‘Scaling up’ is different from ‘growth’.
Growth involves increasing revenue by adding resources like capital and employees, often leading to higher costs. Scaling up, in contrast, increases revenue without proportionally increasing resources. While growth often requires significant investment, scaling focuses on expanding revenue with minimal additional costs, crucial for businesses transitioning beyond the startup phase.
From our own perspective at Ceannas we are just entering that ‘scaling up’- phase. We have a range of successful products and services. We have made significant investments in employees, technology, branding, research and development, and have a capacity to increase income without a corresponding increase in expenditure. If we can succeed at this stage then we will have successfully ‘scaled-up’.
So how should we do it?
LEARNING FROM CANDY CRUSH
King Digital Entertainment achieved remarkable success and stability in the hyper competitive mobile gaming market, primarily through its flagship game, Candy Crush Saga. This game not only captured the imaginations of millions worldwide but also set a new standard for mobile gaming profitability and user engagement. King's journey from a modest start-up to a dominant player in the digital entertainment industry offers us profound insights into strategic scaling.
Candy Crush Saga, launched by King in 2012, is a free-to-play tile-matching game initially released on Facebook. The game involves swapping coloured candies on a board to form matches of three or more, creating opportunities for chain reactions with power-ups from matches of four or more candies.
At its peak, King earned nearly $1 million per day. By 2023, Candy Crush Saga had amassed over $20 billion in revenue and over 2.7 billion downloads, making it one of the most successful mobile apps.
SCALING UP
From mid-2012 to mid-2013, King experienced a meteoric rise in its financial performance, with a 12 fold increase in revenue and a nearly 70 fold increase in operating income. This growth trajectory was not just a product of market luck but a result of deliberate strategic choices and a deep understanding of the cultural dynamics that drive business success. Unlike many of its contemporaries which struggled with profitability despite significant user growth, King Digital Entertainment managed to translate its expanding user base into substantial financial gains.
The company's success can be attributed to its adept management of the extrapolation phase—a critical period of business development that involves both exploring new opportunities and exploiting existing capabilities to maximise growth and profitability. During this phase, King not only confirmed the market's demand for its products but also demonstrated an exceptional ability to achieve profit-market fit, where each new user significantly contributed to the bottom line with minimal incremental cost.
Product-Market Fit?
Product-market fit refers to the degree to which a product satisfies a strong market demand. It is a crucial stage for any new product or service, indicating that the product has been well-received by its target audience and fulfils a specific need in the market effectively. Achieving product-market fit means that a company has successfully identified a target customer base, understands their needs, and has developed a product that addresses those needs in a way that resonates with those customers.
SCALING UP - TEN LESSONS
Here are ten practical steps that King Digital Entertainment did to successfully scale up their business:
Perfected Product-Market Fit: King ensured that Candy Crush Saga and their other games deeply resonated with their target audience, securing a robust product-market fit that attracted a large user base.
Shifted Monetisation Strategy: King pivoted from relying on advertising revenue to focusing on in-app purchases, which significantly boosted their revenue per user.
Controlled Cost Increases: Despite their rapid expansion, King managed to keep their cost increases relatively low (only a 6x increase compared to a 12x increase in revenue), focusing on scaling operations without proportionate rises in costs.
Leveraged Data Analytics: King extensively utilised data analytics to understand user behaviours and preferences, allowing them to continuously refine game features and enhance user engagement.
Iterative Development Approach: They adopted an iterative approach to game development, consistently updating games with new features and levels to maintain user interest and promote ongoing in-app purchases.
Built a Strong Community: King cultivated a robust community around Candy Crush Saga, using social media to enhance player engagement and retention through community challenges and shared achievements.
Expanded Globally: King focused on international expansion, making Candy Crush Saga accessible worldwide and localising content to cater to diverse markets, thus expanding their user base.
Streamlined Operations: They optimised operations by focusing on core competencies and outsourcing non-essential activities, maintaining a lean operational model during their growth phase.
Maintained Modular Team Structures: King preserved a modular organisational structure with autonomous teams dedicated to various aspects of game development and user experience, fostering agility and innovation.
Engaged in Strategic Experimentation: Throughout their expansion, King continuously experimented with new game concepts and monetisation strategies, quickly adapting their approach based on the effectiveness of these initiatives.
These strategies enabled King Digital Entertainment not only to expand their user base and revenue rapidly but also to effectively manage their costs, leading to a significant increase in operating income and establishing a sustainable, profitable business model.
KING DIGITAL ENTERTAINMENT - CULTURE FOOTPRINT
The following analysis of King's actions within the seven Ceannas Cultural Building Blocks—Warmth, Edge, Leadership, Management, Learning, Entrepreneurship, and Teamwork—provides deeper insights into how the company's cultural strategies were instrumental in its extraordinary growth and profitability.
King Digital Entertainment's success story offers valuable lessons for other organisations aiming to scale up effectively. By examining the strategic actions King took within the seven cultural building blocks, we can distill key lessons that can guide other companies through their growth phases.
Warmth: Do You Care About Your People?
Lesson 1: Employee Engagement Drives Innovation
Fostering a workplace where employees feel valued and engaged can lead to higher creativity and innovation, especially in industries that rely heavily on creative outputs.
Lesson 2: Flexibility Enhances Productivity
Implementing flexible work policies can improve employee satisfaction and productivity, as seen in King’s approach to work conditions.
Lesson 3: Supportive Environment Attracts Talent
Creating a supportive and inclusive work environment is crucial in attracting and retaining top talent, which is essential for sustained growth and innovation.
Lesson 1: Pivot Based on Data
Using data to understand customer preferences and market trends can guide strategic pivots that enhance profitability, like King’s shift from ad-based revenue to in-app purchases.
Lesson 2: Focus on Scalable Business Models
Adopting business models that can scale effectively with growth is crucial. King’s model of virtual goods is an example of a scalable revenue stream that aligns with user engagement.
Lesson 3: Continuous Optimisation
Continuously optimising products and services to meet changing market demands ensures sustained growth and competitive edge.
Leadership: Do You Have Leaders Who Lead?
Lesson 1: Visionary Leadership is Key
Strong, visionary leadership that can navigate through market changes and drive the company towards long-term goals is essential.
Lesson 2: Adaptability in Leadership
Leaders must be adaptable, able to adjust strategies in response to new information and changing circ*mstances.
Lesson 3: Inspire and Motivate
Leaders should inspire and motivate their workforce by being role models in innovation and commitment to the company’s goals.
Lesson 1: Implement Robust Project Management
Effective project management practices are crucial in handling complex operations and ensuring that strategic initiatives are executed efficiently.
Lesson 2: Leverage Data for Decision Making
Using data analytics to inform management decisions can lead to better outcomes and more efficient resource allocation.
Lesson 3: Focus on Scalability and Efficiency
Management practices should focus on scalability and operational efficiency to support growth without compromising on service or product quality.
Learning: Do You Learn and Improve?
Lesson 1: Foster a Culture of Continuous Learning
Encouraging continuous learning and adaptation is vital for staying relevant and competitive in rapidly changing industries.
Lesson 2: Utilise Feedback for Improvement
Actively using customer and employee feedback to refine products and services can lead to significant improvements and innovation.
Lesson 3: Promote Experimentation
Creating an environment where experimentation is encouraged can lead to discoveries and developments that propel the company forward.
Lesson 1: Encourage Innovation
Cultivating an entrepreneurial spirit within the organisation can drive continuous innovation and adaptation.
Lesson 2: Rapid Prototyping and Testing
Implementing ideas through rapid prototyping and testing allows for quick iteration and refinement, reducing time to market.
Lesson 3: Market Alignment
Ensuring that new ideas and products are closely aligned with market needs and customer preferences is crucial for successful innovation.
Teamwork: Do You Achieve Things Together?
Lesson 1: Promote Autonomy and Accountability
Empowering teams by promoting autonomy and accountability can enhance agility and speed in decision-making.
Lesson 2: Foster Cross-functional Collaboration
Encouraging collaboration across different functions and departments can lead to more holistic and innovative solutions.
Lesson 3: Modular Organisational Structure
Adopting a modular organisational structure can help maintain flexibility and responsiveness as the company grows, preventing stagnation and encouraging innovation at multiple levels.
By integrating these lessons into their strategic planning and operational execution, other organisations can enhance their chances of successful scaling and long-term sustainability, much like King Digital Entertainment.
The analysis of King Digital Entertainment's strategic use of the seven cultural building blocks—Warmth, Edge, Leadership, Management, Learning, Entrepreneurship, and Teamwork—reveals a fantastic blueprint for organisational success in scaling operations. King's ability to integrate these cultural elements into its business operations was pivotal in its transition from a fast-growing startup to a stable, profitable entity in the competitive mobile gaming industry.
King's journey underscores the critical importance of a balanced and dynamic organisational culture that supports both innovation and operational efficiency. The company's focus on employee engagement and satisfaction (Warmth), combined with a relentless pursuit of results (Edge), created a robust foundation for sustainable growth. Leadership at King was visionary yet adaptable, steering the company through various market changes with a clear focus on long-term goals. This was complemented by effective management practices that ensured scalability and efficiency.
King's commitment to continuous learning and improvement facilitated rapid adaptation to new challenges and opportunities. The entrepreneurial spirit within the company encouraged innovation, while teamwork and collaboration were enhanced by a modular organisational structure that supported autonomy and rapid decision-making.
In conclusion, King Digital Entertainment's strategic management of its cultural framework provides valuable lessons for other organisations aiming to scale successfully. The deliberate cultivation of a supportive, innovative, and results-oriented culture is not just beneficial but essential for navigating the complexities of growth and market competition.
Organisations looking to replicate King's success must consider how each cultural building block can be adapted and integrated into their unique operational contexts to drive sustained growth and profitability.
From a Ceannas perspective this has been a very worthwhile learning experience. Who knows if we will be able to scale up successfully, but the model provided by the Candy Crush experience is exceptionally useful, albeit that our premium services are a little different. Nevertheless, it just goes to show that regardless of your business the challenges of scaling up have much more in common, than they are different.
Good luck!
