Looking around for my next gig has made me really think about how I manage professionals and why. If you haven't seen this TED talk, and you manage professionals, you should.
http://www.ted.com/talks/dan_pink_on_motivation.html
On top of Dan's excellent anaylsis, let me add a few observations from a good deal of experience on both sides of the management fence:
(1) If you have a system, and its getting lousy compliance, the problem is *the system* not the employees.
(2) If you have a problem employee, 90% of the time what you really have is a mis-match of employee to situation. It is far less wasteful and generally more productive to try to fix the situation then to try to "fix" the employee.
Both one and two above are based on a simple and true premise. Its one Dan talks about in his work. Its that people are intrinsically motivated. Most people really want to do a good job. Rather then the typical management view of "if someone isn't doing a good job then they don't care enough", I propose that 90% of the time if someone isn't doing a good job its because something is in their way and they are at least as frustrated by it as you are.
This leads to my third observation:
(3) Self-organization is the most powerful solution to (2) in your arsenal.
I have seen this over and over. If I try to over-structure a team, I make mistakes. People struggle with the roles I have assigned them. Some do well, some not so well. This is not surprising. After all, all I really know about them is a resume and some short conversations.
HOWEVER they get to know each other very well very quickly. They spend 8 hours a day problem solving together. Left to their own devices they inevitably come up with better solutions as to who is suited to what then I could. Furthermore, their solutions are fluid and can change to meet changing requirements.
Which leads me to my most important point....
(4) The single most detrimental thing to professional productivity, is too much management.
Its wasteful in that it requires a lot of management time, and its wasteful in that generally all you are doing is getting in the way of your people. When I have a team spun up and functioning, that team takes half an hour a day to manage, and (depending on its seniority) 5 to 10 hours a week to coach. Thats it.
If you think every team needs its own manager, you are doing way too much management. 9 women cannot make a baby in 1 month, and 9 managers can't make a baby at all! In fact, put even one "manager" in the room full time directing and grading a couple trying to make a baby and its the rare couple that can manage to achieve the goal.
The old school of management suggested that the best motivators were fear and greed. As Dan points out, that works great for assembly workers, but not for professionals.
The best motivators for professionals are autonomy and trust. The *first* job of a manager of professionals is not to manage the workers, but to manage their environment such that they can work effectively.
This isn't to say that a team should not be directed, but the most effective direction is in the form of engineering goals to accomplish not ways to accomplish them. A team that feels empowered will come to you, in most cases, if they are unsure of how to proceed. And such "event driven" management is far more efficient for both sides then "polling."
For the cases where they don't realize they are headed into trouble, thats what monitoring is for... but that monitoring should always be a light touch. A peek over the shoulder of a mentor, not the drumbeat of a task master.
In my case, I use a white-board based scrum burn-down chart and it takes 10 min or less at the end of the day to discuss and update it. The goal is not to grade them on productivity, but simply to know what is getting in their way and to adjust estimates as we understand more about the problem at hand.
The modern manager needs to serve the company's greater goals by serving his employees needs for both direction and an environment in which they can do their best work. And a manager with time on his or her hands is a manager who has succeeded in those goals. A constantly busy manager, on the other hand, is one who is floundering.
In short, modern effective management is not a position of mastery, but of service. And true service means doing just what is helpful, and then getting out of the way.
My wife, the theologian, would say someone told us this 2000 years ago. Its time we listened.
Saturday, January 14, 2012
Tuesday, August 2, 2011
For those with no memory....
I get really annoyed when people start mouthing myths as facts, particularly when they fly *against* all actual facts.
That the current deficit is somehow due to the democratic party or their priorities is simply and obviously not true to anyone who actually looks at the facts:
Fact: We had a national budget surplus when Bill Clinton left office.
Fact: The current debt is *entirely* due to George W Bush fighting two wars on credit.
If you don't believe me, look it up in any honest and unbiased source for historical news.
That the current deficit is somehow due to the democratic party or their priorities is simply and obviously not true to anyone who actually looks at the facts:
Fact: We had a national budget surplus when Bill Clinton left office.
Fact: The current debt is *entirely* due to George W Bush fighting two wars on credit.
If you don't believe me, look it up in any honest and unbiased source for historical news.
Friday, July 15, 2011
Business, F2P, MMORPGs and basic math
My past two columns have been digging into Zynga numbers from their S1 statement to see what we can learn about the real F2P business. Today, I'm going to do some basic math with the, Don't worry, its nothing worse the multiplication, division, addition and subtraction. just those simple tools can generate some very interesting results.
The big squawk in the MMORPG space right now is about MMORPGs turning to F2P/Micro-transaction models. Its being hailed as some great new trend, but I've always maintained that the economics were fairly clear. That this isn't a viable way to make money in this space. Why then do it? Because, I contend, in all these cases you have failed MMORPGs with sunk costs to recover and some income is better then none.
With the hard Zynga data, we can explore this topic a little bit better.
Two columns ago, I dug out of Zynga's numbers a clear data point-- that Zynga grossed $3.21 per year per active account in 2010; Last column, with a bit deeper analysis, I concluded that they see a raw margin over operating expenses of about 20%. This means a net before marketing and such of about $0.64 per active account.
So, lets make a few assumptions:
(1) Zynga is the master at this and represents a best-case long term return (a fairly reasonable assumption i think.)
(2) Your MMORPG costs $40M to develop. (Age of Conan was $40m as per http://forums.ageofconan.com/showthread.php?t=149585&page=3, Wow cost $68M to develop http://www.raphkoster.com/2006/06/13/what-wow-cost/. So that seems conservative.)
(3) Your MMORPG has a life-span of 5 years and maintains peak usership for all 5 years. (A very generous assumption.)
(4) Your MMORPG has no more cost of operation then Zynga's casual games and can reach the same profit margin. ( A very very generous and almost certainly false assumption.)
In this perfect storm, how many users does it take til you break even?
Well 20% of $3.21 is about $0.64 a year per active account. Over 5 years thats $3.21 again for the 5 years (not surprising, 5 is 20% of 100).
$40M/3.21 = 12,461,059
SO to even make back your investment in this model, you need to sustain an active user base of almost 12.5 million users over 5 years.
Seen many MMORPGs do that recently? WoW only has 11.4M current subscribers, took years to get to that point, and spent a lot of money on marketing in the process that isn't accounted for in the above overly-generous model.
Real F2P MMORPGs are sometimes a desperate way to get some revenue out of a failed product with sunk costs. But as a way to even break even its a fantasy, not a business model.
The big squawk in the MMORPG space right now is about MMORPGs turning to F2P/Micro-transaction models. Its being hailed as some great new trend, but I've always maintained that the economics were fairly clear. That this isn't a viable way to make money in this space. Why then do it? Because, I contend, in all these cases you have failed MMORPGs with sunk costs to recover and some income is better then none.
With the hard Zynga data, we can explore this topic a little bit better.
Two columns ago, I dug out of Zynga's numbers a clear data point-- that Zynga grossed $3.21 per year per active account in 2010; Last column, with a bit deeper analysis, I concluded that they see a raw margin over operating expenses of about 20%. This means a net before marketing and such of about $0.64 per active account.
So, lets make a few assumptions:
(1) Zynga is the master at this and represents a best-case long term return (a fairly reasonable assumption i think.)
(2) Your MMORPG costs $40M to develop. (Age of Conan was $40m as per http://forums.ageofconan.com/showthread.php?t=149585&page=3, Wow cost $68M to develop http://www.raphkoster.com/2006/06/13/what-wow-cost/. So that seems conservative.)
(3) Your MMORPG has a life-span of 5 years and maintains peak usership for all 5 years. (A very generous assumption.)
(4) Your MMORPG has no more cost of operation then Zynga's casual games and can reach the same profit margin. ( A very very generous and almost certainly false assumption.)
In this perfect storm, how many users does it take til you break even?
Well 20% of $3.21 is about $0.64 a year per active account. Over 5 years thats $3.21 again for the 5 years (not surprising, 5 is 20% of 100).
$40M/3.21 = 12,461,059
SO to even make back your investment in this model, you need to sustain an active user base of almost 12.5 million users over 5 years.
Seen many MMORPGs do that recently? WoW only has 11.4M current subscribers, took years to get to that point, and spent a lot of money on marketing in the process that isn't accounted for in the above overly-generous model.
Real F2P MMORPGs are sometimes a desperate way to get some revenue out of a failed product with sunk costs. But as a way to even break even its a fantasy, not a business model.
Saturday, July 9, 2011
More Zynga Analysis - Profit margin
One of the unanswered questions for a long time has been "how much money does Zynga actually make?" They have been happy to release gross figures, but not net. What is their actual profit margin. A friend of mine used to joke "We lose $10.00 on every sale but we make it up in volume!" Obviously, it doesn't matter HOW much money comes in the door if it costs you more then you are taking in to get it.
This is particularly highlighted by the revelation of my last blog. Zynga is taking in about $3.00 per active user account per year. Now, the economics of online help here a little. Your operational costs are mostly based on concurrently connected users, or CCU. Each concurrently connected user has a cost associated with supporting that user's online session. So its really the return per CCU that matters in your final economics.
It is a rule of online entertainment that your peak CCU is 5% to 10% of your total active user population. So, lets be generous and multiply Zynga's $3.21/yr/active account by 20. That gives an actual income of $60/peak CCU/year or $5.00 per peak CCU/month.
Thats *not* a lot of money to runa service on. A $5.00 per month subscription MMO generates $100/peak ccu/month by the same math. a $15.00 one generates $300 per peak CCU/mo. So, how much of that $5.00 a month is beign spent to get support that user? What is left is what is called the "margin", and thats where your profit comes from.
We can get a rough guess from this, more complicated chart from the S1:
In particular we are interested in this line, gross revenue:
And this line, which is profit after operating expenses:
What we can see from these charts is that, in 2010, Zynga took in $597,495K or just about $597.5M.
Not bad, but what was left after expenses? from the second line we see that, before taxes, it was $127,059K or about $127M.
From that, we can compute a rough margin, using the formula margin% = 100*net/gross. Thus Zynga had a profit margin in 2010 % of about 100*127/597.5 = 21%. Thats not a great margin, but its not razor slim either. As long as they can hold their costs even they aren't in a bad place.
And there is the rub. Because entertainment that stays the same bores its audience and dies. Every other platform and niche in game playing has seen a fairly rapid escalation of complexity and cost in games. The casual space is not likely to be any different. So, can Zynga meet the future challenges it faces on $5/ccu/month? Its a good question. if i had the answer I'd be making a lot more money then I do now (which isn't too shabby as it is.) One thing is for sure, you cant run a game as complex as a modern MMORPG on that. Not without drastic compromises in security.
Another interesting thing emerges from the Zynga documents however, which is that in 2009, with $127M of income, they actually *lost* money. Now a lot of that may be attributable to marketing spends to get themselves to their current $600M of revenue. But if 2010 is benefitting from last 2009's deficit, it calls into questions how sustainable the current margin really is.
No easy answers, but an interesting read. One thing is for sure-- this is not a financial model that supports server-heavy game designs. Unfortunately, those server heavy designs are also the only way to make complex games secure.
All in all I suspect it will be an interesting future for Zynga.
This is particularly highlighted by the revelation of my last blog. Zynga is taking in about $3.00 per active user account per year. Now, the economics of online help here a little. Your operational costs are mostly based on concurrently connected users, or CCU. Each concurrently connected user has a cost associated with supporting that user's online session. So its really the return per CCU that matters in your final economics.
It is a rule of online entertainment that your peak CCU is 5% to 10% of your total active user population. So, lets be generous and multiply Zynga's $3.21/yr/active account by 20. That gives an actual income of $60/peak CCU/year or $5.00 per peak CCU/month.
Thats *not* a lot of money to runa service on. A $5.00 per month subscription MMO generates $100/peak ccu/month by the same math. a $15.00 one generates $300 per peak CCU/mo. So, how much of that $5.00 a month is beign spent to get support that user? What is left is what is called the "margin", and thats where your profit comes from.
We can get a rough guess from this, more complicated chart from the S1:
In particular we are interested in this line, gross revenue:
And this line, which is profit after operating expenses:
What we can see from these charts is that, in 2010, Zynga took in $597,495K or just about $597.5M.
Not bad, but what was left after expenses? from the second line we see that, before taxes, it was $127,059K or about $127M.
From that, we can compute a rough margin, using the formula margin% = 100*net/gross. Thus Zynga had a profit margin in 2010 % of about 100*127/597.5 = 21%. Thats not a great margin, but its not razor slim either. As long as they can hold their costs even they aren't in a bad place.
And there is the rub. Because entertainment that stays the same bores its audience and dies. Every other platform and niche in game playing has seen a fairly rapid escalation of complexity and cost in games. The casual space is not likely to be any different. So, can Zynga meet the future challenges it faces on $5/ccu/month? Its a good question. if i had the answer I'd be making a lot more money then I do now (which isn't too shabby as it is.) One thing is for sure, you cant run a game as complex as a modern MMORPG on that. Not without drastic compromises in security.
Another interesting thing emerges from the Zynga documents however, which is that in 2009, with $127M of income, they actually *lost* money. Now a lot of that may be attributable to marketing spends to get themselves to their current $600M of revenue. But if 2010 is benefitting from last 2009's deficit, it calls into questions how sustainable the current margin really is.
No easy answers, but an interesting read. One thing is for sure-- this is not a financial model that supports server-heavy game designs. Unfortunately, those server heavy designs are also the only way to make complex games secure.
All in all I suspect it will be an interesting future for Zynga.
Thursday, July 7, 2011
Real Zynga Numbers
There has been much speculation about Zynga's numbers over the past few years. They gave out tantalizing tidbits but never enough to really know what they were making. As the acknowledged leaders of the F2P space, this is important information and, in the absence of real information, speculation ran wild.
However, in order to make a public offering, you have to "lift the skirts" as they say and so, buried deep in Zynga S1 filing with the SEC are these interesting tidbits:
This is a chart showing Zynga's gross income. The magic bar is the darker blue "revenue" bar as thats the actual money they took in.
This by itself is not much news, but when combined with this next chart, also in the document, it starts to paint a picture:
Looking at a total 2010 income of $698M and an average DAU of 217M, thats about $3.20 per active user account per year.
Honestly, thats better then I thought, though obviously a lot less then the $60 - $180 per account per year a subscription MMO returns.
However, in order to make a public offering, you have to "lift the skirts" as they say and so, buried deep in Zynga S1 filing with the SEC are these interesting tidbits:
This is a chart showing Zynga's gross income. The magic bar is the darker blue "revenue" bar as thats the actual money they took in.
This by itself is not much news, but when combined with this next chart, also in the document, it starts to paint a picture:
Looking at a total 2010 income of $698M and an average DAU of 217M, thats about $3.20 per active user account per year.
Honestly, thats better then I thought, though obviously a lot less then the $60 - $180 per account per year a subscription MMO returns.
Tuesday, June 28, 2011
AARP under right wing attack
The AARP, traditionally a strong supporter of medicare and social security and a pain in the ass to conservatives wishing to cripple or eliminate these programs, is currently under the same kind of low-political and propaganda attack we just recently saw leveled at PBS.
If you appreciate the AARP but are under 50 years of age, you might want to show support now by becoming an associate member for $12.50.
As a little fore-warned is fore-armed reading, the right is quoting this article BADLY out of context and in very misleading ways. if you think you might have to discuss it with someone, its worth reading in its entirety...
If you appreciate the AARP but are under 50 years of age, you might want to show support now by becoming an associate member for $12.50.
As a little fore-warned is fore-armed reading, the right is quoting this article BADLY out of context and in very misleading ways. if you think you might have to discuss it with someone, its worth reading in its entirety...
Monday, June 20, 2011
Just because you say it often, doesn't make it true....
One of the most common of logical fallacies in modern society is the Availability Heuristic. This is the tendency in the human mind to believe most strongly that which is most available in memory. This biases us towards decisions based on the most recent experiences, and the easiest ones to remember.
Its not an unreasonable bias to be built into us as animals. The most recent experiences have the greatest likelihood of pertaining to where we are right now. Furthermore, repetition increases memory and the speed at which memory is recovered, and this too is reasonable. If something happend 10 times recently its a lot more likely to be relevant then something that happened just once.
Generalities are also easier to remember then specifics. It can be argued that this too at one point in time was adaptive in that we are unlikely to encounter the exact same situation twice but we might well encounter many that have important things in common.
Unfortunately, today we live in a finely crafted soup of experience designed specifically to drive our decision making in directions those who pay for the soup want us to go. From all of the above comes a very simple and well known advertising maxim: the more times people hear your message from apparently different sources, and the simpler that message is, the more likely they are to base their decisions upon it.
The Bush administration raised this to a fine art in the political arena by coordinating many right wing radio and talk show hosts around daily messages. Each day they would send all these people a short list of bullet point "messages of the day' to tell their listeners, with the Fox news network at the center driving it home. (http://www.opednews.com/wade_071604_outfoxed2.htm)
A less directly coordinated, but no less insidious, effort has existed since the 1970s and has continued to exert its influence to day. (An examination of its approach to Welfare as an issue can be read here: http://www.publiceye.org/welfare/Decades-of-Distortion.html)
To me, one of the most insidious distortions that has been created through continued repetition of a falsehood is the idea that this is a "Christian Nation."
Nothing could be further from the actual truth. This nation was founded by expatriates from Europe, a place of legitimate Christian nations-- which is to say nations whose Kings claimed their right to rule on Christian religious precepts and which defined Christianity as their state religion.
In stark contrast, our founding fathers did *not* by and large identify themselves as Christians, but rather were part of a movement that has come to be called "enlightenment deism" by theologians and historical scholars. This was founded in the notion that god was represented in the natural order and could be found there, and not in institutions and religions created and run by men. (http://en.wikipedia.org/wiki/Deism)
They enshrined that belief in one of the most amazing and daring propositions of their day: that *all* men were created equal by their maker, and that freedom of religion was an individual right that should be held totally separate from the matters of governance. By doing so, they were declaring war not just on England, but on all the European notions of state religion.
This is NOT a Christian nation, nor has it ever been one. This is a nation that exists independent of any religion. That it happened to be majoritively occupied by Christians, at its founding or today, was not a reason to make that the state religion.
That was what our founders thought. Thats what the constitution says. And if you didn't know that, maybe you should read it again.
Its not an unreasonable bias to be built into us as animals. The most recent experiences have the greatest likelihood of pertaining to where we are right now. Furthermore, repetition increases memory and the speed at which memory is recovered, and this too is reasonable. If something happend 10 times recently its a lot more likely to be relevant then something that happened just once.
Generalities are also easier to remember then specifics. It can be argued that this too at one point in time was adaptive in that we are unlikely to encounter the exact same situation twice but we might well encounter many that have important things in common.
Unfortunately, today we live in a finely crafted soup of experience designed specifically to drive our decision making in directions those who pay for the soup want us to go. From all of the above comes a very simple and well known advertising maxim: the more times people hear your message from apparently different sources, and the simpler that message is, the more likely they are to base their decisions upon it.
The Bush administration raised this to a fine art in the political arena by coordinating many right wing radio and talk show hosts around daily messages. Each day they would send all these people a short list of bullet point "messages of the day' to tell their listeners, with the Fox news network at the center driving it home. (http://www.opednews.com/wade_071604_outfoxed2.htm)
A less directly coordinated, but no less insidious, effort has existed since the 1970s and has continued to exert its influence to day. (An examination of its approach to Welfare as an issue can be read here: http://www.publiceye.org/welfare/Decades-of-Distortion.html)
To me, one of the most insidious distortions that has been created through continued repetition of a falsehood is the idea that this is a "Christian Nation."
Nothing could be further from the actual truth. This nation was founded by expatriates from Europe, a place of legitimate Christian nations-- which is to say nations whose Kings claimed their right to rule on Christian religious precepts and which defined Christianity as their state religion.
In stark contrast, our founding fathers did *not* by and large identify themselves as Christians, but rather were part of a movement that has come to be called "enlightenment deism" by theologians and historical scholars. This was founded in the notion that god was represented in the natural order and could be found there, and not in institutions and religions created and run by men. (http://en.wikipedia.org/wiki/Deism)
They enshrined that belief in one of the most amazing and daring propositions of their day: that *all* men were created equal by their maker, and that freedom of religion was an individual right that should be held totally separate from the matters of governance. By doing so, they were declaring war not just on England, but on all the European notions of state religion.
This is NOT a Christian nation, nor has it ever been one. This is a nation that exists independent of any religion. That it happened to be majoritively occupied by Christians, at its founding or today, was not a reason to make that the state religion.
That was what our founders thought. Thats what the constitution says. And if you didn't know that, maybe you should read it again.
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