business models mindtrek
TRANSCRIPT
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Innovation and new business models in video games -
learnings from the evolution of the Internet
Tommi PelkonenStrategist
S A T A M A Amsterdam
October 4, 2007
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Copyright September 30, 07 Satama. All rights reserved.
• Leading European interactive agency• Headquarters in Helsinki, Finland• 400 experts in business development, design and technology• In 2006: 1000 projects delivered in 23 countries• Net revenues 2006: €35.8; Operating profit €0.2 million.• In the Netherlands: 68 people, strong growth track
Satama in brief
“We combine talent with technology to make work and customer dialogue simple, fun and profitable.”
Helsinki
Stockholm
Tampere
Amsterdam
Düsseldorf
Turku
PERFORMANCEMARKETING
SALES ANDMARKETING
SYSTEMS
MOBILE EXPERTISE
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Copyright September 30, 07 Satama. All rights reserved.
• Leading European interactive agency• Headquarters in Helsinki, Finland• 400 experts in business development, design and technology• In 2006: 1000 projects delivered in 23 countries• Net revenues 2006: €35.8; Operating profit €0.2 million.• In the Netherlands: 68 people, strong growth track
Satama in brief
“We combine talent with technology to make work and customer dialogue simple, fun and profitable.”
Helsinki
Stockholm
Tampere
Amsterdam
Düsseldorf
Turku
PERFORMANCEMARKETING
SALES ANDMARKETING
SYSTEMS
MOBILE EXPERTISE
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Leading digital services company
Turnover by sector in 2006
Net revenues: €35.8 mEUR
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Innovation and new business models in computer games
• Internet - where are we in 2007?
• Innovation and business modeling
• Towards Blue Oceans
• Games as services: threat or opportunity
• Conclusions
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Quick journey to internet growth
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Quick journey to internet growth
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Quick journey to internet growth
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Quick journey to internet growth
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Quick journey to internet growth
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Quick journey to internet growth
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Quick journey to internet growth
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Copyright © 2007 Satama Interactive
200,000,000 blogs
9.8 million residents
>100,000,000 videos(65,000/day)
www.ebay.com 21 Nov 200614,463,346 auctions
Almost 5,300,000 articles(100 languages)
“It’s only just begun” – this is just the beginning
•1,1 Billion internet users – and expanding rapidly•Global presence, global opportunity•New ways of working•New ways of networking•Evolution / Transformation – from information to communication
What is happening?
39 million users (Aug’07)
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# 5. Copyright September 30, 07 Satama. All rights reserved.
Web 2.0 is rapidly shifting towards true productivity
Lähde: Gartner, August 2007
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The era of building brands namely through mass media advertising is over.
We need to find ways to get consumers to invite brands into their lives.
BusinessWeek
New era for media is dawning...
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The era of building brands namely through mass media advertising is over.
We need to find ways to get consumers to invite brands into their lives.
BusinessWeek
New era for media is dawning...
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Outcome...
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Outcome...
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Outcome...
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Innovation and new business models in video games
• Internet - where are we in 2007?
• Innovation and business modeling
• Towards Blue Oceans
• Games as services: threat or opportunity
• Conclusions
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What is innovation?
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What is innovation?1. the process of making improvements by introducing something new
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What is innovation?1. the process of making improvements by introducing something new
2. the act of introducing something new: something newly introduced (The American Heritage Dictionary).
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What is innovation?1. the process of making improvements by introducing something new
2. the act of introducing something new: something newly introduced (The American Heritage Dictionary).
3. the process of translating new ideas into tangible societal impact (Krisztina Holly, Vice Provostt, UCSC)
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What is innovation?1. the process of making improvements by introducing something new
2. the act of introducing something new: something newly introduced (The American Heritage Dictionary).
3. the process of translating new ideas into tangible societal impact (Krisztina Holly, Vice Provostt, UCSC)
4. the introduction of something new. (Merriam-Webster Online)
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What is innovation?1. the process of making improvements by introducing something new
2. the act of introducing something new: something newly introduced (The American Heritage Dictionary).
3. the process of translating new ideas into tangible societal impact (Krisztina Holly, Vice Provostt, UCSC)
4. the introduction of something new. (Merriam-Webster Online)
5. a new idea, method or device. (Merriam-Webster Online)
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What is innovation?1. the process of making improvements by introducing something new
2. the act of introducing something new: something newly introduced (The American Heritage Dictionary).
3. the process of translating new ideas into tangible societal impact (Krisztina Holly, Vice Provostt, UCSC)
4. the introduction of something new. (Merriam-Webster Online)
5. a new idea, method or device. (Merriam-Webster Online)
6. the successful exploitation of new ideas (Department of Trade and Industry, UK).
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What is innovation?1. the process of making improvements by introducing something new
2. the act of introducing something new: something newly introduced (The American Heritage Dictionary).
3. the process of translating new ideas into tangible societal impact (Krisztina Holly, Vice Provostt, UCSC)
4. the introduction of something new. (Merriam-Webster Online)
5. a new idea, method or device. (Merriam-Webster Online)
6. the successful exploitation of new ideas (Department of Trade and Industry, UK).
7. change that creates a new dimension of performance (Hesselbein, 2002)
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What is innovation?1. the process of making improvements by introducing something new
2. the act of introducing something new: something newly introduced (The American Heritage Dictionary).
3. the process of translating new ideas into tangible societal impact (Krisztina Holly, Vice Provostt, UCSC)
4. the introduction of something new. (Merriam-Webster Online)
5. a new idea, method or device. (Merriam-Webster Online)
6. the successful exploitation of new ideas (Department of Trade and Industry, UK).
7. change that creates a new dimension of performance (Hesselbein, 2002)
8. A creative idea that is realized (Harvard Business School Press, 2004)
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What is innovation?1. the process of making improvements by introducing something new
2. the act of introducing something new: something newly introduced (The American Heritage Dictionary).
3. the process of translating new ideas into tangible societal impact (Krisztina Holly, Vice Provostt, UCSC)
4. the introduction of something new. (Merriam-Webster Online)
5. a new idea, method or device. (Merriam-Webster Online)
6. the successful exploitation of new ideas (Department of Trade and Industry, UK).
7. change that creates a new dimension of performance (Hesselbein, 2002)
8. A creative idea that is realized (Harvard Business School Press, 2004)
9. "The capability of continuously realizing a desired future state" (John Kao, The Innovation Manifesto, 2005)
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What is innovation?1. the process of making improvements by introducing something new
2. the act of introducing something new: something newly introduced (The American Heritage Dictionary).
3. the process of translating new ideas into tangible societal impact (Krisztina Holly, Vice Provostt, UCSC)
4. the introduction of something new. (Merriam-Webster Online)
5. a new idea, method or device. (Merriam-Webster Online)
6. the successful exploitation of new ideas (Department of Trade and Industry, UK).
7. change that creates a new dimension of performance (Hesselbein, 2002)
8. A creative idea that is realized (Harvard Business School Press, 2004)
9. "The capability of continuously realizing a desired future state" (John Kao, The Innovation Manifesto, 2005)
10. "The staging of value and/or the conservation of value." (Daniel Montano 2006.)
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think outside-of-the box
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think outside-of-the box
People assume that everything that is going
to be invented must have been invented already.
But it hasn’t.
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four areas of innovation
business model innovation
product & service innovation
process innovation
technology innovation
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technology innovation[Osterwalder (2006]
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process innovation
[Osterwalder (2006]
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product & service innovation
[Osterwalder (2006]
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business model innovation
[Osterwalder (2006]
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E-commerce - process and business model innovation
In short, greatest revolution of the internet was to enable direct dialogue between the manufacturer and consumers
Source: Laudon & Traver, 2004
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E-commerce - process and business model innovation
Figure 2.3, Page 98
In short, greatest revolution of the internet was to enable direct dialogue between the manufacturer and consumers
Source: Laudon & Traver, 2004
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Business model?
a business model describes the value an organization offers to various
customers and portrays the capabilities and partners required for creating, marketing, and delivering this
value and relationship capital with the goal of generating profitable and
sustainable revenue streams
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Key Ingredients of a Business Model
Source: Laudon & Traver, 2004
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INFRASTRUCTURE CUSTOMER
[Osterwalder (2004) The Business Model Ontology]
business model framework
VALUEPROPOSITION
OFFER
WHAT
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INFRASTRUCTURE CUSTOMER
[Osterwalder (2004) The Business Model Ontology]
business model framework
ACTIVITYCONFIGURATION
CORECAPABILITIES
PARTNERNETWORK
HOW
VALUEPROPOSITION
OFFER
WHAT
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INFRASTRUCTURE CUSTOMER
[Osterwalder (2004) The Business Model Ontology]
business model framework
ACTIVITYCONFIGURATION
CORECAPABILITIES
PARTNERNETWORK
HOW
VALUEPROPOSITION
OFFER
WHAT
CUSTOMERRELATIONSHIPS
CUSTOMERSEGMENTS
DISTRIBUTIONCHANNELS
TO WHOM
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INFRASTRUCTURE CUSTOMER
COSTSTRUCTURE
[Osterwalder (2004) The Business Model Ontology]
business model framework
ACTIVITYCONFIGURATION
CORECAPABILITIES
PARTNERNETWORK
HOW
VALUEPROPOSITION
OFFER
WHAT
CUSTOMERRELATIONSHIPS
CUSTOMERSEGMENTS
DISTRIBUTIONCHANNELS
TO WHOM
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INFRASTRUCTURE CUSTOMER
REVENUESTREAMS
COSTSTRUCTURE
[Osterwalder (2004) The Business Model Ontology]
business model framework
ACTIVITYCONFIGURATION
CORECAPABILITIES
PARTNERNETWORK
HOW
VALUEPROPOSITION
OFFER
WHAT
CUSTOMERRELATIONSHIPS
CUSTOMERSEGMENTS
DISTRIBUTIONCHANNELS
TO WHOM
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INFRASTRUCTURE CUSTOMER
REVENUESTREAMS
COSTSTRUCTURE
[Osterwalder (2004) The Business Model Ontology]
business model framework
ACTIVITYCONFIGURATION
CORECAPABILITIES
PARTNERNETWORK
HOW
VALUEPROPOSITION
OFFER
WHAT
CUSTOMERRELATIONSHIPS
CUSTOMERSEGMENTS
DISTRIBUTIONCHANNELS
TO WHOM
FINANCE
HOW MUCH PROFITS
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HOW WHAT TO WHOM
HOW MUCH PROFITS
Case:Skype
free VoIP & value added services
software development
website
global(non segmented)
deliver voice & video quality
“eBay”
large scalelow margin
internetsoftware development
free voice-over-IP VoIP telephony & value-added services
[Osterwalder (2004) The Business Model Ontology]
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Five Primary Revenue Models
Source: Laudon & Traver, 2004
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Table 2.2, Page 66
Five Primary Revenue Models
Source: Laudon & Traver, 2004
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B2C Business Models
Source: Laudon & Traver, 2004
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B2C Business Models (cont’d)
Source: Laudon & Traver, 2004
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Source: Laudon & Traver, 2004
Innovative Business Models
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Table 2.5, Page 88
Source: Laudon & Traver, 2004
Innovative Business Models
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compound annual growth rate over five years
[Source: IBM, CEOs are expanding the innovation horizon: important implications for CIOs]
Operating Margin Growth in Excess of Competitive Peers
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percent of respondents
[Source: IBM, Global CEO Study 2006]
Benefits Cited by Business Model Innovators
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reality: everything else than planned[Osterwalder (2006]
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Here
CEOs10°
reality: everything else than planned[Osterwalder (2006]
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Here
CEOs10°
Managers60°
Here
reality: everything else than planned[Osterwalder (2006]
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Here
CEOs10°
Managers60°
Here
Staff360°
Ok
reality: everything else than planned[Osterwalder (2006]
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MEDIA: Two-Sided Marketplace
Media AudienceAdvertiser
Demand
Supply Demand
Supply
Production
Attention
EyeballsEuros Middlemen
What role can video games play in marketing?
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Adaptive landing pages
From simple model into marketing planning complexity in 2007...
R E A N
Own Store purchases
Lead generationProgram,
Subscriptions
MSN
RSS feeds
SMS campaign
Banners
Adaptive flash banners
Podcasting
SEM Prestudy
Banners linking to
online store
Newsletter
Landing page 1
Landing page 2
Landing page n
Other buy page?Amazon etc.
Viral
My Space
You Tube
Second Life
Targeted SEMSeasonal,etc.
Partner sites
Video Banners
Own Storepurchases
Indy Storepurchases
Call centers
Channel sales
Seeding
Instore Advertising, POS materials
On device demos
Retail screens
Retail games
ONLINE
Continuous analysis and metrics
Seeding
Community Seeding
Flickr
Competition
Yahoo
Indy Online Storepurchases
Reach activities Engage activities Activate=conversion Nurturing existing customers
Seeding
CRMmarketing
Internal Links
Free external links
Mobile campaign
Partner StorepurchasesCompetition
OFFLINE
Self serviceLogins
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Opportunity for video games..
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Opportunity for video games..
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Opportunity for video games..
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Opportunity for video games..
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Opportunity for video games..
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Opportunity for video games..
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Opportunity for video games..
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Opportunity for video games..
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Innovation and new business models in video games
• Internet - where are we in 2007?
• Innovation and business modeling
• Towards Blue Oceans
• Games as services: threat or opportunity
• Conclusions
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> market boundaries are not given
> they are reconstructed by the actions & beliefs of industry players
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Two worlds …
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Blue Ocean Logic: The Core Principles
Reconstruct Market Boundaries
… overcome believes.
Reach beyondexisting Demand
… go for uncontested space.
Get the strategic sequence right
… value [innovation] first.
VIVI
COST
VALUE
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Two worlds …
Red Ocean Strategy Blue Ocean Strategy
Compete in existing market space. Create uncontested market space.
Beat the competition. Make the competition irrelevant.
Exploit existing demand. Create and capture new demand.
Make the value-cost trade-off. Break the value-cost trade-off.
Align the whole system of a strategic firm's activities with its choice of differentiation or low
cost.
Align the whole system of a firm's activities in pursuit of
differentiation and low cost. VALUE INNOVATION
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Two worlds …
Red Ocean Strategy Blue Ocean Strategy
Compete in existing market space. Create uncontested market space.
Beat the competition. Make the competition irrelevant.
Exploit existing demand. Create and capture new demand.
Make the value-cost trade-off. Break the value-cost trade-off.
Align the whole system of a strategic firm's activities with its choice of differentiation or low
cost.
Align the whole system of a firm's activities in pursuit of
differentiation and low cost. VALUE INNOVATION
37
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Two worlds …
Red Ocean Strategy Blue Ocean Strategy
Compete in existing market space. Create uncontested market space.
Beat the competition. Make the competition irrelevant.
Exploit existing demand. Create and capture new demand.
Make the value-cost trade-off. Break the value-cost trade-off.
Align the whole system of a strategic firm's activities with its choice of differentiation or low
cost.
Align the whole system of a firm's activities in pursuit of
differentiation and low cost. VALUE INNOVATION
37
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Two worlds …
Red Ocean Strategy Blue Ocean Strategy
Compete in existing market space. Create uncontested market space.
Beat the competition. Make the competition irrelevant.
Exploit existing demand. Create and capture new demand.
Make the value-cost trade-off. Break the value-cost trade-off.
Align the whole system of a strategic firm's activities with its choice of differentiation or low
cost.
Align the whole system of a firm's activities in pursuit of
differentiation and low cost. VALUE INNOVATION
37
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Two worlds …
Red Ocean Strategy Blue Ocean Strategy
Compete in existing market space. Create uncontested market space.
Beat the competition. Make the competition irrelevant.
Exploit existing demand. Create and capture new demand.
Make the value-cost trade-off. Break the value-cost trade-off.
Align the whole system of a strategic firm's activities with its choice of differentiation or low
cost.
Align the whole system of a firm's activities in pursuit of
differentiation and low cost. VALUE INNOVATION
37
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Two worlds …
Red Ocean Strategy Blue Ocean Strategy
Compete in existing market space. Create uncontested market space.
Beat the competition. Make the competition irrelevant.
Exploit existing demand. Create and capture new demand.
Make the value-cost trade-off. Break the value-cost trade-off.
Align the whole system of a strategic firm's activities with its choice of differentiation or low
cost.
Align the whole system of a firm's activities in pursuit of
differentiation and low cost. VALUE INNOVATION
37
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Illustrate options with canvas
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Innovation and new business models in video games
• Internet - where are we in 2007?
• Innovation and business modelling
• Towards Blue Oceans
• Games as services: threat or opportunity
• Conclusions
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Traditional media consuption metrics
Reading newspapers (not online)
Reading magazines (not online)
Watching TV
Watching DVDs or VHS
Listening to the radio (not online)
Using the Internet for personal purposes
0 10 20 30 40
Media consumption in the US: 2007 (hours/week)
Early Adopters Mainstream Consumers Sidelined Citizens
Source: Forrester Research, 2007
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Gamer metrics
•69 % of American heads of households play computer and video games. The average adult woman
plays games 7.4 hours per week in the US. The average adult man plays 7.6 hours per week. (ESA,
2006). 44 % of they play games online
• The average MMORPG gamer (addicted or not) spends
20-25 hours per week MMORPGs, (Kimberly
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Booming game markets...
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Booming game markets...
42
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Booming game markets...
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Booming game markets...
42
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Booming game markets...
42
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Booming game markets...
42
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Booming game markets...
42
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Booming game markets...
42
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Booming game markets...
42
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Booming game markets...
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...yet, business model in challenges
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...yet, business model in challenges
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...yet, business model in challenges
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...yet, business model in challenges
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Case: Wii and the Blue Ocean
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Case: Wii and the Blue Ocean
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Case: Wii and the Blue Ocean
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Case: Wii and the Blue Ocean
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Case: Wii and the Blue Ocean
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Case: Wii and the Blue Ocean
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Case: Wii and the Blue Ocean
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Case: Wii and the Blue Ocean
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Case: Wii and the Blue Ocean
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Case: Wii and the Blue Ocean
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Case: Wii and the Blue Ocean
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Case: Wii and the Blue Ocean
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Case: Wii and the Blue Ocean
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Case: Wii and the Blue Ocean
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Case: Wii and the Blue Ocean
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Wii: Strategy canvas
Source: DFC Intelligence, Sep 2007
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Wii: Strategy canvas1. Wii will sell the most hardware units in Japan and could be the overall worldwide winner. However, the PS3 could be a strong second. Furthermore, by 2012 the PS3 may actually lead in software revenue even though the Wii has sold more units.
2. Under DFC's best case scenario for the Xbox 360, the system is in a virtual tie with both the Wii and the PS3. However, unless the Xbox 360 can kick it into gear in the fourth quarter and through 2008, the system will probably finish in a fairly distant third. A big challenge for the Xbox 360 is building a base outside North America.
3. The PS3 is looking to make a strong play for 2009 and beyond. For software revenue, the PlayStation 3 looks to be a solid platform for the 2009-2012 time period.
Source: DFC Intelligence, Sep 2007
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Strategy canvas for video games
0
2,5
5,0
7,5
10,0
Broadcast Television Internet media usageOffline video games Online video games
PriceSelection
AvailabilityInteractivity
PortabilityCommunity
Rich experiencePersonalisation
Ease of use
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Strategy canvas for video games
0
2,5
5,0
7,5
10,0
Broadcast Television Internet media usageOffline video games Online video games
PriceSelection
AvailabilityInteractivity
PortabilityCommunity
Rich experiencePersonalisation
Ease of use
47
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Strategy canvas for video games
0
2,5
5,0
7,5
10,0
Broadcast Television Internet media usageOffline video games Online video games
PriceSelection
AvailabilityInteractivity
PortabilityCommunity
Rich experiencePersonalisation
Ease of use
47
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Strategy canvas for video games
0
2,5
5,0
7,5
10,0
Broadcast Television Internet media usageOffline video games Online video games
PriceSelection
AvailabilityInteractivity
PortabilityCommunity
Rich experiencePersonalisation
Ease of use
47
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Strategy canvas for video games
0
2,5
5,0
7,5
10,0
Broadcast Television Internet media usageOffline video games Online video games
PriceSelection
AvailabilityInteractivity
PortabilityCommunity
Rich experiencePersonalisation
Ease of use
47
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Strategy canvas for video games
0
2,5
5,0
7,5
10,0
Broadcast Television Internet media usageOffline video games Online video games
PriceSelection
AvailabilityInteractivity
PortabilityCommunity
Rich experiencePersonalisation
Ease of use
47
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Strategy canvas for video games
0
2,5
5,0
7,5
10,0
Broadcast Television Internet media usageOffline video games Online video games
PriceSelection
AvailabilityInteractivity
PortabilityCommunity
Rich experiencePersonalisation
Ease of use
47
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Strategy canvas for video games
0
2,5
5,0
7,5
10,0
Broadcast Television Internet media usageOffline video games Online video games
PriceSelection
AvailabilityInteractivity
PortabilityCommunity
Rich experiencePersonalisation
Ease of use
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Innovation and new business models in video games
• Internet - where are we in 2007?
• Innovation and business modeling
• Towards Blue Oceans
• Games as services: threat or opportunity
• Conclusions
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Focusing on customers
Copyright © 2007 Satama Interactive
Fitting the user needs (utility)
Easy to use (usability)
Pleasurable experience
(satisfaction)
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Focusing on customers
Copyright © 2007 Satama Interactive
Fitting the user needs (utility)
Easy to use (usability)
Pleasurable experience
(satisfaction)
Good ExperienceI tell 4 people
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Focusing on customers
Copyright © 2007 Satama Interactive
Fitting the user needs (utility)
Easy to use (usability)
Pleasurable experience
(satisfaction)
Good ExperienceI tell 4 people
Bad Experience
I tell 18 people
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Elements of a good experience
# 49. Copyright September 30, 07 Satama. All rights reserved.
The Rich
Experience
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Elements of a good experience
# 49. Copyright September 30, 07 Satama. All rights reserved.
The Rich
Experience
I find things where I expect them
I like the brand and visual design
It is nice to do things at this location
I saved a lot of time doing things via the service
I feel the service ‘understands’ me
I get things done more efficiently than by myself
I got exactly what I needed know
I am impressed by the service
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Elements of a good experience
# 49. Copyright September 30, 07 Satama. All rights reserved.
The Rich
Experience
I find things where I expect them
I like the brand and visual design
It is nice to do things at this location
I saved a lot of time doing things via the service
I feel the service ‘understands’ me
I get things done more efficiently than by myself
I got exactly what I needed know
Any form of service / entertainment should lead to a relevant and rich experience
I am impressed by the service
I had fun with this service
I want to recommend my friendsto use this service
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Video games - innovate and network
• Video games industry need to innovate to continue on the growth track and reach new customers
• Incremental innovations needs to be supplemented with consumer and rich experience-oriented innovations
• The online generation lives online - games should be geared towards leveraging this networking, too.
51