Opening the Valve: From Software to Hardware

What is the key issue in the case?

I shall address the key issues of this case by following a systematic approach to highlight the case
situation, the incurred challenges, and the proposed recommendations to tackle these challenges.
The Situation: In today’s entertainment industry, the video gaming market has become one of the largest
and most profitable businesses. “PC gaming market share statistics reveal that in 2019, its market share
was at 24%, which amounted to $35.3 billion” (Deyan, 2020). This case dives into one of the most
successful leaders of this industry: Valve. A company rooted in software production and founded in 1996
by former Microsoft employees Gabe Newell and Mike Harrington. Hindered by the stagnant growth of
hardware, it became clear to Valve that the only way to advance their software programs, was to find a
way to enhance the gaming hardware that was available to the public.

Organizational Challenge:

Is the company’s organizational and operational structure compatible with what is necessary for
successful hardware production?

The challenge was to provide a virtual living room & mobile hardware
The challenge is in the hiring and selecting the talented people (who will decide the quantity and level of
experience0?
Are there any support department like HR, Finance, Transportation? If yes, this mean that part of Valve
business structure is hierarchical (mentioned that it is a participatory management model)
If there are compensation plans, Who will pay the bonus or incentives for the employees?

Who will resolve any individual or team conflict?...There is no clear conflict resolution process for Valve
One of the main conceptual assumption problem Value was facing is generalization assumption. The
assumption that if they are successful in gaming software industry, that could be generalized to any
industry part of IT.

Recommendation: I have created two alternative solutions to Valve’s main issue. One way that Valve
could approach their entry into the hardware market would be to create a community of cabals that
focused their energy on hardware production. Although the separation could negatively influence their
autonomous structure, there could also be a way to maintain that one-level structure within their software
production, while tweaking it in a way that catered to the success of hardware production.
Another way is to utilize consultants in Business Architecture to review their current business framework
and design the models and strategies to guideline the transformational process. The BA consultants can
provide insight on how a uniquely structured organization such as Valve could work on projects that are
rooted in formalized and centralized operations.
My recommendation would be a mixture of both alternatives provided above. Although this may seem
intimidating to the company’s current state, the benefits that would be brought on by successfully
entering the hardware market highly outweigh the cost of creating minor change within the organization.
Ultimately, the creativity held in Valve is sufficient enough to find a way to infiltrate a formal
environment with a decentralized and autonomous employee community.
Valve can act as a channel master in the hardware ecosystem that it relates to.
The hardware cabal could act like the R&D Spirit of Valve where software experiments that are
related to hardware can be conducted in the same spirit and values of Value (by hiring hardware
designers and engineers)

Who is (or are) the main protagonists?

 Gabe Newell, Founder of Valve
 Mike Harrington, Founder of Valve
 STEAM Audience
 Desktop Gamers
What is a question you would ask about the case?
Is it worth for a successful gaming company like Valve to seek ways to enter the hardware market or
attain their market position as a leading company in their business?
Reference

Deyan, G. (2020). 43+ Out of This World Video Games Industry Statistics in 2020. Retrieved February
18, 2021, from https://techjury.net/blog/video-games-industry-statistics/#gref