relationship with outside entities for one of several reasons which can alter with time, leading to unintended consequences. Van de Ven et al. (1999) mention examples of resource scarcity forcing innovators to leverage sets of highly interdependent transactions, creating a fragile system of reliance. Partnerships and joint ventures can end up in stalemates due to parent companies’ strategic

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differences, and even successful close relationships where everything works well can lead to groupthink. To make this even more difficult for innovators, collaboration, joint venture or any type of cooperation can change with time. Innovations can take years to come to fruition and during that time either internal or external factors can lead to a change in any of the participants in the cooperation which can have detrimental effects. A former cooperator could turn into a direct competitor or a funding partner might decide to withdraw leaving the project underfunded. Positive implications: Although perhaps more rare than negative changes, former competitors might form partnerships or joint ventures. Negative implications: Relationships with external partners can change over time; a former partner may go into direct competition with your innovation after having learned of your methods or ideas. Partnerships can also end with the former partner taking away important resources such as people, funding or knowledge.

Process Characteristic 10 - Industry Team Playing The industry, which an innovation is being developed in, needs to have a proper infrastructure to allow for a better implementation or commercialization of the innovation. This includes establishing institutional norms, basic scientific knowledge, financing and a pool of skilled workers. An organization is often involved with larger outside public and/or private sector organizations and agencies in creating an infrastructure to support the development of their innovation, through a pool of human or financial resources. For a new industry however, this sort of industry macroinfrastructure is not always available, which may lead to cooperative actions undertaken by several industry members to create such an industry infrastructure. This effort though leads to “the paradox of cooperation and competition”, where organizations that compete must work together as well in order to ensure the collective survival of the industry (Van de ven et al., 1999). Cooperating with other companies to create an industry infrastructure can help companies starting up in the industry. It can also help current companies in expanding the size, importance and validity of the industry. This can help in removing barriers and reducing the scarcity of resources.

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Positive implications: Choosing an industry with good infrastructure can help entrepreneurs in acquiring resources and support for their new ventures. Negative implications: Some industries may be difficult to enter or simply may not have any infrastructure that companies can take advantage of.

The Implementation/Termination Period Process Characteristic 11 – Adoption When an innovation, developed in-house is adopted and implemented, it is usually by integrating them into the current environment by what is called “linking the old with the new”. If this is an outside-developed innovation however, it is more likely to be reinvented to fit the organization’s situation. This however is not the end of the innovation’s development, as it may be reinvented to fit the organization. Not everyone is open to innovation however and people may resist this change as commitment has been made to the old system. Positive implications: A new administrative system would be expected to confer benefits to the organization like an increase in productivity. A new product would mean new opportunities with new markets. This is not an end to the innovation as reinvention may continue. Negative implications: Not everybody is ready to accept new ideas, when an administrative innovation is implemented into a company there might be a resistance to the innovation due to commitments to the old system. This is less of a problem though for product innovation but still they would need to be linked to the old system.

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Process Characteristic 12 – Termination An innovation is stopped when resources run out or when top management declare it either a success or failure, thus signifying the termination of the innovation process. If an innovation finished successfully then praise and merit is awarded to those that played a part in it, while blame is often assigned in cases of failed innovation. Positive implications: An unsuccessful innovation would be terminated so more resources would not be wasted, or a successful innovation would be stopped as the goal of it has been reached. Negative implications: If an innovation is deemed a failure there is often the assigning of blame to the person/s that were responsible for the innovation project.

4.0 Company Profile 4.1 History of CCP In the beginning there was an idea, a massively multiplayer online game set in space where players would fight each other in spaceships, the focus would be on players fighting other players; the first line written of the games manuscript was written: “Death is a serious matter”. From this idea EVE Online would eventually develop and three friends started a company to make this game a reality. In Iceland in 1997 Loki Margmiðlun was founded by Ívar Kristjánsson, Reynir Harðarson and Þórólfur Beck for the purpose of making EVE Online. Due to lacking the capital to start the severalyear journey it would take to make EVE, they began by designing and releasing a board game known as Hættuspilið. The game was an enormous success and became a household stable at the time in Iceland, with around one of every eight homes owning the game (ÍVAR). In 1999 they changed the name of the company to Crowd Control Productions or CCP Games for short. Through an IPO in 2000 they raised more capital and the development of EVE Online began. In 2002 they signed a deal with Simon & Schuster to distribute their game in North America, during that time the 31

norm was go to out to the store to buy a physical copy of the video game, downloading them was rare. In May of 2003 CCP launched EVE Online after many years of preparation and three years of development, for most types of video games, and forms of entertainment, this would be where the development of the game would end. In reality this simply marks a stepping stone for EVE, at the time of launch it had been in development for 3 years. With the game in constant development since its release, now 10 years ago it has now been in development for 13 years. CCP has since the beginning developed EVE with the players as their focus; they have monitored how the players play the game and have given them the tools to allow them to play the game as they want to (CEO). Even in the first year after the release of EVE CCP contacted some select players and asked them to help with ideas to improve the game; this group of players would in the future become known as The Council of Stellar Management (CSM) and would be elected annually by EVE players. CCP annually flies the elected players from all over the world to join them in their headquarters for 3 days of meetings and cooperation where they present their ideas. This is an iconic feature of EVE Online and epitomizes CCP’s culture of iteration and cooperation, empowering not only staff to change the game but players as well. Soon after its release, in December 2003, CCP decided to buy their publishing rights back from Simon & Schuster and from then on almost solely offered EVE Online as a free downloadable client. In spirit of the company’s empowerment of the players and the community they held a fan festival in Iceland in 2004, which since then has become an annual tradition. In 2006 the company opened up a CCP China office to prepare to enter the Chinese market, and acquired White Wolf Publishing Inc., a table top roleplaying game publisher, that same year. Late 2006 they announced they were developing an MMORPG based on White Wolf Publishing’s roleplaying games entitled: World of Darkness, it continues its development from their studio in the United States, but release has been delayed since 2011 while CCP focuses on EVE and Dust 514. In 2007 CCP’s Shanghai studio began work on their 3rd game, which would turn out to be the second one to be released; the name of the game is Dust 514 and was announced in 2009. In 2011 CCP announced a strategic realigning with increased focus on EVE and Dust 514 with a sizable layoff in their USA studio, the CEO commented: “we had just been growing unhealthily fast” (CEO). Today CCP has around 600 employees and is working on 3 video games with 2 of them released and being constantly iterated on, EVE and Dust 514. They have developed their own technology platform called Carbon that is constantly being improved to stay cutting edge. It has several components fx. the Trinity Graphics Engine that renders all the graphics of their games, Ambulation Technology that does full body

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animations and interior and exterior spaces, Carbon Cluster Technology a cluster framework that has allowed CCP the most number of concurrent players ever in an MMO (Founder). Everyone can impact the world of EVE Online and make his mark on it. The CEO put it very simply: “The game will be a lot better if everybody contributes to it, and it’s also just a lot more fun!”. -CEO

CCP continues to grow and develop games with their ideologies. To empower staff and players alike to together create virtual worlds rather than games (CEO).

4.2 What is EVE Online? EVE Online (EVE) is the first video game developed by CCP Games, it was released in 2003 and is played on a PC. In EVE the player takes control of a space ship pilot in the distant future. The narrative- ludology description is sci-fi space flight combat simulator MMO. Humanity has left its planet of origin and traveled through a star gate called EVE to a distant part of the universe that they have named “New Eden”. The world of New Eden is divided into three types of areas depending on the freedom and security the player has in that area; these are high security (high-sec), low security (low-sec) and null security (null-sec). The higher the security the lower the freedom; a player that shoots another player’s ship in high-sec will incur the wrath of the police who will immediately come to help the victim. A player that shoots another player in low-sec or null-sec won’t have to worry about any police as there are none. In high-sec and low-sec, the star systems are owned by the empires and have stations that players can access. In null-sec however there is no longer a form of government and bands of players, known as “alliances” can take over a single or hundreds of the thousands of null-sec star systems and hold sovereignty in these areas. Now they are able to build their own space stations and defenses in the system. In a presentation at CCP’s annual fan festival, Fanfest, in 2013 the Principal Games Designer explained some of the basic ideologies of EVE Online. He said that EVE was like a sandbox, in the sandbox you can build your own sand castle and you can try to ruin other peoples’ sand castles, since this is your sand castle you will fight that much harder to protect it (Olssam62, 2013, 26 April). Like how null-sec players are given the freedom to make their own empires and fight each other to expand the borders of their empires. Another thing that CCP wanted to do was to create a 33

real world, and as such have every player in EVE playing on the same “server”. In many other MMOs, such as World of Warcraft, the players will be playing on many different servers and each server is run on different hardware. Meaning that if I am in a place called “Big Mountain” and my friend is on “Big Mountain” as well, we don’t meet unless we’re playing on the same server. EVE’s entire population of over 500.000 players is playing in the same universe. If both I and my friend go to “Big Mountain” in EVE we will meet there. This means that when there is a war over some territory thousands of players can be fighting each other in the same location, EVE’s largest battle had over 4000 real people fighting at the same place at the same time (Eve players stage giant, 2013, 29 July). The market of EVE is one of the most extensive MMO in-game markets in existence. Almost every single object that can be used in EVE can be made and sold by players, meaning that the market is almost entirely player-run. To monitor this market CCP has hired a full-time doctor of economics (Timeline, n.d.). Players gather resources and then manufacture anything they want. This can be anything quick and simple, like a small rocket launcher, which takes minutes to complete. Up to the largest spaceships in the game known as “Titans” which can take months to build. This variety allows a player to choose how he plays EVE. He can be safe in high-sec mining minerals and never fire a weapon, killing and ransoming players as a pirate in low-sec or banding with thousands of players to forge massive empires in null-sec, or anything in between. The choice is put in the player’s hands.

4.3 Learning from EVE CCP Games is a 15 year old company that released its first video game, EVE Online, 10 years ago and it has been continuously working on that game for all of the 10 years it has been out. The culture of the company takes a lot from this first game of theirs as it has not only been a source of great pride for them but also a valuable learning experience which started 13 years ago when work began on the game. Their methods of project management and innovation process management are built on what they have learned from the development of EVE, their game design ideologies also take from it. These are all the foundational principles that Dust 514 is built on. This section aims to help us understand what lies behind the structuring and design of the innovation process of Dust 514.

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4.3.1 Empowerment The players of EVE and can build massive structures as well as massive spaceships to blow up those structures. A great part of the world of New Eden can be claimed and owned by players; as such each and every player can have an enormous impact on the world, even to such a degree that video game magazines will publish several page articles on betrayals and large scale destructions in EVE (Eve players stage giant, 2013, 29 July). But the players do not only have impact in the game world, they can also have an impact on the game world. CCP monitors what players want in the game and how they want to play the game. In the beginning, CCP saw that players wanted to make a cooperative effort between many different player-controlled corporations, so CCP implemented “alliances”, which allows players to join several corporations together for easier cooperation. Furthermore, CCP has had The CSM, player-elected representatives, that fly to Iceland annually to work with CCP on upcoming changes to the game. But this empowerment is not limited to the CCP staff, At CCP all employees are encouraged to suggest ideas for the game, ideas are not limited to the game developers and the CEO mentioned this as something they had some trouble with their studio in China: “They didn’t realize that it was ok for anyone to suggest ideas, but with time they did come to see that it was indeed true.” –CEO

With studios around the world they mentioned that people working on other CCP games in different countries might play with them in the in-house play-tests and suggest something for the game, but the focus is still what the players want. The COO noted: “You need to get any idea out to the players and then develop it with them.”.

Shortly after launching Dust 514, they set up a communication with the players letting them know which ideas of theirs CCP was following and how they wanted to work on them (CCP Cmdr Wang, 2013, 9 April). During the 2013 fan festival in Iceland they, as they do every year, invited attendees to ask questions or give suggestions at different panels on different aspects of their games. CCP staff members were very receptive to comments and the Creative Director of Dust 514 himself would make statements like “if you guys want doors we’ll absolutely make that” (Olssam62, 2013, 26 April).

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4.3.2 Project Management In the early days of CCP when they were developing EVE Online they used a project management method called Stage Theory Planning where they would aim to create vertical slices of the product within a certain timeframe to allow testing of it (CEO). They have evolved through many different agile methods but today use Agile-SCRUM. In the Agile-SCRUM method they make a 5 year vision, a 3 year roadmap and a 12 month plan, they then review and change this as necessary every 6 months, allowing the development team to focus on their work uninterrupted for that time period. Additional ideas that come up will be put aside and then implemented into the vision, roadmap or plan depending on where it fits, at the 6 month review (CEO). The idea of both methods is to create a whole, workable version of the product within a certain timeframe. In this SCRUM method, there are many different interdisciplinary teams that each work on some aspects of the game, such as environment, guns etc. These SCRUM teams then “own” their projects that they work on; this again emphasizes CCP’s empowerment of their employees. The COO described it best how this empowerment and project management style worked together: “Make a team that make their own decisions, connect them to the community, get the game out as soon a possible, get feedback from the community and iterate” One example was that one team was asked to make something new that happens when you die in Dust 514 and what it looks like when you come back to life, they were given complete freedom in how they would execute this (CD). This was then released to the community who had some suggestions for iterations to make it better suited to their playing needs.

4.3.3 World-Wide CCP began as a company in Iceland but has since then spread to USA, England and China; as such they have had to change their operating procedures. They have moved from being centralized and management is now more decentralized with more power given to each regional director. They tried to implement the company culture from Iceland and transplant it in their new regional offices but the CEO felt it had started to work against them:

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“You have to allow people to own their own culture at each office, that’s how culture comes about, you can’t create it, you can mold it and shape it. It’s like growing a tree, you can trim it, but you can’t tell it how to grow.”

Working at 3 places at the same time had begun to affect their development. In the beginning the people working on the core engine sat in the same office as the game developers so they could easily communicate, but with the great distances people working on the core engine disturbed the people working on Dust as they didn’t know what was coming. However in 2012, the technology was broken apart and people could develop each part on its own, they knew the ideology and could continue in their own context (COO).

4.3.4 Change The nature of EVE Online is constant iteration and change, the core principles are the same but the operation procedures can and will change. “One thing you have to watch out for is that what makes you successful at one time doesn’t necessarily make you successful at another time.” –CEO

The only constant at CCP is change, they look for opportunities in new markets, founding a company for the Chinese market and entering the Playstation 3 console market immediately for their second product. They modify their project management methods to fit their needs (CEO). The CEO says he still sees CCP as an internet start-up company and that their culture is much more internet-related than Iceland-related. The CEO puts this ideology into words: “You always have to make sure to change a lot of things, because everything is always changing around you. If you don’t change you’ll get left behind. But you need to have a thread; you can’t lose your soul.”

The COO further stated: “Change is good, change what doesn’t work”

These processes and ideologies can all be seen in the development of Dust 514 as well as EVE Online, with the constant iterations. CCP’s culture does differentiate a little from office to office but these core ideologies remain the same.

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4.4 What is Dust 514? Dust 514 is the second video game released by CCP Games and its official launch date was 14 May 2013, which was during the research and writing of this paper. Dust 514 is played on the Playstation 3. In Dust 514 the player takes the role of a mercenary soldier who gets paid to fight on planetary surfaces in New Eden. Dust 514 and EVE are played on the same server, which adheres to CCPs wish to create a real world for their games. As such an EVE player, on his PC, flying his spaceship over a planet where Dust 514 players are fighting, from their Playstation 3, can send messages from his computer that the Dust 514 players receive in real time on his console. This interaction between two games, as well as platforms, is something that has never been done before and is the biggest innovation in the game. Instead of fighting in space, the Dust 514 players fight on the ground. This is done from a first person perspective where the player controls a character equipped with a gun, and is in essence a first person shooter (FPS) game, although with quite a lot added to that basic idea. As discussed in “Chapter 1.1 Taxonomy” Dust 514 is a sci-fi MMORPGFPS. Players have the options of calling in different types of vehicles, from armored vehicles like a jeep or a tank to an assault aircraft to assist them in their fight. In Dust 514, players band together into corporations, and alliances of several corporations, they can even band together with EVE corporations. They then fight in one of several types of battles: Instant Battle, Faction Warfare or Planetary Conquest. Instant Battle is a fight between two corporations, not run by players, which hire players to fight for them, the win or loss has no effect on New Eden. In Faction Warfare the players fight for one of the four empires of New Eden and the winning side will give bonuses to EVE Online players fighting for the same empire in that star system. Lastly, in Planetary Conquest Dust 514 players attack and take over districts on planets and claim them for their own player-run corporations, much like how players in EVE claim sovereignty in null-sec. These planetary district ownerships can then confer benefits to EVE Online players from the same player-run alliance. The connection between the two games in this same universe is most apparent in Planetary Conquest, as an EVE pilot can shoot his ship’s weapons from space down to the planet’s surface which will happen in real time between the PC and the Playstation 3 computers. In doing so an EVE Online player on his PC is killing Dust 514 players on the Playstation 3.

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Like EVE, Dust 514 is an MMO game and will be in continuous development and iteration for the unforeseeable future. EVE has had 19 expansions to this day during its 10 years since launch and countless additional features have been added to it. There have been made development plans for Dust 514 into the far future and with time will come more and more integration of the two games (COO). Future plans will have the markets and economy merged with EVE. But as with the nature of the game, there will always be expansions in development.

4.5 How is Dust 514 different? With the ludology- narrative classification of Dust 514 is sci-fi MMORPGFPS it is difficult to define Dust 514’s direct competitors. Being a hybrid, having elements of FPS ,RPG and MMO they could attract players that want fast action shooting and thus be competing with FPS games like Counter Strike or Call of Duty. They could also attract players that want continuous character development like MMORPGs and thus be competing with World of Warcraft, Guildwars 2 or EVE Online. Although Dust 14 is a rather unique type of game there are some games that share common features with it, such as the fast action (FPS), continuous character development (RPG) and persistent world (MMO). The biggest games that share these features are Global Agenda and Planetside 2. All three of the games have a system where you accumulate skill points as you play, these points can then be allocated to increase your effectiveness or versatility, the RPG elements. In all of them you carry weapons, in an FPS, manner and fight over control of limited territory, the MMO aspect. However, they all differ slightly, where Global Agenda has a 3 rd person view and no vehicles (www.hirezstudios.com/globalagendagame), Planetside 2 has 3 empires which you will fight for whereas in the other two games you create your own “empire”, “corporation” or “agency” to fight for (www.planetside2.com). But, the main feature that makes Dust 514 stand out from its competitors is that the persistent world aspect of the game is a much more fully fleshed out world. In Dust 514 you fight in a world that has been in existence for 10 years and already has 500.000 space pilots inhabiting the world. This does give Dust a definite MMO advantage since there are few online worlds as persistent as the world of New Eden. But having aspects of these different video game genre elements and being difficult to classify is not necessarily a good thing. Potential customers find it difficult to choose between products when they all embody different merits (Tushman and Rosenkopf, 1990).

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5.0 Analysis In my pursuit to define the Critical Success Factors for managing an innovation in the video game industry I will begin by applying Van de Ven et al.’s Process Model (1999) to the development of the video game Dust 514 from CCP. I will go chronologically over each Process Characteristic, analyzing how it transpired for CCP and comparing it to the negative and positive implications seen in the Process Model from Chapter 3.0 The Process Model. In addition I will supplement this with the perspectives of several authors’ description and observations of video game development process taken from the book Introduction to Game Development (2005) as well as a few other authors on different topics. Afterwards, I will use draw from the analysis the Critical Success Factors which will then be discussed.

5.1 The Process Model of Dust 514 This model is based on the responses from my interviews with several interviewees from CCP, the accounts from the interviewees combined gave a relatively holistic picture of the process. The model progresses chronologically from the Initiation Period to Developmental Period and finally to Implementation/Termination Period.

5.2 Initiation Period The Initiation Period is not just the early stage of the innovation, but even begins before the innovator starts to think about what he wants to do. During this period the innovation goes from being a vague idea to a plan to which resources are allocated in order to begin its development.

5.2.1 Gestation CCP Games set up offices in Shanghai China in 2006 as they wanted to research the Chinese market and knew that they wanted to do something in China. There had been an idea to make an MMO for the Chinese market, nothing had been decided yet but CCP wanted to get one foot

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into the door and felt they needed to be physically in the Chinese market before they could really enter it (COO). The idea of making Dust 514 began with CCP wanting to make use of their EVE Online intellectual property and to make another game that would be set in the universe of New Eden, EVE had been very successful. At that time the idea of having this new game as a part of EVE and being able to affect EVE had not yet been thought about, let alone having players able to interact with one another between the two games (COO). The idea was to make a game very different from EVE and introduce the New Eden universe to players that would not be interested in be playing EVE, reaching those that EVE would not be able to reach. As the CEO put it: “It’s hard to understand what the goal is [in EVE Online]…it’s very abstract…How can we make a game that works on the same principles, from a game design perspective, as EVE, but is in a sense easier to play because it follows better known game pattern?”

The Creative Director of Dust 514 knew some of the top guys at CCP from having worked together in the late 1990s; this was around the time that CCP was setting up offices in China and he was working at another game development company. He had a talk with his former colleagues from CCP and started kicking around some ideas. EVE was doing well and they discussed possibly making a spin-off game. When it came to gameplay they had discussed different genres, but as he had a lot of experience with first-person shooter (FPS) games the natural inclination was to make this into an FPS game (CD). At this time we can see that CCP was being alert and open to new possibilities, as discussed in Chapter 3.5 as a positive implication to this Process Characteristic. CCP entered China not because they had a great idea they wanted to act on but rather because they thought there would be possibilities there. They felt it would be valuable for them to set the stage and be ready to act on opportunities as well as to learn more about the Chinese video game market. They set the stage for an innovation to begin; the seed of an idea was there was it was as of yet undeveloped.

5.2.2 Shock The shock that moved CCP forward on the idea of Dust 514 was an acknowledgeme nt of an opportunity. EVE was doing well and was continuing to grow every year; CCP had launched a second server in China, as online games in China must be run by Chinese companies, getting a

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small foothold into the Chinese video game market. They then set up their own offices in China, preparing themselves to enter the market. The COO noted that they moved to China in order to research the Chinese market because they wanted to do something there, no concrete plans had been made but there was an idea to make an MMO for the Chinese market. While they were still learning what was happening in the Chinese market they saw Dust 514 as a smaller project that they wanted to do, an opportunity to work on a small new game before they began working on their MMO for the Chinese market (COO). CCP’s shock that moved them from an idea of an innovation to that of making plans to develop it was that of recognizing an opportunity. They felt they had a big opportunity on the horizon in the Chinese market and planned to only make a small game before making an MMO for the Chinese market (COO). The implication of this Process Characteristic was a positive one as the shock experienced by companies are often the result of negative implications, as mentioned in Chapter 3.5; CCP however experienced this shock only due to their alertness to opportunities, propelling them forward in order to seize an opportunity.

5.2.3 Plans At this point CCP had begun seriously considering making Dust 514, the time seemed right for it as they had the resources and felt there was a market they could explore by targeting those players who were likely not interested in playing EVE. More work began on Dust 514 and the larger picture began to become clearer regarding what this game would be like. Looking to reach people that weren’t playing EVE they decided not to make Dust 514 for the PC, but rather to make it for the Playstation 3 console: “When you turn on your console then you have the expectation that you don’t need to learn anything, everything just works, just turn it on and start playing” –CEO

This was also along the lines of making a simpler game than the complicated game that EVE is, as the average EVE player is 32 years old and has a university degree (COO). “We wanted a game you don’t need an IQ of 130 and an engineering degree to play” -COO

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The original idea was to make a single player FPS game that happened in the New Eden universe, but was not connected to EVE in any way (COO). They felt however that CCP knows how to make MMOs so they would make Dust 514 an MMO (CD). They decided not to include any single player element in the game, something which was unheard of at the time, and decided to make this game only playable with and versus other players, much in line with CCP’s idea that players will always make the best content themselves (CEO). In addition to being an MMO they decided that they wanted to connect EVE and Dust 514 together, having them take place in the same universe at the same time and be able to affect each other so that a Dust 514 player would be able to affect an EVE player and vice versa (CEO). This had never been done before in any video games, connecting two video games together in such a way and to add to the complexity of this, these two video games would be played on two different platforms, the PC and the Playstation 3 console. This was highly ambitious as this was a radically innovative idea and they would themselves have to invent the technology that would make this possible. This would later become problematic as it was such a difficult undertaking, but at this time it became clear that this is what would differentiate Dust 514 from all other video games ever made (CD). A development document was made and presented outlining the plans for Dust 514, when they presented it people said that it was much too ambitious (CD). They did however get the green light from top management and a team began working on the first prototype of the game in the end of 2007. Usually it is difficult to lobby for support to begin the project and to secure resources, Sloper (2005) even suggests meeting with each decision maker individually to address his concerns and lobby for support. Van de Ven et al.’s (1999) description of this Process Characteristic was prophetically accurate when it comes to Dust 514. The Creative Director stated that their development document was thought to be too ambitious, just as Van de ven et al. (1999) note that inflated goals will be provided and unattainable performance expectations in order to secure the resources needed to begin work on the innovation. This should be carefully noted as we progress through the Process Characteristics of the Developmental Period as we will see the effects of this echo throughout the rest of the innovation process.

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5.3 Developmental Period A decision had now been made to move forward with the development of Dust 514, a team had been created that would continue to grow over the course of the development of the game. At this stage the ideas of how the game would be like had not really been written in stone, but the general theme and idea of the game was there.

5.3.1 Proliferation At this point the team in Shanghai was hard at work deciding what features would be in the Dust 514 and what it would feel like to play the game. CCP has a very open and accepting atmosphere of game development and encourages everyone within the company to share their ideas. “We try to have it as encompassing as possible, having it so everyone participates in making the game, that way the game becomes much better. Just as the game [the way it is played] is created through emergence, there is also a certain level of emergence in how we make the game” –CEO

CCP sees this holistic inclusion of staff in creating the content of the game as one of their strengths (CEO). They even let teams run with ideas they want to do, even if top management isn’t sure it will work, to let the teams have the freedom to be ambitious (COO). One of the initial problems they faced in developing the content of Dust 514 was getting everyone on the same page as to where on the complexity scale the game would be. But this problem was solved as soon as they had a version available for play-testing by the players and they started giving CCP feedback (CEO). There is a very structured process an idea will go through when considering whether it will be implemented in the game. If a team member has an idea he will discuss it with his team, this team in inter-disciplinary and includes people responsible for art and the business side as well. If the team decides it’s a good idea the team leader will present it to his segment owner, who will in turn show it to the Creative- and Technical Directors. If the directors like it they will tell the Executive Producer who has the last say in the matter (COO). Ideas can change and be reinvented along this process, but sometimes ideas will just go straight through this and into the game unchanged. Often times the teams themselves decide what goes into the game, such as when they are given broad instructions like “make a new screen for when you die and are reborn”, they are given free reins to do what they want (CD). They changed their organizational chart in 2011 when they hired in a new 44

Executive Producer. Before that time the Creative Director had the final say in the decisions and the executive producer was more just trying to coordinate the segments, they felt that the creative direction was too strong a force at that time (COO). There was a general agreement among the interviewees that things were moving quite slowly forward with the development of the game, the production phase didn’t begin until 2011 and the Creative Director commented: “It’s not good too have too much time, it can be bad, you can start doubting what you have done and start to redesign it”

He also commented that he felt that there was a lack of focus for Dust 514 as well as the company. This change in the organizational chart seems to have been CCP’s response to this as an attempt to focus the development and to make sure that Dust 514 would be published as soon as possible. With this new organizational chart the Executive Producer supplies the overall direction of the project and is supplemented by the Creative Director, who is in charge of the creative direction of the game, and the Technical Director, who is in charge of how the game will develop from a technical standpoint. The Executive Producer can veto the ideas of either the Creative or the Technical Director if he feels they don’t work for the game as he is now the owner of the Dust 514 project (COO). “In the beginning there were lots of new ideas, now for over a year there has been a roadmap of what we are going to implement into the game and there are no new things being added right now. It’s hard to change something now after this roadmap has come about, which is rather sad” –CD

Every single interviewee said the same thing about Dust 514 “It was never supposed to be this big”. It is obvious that Dust 514 experienced feature creep; new features that were not originally intended being added later. This has expanded the size of Dust 514 from the original concept of “a small FPS game” to what the Creative Director called: “The biggest FPS game in the world”. In addition the CEO commented: “It took much longer than we expected, but the outcome is also much better”.

Dust 514 obviously had a great deal of over proliferation, but it cannot be denied that they had a great deal of successful proliferation as well, showing both the negative and positive implications we identified in Chapter 3.5. The overambitious plan from Chapter 5.2.3 Plans may be the result of this, it seems as though the features were kept in and the development schedule was allowed to be

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delayed as a result. Llopis (2005) considers proliferation as vitally important and holds that without iteration and experimentation of content the final product will be of poorer quality. Although sometimes it is necessary to make changes to a game, perhaps to stay competitive with similar games, such as Planetside 2, this can cause problems when introduced later in the development of the game, leading to missed deadlines and extra cost (Sloper, 2005). Additionally, there seems to have been a lack of criticism of this and the scope of the project expanded beyond the size of any other FPS before. The quality vetting process seems to have kept the ideas good, as even if there were too many of them, this resulted in a much better product than they had imagined in the beginning.

5.3.2 Setbacks Occur Frequently During the development of Dust 514 there were several setbacks that the team ran into that were mentioned by the interviewees. The first one was the distance they had between the China studio and the other studios, it was not only the physical distance but also the 8 hour time difference they had. It made it difficult to communicate between studios as the working day was coming to a close in China as the day was beginning in Iceland (COO). Furthermore, the core engine that they were developing the game on was being worked on in England and it was difficult to communicate with them to find out what was happening with its development and what was being changed in the core engine, leading to problems during development in China. CCP however solved problem by breaking up the core engine into smaller parts and moved the development of each part into each of the locations where it was being used, making each studio a lot more independent in their development (COO). Another example was the disruption to the project in 2008 where the entire Dust 514 team was asked to stop development on the game and was moved to Iceland to work on EVE. This break in development lasted for 8 months and the team did not return to work on Dust 514 until summer 2009. This restart of the project led to a lot of redesign on things they had completed before, but felt they could do better thanks to new technology or simply because they had better ideas (CD). However what seems to have been the biggest setback was due to the technical difficulty inherent in the premise of Dust 514 being linked to EVE in real-time. There were a lot of problems because of this novel new idea as the team had to learn how to solve major technical problems themselves

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(CD). They were working on a technology that they had to invent this themselves, connecting the Playstation 3 console to the PC, allowing the two platforms to interact with each other. Video games are already complex and rapidly changing technologies requiring not only advanced software technology but also powerful creative functions such as art, design and story-telling (Tschang, 2005). Top management seems to have understood how difficult this radical technical innovation was and as such allowed the project a very long grace period and it took the team a very long time to create the mechanism that connected Dust 514 to EVE. CCP seems to have had a good grasp of the idea that a radical innovation will have a more disorderly process (Pelz, 1985) from their development of EVE and all of the radical technological innovations that its development entailed. They seem to have been focusing on the enabling of the innovation process rather than constraining it during this time, allowing it the freedom to branch out, looking for the best possible ways to solve it (Van de ven et al., 1999). The long temporal lag between development and implementation was expected so there seems to have been a lack of deadlines, or at least rather lenient deadlines, resulting in a long period of ambiguity that, as mentioned before, the Creative Director felt did not benefit the project: “It’s not good too have too much time, it can be bad, you can start doubting what you have done and start to redesign it”

This seemingly created a vicious cycle, as described in Chapter 3.5, where the innovation team was given a lot of time to work on the game and to solve the technical problems inherent in that, and as a result they started taking even more and more time to work and rework the game. This schedule delay is usually a warning sign of problems beginning to occur, and if they are not addressed immediately they have a tendency to grow, if they are left till a later stage they will only spiral and become worse (Sloper, 2005) In the end this had become very problematic for CCP as the game was adding features and was continuously growing. This problem began at the Process Characteristic Plan, continued through Proliferation and we see it become a very real and a very big problem now. In the next Process Characteristic Shifting Innovation Criteria we will see what happens when top management recognizes the problem as the innovation leaves the period of ambiguity.

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5.3.3 Shifting Innovation Performance Criteria In 2011 top management at CCP decided to change the organizational structure for Dust 514, taking power away from the Creative Director making the Executive Producer more influential and giving control of the innovation project to him. As they did this they hired a new Executive Producer into the company to oversee the development of Dust 514. In describing the new organizational chart the COO noted that before, the production function didn’t manage to drive all of the segments forward. As such the Executive Producer was given control of the entire project and was tasked with the job of finishing what needed to be done so they could finally release the game (COO). At this point we see the performance criteria of the innovation process shift from being a project that was in development to a project that was now supposed to be released. The schedule became much tighter and it became harder to add features into the development plan, a new idea that they decided they wanted to implement would be put on the roadmap after the current 6 month roadmap was finished (CEO). This seems a way for them to curb feature creep and finish what they had decided to do before thinking about what to add. The role of the Creative Director changed to looking more towards the future and to think of what could be done for the next iteration of the game, leaving the development of the current one to the Executive Producer (COO). In the beginning of the innovation process the innovators put forward a very, some said “too”, ambitious plan for the development of Dust 514. CCP recognized that this could become a great game and as a result felt confident in investing in the project. Here we see what Van de ven et al. (1999) call Outcome Criteria and Input Criteria, the innovators have an Input Criteria where they are lobbying for resources to build a team and to launch the development of the innovation. The resource controllers are looking to the future towards the Outcome Criteria where they will have a return on their investment in several years. During the ambiguous period of the early development of Dust 514 they had given the project a very relaxed schedule, now however they were realizing how long it might take to finish the product if no changes were made to it. The shift in the performance criteria had the top management of CCP asking for launch date for the game. During the middle period of the development of Dust 514 CCP relied on managers’ reports on the status of the day-to-day activities as this was a period of ambiguity where they were still working on solving technical problems and well as more standard design issues for the game. This problem of ambiguity is recognized by Van de ven et al. (1999) who mentions the difficulties in showing progress for the innovation during its earlier stages of development as the team is still working on

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solving problems. Furthermore, Sloper (2005) states that this problem is also well known in the video game industry as the only thing that can be shown to decision makers in the early stages of development is progress reports, since there is a tremendous amount of programming needed to demonstrate what a game will look like. Owing to such a long period of ambiguity CCP found themselves in a different position from what they had expected, as we can see in the changes of the organizational chart and roles of leaders and the empowerment of the Executive Producer position. A realignment of strategies occurs as predicted in Chapter 3.5, the reason for what may have caused this will become more clear after our next chapter, in Chapter 5.3.5 Top Management Involvement and Roles.

5.3.4 Fluid Participation of Innovation Personnel Innovation at CCP is not a part-time job; the company’s first product was highly innovative and has proven to them how important good innovation is for a company. Furthermore, it is quite difficult to work part-time on a project in China, while focusing on another project in Iceland or England, logistically it’s not possible. Innovation at CCP is important as both of their products, EVE and Dust 514, are never really finished, the nature of an MMO means that they are iterated on continuously throughout their entire lifetimes, meaning that they are in a sense always working on innovations. They make an enormous effort in involving everyone in the company in coming up with ideas or iterations to use for their games. During the development of Dust 514, they have been adding staff to the project, not reducing it, although in the beginning they mostly had to move people from Iceland to China to work on the game they also hired Chinese staff, more and more so as time went on. Losing people from a project is recognized by both Van de ven et al. (1999) and Sloper (2005) as having adverse effect on a project, leading to brain-drain from the project where people will take knowledge away with them as well as it can mean they need to train a new team member, leading to downtime and a delay in the project. The development team began as only a handful of people but at the launch of the game there were between 140-160 people working on Dust 514 (Founder). We can see how CCP exposes itself more to the positive implications of this Process Characteristic, by adding more and more people to the project and with that adding constantly fresh ideas and perspectives to it as well. This, when paired with their open and inclusive culture that allows everyone to contribute ideas to projects, keeps

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continual additions of fresh ideas to their innovation. During the interviews high rate of turnovers was never mentioned as a problem, with the increase in number of people, and rather interviewees complaining that it was difficult to gain access to more talent, it doesn’t seem as though the negative implication of this Process Characteristic, the brain-drain effect, was a problem. It should be noted however that with a video game of this sort, CCP will not maintain such a large staff to continue iterating on Dust 514 (Founder). The large number of people working on Dust 514 during its release was mostly to finish the game and afterwards the staff will be reduced with time. As it stands right now, we can assume that CCP has suffered no major brain-drain from the Dust 514 innovation process, but as the project’s team is reduced, Dust 514 should be expected to suffer somewhat from the negative implication of this Process Characteristic. When CCP begins to reduce the team’s size they will already have published the game and will be working on either iteration to the current content or be working on new features and ideas to implement into the game. As it stands right now we cannot say whether the negative implications will have the same effect as they would during the development of the game, but it can be assumed that they may have some negative effects. But it is important to note though that CCP does not seem to be experiencing any people leaving the project in order to stay focused on a more permanent position they hold within the company, a negative implication noted in the literature that is far more harmful to the innovation, as it means a person working on the innovation team is not dedicated to the innovation.

5.3.5 Top Management Involvement and Roles From my interviews it seems evident that the top management of CCP was very supportive and involved in the development of Dust 514. There seems to have been a lot of championing for the development of the game at top management levels as they moved ahead with a game whose development document was believed to be too ambitious (CD). In addition they had a lot of support from the CEO who helped a lot in the beginning and then in the later stages of its development he spent his time equally working in Iceland and in China. “I’ve been working on virtual realities for 20 years. I have experience that is very useful in the beginning and the end…so they don’t make the same mistakes, let them make new ones” –CEO

It was also evident that top management was aware of the difficulties in the innovation process needed to create an innovative game. Much of the top management of CCP had worked on their

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original game, EVE Online. Furthermore, the CEO notes that he sees CCP still as an internet startup company and he feels that they need to do everything at the highest level (CEO). He understands how start-ups work; he was at CCP when they were only a start-up, and knows how time consuming and disorderly it is to make a game that is so radically innovative. But as he mentioned, it is important to him that they maintain the highest standards. EVE Online has been growing every year for over 10 years now, which has never been see for MMOs, and has some of the most loyal and active player base (CEO; Founder). So maintaining high standards for what they make is important to sustaining the brand that they have created for themselves. The Dust 514 team was given a lot of slack time to work on the game and was neither constrained by time nor resources. This is however not to say that there were no critical voices. Not all of top management was enthusiastic about making Dust 514 and the CFO of the company was even against the development of the game (Founder). Furthermore there is a layered vetting process for any new ideas, but it does seem as though the leadership role of the Critic, as discussed in Chapter 3.4 Leadership During Innovation, had been lacking at CCP. The role of the Sponsor and Mentor was quite strong at CCP and even the CEO acted as a mentor to the team, as he stated himself in how he was able to share his experience with the team so they would not make the same mistakes as he had done (CEO). Not to mention that he splits his time equally between Iceland and China, which gives the Dust 514 team certain benefits? “I can influence things, in organization there are some people you pay more attention to than others” CEO

They were also joined by the Principal Game Designer in the early periods of Dust 514; he was a part of making the original prototype for the game (CD). As we can see Dust 514 had the benefits of a very strong Sponsor and Mentor leadership roles from people all the way up to the CEO of the company. Normally the CEO of a company will be the main influence of the Institutional Leader to an innovation. This role seems to have been accomplished well, whether by him or others, as there was never mentioned any difficulties in obtaining resources. Another important function the Institutional Leader role fulfills is that of breaking vicious cycles, and this was done as well. In Chapter 5.3.3 Shifting Innovation Performance Criteria we saw that after the period of ambiguity the top management of CCP realized that they were not as close to publishing Dust 514 as they would have liked to been. There was a strategic realignment and a change in the organizational chart, with the position of the Executive Producer put in charge of the whole Dust 514 project

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tasked with publishing the game finally (COO). This slow progression in the development of Dust 514 seems to have been the lack of the Critic leadership role during the ambiguous development period of the game. This too seems evident in CCP’s actions where they empowered the position of the Executive Producer and put him in charge of the whole project. It had been noted before that in the earlier organizational chart the production function was trying to coordinate the segments but didn’t really manage to (COO). By empowering the Executive Producer they and making him responsible mainly for the timely delivery of the project they reinforced the Critic role, that up until that point had been lacking. There is a problem however in implementing a strong Critic role in the late stages of an innovation according to Van de ven et al. (1999) that the Critic will simply cancel the project as it does not seem to be economically viable for the company. CCP however circumvented this problem by making this reinforced Critic role responsible for publishing Dust 514. Meaning that cancelling the project is not an option, so he will have to make sure that hardnosed business criteria is applied to the innovation, making sure that the game is finished in the most economically feasible manner possible that will end up making money for CCP. Even if the leadership roles of Dust 514 were not equally balanced, in the beginning, and skewed more towards the Sponsor and Mentor roles, they did put a great deal of effort into balancing them as they came out of the period of ambiguity. They used a very smart way of reinforcing their Critic role in the later stages of the game, that countered the problems often seen with implementing it at a late stage in the innovation (Van de ven et al., 1999). There is a question though of how constraining this new role was as it has been commented on that it is much harder to get new ideas into the game now than it used to be (CD). It is probably better for it to be so, but whether it has become too hard is difficult to say.

5.3.6 Relationships Frequently Altered This Process Characteristic might be the one that CCP was least affected by, neither beneficially nor negatively. CCP is an independent studio, which means they are both the developer as well as publisher of their games. Although in the case of Dust 514 their game is released digitally on the Playstation Network, but Playstation has no say in the development of their game and only puts the game on their platform and implements updates to the game. The development of Dust 514 was not reliant on any outside investors or loans so there was no relationship they relied on for resources.

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All technology was developed in-house as well so the was no outside relationship that CCP was bound to in any way, making them totally independent in their development of Dust 514, so there was really no relationship that could be altered. This relationship between publishers and developers can be problematic and any type of money issues on either end can sour the relationship and put the game development at risk (Sloper, 2005). The benefits of CCP’s independence will be discussed further in Chapter 6.5 Reduce Outside Dependence, but this freedom that they had in terms of Dust 514 meant that they did not have to suffer through any pressure from outside factors when or if they faces difficulties. The long development time of the game could have pushed partners to pull out or demand action, CCP’s independence allowed them to deal with any and all problems on their own terms.

5.3.7 Industry Team Playing CCP had entered a new market by opening up offices in China, not a new market where they sold their products, but rather a new market where they hired people. All of the interviewees discussed the difficulties in recruiting good people into the company in China (CEO; COO; CD). Although CCP was well known in Iceland and respected in the Western video game industry they were not well known in the Chinese video game industry, which meant that they had trouble attracting local Chinese staff. There wasn’t much they could do in that respect as there is no quick way to gain prominence in the video game industry in China. They had to resort to bringing people outside of China into the country to work for them; to begin with these were mostly people from their Icelandic office (CD). But more people joined with time and they had some well-known programmers join their team from famous companies such as Electronic Arts, Ubisoft and others (CD). When these well-known programmers started to join the team the Chinese programmers started to take more notice of CCP in China and it became easier to attract good local talent (CD). CCP had chosen to establish themselves in a new market. The problem wasn’t a lack of proper infrastructure, as mentioned as negative implications in Chapter 3.5 The Process Model, but it was simply that CCP was now a small fish in a big pond. As large as companies are on the Western market, they are much smaller compared to the Chinese market. The problems CCP faced in this Process Characteristic was simply that they wanted the best, but weren’t the biggest. They did

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however solve this problem by bringing in “the best” from another market and showing the local programmer that they were a company that should be recognized.

5.4 Implementation/Termination Period We come now to a period in which the unusual nature of Dust 514 as an MMO plays an integral part. Since, although the game is published, it is in no way finished, it is implemented and then it is iterated on continuously throughout the entire lifespan of the game. EVE Online has now been doing this for 10 years with the 20th addition to the game content-wise, although minor fixes are being implemented much more frequently than that.

5.4.1 Adoption Dust 514 was released on 14 of April 2013, it had however been in “open beta testing”, meaning that anyone that wanted could play it, for several months. The release of the game consisted of an update to the content of the game, but most features of the game remained the same as it had been during the open beta, the progress people had made during the beta and anything they had collected remained unchanged. During the writing of this paper there have been several additions made to the game, iterating on current content and implementation of new features. The game will in its essence stay in the Process Characteristic Adoption for as long as it is in existence, for if they were to stop adding content to it, it is likely that is would move on to the last Process Characteristic Termination. New features and content that is being developed for Dust 514 will however continue to develop from Gestation to either Adoption or Termination; this is what makes the nature of MMOs so different from the innovation process of physical products or services. The negative and positive implication from Chapter 3.5 The Process Model are not very relevant to CCP’s development of Dust 514 other than that since CCP decided to link Dust 514 with EVE they will need to have the EVE community accept this by “linking the old with the new” and showing them how this makes EVE better. EVE players seem to have taken well to the idea of Dust 514 being a part of their world (CD). This may in part be due to CCP’s efforts in cooperating with their player-elected council, the CSM, in telling them what they were afraid of might disrupt their experience in EVE (CEO). CCP also made sure to let them know well in advance of this, years in 54

fact, to allow discussion and preparation for the integration. There have so far been no negative implication felt from this.

5.4.2 Termination As mentioned previously this Process Characteristic is different for Dust 514 from the standard product or administrative innovation. The special nature of Dust 514 means that there cannot be a Termination without it meaning a failure of the game, as the nature of MMO means that they either continue constant iteration and additions, or the game is no more. A declaration of success cannot lead to the termination of the innovation process of the game, so this stage is a real end station for an MMO. The positive implication mentioned in Chapter 3.5 The Process Model does not apply to the innovation process of Dust 514, although the negative still applies. However while this paper is still being written Dust 514 is still active, meaning that the game itself has entered the Adoption Process Characteristic and new features and ideas are going through the entire Process Model again. Latest news from the game tells of iterations on current content as well as new features being developed and released into the game soon (CCP Eterne, 2013, 8 October). Neither the positive nor the negative implications of this Process Characteristic have surfaced and they are not expected to do so, should iteration ever stop for Dust 514 it will signify the end of the game.

6.0 Critical Success Factors Having now analyzed the innovation process of Dust 514 using Van de ven et al.’s Process Model (1999) and looking specifically at the negative and positive implications of each Process Characteristic, I will use that information to extrapolate Critical Success Factors for innovation in the Massively Multiplayer Online gaming industry. It is not by choice that the innovations go through these Process Characteristics, but rather they are based on Van de Ven et al.’s observation of how an innovation progresses (1999). Therefore, by understanding the negatives and positives of each Process Characteristic I can look for ways of either reinforcing the positive implications and/or weakening the negative implications. Nothing can guarantee the success of an innovation, but by

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reinforcing positive implications and weakening negative implications of the process the innovator would increase the likelihood of success for the innovation. For each of the following chapters I will introduce a Critical Success Factor, which are all aimed at improving the chances of success for an innovation, and discuss how I derived it from the analysis of the innovation process of Dust 514. By adhering to these Critical Success Factors an innovator in the MMO industry will give his innovation a better chance of success.

6.1 Manage Scope The 1st Critical Success Factor is Manage Scope, this is aimed at reducing complications that can arise from over-proliferation. As the journey of the innovation cannot be mapped out perfectly before its initiation there will need to be an awareness of the scope of the project so it does not grow too large for the time and resources the innovation team has access to. The first time CCP encounters this problem is in the 3rd Process Characteristic Plans, they created a development document to map out what features etc. Dust 514 will have. Right from the start they have a plan that was described as “too ambitious” (DC), nevertheless they moved ahead with this as their plan for the game. Perhaps it only began as a vision for the game that they never expected to fulfill and as such they were allowed to move forward with such an ambitious plan. But for the next Process Characteristic Proliferation they end up implementing more or less all of these original ideas (CD). Whether by choice or by accident, this is what can be expected when moving forward with such an ambitious plan, had they immediately during the 3rd Process Characteristic as they made plans sought to carefully manage the scope of their innovation for the game they would not have had to suffer the over-proliferation of the 4th Process Characteristic which led to the project taking a very long time, influencing both the Process Characteristics Setbacks and Criteria Shift. For the 3rd Process Characteristic this Critical Success Factor means that plans must be realistic, attainable and economical. Although it is the driving force of any innovation, creativity needs to be balanced with real world business criteria, allowing the organization undertaking it to achieve its goals. This is equally hard for innovators and top management, as innovators will have a tendency to inflate goals and promises to top management to secure the necessary resources (Van de ven et al., 1999). These goals must be more realistic to give a better idea of what the real expectations of the innovation process will be, the results of what happens after the innovation is always the big 56

unknown, but schedules and budgets can be estimated. What may be difficult for top management is to accept that things will not always move fast and great strides will not be taken every day, innovating can be costly and can take time. But, if the scope of the innovation is managed intelligently it is possible to make a realistic plan in the early stages that does have great potential. Managing the scope of the innovation allows for a more manageable innovation process. This Critical Success Factor weakens the negative implication of the 4 th Process Characteristic. The 3rd and the 4th Process Characteristics are the ones mainly affected by this Critical Success Factors. But as we could see in the case of Dust 514, a positive or negative effect at an early stage can have trickledown effect throughout the entire innovation process. We saw a lack of management of the scope in the development of Dust 514 and how this in return had cascading effects down through the Process Characteristics. A positive effect could have similar consequences for the development. Introducing a limitation early on could have resulted in a much more streamlined process through the development of Dust 514. CCP is extremely happy with the outcome of Dust 514; it was been described as much better than they had ever expected (CEO). It is great that there was a positive outcome for the game even if the scope expanded far beyond what they had planned, but that doesn’t mean that this is always a good thing. The innovation process of Dust 514 grew exponentially in scope from the original idea, but whether by skill, experience or luck, it turned into a great product.

6.2 Shorten Period of Ambiguity The 2nd Critical Success Factor is Shorten Period of Ambiguity. The innovation process is an ambiguous time, this ambiguity stems from the process’ nature of uncertainty of what should be the next step to be taken to move the innovation forward. As discussed in Chapter 3.3 Learning During Innovation, during the innovation process learning will begin with Learning by Discovery, where an organization will gradually through discoveries learn what direction to take the new innovation. After a time of discovery learning they will advance to Learning by Trial-and-Error, where they have decided what direction to take the innovation and are more trying to pinpoint smaller issues. For an example, a company might decide to develop a new type of shoes, after a period of Learning by Discovery they have decided to make water resistant shoes for boating, during the Learning by Trial-and-Error period they might be deciding what types of laces to use and what way is best to fit 57

the soles. Stability is created in the innovation process when the innovation progresses to Learning by Trial-and-Error. Learning by Discovery is needed before one can proceed to Learning by Trialand-Error (Harrison and March, 1984). The problem is with Learning by Discovery is that there is little learning during it, due to the chaotic links between action and outcome, a negative feedback will have little value as it doesn’t help direct the innovation, so a positive one is much more valuable, trial and error yields more learning (Van de Ven et al., 1999). Shortening this period can help eliminate common problems encountered in the innovation process. This has minor effects on the 4th Process Characteristic as long as the first Critical Success Factor is adhered to. Managing the scope of the innovation will mean a more limited time and freedom to proliferate, resulting in a somewhat shorter period of ambiguity at that stage. This Critical Success Factor then as such should not have very great effect on Proliferation, although the spirit of it would contribute to the decrease of over-proliferation. During the 5th Process Characteristic Setbacks Occur Frequently, reducing the period of ambiguity will lessen likelihood of spill-over effects of failures as there will be a shorter time where innovations are in a state of ambiguity and as such not given as much time for failures to fester and grow. Meaning, that these problems are not as likely to spiral into vicious cycles, avoiding serious consequences for the innovators, as mentioned in Chapter 3.5 The Process Model under negative implications, in addition to what we saw in the case of Dust 514 and the extremely long development time. If CCP’s top management had been more aware of the day-to-day operations during the innovation process it might not have called for as strong a reaction in the 6 th Process Characteristic Criteria Shift when they changed their organizational chart and hired in a new Executive Producer. Had the development been better understood by top management they could have reacted earlier and in a less forceful manner. It is for this Process Characteristic where this Critical Success Factor will be most beneficial as it translates into a better performance in the following one. As it affects the 5th Process Characteristic, so it will also affect the 6 th , Shifting Innovation Performance Criteria, due to their causal relationship. A time of ambiguity leads to management difficulties, shortening this period will make is easier for both resource controllers as well as innovators. The middle period of innovation is a time of ambiguity for top when they need to rely on the reports of the innovators for status updates. There might be little visible progress, or even real one, but they need to be able to trust the innovators’ reports. Crucial hints though tell us that a

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key source of this ambiguity is the long temporal lag between development and implementation (Van de Ven et al., 1999). Afterwards when the innovation enters its later stages the status of the innovation becomes more clear and top management will need to realign their strategies to fit with the current status. Shortening this period means less time spent relying on the innovators’ reports and shorter period of ambiguity. This Critical Success Factor mainly weakens the negative implications of the 5th and 6th Process Characteristic.

6.3 Openness to Innovation What I have identified as the 3rd Success Factor is Openness to Innovation. Without ideas there will be no innovation and as such this is of profound importance to any innovation project. Llopis (2005) compares senior and junior programmers stating that although the senior one brings wisdom and experience to the project an enthusiastic junior programmer will bring a new perspective and add a certain degree of enthusiasm to the entire team. These kinds of impulsive and visionary personalities can lead a game in a new direction, open doors and inspire people (Llopis, 2005). Listening to people that have new ideas and inspiring people to share their ideas can make everyone into this enthusiastic junior, only more experienced. Furthermore, encouraging creativity empowers team members and helps motivate them, making for staff that works better in addition to adding their ideas to the project (Tschang, 2007). During the development of Dust 514 there was never any lack of ideas, CCP was generating ideas so fast and so many of them that it expanded their project a lot from the original idea. In the end they had to make a stricter process to implement new ideas into the game as they already had so many that there was at least a year’s worth of ideas on their schedule, not to mention very large features that they plan on implementing in the next few years (CD; Olssam62, 2013, 26 April). We never see any problems from lack of ideas or from CCP being closed to innovations or new ideas. To see what may go wrong from not adhering to this Critical Success Factor I will go through problems mentioned in the literature for different Process Characteristics and the positive and negative implications and compare that to the experiences of CCP during the development of Dust 514 had of them. Starting at the 1st Process Characteristic the original concept of an innovation is begins at Gestation; people may get an idea for an innovation that could be useful/beneficial, or sometimes for video 59

games, simply cool. If a person knows that the company they work for isn’t interested in hearing peoples’ ideas they are likely to simply forget about this idea, or save it for themselves, in case they decide to branch out on their own. CCP however heard of many new ideas and actively encouraged people to share their ideas with the promise of taking them all seriously (COO). This encouraged people to think about if there was anything that could be done differently or better. When a company experiences a shock, whether a crisis or an opportunity, having openness to innovation can help people look for a way to exploit this new situation. Therefore this Critical Success Factor also affects the 2nd Process Characteristic Shock by encouraging people to seek an opportunity in changes. CCP did not experience the Shock as a crisis; they were simply open and looking for opportunities when they saw an opportunity to make Dust 514. During Proliferation the 4th Process Characteristic, Openness to Innovation enables an organization to get the most out this step with allowing freer expression of innovative ideas, although this could, if unchecked, lead to developing too many ideas or parallel projects but is countered by the 1st Critical Success Factor Manage Scope of the Innovation from Chapter 6.2. Another thing to keep in mind is that the development of a video game can last a year to several years, technology, tastes and products on the market can change over the period of development, and an innovation must be open to changes. CCP never lacked ideas, but did experience over-proliferation. When during the innovation process it is a careful balancing act empowering teams to propose new ideas and putting them in development and dismissing their ideas. There is an interesting effect that this Critical Success Factor has on the 7th Process Characteristic Fluid Participation of Innovation Personnel. It makes innovations an important part of the organization’s efforts and lends increased stability to innovation projects, reducing brain-drain from them. Burgelman (1983) argues that large organizations need both order and diversity and it is the role of the entrepreneurial activity to provide the required diversity. Penrose (1968) further points out that organizations that have entrepreneurial resources have an in-built automatic increase in knowledge as well as an incentive to reach for new knowledge, leading to an internal impulse for growth separate from external factors. In the case of Dust 514 there was never a problem with people leaving the project or not being focused on it, focusing more on their “full-time job”. CCP makes sure that innovation is seen as an important job and is people’s “full-time jobs”, this Openness to Innovation they have seems to be the reason they never had to deal with any significant

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brain-drain from their project. This Critical Success Factor is a powerful tool to reduce the negative implication of the 7th Process Characteristic Fluid Participation of Organization Personnel. Finally, the 11th Process Characteristic Adoption would be affected by this Critical Success Factor, but for the case of innovation in the MMO industry it doesn’t have very extensive implications. This would aid in eliminating the negative implication of the Process Characteristic in that it would inspire an atmosphere open to innovations and not make it as difficult for people to accept linking the new with the old system.

6.4 Balance Leadership Roles As mentioned previously, leadership during the innovation process is vitally important. The model of the 4 leadership types (Van de Ven, 1999) demonstrates the importance of balancing leadership roles against each other to eliminate favoritism for or against an innovation. Properly exercising these roles is the 4th Critical Success Factor: Balance Leadership Roles, which can tackle common problems in most of the Process Characteristics of Process Model making this a crucial factor for all innovation processes. What makes this a lot more complicated than many of the other Critical Success Factors is that while most of them deal with a single issue, which can often be decided on by top management, this Critical Success Factor relies on many more moving parts. Balancing the leadership roles means balancing the power between 4 different leadership roles; if this would simply be a matter of balancing the power between 4 different people then it would be a much simpler task. Balancing the power between these 4 leadership types is a lot more complicated as pluralistic leadership means that anyone that is able to exert some influence and does so is essentially taking on a leadership role (Bavels. 1960), depending on what he exercises his power towards. The same leader will take on several roles frequently in different situations. The difficulty here then is ensuring that the power of one leadership role does not dominate in the innovation process, nor that one or more are underrepresented. What we saw during the development of Dust 514 was that they were working in a very supportive environment. The CEO of the company was lending them his experience, taking on the role of the Mentor for the team, and towards the end of the development he spent half of his time in China with the team. In addition to this they had help from other high ranking personnel, such as the Principal Game Designer in the early stages. There was also a high influence from the roles of Sponsor, as we 61

can see from them going forward with a plan that felt too ambitious and still managing to secure the resources necessary. The role of Institutional Leader was somewhat strong, allocating resources to the team effectively and granting the innovation legitimacy. The framing of the innovation project seems to have been as one would expect with such a radical innovation, there was a general outline and the project itself didn’t change much outwardly. As a role that breaks vicious cycles this was done very effectively with a harsh, yet necessary change in the organizational structure for the project after top management realized how much work was yet to be done. This however was due to the lack of the final role, that of the Critic. During the development of Dust 514 they needed more people questioning what they were doing, challenging it and asking if this would delay them. They would have needed more voices asking them the difficult questions about time, scope and cost. This demonstrates how important it is not only to encourage, but also to challenge; this establishes the importance of good balance of leadership roles. It is important to distinguish between active participation of top management and Balanced Leadership Roles, this Critical Success Factor is not mainly focused on having top management support innovations, but rather a good balance of the roles management enacts. The securing of management support for innovating in more related to the 3rd Critical Success Factor Openness to Innovation. The way this Critical Success Factor affects the Process Characteristics starts from the 3 rd Plans, where plans are made to prepare for the development of an innovation. With well-balanced leadership roles plans will not be accepted if they are not found to fulfill the requirements of the entire leadership roles. This is mostly where the Critic exercises his power, a plan must be economically viable, have a realistic schedule and scope. During Proliferation, the 4th Process Characteristic, keeping to the Critical Success Factor will on the one hand mean that innovators will be given help in advocating to and soliciting resources from top management by Sponsors, they will have support and guidance from Mentors. But on the other hand, their new ideas will have to answer to the Critic on viability, justifying what they want to do with regards to schedule, cost and scope. From his interview with 30 lead designers Tschang (2005) states that most innovative video games had a strong leader that held to his vision of the game. At CCP their lack of the Critic role was a factor in their over-proliferation, perhaps due to this strong vision that was not balanced with an equally strong Critic, which led to the later strategic realignment and the new organizational chart. Had this problem been avoided at this stage it would not have led to a vicious cycle which had to be broken at a later stage.

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The interplay of the all of the roles is needed again in the 5th Process Characteristic Setbacks Occur Frequently. When these problems are encountered it is vital that the right action is taken in order to correct it, if the Critic role is too strong a problematic innovation will be abandoned or cancelled, while a Sponsor or Mentor might try to fix them all. The right action must be chosen, whether to solve it or abandon it, or whether a vicious cycle has come about that need the attention of the Institutional Leader in order to break it, by means of organizational change or a change in the general direction or framing of the innovation project. Perhaps the most obvious Process Characteristic this Critical Success Factor influences is the 8 th Top Management Involvement and Roles. The negative implications of this Process Characteristic would be solved as the nature of the problems of that step is lack of balanced leadership when this Critical Success Factor calls for the balancing of the roles. These leadership roles would however not have to be, and should not be, carried out by a single person, but rather by many people. This is known as Pluralistic Leadership, where the roles of leadership are seen as institutional functions which can be performed by anyone (Baveles, 1960). The nature of some roles such as the Institutional Leader would however need to be performed by someone with the authority needed by that role. This sharing of leadership has been shown to improve decision making (Katz and Kahn, 1978), Levinthal (1997) warns that homogenous leadership can lead to a competency trap, a serious problem for innovations. This Process Characteristic is a very inclusive one and really affects the innovation process during all times it takes place. For the case of CCP, had the roles been better balanced it is likely that more concrete business criteria would have been applied to decisions of implementing features. This would likely have eliminated the need to the empowerment of the Executive Producer role as well.

6.5 Reduce outside dependence The 5th and final Critical Success Factor is Reduce Outside Dependence; this is to limit outside influences, which are elements that the innovators are not able to control. By depending on partnerships or joint ventures the company increases exposure to elements outside of the organization, which the innovators have no control over. A partner organization may go through internal restructuring that the innovators have no say in, resulting in change in their partnership. For the MMO industry, and the video game industry in general, the most common relationship seen like

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this would be the developer-publisher relationship. It is common that a publishing company hires a development company to make a game that they want to publish; the publisher pays for the development and usually retains all intellectual property rights. The development company is paid to develop the game and will then usually not see any profit from sales unless the sales go over a million copies (Sloper, 2005). In this relationship the publishing company acts in a similar way as top management to the development company, dictating what features they are allowed to add to the game etc. There are a myriad of problems that can stem from this publisher-developer relationship, which nonetheless is a frequent phenomenon in the video game industry (Sloper, 2005). A publisher can decide they want to move in a different direction, perhaps cancel a game or change it. Some developers end up altering their games constantly in order to please publishers and marketing departments and then beginning the whole process anew when a new publisher takes over the project (Tschang, 2007). These types of problems are also mentioned in Van de ven et al.’s (1999) work, where partnerships can fall apart, interdependent transactions are not delivered on or a stalemate with a joint venture due to the parent company’s strategic differences. Some authors have gone so far as describing this publisher-developer relationship as saying the publishing sector exerts a squeeze over game developers and that the key to a sustainable profitability for game developers is to escape from the shadow of publishers (Grantham and Kaplinsky, 2005). As an independent studio CCP develops and publishes their own games themselves, eliminating this difficult relationship between publisher and developer, as well as the problems inherent in it. The innovation process of Dust 514 was not affected by any external relationship factors, although they were initially inconvenienced by some intra-organizational reliance on technology developed at their UK studio. This undoubtedly played a part in their success with developing Dust 514 as external partners would perhaps not have been willing to wait as long for the development of the game, applying pressures to CCP to finish the game faster or simply giving up on the relationship. As CCP did not have this problem, due to their independence, we were unable to see what problems can be encountered. As such, following is a description of the problems that can arise from having outside dependencies as well as how this Critical Success Factor influences it. Where one would first see the effect of this Critical Success Factor is in the 3 rd Process Characteristic Plans. Making plans for the development of a game means planning out schedules, assigning people and resources to the project and when they will need these people and resources. There is an added dimension of complexity when there is more than one organization involved in

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this planning. Not only must there be an agreement on what to do, how to do it, how many people are needed and how many resources, but they must then also agree on how much from each partner as well as what people from each will be used. This would be faster if there was only a single organization making the plans. Proliferation, the 4th Process Characteristic is also affected as now agreements must be had from all partners if new ideas mean a strategic realignment of the project. Discoveries can lead to realizations about the entire nature of the project, perhaps the original d irection was not the best one, this is what makes Proliferation so important, finding which branch yields fruit. There must then now be an agreement from all partners on this new direction, which might not suit all, leading to falling out. There is more freedom to explore possible alternate innovation paths if outside dependencies are reduced. During the 5th Process Characteristic Setbacks, companies may take the news about setbacks differently. If one were to partner with a company who isn’t in a financial situation where it can allow the innovation a grace period or if they are simply unfamiliar with innovations of this sort they might demand results or actions to correct this, putting a strain on the project and their partner relationship. A publisher might decide that there is too much complexity and simply withdraw from the project. An independent company can make decisions based on what they believe to be best for the project as well as their company as a whole. The 6th Process Characteristic, Criteria Shift, is closely related to the 5th one. If there is a need for a strategic realignment of the project during development after a period of ambiguity it will have the same problems as previously mentioned for Plans: an added dimension of complexity, an agreement needed for what to do, how to do it, as well as what people will be used. This Critical Success Factor eliminates this added dimension of complexity. Among the most problematic is the 7th Process Characteristic Fluid Participation of Personnel. This is because with a partnership, joint venture or a publisher developer relationship the positions within the innovation project will be new. Meaning that this will not really be peoples’ full-time job as their permanent position is likely something else within the company and the innovation simply a project they work on. Being independent allows a company to make their innovation position fulltime permanent positions.

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Top Management Involvement and Roles, the 8 th Process Characteristic becomes much more complicated if there is outside dependence. The publisher developer relationship makes it so that the publisher is in a sense the top management for the developer, taking control of the project out of the hands of the developer. This makes it harder to balance the leadership roles and essentially removes control from the developer. An independent company has the freedom to say yes and no, they are their own masters and will stand and fall with their own decisions, at least they are allowed to make those decisions. By reducing outside dependence they are able to weaken the negative effects of the 9 th Process Characteristic of the innovation process, Relationships Frequently Altered, where collaborators can turn into competitors and joint ventures can abruptly end, taking away vital resources from the innovation project. This Critical Success Factor weakens the negative implication inherent in this Process Characteristic. Finally, for the 11th and 12th Process Characteristics, Termination and Adoption , by reducing outside dependencies an organization will be able themselves to decide when and/or whether to terminate or adopt an innovation.

6.6 Critical success factor’s model We come now back to what I have identified as the Critical Success Factors, these are: 1. Manage scope 2. Shorten Period of Ambiguity 3. Openness to Innovation 4. Balance Leadership Roles 5. Reduce Outside Dependence

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These have been plotted together into a table showing what Critical Success Factor affects which Process Characteristics to show how they work together to create a holistic approach to the management of the innovation process.

Figure 5: The Critical Success Factor of the innovation process As has been demonstrated from previous chapters this table comes about by comparing the common positive and negative implications of innovation management with common patterns in video game design. Then applying those to the innovation process of Dust 514, identifying problem and success areas and from that defining these Critical Success Factors that would help reinforce positive implications and weaken negative implications of the innovation process. This cannot guarantee the success of an innovation but it will increase its chances of success. Additionally, this is meant for the management of the innovation process, not the innovation itself. A video game will still have to be good in order for it to succeed; the Critical Success Factors will only make it easier to develop the video game, not necessarily make the game better, although it

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should have a better chance of becoming better. By adhering to these Critical Success Factors an innovator in the MMO industry can increase his chances of success by minimizing common negative implications of Process Characteristics for the innovation process and maximize positive implications.

6.7 Discussion The aim of this paper has been to analyze how a company can manage the innovation of a new product in the MMO industry. Through the process of my analysis I have come to the hypothesis that there are 5 Critical Success Factors that innovators need to adhere to in order to maximize the chances of their innovation process. This work is inspired by Van de ven et al.’s (1999) Process Model that maps the Process Characteristics they saw innovations go through. In order to apply this model to the innovation process of an MMO game it needed to be supplemented with additional information about the regular development process of video games and that is where Sloper (2005) and Llopis (2005) filled in the missing blanks as well as a few additional articles. When we looked at the innovation process of Dust 514, applying the Process Model (Van de ven et al., 1999) and looking at negative and positive implications, as well as observations from where Sloper (2005) and Llopis (2005) this gave a very good holistic view of what to expect from the process. Van de ven et al.’s (1999) observations of how problems can grow larger and turn to vicious cycles during times of ambiguity were mirrored completely in Dust 514’s development. This was true all the way through the resolution of it by intervention of Institutional Leaders and the Shifting Outcome Criteria with a realignment of strategies with top management’s focus on Outcome Criteria. It also came as somewhat of a shock just how little power a developer has in the publisher-developer relationship in this industry and the author agrees with Grantham and Kaplinsky (2005) that independence is paramount for video game companies. This industry is still in its infancy being not much more than 30 or so years old; there has been too little focus of the business of it, games used to be made by 1-5 programmers and all of a sudden there are 200 people with a budget of $260 million. Further study needs to be done of the processes and how to make companies successful and not reliant on large business-minded publishers. The developers themselves must become more business oriented, or else end up like musicians, relying on large publishers who take most of the profits for the work.

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Although Van de ven et al.’s (1999) Process Model is great for the generalization of the innovation process there are some special characteristics within the MMO industry that required supplemental perspectives to analyze the innovation in that industry in order to construct the Critical Success Factors. The MMO industry, as well as the general video game industry is very knowledge intensive and innovation is usually very technologically complicated. There is an added degree of technical complication with the different platforms, with PC platforms (Windows, Mac and Linux), console platforms (Wii, Playstation 3 and Xbox 360) or the new emerging ones like SteamOS consoles and Occulus Rift’s virtual reality. This is made even more complicated with the creative side of games where there must be good storytelling to make the game interesting and good art to make it visually pleasing. For management there needs to be a further study into how to balance these issues and work such as Tschang’s (2007) work on balancing tensions between rationalization and creativity needs to be expanded upon to help create a better understanding of how to create better processes for the industries. I believe it is not enough to focus on project management for teams with approaches such as agile development processes, as this does not address a holistic approach for the entire company. Most of the Critical Success Factor’s I found rely on the innovation being integrated into the company in a more expansive way than having it simply as a project. The organizational design of a company should reflect the work that they do, a video game company needs to be structured in such a way that they maintain all necessary functions within the company, anything from marketing to programming and testing should be internal to the company. The necessity of management involvement, as seen from the Critical Success Factors, in decisions should also be reflected in this. Critical Success Factors like Openness to Innovation and Reduce Outside Dependence require a company approach more than simply a project approach, which I believe is vital due to the importance of innovation in the industry. When the developers want to make changes to EVE Online they usually start out by going on the forums, telling the players what they want to do, put out all the detail in numbers and let the players give them feedback on this. A good example of this was when they wanted to make changes to the “transport ships” in the game, CCP made a post on the forums and told the players what they wanted to do and after many pages of discussion with the players they made drastic changes to their original ideas and implemented it into the game (CCP Rise, 2013, 19 June; CCP Rise, 2013, 26 June). With this they don’t do crowdsourcing in the traditional sense but more of a “crowdsourcing of ideas”, where they empower the community to make real contributions to the game in the form of idea-work, but then the developers of CCP do the actual programming or artistic work involved.

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This type of empowerment of the MMO community has been followed by other games such as The Secret World, which held a design contest where players designed new clothes for the game, then voted on the best designs that would be implemented into the game (Tarib, 2013, 16 August). This type of crowdsourced idea-work has been discussed in Brabham’s (2008) paper on crowdsourcing as a model for problem solving, mentioning examples such as Threadless, a T-shirt company where customers design and vote on new designs and iStockpohoto, a photo archive people can buy from. The idea of having those that use your product, design and vote on the best designs is brilliant in its simplicity. If you ask people, not only to make the designs, but also to vote on the best designs, you have made a quantitative analysis of what your customers want, while empowering them, showing them that you value their opinions. This can be especially powerful for the iteration of video games where you have thousands or millions of players. When you give information to this enormous crowd and let them run the numbers and find a good balance, like CCP does, they will put their collective mind to work. Surowiecki (2004) discusses the difference between this and averages: “…if you ask a hundred people to run a 100-meter race, and then average their times. The average time will not be better than the time of the fastest runners. It will be worse. It will be a mediocre time. But ask a hundred people to answer a question or solve a problem, and the average answer will often be at least as good as the answer of the smartest member. With most things, the average is mediocrity. With decision making, it’s often excellence.”

In CCP’s case the players come back to tell them that they are adding too much or adding too little and will go into detail about how. To further facilitate this CCP allows players to access their Application Programming Interface (API) and use it themselves in making websites, tools or services for players in EVE Online. This has resulted in software so sophisticated that recently CCP asked one of the player-built websites to conduct a lottery for them in order to distribute prizes, as CCP themselves did not have such an advanced tool at their disposal (http://cogdev.net/blink). This way of crowdsourcing has helped CCP perform beyond the capabilities of the company alone as they have up to 500.000 other heads working on their problems now. This offers up many possibilities for further research into crowdsourced problem solving and the opportunity it presents. The nature of video games is that they must be “fun” in order for them to be good, what this means is that the developers must understand what a “fun” video game is. Zackariasson et al. (2005) explores the concept of “phronesis”, which is intelligence in the form of “street smarts”, where he explains that developers must play video games to understand video games. In an industry with a

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revenue of $14.8 billion (Essential facts, 2013) there is an intangible concept like “fun” behind it that only the gamers understand that can’t be taught. This concept is also the reason why video game companies often have open beta testing for the public as it is the public that are the ones that can really tell developers what is “fun”. At CCP there is a close working relationship with the players and CCP has created an annual election in EVE Online open to all 500.000 players where players are voted to represent the interests of the player-base. These representatives are then flown to Iceland for several days to cooperate with the developers on upcoming changes and iterations on the game. This crowdsourcing of ideas and iteration process involved in making, especially, MMO games needs to be studied better as well as companies like CCP accredit much of their success to being able to do this well. This may well explain why CCP, claims to, have some of the highest player retention among MMOs and are the only, Western at least, MMO whose size has grown every single year for over a decade (Founder). Not only that, but CCP has mentioned a new source from which they have recruited programmers and community managers alike, from EVE Online (Founder). With players working actively on solving problems and providing ideas for CCP, it is no wonder that they see their players as possible recruits for the game. This is not new in the MMO industry as a famous Everquest player who was very active in the community was eventually hired by Blizzard Entertainment to work on World of Warcraft (Kollar, 2009). The term Phronesis has not been discussed much in the context of video games although it seems a very important one, further research could be very valuable. The final thought on MMOs in a larger perspective is the question of whether or not they represent a Disruptive Innovation. I touched on the broader issues of video games in the early chapters of this paper regarding the trends of video games, the size of the industry and the types of the players. The broad theoretical question is whether MMOs are just video games, or do they represent a Disruptive Innovation? In Chapter 1.1 Taxonomy, the nature of all MMOs as being described collectively as Massive games instead of classifying them ludologically, due to their public and social nature of consequences (Whalen, 2004). When we look at the trends of video games and MMOs women are becoming a larger part of the video game users while they remain a relatively smaller part of the MMOs users (Williams, Yee and Caplan, 2008; Essential facts, 2013). Furthermore, there have been noted 3 motivations for the play of MMOs, all showing similar values but of those there is one motivation that regular video games cannot fulfill, which is the motivation “social”. It seems as though MMOs are not just the next phase in video games, but rather a new genre that not only allow people their regular pleasures of video gaming, but those of socializing and team efforts as well.

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Speculating what this means is very tempting, guessing at what motivates people to this behavior. Could it be that we are seeing a generation participating in a team effort in the “sports” they grew up with? Much like we see amateur soccer leagues arranged. Discovering what this trend is and what it can mean to the video game industry is the million dollar question, or if we look at the yearly revenue of Activision-Blizzard, the owners of World of Warcraft, the 5 billion dollar question (Nunneley, 2013).

6.8 Conclusion The goal of this paper has been to answer the question: “How does a Massively Multiplayer Online game company manage the innovation of a new product?”. This began with the selection of a research framework that could be used to analyze an innovation process, the research framework I chose to use was Van de ven et al.’s Process Model (1999) due to its holistic approach to the innovation process from before the beginning, until after the end of an innovation project. The Process Model from Van de ven et al. (1999) was developed after an on-site research of 14 different innovation projects and gives a good description of the general innovation process with a positive description. To begin with I noted the positive and negative implications of each of his 12 Process Characteristics from the Process Model, this was to be able to see how accurately the Process Model would predict what would happen for the development of Dust 514. At first glance it seemed to do a very good job of this prediction, inadequate planning would lead to a longer development time and a long period of ambiguity would mean a major strategic realignme nt from top management. There was no evident discrepancy between the model and the Development of Dust 514. When I began to look at the literature on video game development however it became apparent that CCP’s case was different from the traditional model of video game development. Some of the most important aspects in the development of the Critical Success Factors came from the use of the supplemental information regarding common practices and observation of video game development. The 5th Critical Success Factor Reduce Outside Dependence played a much more pivotal role than one might expect from Van de ven et al.’s (1999) analysis of their innovation projects. Naturally, there was a discussion about the effects that outside relationships could have on an innovation project, but the video game industry has developed their own standard operating procedures that put things in a different perspective.

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I will summarize the findings of this paper by going over each of the Process Characteristics of the Process Model and apply the Critical Success Factors I have arrived at in my analysis to demonstrate their importance in the development of an effective innovation process. This will be done by following an imaginary idea through the innovation process. An innovation will begin at the Initiation period, starting at Gestation, the 1 st Process Characteristic, if the potential innovator feels that his company is open to innovations, the 3 rd Critical Success Factor, he may be more likely to look for ways to improve current processes or products. This will result in benefits for him and his company. A Shock, the 2 nd Process Characteristic, will occur such as a market failure, change in leadership or a market opportunity. Since the innovator’s company is Open to Innovation, 3rd Critical Success Factor, he will look for the possibility to implement his new idea and approach his superior. The idea is good or may need changing, either way they decide to make Plans, 3rd Process Characteristic, for this new innovation. All the decisions for this innovation is made by the company since they have Reduced Outside Dependence, 5 th Critical Success Factor, so they rely solely on the leadership of their company. The company has Balanced Leadership Roles, 4th Critical Success Factor, so there is a discussion with some championing the idea while others remain critical of the business viability. Eventually a decision is made based on everyone’s input, top management decides to move forward with the innovation project and give their support to it. They have now moved into the Developmental Period and the innovation project has begun. The original idea begins to Proliferate, 4th Process Characteristic, to find what is the best way to develop this new idea. They discover some new ways to approach their problems, they are allowed to look for new ways as the company is Open to Innovation, 3 rd Critical Success Factor, and as they have Reduced Outside Dependence, 5th Critical Success Factor, so they can follow these without needing outside permission or acceptance. But the Balanced Leadership Roles, 4 th Critical Success Factor, pay close attention, challenging the team via the role of the Critic on feasibility on their ideas or offering Mentor support from an experienced innovator. They are not given the freedom to work on endless new ideas as they need to Manage Scope, 1 st Critical Success Factor, and management works with them and also limits the time they are allowed to spend on new ideas as they want a Shorter Period of Ambiguity, 2nd Critical Success Factor, this is easier with the increased involvement of the Balanced Leadership Roles, 4 th Critical Success Factor. They begin to have some Setbacks, 5th Process Characteristic, as almost all innovations do. They did not experience a

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long period of ambiguity as they focused on Shorter Period of Ambiguity, 2 nd Critical Success Factor, and the strategic realignment of the innovation process as such is minimized. The have Reduced Outside Dependence, 5th Critical Success Factor, and only need to consult their own management on what to do, as they have Balanced Leadership Roles, 4 th Critical Success Factor, they make a decision with a balance of business criteria and enthusiasm for the innovation, the Institutional Leader breaks up any vicious cycles the project may have evolved. The following Criteria Shift, 6th Process Characteristic, is minimal as they had a Shortened Period of Ambiguity, 2nd Critical Success Factor, so there were few unexpected outcomes for the top management. They had Reduced Outside Dependence, 5th Critical Success Factor, and made their decisions on the Criteria Shift with the best interests of the company and project in mind. There was little Fluid Participation of innovation personnel, 7 th Process Characteristic, as the company was Open to Innovation, 3rd Critical Success Factor, so the innovation project had equal merit to any other standard project in the company and people’s positions were as important as permanent positions. They had Reduced Outside Dependence, 5th Critical Success Factor, so there were no temporary personnel from outside the company joining or leaving. The Top Management Involvement, 8 th Process Characteristic, was good as they had Reduced Outside Dependence, 5 th Critical Success Factor, and all the decision makers for the innovation process were from their own company. Leadership roles were balanced, 4th Critical Success Factor, so any sponsoring of the innovation would be challenged by a Critic to evaluate it properly as well as criticisms would be challenged by Sponsors; an Institutional Leader would intervene when needed and his support granted legitimacy to the whole project. When Relationship Altered, 9 th Process Characteristic, these would have minimal effects on the innovation project as they had Reduced Outside Dependence, 5 th Critical Success Factor, meaning that they relied mainly on intra-organizational entities. The Industry Team Playing, 10th Process Characteristic, affected them as they expected from their market positioning rather than their innovation process management. They had now entered the final period of the innovation, the Implementation/Termination Period and their product was now ready to be implemented or released. When they decided to Adopt, 11th Process Characteristic, the product and add it to their portfolio of products the organization was open to the idea as they had Openness to Innovation, 3rd Critical Success Factor, and there was little resistance within the company. They had Reduced Outside Dependence, 5th Critical Success Factor, so there was no need to coordinate with another organization and released the product when the company felt it was ready. After several iterations to the product after release, in the form of

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updates or patches, they felt it had finished its lifecycle, they decided to Terminate, 12 th Process Characteristic, work on the product. As they had Reduced Outside Dependence, 5 th Critical Success Factor, they did this when the company itself felt the product was in the right place for them to terminate work on it, they were not reliant on the agreement of an external organization or entity. This puts into perspective how important it is to have control over your innovation project and what a powerful force top management is in the innovation process. Out of the 5 Critical Success Factors I identified there were 3 that rely on top management being very involved, if not directly in the project itself then at least in the design of the processes. The Critical Success Factors show that in order to make innovation more successful it has to be acknowledged as an important aspect of the organization’s activities. While the 1st and 2nd Critical Success Factors, Manage Scope and Shorten Period of Ambiguity, deal with the innovation from the perspective of project management the other 3 take the perspective of the organization as a whole. This means that the 1 st and 2nd Critical Success Factors take a more narrow view than the 4 th , 5th and 6th . This can also be seen by the number of Process Characteristics that they each affect, with the 1 st and 2nd affecting 2 and 3 Process Characteristics respectively, while the broader Critical Success Factors affect from 4 to 9 each (Figure 5). This does not mean that the first two are less important than the others; it simply means that they are aimed at dealing with project management problems that occur in the innovation process. The 3rd, 4th and 5th Critical Success Factors are meant to deal with problems that are much larger in scope than project management problems and as such require a broader approach to the problem solving. If an innovation is simply seen as a project and will only be handled as a project it is more likely to encounter problems during its process. To put this in perspective: if a company that makes tables decides to make chairs as well, but do not change the way that the company operates, does not have top management’s full attention and does not see making chairs as an important aspect of the company would we expect this branch of the business to be successful? Innovating is the invention, development or implementation of new products, programs or services (Van de ven et al., 1999). It seems contradictory that people would think to develop something new they have not done before and to devote less energy to it than products and processes they are already familiar with, which have established routines and processes. But this is often what is observed, best perhaps noted by Van de ven et al.’s (1999) 7 th Process Characteristic Fluid Participation of Innovation Personnel. The common observation by Van de ven et al. (1999) was that innovations were usually seen as a sort of side-project that people would be allocated to, or

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participated in part-time in addition to their permanent positions. In the case of Van de ven et al. (1999) they noticed that people would often not put as much effort into these part-time innovation projects and would first and foremost make sure they were fulfilling their obligations to their fulltime positions, as in the end, those were their positions among the company that counted. With time the innovation projects would lose people, although new people would be added, but this resulted in a brain-drain in the innovation project. CCP is an independent studio that both develops and publishes their own games; normally however a development studio would be hired by a publisher to develop a game. This relationship is a difficult one and I have likened it to that of musicians and their publishers (record labels) earlier, where the publishers frequently take most of the profits a song or an album makes. This year, 2013, there was the first song to hit #1 on the Billboard Hot 100 list published by an independent musician since 1994 (Campell, 2013, March). That means that every artist to have a #1 song on that list, every week for the last 19 years has been published by someone other than the artist. This was a message to artist everywhere that they weren’t going to be reliant on publishers, which take so much of their money, anymore. As it is now in the video game industry it is very common for developers to have publishers that take care of the business side for them such as marketing, distribution and the like. Developers are paid for the project and usually will not see any more money based on the volume of sales of the game, unless they sell over a million copies of it (Sloper, 2005). Additionally the publishers will normally retain the intellectual property (IP) rights of characters or the game world, in the case of EVE Online this would be owning the IP of New Eden so when anyone wanted to use that world they would have to pay the publisher (Grantham and Kaplinsky, 2005). If developers keep relying on publishers they will stop being the masters of their own destiny and an industry of highly skilled people, both technically and artistically, will have to answer to publishers who invest in video games and sell them. This trend has been noted by several authors (Green and Keen, 2001; TerKeurst, 2003) and Grantham and Kaplisky (2005) state: “…a key feature of strategic positioning for the games developers is the necessity to establish some form of independence from the publishers and this has implications for the management of their innovation processes, including their management of strategic positioning”

This is perhaps one of the most important implications to take into consideration for a company in the MMO industry, if they do choose to work with a publisher they are relinquishing control of their development into the hands of the publisher. As mentioned in the analysis, the publisher will

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essentially take over the role of top management and the developer will handle leadership more in the role of a project manager. One of the Critical Success Factors I identified is Reduce Outside Dependence, where more freedom would allow a developer more control over their project, minimizing external uncontrollable effects, and as such to have the project fail or succeed on its own merit. In conclusion, by giving control over into the hands of an external partner, publisher or company the innovator is no longer managing the innovation process and is limited to project management, without having the power of top management. Looking at such a development from the perspective of the Process Model we realize that decisions that can affect the Process Characteristics in a valuable manner would not be in the hands of the developer anymore. The content of this paper would be irrelevant, for the most part, for practical application to those that do not have any control over their innovation project; this information might then become more relevant to the publisher than the developer.

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8.0 List of interviews CEO, Hilmar Veigar Pétursson, Chief Executive Officer of CCP [Personal communication] 20 March 2013 COO, Jón Hördal, Chief Operations Officer of CCP [Personal communication] 20 March 2013 CD, Atli Már Sveinsson, Creative Director of Dust 514 [Personal communication] 20 March 2013 EP, Brandon Laurino, Executive Producer of Dust 514 [Personal communication] 20 March 2013 Founder, Ívar Kristjánsson, co-founder of CCP [Personal communication] 20 March 2013 DD, Kjartan Ársælsson, Development Director at CCP [Personal communication] 7 May 2013

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