Saturday, March 18, 2006

Never innovate halfway

Double Fine’s Psychonauts was an original game that by all indications did poorly in the marketplace. This has led to the odd comments from fence sitters (and misinformed publishers) that innovation is a failed strategy. Bad monkeys! Bad!

We often talk about “innovation” in product development as if it were a miraculous substance that always benefits a game. I also imagine a scene in an idyllic game development kitchen with a game designer wearing a chef hat. “This title needs a dash more innovation!” he cries and the sous chef scurries off to the back room to see if they have any left.

If only it were this simple. First, realize that there are different types of innovation and not all types are equally beneficial. There are many places we can start on this topic, but we should first start with the classics. Back in 1991, researchers Cooper and Kienschmidt wrote a paper that discusses classes of innovation and their impact on market adoption. The studies looked at the market success of three category of products
  • Low innovativeness products: Modifications to existing product lines
  • Moderately innovative products: Product line extensions
  • Highly innovative products: New to the world products.
Each category was measured on three factors:
  • Success rate: What percentage of new products broke even?
  • ROI: What was the average profitability of the products that broke even?
  • Market Share: What percentage of customer in the markets adopted the product?
By looking at the patterns that occur across many industries, we can gain insight into how to build successful innovative games in our industry.

Interpreting this data in the game world
Let's map this general product model onto the specifics of the current game market.
  • Low innovativeness products: Sequels or expansion packs
  • Moderately innovative products: Games that attempt to blend genres or establish new brands in established genres.
  • Highly innovative products: Games that attempt to create new genres
The results
The results of the study are fascinating. Common wisdom would suggest that as the product became more innovative, the success rate would drop off. After all innovation is directly correlated with risk, right?

Instead, the data shows a U-shaped curve instead of a downward slope. Highly innovative products are actually mildly more successful than their low innovation counterparts. Moderately innovative products on the other hand do the worst out of any of the categories. This pattern repeats itself in the other areas.

Less surprisingly, ROI is strongest for low innovativeness products and quite reasonable for highly innovative products. It is again miserable for moderate innovation products. Market share is also low for moderate innovation products.

The immediate lesson is that both low innovation and high innovation products can do quite well. If you end up in the middle, however you are in big trouble. Let's dig into the strange U-shaped curve in more detail.

Explaining the U-shape
There are lots of reasons why sequels and direct expansions are successful. Several include
  • Lower R&D risks. The game mechanics in a sequel are well-defined and can be reused. Generally, game sequels add more content and mild technological innovation. These are both well understood production areas that can be budgeted for and scoped appropriately.

  • Built-in audience. With an established brand, sequels sell to both old players and players who did not pick up the previous title. This results in higher customer sales per marketing dollar spent.
An alternate set of reasons explains why highly innovative games such as the Sims or Animal Crossing are successful despite not having the advantages of low innovation products.
  • Tapping pent up market demand: Highly innovative products tend to get a burst of adoption as word of mouth from excited users spreads the news that someone has finally released a game that meets their needs. This happened with Nintendogs, where many women became avid promoters of the game to their friends.

  • Less need for polish: Because demand is pent up, people tend to ignore many damning issues. For example, Brain Training’s limited set of mini-games quickly become repetitive. Yet people are willing to put up a flaw that would have destroyed a less innovative title. The title offers a unique, high value experience that cannot be replicated with substitute products.

  • Lack of competition: When you are first to the market with a high value product, you can often just breeze in and acquire customers with no worries about competition. The Sims managed such a feat with gamers who preferred to create and explore relationships. The game industry had been blatantly ignoring this massive audience and the Sims reaped the benefits of being the only one who saw the opportunity.
Finally, we get to the moderately innovative games. These titles are cursed with the worst of all worlds.
  • Higher R&D risks: When you try out new game mechanics it is much more likely that you need to spend copious amounts of time balancing the title. If you do not have this time, there is a good chance the game will be released with poorly polished game mechanics.
  • No built-in audience: A mildly innovative game satisfies no one. It doesn’t tap into a new market of underserved users. It doesn’t appease existing fans of particular title or brand.
  • Strong competition: Often moderately innovative products are classified as part of an existing genre. The genre addicts have their favorite title already so why purchase a new one?
Where would Psychonauts fit into this mix? It is a competently executed, traditional platform game wrapped in a wonderfully quirky exterior. This rings some warning bells. It is more of the same, but different enough to be scary. It falls into the no-mans land of not familiar enough and not innovative enough to make a mark on the industry.

One step further
Psychonauts also points us in the direction of identifying the factors that matter less than we might expect when creating an innovative game. Psychonauts poured incredible amounts of blood and sweat into creating a delightful story, filled with new and interesting characters and sparkling with humor. All these elements were highly original and yet the title overall was not innovative.

These are not primary differentiators in the marketplace. In general, the game mechanics of a title and the ties into real world interests determine the value of a title. Well executed plot and characters merely support and augment the underlying game mechanics. In a novel, the story is the value. In a game, the activity that the player engages in determines the value of the experience. These are two very different value propositions that you confuse at your own risk.

If your core game mechanics are recycled from another genre, slathering a layer of original (and very expensive) content on your title will do nothing to push it into the realm of high innovation. It unfortunately, might be enough to push you out of the safe zone of comfy sequels.

If you are going to make a sequel, realize that more of the same is actually a good thing. You are in the gaming equivalent of the shampoo business, producing the same old bottle of Finesse over and over again. Sure, you can mix it up with a little sticker that says “Now with stronger cleaning power”, but don’t get too many ideas about changing the world. That isn’t what your audience wants. Give them more of the same: more levels, deeper stories and prettier graphics.

If you are going to be original, make a title with original game mechanics that taps into an underserved audience. Knock your title out into left field. Don’t look at other games, they aren’t your competition. Instead look at other activities outside of gaming. Don’t worry too much about plot, graphics or the polish of your title. Instead focus on generating deep value with people who don’t even think of themselves as gamers.

Never go half way. Don’t say “It is a shooter, but you fire ducks instead of bullets.” This is generating a half-assed value proposition by addition or exception. It is the sort of innovation that kills a game in the marketplace. You confuse the customers and suffer from comparison to existing products.

Developing a game title will often consume years of your life. Making a game that is only ‘moderately innovative’ simply is not worth the effort. Each project must choose its focus.
  • Are you a craftsman who lovingly polishes an established genre?
  • Or are you an innovator who creates new genres?
If you fail to chose, you risk being stranded in the no man's land that lurks between the two strategies.

Take care

Comparison of first month sales for several titles: Pyschonauts: 12,000 units. God of War 200,000. Halo 2: 3.3 million. As a side note, 200,000 units for God of War are not great numbers considering the budget. They’ll cash in on this newly launched brand only if they do a sequel.

More tales of Psychonauts
“According to the most recent NPD figures, Psychonauts has moved nearly 51,000 copies on the Xbox, not quite 23,000 on the PlayStation 2, and a little more than 12,000 on the PC.

Developed by Grim Fandango creator Tim Schafer and his team at Double Fine Studios, Psychonauts is something of an industry-standard cautionary tale about innovation. Psychonauts is about the story of a young child stowaway at a summer camp for psychics who must enter into the minds of his fellow campers and the camp counselors, and it was originally planned as a high-profile Xbox exclusive with Microsoft itself as publisher. However, Microsoft dropped the project in March of 2004 with no reason given.

Schafer shopped Psychonauts around for months before finding a new publishing partner in Majesco. The game was released on the Xbox, PC, and PS2 earlier this year, and met with critical praise and consumer apathy. Majesco (and a number of analysts, Pachter included) had great expectations of the game's retail performance. When the sales didn't materialize and another high-profile Majesco title flopped in Advent Rising, the company lowered its projected revenues for the year by a third, the CEO Carl Yankowski resigned, and a number of shareholders sued as the stock plummeted.”