Friday, October 16, 2015

Angry Birds: Falling afoul of early success

OCTOBER 16, 2015

Angry Birds once had grand ambitions.

For a while, the mobile game in which irate cartoon birds do battle with egg-stealing green pigs seemed to be everywhere — on T-shirts, kids’ backpacks, and even plastered on Sentosa’s cable cars.

Released in 2009 and chalking up more than 2.5 billion downloads, the first Angry Birds and its offshoots spawned a pop culture phenomenon, especially in Asia where it even challenged perennial favourite Hello Kitty.

Just a few years ago, Rovio executives were spouting ambitious plans to make Angry Birds a global digital entertainment franchise with theme parks, educational programmes and other spin-offs.

Now, it seems the furious fowl have had their wings clipped.

Amid plunging earnings, Rovio, the Finland-based start-up behind Angry Birds, announced recently that it was shedding 260 staff — a third of its workforce — saying it had tried to do “too many things” with the Angry Birds brand.

With consumer fatigue setting in, the firm is facing the harsh reality that one success does not a sustainable business make.

Repeating an initial success is not easy, especially in the fast and fickle world of tech.

Indeed, a common problem for up-and-coming start-ups is that they fail to see how runaway successes can rapidly run out of steam.

The app and mobile gaming industry is still relatively young — from nothing in the late 2000s, gaming alone has ballooned into a global industry forecast to be worth more than US$100 billion (S$137.7 billion) by the end of the decade.

While this rapid growth has built a potentially lucrative market, we have seen many times that games tend to have an extremely short life cycle and low consumer loyalty.

In 2009, Rovio was fortunate to ride the initial wave of the smartphone boom, capitalising on an original, engaging concept and good timing.

Then, the app market was in its infancy; today, it is bigger and much more fragmented, with many more games making it harder for developers to gain market share.

For every success, there are thousands that fizzle or fail — many for no particular reason other than simple bad luck.

Hoping to reignite the brand, Rovio earlier this year launched a new Angry Birds 2 game and is pushing ahead with the development of an Angry Birds movie.

But analysts are sceptical of its chances.


What lessons can start-ups learn from this?

The challenge for many start-ups and small firms — and the reason many fail — is that they are unable to progress beyond their first product.

The owners and creators of Angry Birds should ask themselves whether it is time to take the money and run — cash in on the remaining brand value by selling the firm and investing the funds in a new project.

Start-ups are inherently ambitious, but can overestimate their capabilities. It is important to remember that striking gold with a mobile game, for example, does not necessarily translate into being good at other things, no matter how original it is.

Indeed, most small organisations, start-ups or otherwise, lack the competencies to succeed against competitors in very different businesses.

In Rovio’s case, it should perhaps have placed a greater focus on its core skills, with heavier investment in future generations of games and related apps.

Tying further spin-off products to the game, as Rovio has tried to do, could create value, but only if complementary capabilities are present.

Instead of focusing on developing its own spin-offs in-house, Rovio might have done better to secure licensing deals or tie-ups with companies that already have the experience and capabilities that they themselves lack.

Without these capabilities — as Rovio is learning the hard way — such ventures carry high risk and cost.

For growing start-ups, the key to success is striking a critical strategic balance, developing competencies for the next-generation product while also trying to maximise what they do in the present.

At the same time they need to grow the organisation, hire people and formalise operations, all of which require heavy investment and solid business expertise — factors that most start-ups often find themselves lacking in.

To avoid the one-hit-wonder syndrome, start-ups should consider recruiting staff from diverse backgrounds to bring a broad range of perspectives to the firm.

Likewise, they should aim to keep their organisational structure as flat as possible, allowing for the rapid cross-fertilisation of ideas that is required in a highly competitive and fast-changing industry.

Yet even with these measures, one should remember that scoring hits in mobile gaming retains a large element of luck.

For all the games that are released, true successes are few and far between — and those that do strike gold find themselves constantly facing the entry of “me-too” competitors.

After all, where Angry Birds once dominated mobile screens, today Candy Crush reigns supreme.

Meanwhile, tomorrow’s next big thing is just a download away.


Andrew Delios, Kulwant Singh and Ang Swee Hoon are professors at National University of Singapore Business School.

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