Digital Chocolate

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WRITTEN ANALYSIS OF CASE

Course Title: Organizational Behavior & Leadership

Submitted to: Dr. Nasir Afghan

Submitted by: Mohammed Asgher (ERP ID: 05024)

Synopsis of the Situation:

Company Name: Digital Chocolate.

Located in: San Mateo, California (Headquarters); Helsinki, Finland; Bangalore, India;
Barcelona, Spain

Operating Segments: Standalone games designed for solo users (referred to as “cookies”),
games for multiple users (referred to as “cakes”)

Genres: puzzle & word, action & adventure, sports & racing, simulation, social entertainment,
cards & casino.

Market: International.

Major Business Units: Mobile & Social Media games, Iphone Apps.

Distribution Channel: Wireless Companies, App stores, Facebook, etc.

Product In Consideration: Social gaming category..

Overview of the case:

Digital chocolate is an innovative gaming company leld by Trip Hawkins. Digital Chocolate has
young and passionate employees and this has translated into many successful, original gaming
titles. The company was started in 2003 and has grown globally through these strategic
acquisitions. Hawkins’s vision and leadership skills have enabled Digital Chocolate to find teams
that fit culturally to them. With teams in San Mateo, Helsinki, Barcelona and Bangalore, Trip
Hawkins has been able to reduce costs and create games with global prospective. Digital
Chocolate began its journey developing games and distributing them through various wireless
carriers. Then in mid 2008, it began distribution through consumer marketplace applications for
mobiles, such as App store. Now it is on the verge of entering the exciting world of social
gaming.
Current Scenario:

Trip Hawkins is on a flight back from Helsinki, Finland excited to be able to test the prototypes of
the new social game as developed by the Finland team. He has had a vision of combining social
interactions with gaming since 1970, but until today he hasn’t been able to find the technology to
resonate his vision, due to lack in the interactive technology.

Hawkins knows that he has some management decisions to make regarding the development of
social games, the organizational structure and strategic alliances going forward. Wrong choices
could affect the existing company structure and culture.

Cognitive resource theory is a leadership theory that focuses on the conditions in which a
leader’s cognitive resources such as intelligence, expertise and experience contribute to the
effective leadership and successful growth of the organization.

Excellent leadership qualities of Trip Hawkins have been the integral part of the success of
Digital Chocolate over the years. He has the expertise as he has been developing games since
his teenage years; he complimented his interest by getting formal education from Harvard in the
same field along with the wide range of experience (Apple, EA Sports, 3DO). He is known as a
gaming legend. Secondly, the company’s strategic acquisitions have helped the organization cut
costs where necessary and innovate, keeping in mind the global trends. Thirdly, there was
effective use of functional distribution by the company for the global teams.

Most importantly, the Digital Chocolate’s custom-designed engineering platform technique has
enabled the company to chum out new gaming titles that can be used across many devices.

Discussed below are the company’s characteristics that have been paramount to the company’s
success.

 Culture: Trip Hawkins the founder has been able to inculcate a strong culture in the
company. He knows from his past experiences that in order to create a creative &
dynamic environment, inter personal skills are of huge importance. He was able to bring
in the free flow of information through the idea blogs, where everyone’s idea is evaluated
equally and everyone’s encouraged to think. Also the organization’s ability to adopt to
changes has played a vital role in the company’s success.
  Agility and change: He knows the importance of agility and adaptability to changes in
the gaming industry and through his careful screening processes, he has been able to
ensure his employees are comfortable with change and produce better results in a
dynamic environment.

 Communication: Digital Chocolate gives a lot of importance to communication.

Frequent calling, emailing and texting is encouraged. Every Friday afternoon, the initial
game builds are uploaded and tested. This is another technique to bring everyone up to
speed to whatever’s going on in the organization.

 Simplicity: Another important aspect of the culture was the simplicity of the procedures
that were followed. For instance, the “YDC?” presentations that allowed participants to
discuss the merits and de-merits of selecting a particular game. Also, the appraisal
process just has a few simple questions.

 Value: The fact that Hawkins valued integrity and equality very highly was evident from
the way he changed the name of his emailing lists to get of the politics. He has built a
company around certain core values, i.e., energy, innovation, excellence, integrity and
ownership (EIEIO). He ensures that the values remain intact throughout the hiring
processes and while getting rid of solo-flyers & people who doesn’t fit in the company’s
culture.

 Creativity: Their organization values creativity very highly and encourages all its
employees to be more creative. Every idea that’s generated is discussed and positively
criticized. The fact is evident from the many examples present in the case.

Thus, Digital Chocolate has facilitated a learning environment that fosters positive attitudes and
constructive criticism that enables the employees to get motivated for the changes.
Future Plans:

Strong culture, values and communication have ensured the production of innovative games
and huge financial successes throughout. In order to continue on the right track, the
organization leaders need to focus on these points that formed the basis of their success.

The emerging new market segment of social gaming is of upmost importance when considering
future plans for the organization as this particular segment is growing rapidly.

Acute organizational structure and strategies are very important to the decision that Hawkins
has to make. He has options to change the structure of teams or to strategically merge or
acquire new teams. Thus understanding the existing structure and strategy and then deciding
the best option and how the new options would reflect the changes in the existing organization
is a significant decision.

Organizational Structure:

 The company has well defined functional teams. Each team has a specific function to
perform during the production cycle of a game. The chief operating officer describes the
ability of his team as the basketball effect. Each team was specifically selected for the
task; the teams had expertise in their functional area.

 No formalization of roles, i.e. there was flexibility in changing the roles by the senior
management.

 In the lower levels of the hierarchy, direct supervision method is used. For e.g., the audio
designer reports to the production manager and the artists report to Art Director.

 The senior management is very carefully selected and their roles in the organization are
well-defined, indicating towards the good alignment within the organization.
Collective Creativity:

Creative people are more important than creative ideas. Creativity and innovation involves a
large number of people from different disciplines pitching in with their ideas to come up with
effective results. Collective creativity requires placing the creative authority to project leaders,
incubating ideas before rejection, continually challenging assumptions and also having active
feedback schematics.

Existing Strategy:

The gaming industry is a highly dynamic and competitive industry with growing trends.
Uncertainty is the biggest challenge and requires meticulous strategies to overcome its effect.
There is a new development every day and innovation is the key. Gaming industry is also very
resource dependent. The quality of games produced is directly related to the ability of game
developers. Thus, need for the expert game developers arises who understand the changing
demands of the industry and are capable of producing the best results, both with regards to
creativity and high definition graphics.

Hawkins understood the environmental requirements and always tried to stay one step ahead of
the competitors, which was evident by the way he tackled the app store technology introduced
by Apple, Inc. in 2008. He understood the gaming world well and knew that the mobile gaming
was the future. Now he knows and understands that there is a lot to gain from the newly
emerging social gaming industry.

Initially, Digital Chocolate was not directly involved in strategic alliance, but all the companies
chosen for acquisition had strategic alliances with the consumers and were the leading network
operators in their respective geographical markets. Another strategy that is apparent from the
case is that always tested the waters first before diving in, which obviously is very crucial if
you’re leading a dynamic organization. All it takes is one incorrect decision to lead to disasters.
He tested the iphone app store with a few of their best games and then dedicated a whole team
for it.

Through his careful selection procedure he ensured that all his employees were open to
changes and thus his company was quickly able to adapt to changing environmental needs.
Future Considerations:

Basic criteria to evaluate the choices available to proceed with the social gaming market are
discussed in this section. From the above analysis it is clear that the company can attribute its
financial success to its strong culture, good communication and coordination, excellent
management, skilled developers and most importantly its strategic mergers and acquisitions.

Thus in order to adapt a choice, Trip Hawkins first needs to ensure,

 The culture of the existing organization is retained

 The core values of the organization doesn’t change
 Proper team selection
 Development of the new strategy in such a manner that the existing structure and
operations of the company are not affected.

In addition to this,

 He needs to be involved in every step of initial development of the product

 To enter the market as quickly as possible
 To learn to monetize the social gaming market segment

Alternative Solutions:

Option 1; Buying a start up with winning social titles.

Trip has been successful in the past with his mergers and the companies that he has chosen
have all satisfied their criteria for selection, indicating towards his excellent ability to have an
eye for successful mergers. This option maybe time consuming as Hawkins would have to do a
detailed market research to find the right team. Also, it might prove costlier than they can afford.

Option 2; Creation of a separate division for “Social Gaming”

There can be a specialized group for social gaming section in either of the three overseas
locations available to them. The group could be placed under Shah who has the expertise in the
field. Another important aspect of this approach is that Hawkins can implement an ambidextrous
organization, where Shah is to report directly to him, thereby ensuring the synergy with the other
parts of the organization. The existing organization too stays undistracted and continues to
operate effectively.
 1. The case describes the product development system at Digital Chocolate prior to
the introduction of the iPhone. What are the strengths and weaknesses of this
system for producing cookies single-user games for standard handsets?

The development process used prior to the iPhone introduction is somewhatinformal (in terms of
communication channels) and is based on what thecarriers want, so:

Advantages:

 The openness of the process allows for the generation of lots and lots of ideas
 Presenting the concepts to the carriers beforehand allows to focus resources only on
those games that will “see the light of day”
 Working on the development stage almost “as a factory line” – in which each person has
a specific Job – allows to achieve the best results in all areas as well as to achieve
efficiency of resource allocation

Disadvantages:

 The centralization of the final decision on the executive team may cause the process to
be too long in time
 The lack of formal relations and communication channels may cause a lot of loss of
information – especially when the organization is growing in size (number of people and
geographies)
 The “blog method” is a good one while the company is small, but at its present
dimension it may be very hard to keep track of all things being developed (some of the
developments may be lost or forgotten along the way)
 2. How does your evaluation change if the company is producing cakes (multi-user
socially-networked games to be played simultaneously on multiple platforms)
instead of cookies?

If the company is producing this new kind of games, this “network” kind of organization may be
very useful, especially if they use this internal “network of potential customers” to test their
concepts. I mean, they no longer can rely on carriers to push their games onto the customers,
so they want to generate as many hits as possible. One way to do this is to shoot in all
directions, the other is to do some research before investing in the development of the games
themselves. Still about the original process, the timeframe necessary to develop one game is far
to long for the new competitive environment. Possibly Digital Chocolate needs to make some
concessions (the graphics part for example) in order to get releases at a faster pace. The fact
that ideas are being generated at all levels of the company is a very positive thing (more ideas
derives in more chances of success), but still, I’m worried with the lack of organization. They’ve
been in business for years and they still can’t tell whether a game will be a success or not – It is
a very difficult job, but there are some patterns…and by this time they should’ve been able to
find them.