Yearly Ilkka Paananen, the CEO of Supercell leads his staff in an annual monetary information launch and – famously – publishes a weblog outlining his state-of-play for the video games business. It reveals his hopes and fears and quite a lot of hints at what this big of gaming might be doing subsequent…
Beneath – full and unabridged – is Paananen’s weblog for 2024:
Snug Feeling Uncomfortable
It is Monday, August twenty eighth, 2023, the primary day of Supercell’s annual firm offsite, and I am about to offer perhaps the harshest presentation to everybody at Supercell that I’ve ever given. Public talking has by no means been my favourite exercise (to say the least), however this time I’m much more nervous than common. How would folks react? Would they really feel anger, disappointment, concern…or, would they get fired up and impressed? And what would they consider the very massive modifications I used to be about to announce? Would they suppose that our tradition, that all of us are so happy with, was about to alter for the more severe? However I suppose greater than something, I actually felt for our folks. I used to be about to problem them, and ask loads from them.
The presentation first highlighted the chilly information of Supercell’s efficiency within the final a number of years. We had not been in a position to develop our stay video games and had fallen behind the perfect corporations who had completed so. Moreover, we had not launched a brand new sport since Brawl Stars in 2018. The end result, I confirmed intimately, was Supercell falling from the #1-ranked international writer of cellular video games in 2016 to outdoors the High 10 in 2023. It was painful, however sincere and vital, in order that all of us shared the identical context. Subsequent, I walked everybody via a number of important modifications which we believed would assist Supercell enhance and to shut the widening hole between us and the very top-performing corporations in our business.
I wish to share these modifications with you on this publish, however let’s first rewind to how we got here to those choices. One thing completely needed to change, however what? How? What had been the dangers?
“Don’t Do It”
In final yr’s weblog publish, I outlined Supercell’s two-pronged problem of rising stay video games and concurrently creating new ones. We had been combating each. I used to be delighted to get a ton of suggestions from inside and out of doors Supercell. I spoke to dozens of individuals, together with founders, traders, artists, incubators, accelerators, and members of academia to get their enter.
I used to be stunned that the overwhelming majority of individuals spent most of their time warning me about what may go mistaken if we began altering issues at Supercell. In a technique or one other, most advised me: “don’t do it.” Some implied it, others had been fairly direct, however the message was clear. I used to be additionally stunned that this message was extra true of suggestions from folks outdoors of Supercell vs. from my colleagues inside. I’d have anticipated the other.
To offer you an thought, amongst different issues, I obtained enter comparable to:
“You guys are the one cellular studio that has created 5 billion greenback video games, don’t change what’s working”
“Greater than 200 million month-to-month gamers, half a billion in annual income and also you’re not glad??”
“Have a look at [great game company], they did what you’re planning on doing and that was the start of the tip. All the perfect folks merely left.”
“Deal with stay video games, and take an M&A method to accumulate new video games to your portfolio.”
“You’ll destroy what makes you distinctive, which is your tradition.”
Nothing is nearer to my coronary heart than the folks and tradition we’ve got at Supercell, so the concept that I’d drive one thing that will destroy it…effectively, there aren’t any phrases to explain how that will really feel. Tense doesn’t fairly cowl it.
On the identical time, nevertheless, it was unimaginable to disregard the information. The very best-in-class corporations grew their stay video games, we had not (GGWP: Dream Video games, Riot Video games, King, Playrix, and others). A number of nice new video games got here out and carried out extraordinarily effectively since we launched Brawl Stars, however we had not launched any (h/t: Royal Match, Genshin Affect, Monopoly Go, CoD Cell, and others).
With these stark information and nerve-racking (however invaluable) enter from dozens of sensible, skilled folks, how may we take into consideration what to do? I reminded myself of some key psychological frameworks to assist us focus:
1. Will we deal with the previous or the long run? Except we imagine that Supercell’s finest days are forward of us, we shouldn’t be right here anymore. We now have to deal with the long run.
2. Will we deal with issues we are able to management or those who we can not? This appears apparent,
however it’s so simple to think about some outdoors power that will destroy our tradition. All of us personal it, so it’s as much as us to make sure the perfect elements of it don’t change. We now have to deal with what we are able to management.
3. Will we deal with the various methods one thing would possibly fail or on the few methods it’d succeed? My colleagues typically inform me that I’m an optimist (they’re often rather more excessive of their descriptions of me!). In my profession, I’ve been very fortunate to witness huge successes. In every of these conditions, there have been numerous issues that might have gone mistaken and the reason why groups ought to have failed. Nonetheless, in every occasion, there was a gaggle of people that believed in why one thing would work and so they dedicated themselves to ensure it did. We now have to deal with how & why we may succeed.
This psychological method gave me the mandatory confidence that we had been about to do the suitable (and accountable) factor. We owed it to our gamers, our group, and to everybody at Supercell, previous & current. We had to enhance and mustn’t let concern of failure drive our choices.
Two Birds, Two Stones
The main thought behind the deliberate modifications was what I wrote about in my earlier weblog publish: creating a brand new sport from scratch and working/rising a stay sport as a service are fairly completely different issues. We wanted completely different options for every. We might make modifications to how we method new video games and stay video games, and we might change our management staff as effectively.
New Video games as Startups
Sooner or later, I noticed that the psychological mannequin we may apply to new video games was one thing very near house. As a serial founder/entrepreneur and as an lively investor (inside Supercell and by myself), I’ve seen nice new innovation from startups. So I began to ask myself: what if we began to think about new sport groups as their very own startups, inside Supercell? What useful concepts may we apply? Seems fairly just a few!
• Staff of Entrepreneurs: We imagine that new sport groups have the perfect likelihood of success, partly, if they’re began by a staff of loopy bold, resourceful people who execute quick, are usually not afraid to take dangers, and make aggressive (generally painful/scary) modifications rapidly. Truthfully, we’ve got not been rigorous sufficient about deciding about beginning new sport groups at Supercell. Too typically we’ve got ended up with groups which haven’t had all of the required skillsets or the staff dynamics haven’t been what they need to be once you begin a loopy journey like this. Our bar must be as excessive as it might be for beginning a brand new firm. Going ahead, we might be rather more rigorous and are implementing a devoted system/course of to judge potential new sport groups on this entrance. The very best a part of this to me personally is that Supercell’s precept of greenlighting groups, not concepts will stay more true than ever earlier than. NOTE: We are going to share thrilling information within the close to future about how folks outdoors of Supercell can take part on this course of and have a possibility to change into founders of certainly one of Supercell’s subsequent new sport groups! Keep tuned.
• Constraints: These groups of entrepreneurs function below a well-defined set of constraints, i.e., cash raised or “runway,” which act as a forcing mechanism to get @!#$ completed as rapidly/effectively as attainable. Backside line: you higher have one thing nice earlier than you run out of cash. This one is/was actually onerous for us! I began this thread feeling strongly that we completely want onerous constraints (e.g., every new sport staff will get an agreed-upon price range. In the event that they run out of cash, earlier than proving the sport with gamers, the sport is useless). Not so easy! So many issues/situations to beat: if a staff needs to construct a “massive sport,” then they arguably want a big price range, negating the sensation of an actual constraint early on. OK, however what if we slice a bigger price range into smaller elements/milestones (quite common)? This results in a greenlight course of, which I’m truthfully VERY allergic to.
Many nice corporations work this fashion, however studying from my previous errors (I created a greenlight course of at my earlier firm) I’d not wish to see a course of like this at Supercell. I’ve simply seen too many occasions that sport groups find yourself attempting to please the greenlight committee vs. specializing in pleasing gamers and doing one thing that’s dangerous and new. Much more importantly, we present in inside discussions, this might result in our builders feeling like they had been now not impartial groups. This may undo the extra central tenet of Supercell’s tradition. We must discover one other manner, and I imagine we’ve got our start line, which depends on trusting that we actually have the very best staff of entrepreneurs (see the purpose above). Additionally, we are going to ask our new sport groups to decide to key timelines, milestones, and resourcing plans to achieve them, after which brazenly share them with everybody within the firm. In different phrases, we are going to change the same old fastened budgets or greenlight processes with the stress of transparency. Whereas I don’t imagine for a second that buildings or processes would create nice video games (it’s the folks and groups that do!), our “course of” going ahead might be 1) a scientific method to forming the perfect groups, 2) trusting the groups, and three) forcing the groups to function in an surroundings of full transparency. Sounds easy, proper? Will that be enough? Unimaginable to know but, however we’re all dedicated to attempting.
• Exterior Validation: Within the startup world, the frequent knowledge is that you just wish to get your product in entrance of actual clients as quickly as attainable to validate the “product market match”. In a similar way, new sport groups should put their sport in entrance of gamers as quick as attainable. We now have not been best-in-class at this, and our new sport groups would profit from testing their video games with gamers earlier. If participant suggestions meets/exceeds expectations, nice – make investments extra aggressively. If not, that’s
Okay – now the staff is aware of it has to pivot. Both manner, it’s a great consequence! Issues come up if/when new sport groups wait too lengthy to get participant suggestions and it feels too onerous or too late to alter course. That’s the worst consequence for everybody. Word: I don’t imagine you create hit video games by asking gamers what they need, however I do imagine you need to present them early and face the fact of their suggestions. We are going to implement this considering for brand new sport groups at Supercell, encouraging and difficult new sport groups to check video games with gamers earlier and asking them to share this plan brazenly with everybody on the firm as per the transparency precept outlined above.
• Distraction-Free Surroundings: Early-stage startups face one set of distractions within the type of every part it takes to begin & run an organization. New groups inside giant corporations face a special set of distractions, within the type of all of the pure processes and “noise” that come from being part of a corporation of a whole bunch if not hundreds of individuals (Supercell is now 550+ folks). We wish new sport groups at Supercell to keep away from each! Being part of Supercell means new sport groups don’t want to fret about authorized, HR, payroll, taxes, actual property, IT, and so on. – every part that it takes to begin and run an organization. Nonetheless, we additionally need new sport groups to have the ability to focus and keep away from the distractions of a big group. Meaning having the ability to decrease company-level actions comparable to recruiting, inside occasions, choosing inside comms and slack channels, and so on. We’re both eradicating parts or making them optionally available for brand new sport groups. As an excessive instance, one new sport staff determined to maneuver out of our principal workplace into their very own little house close by. We had related discussions relating to expertise. Whereas all 5 of Supercell’s international video games had been constructed utilizing our inside proprietary engine/instruments, new sport groups can select to make use of no matter they need in early phases of prototyping and proof of idea. We now have new sport groups utilizing Unity, Unreal, or different instruments to assist them transfer as quick as attainable to see if they’ve created one thing gamers love. Once more, getting exterior validation as quick as attainable is vital.
Our aim right here is to make Supercell the perfect place for the perfect groups to create the perfect new video games. We wish this place to be higher than your individual startup, which units a really excessive bar. However we’re doing every part in our management to make {that a} actuality and have loads happening for us. At Supercell, you don’t want to fret about constructing an organization and every part that comes together with it, all it’s worthwhile to fear about is constructing an incredible sport. I do know this can be a unending effort and we are going to proceed to alter and enhance within the coming months and years.
Reside Video games As Scaleups
As soon as startups have discovered the so-called “product market match” (which in my thoughts signifies that they’ve in a position to develop one thing that their clients love), they transfer on to the following section which is all about ensuring as many purchasers as attainable get to make use of their product/service, whereas concurrently making the product/service higher. If startups get to this section, they change into “scaleups”. This scaling section may be very completely different and requires completely different kind of considering. I imagine the identical applies to video games and we might profit from taking in some classes from the scaleups.
At Supercell, we’ve got discovered “product market match” with 5 completely different video games. As of late, 200M+ gamers play our video games each month. Conflict of Clans has generated over $10B in income within the final decade. With Conflict Royale, the World of Conflict has generated greater than $14B in income. Brawl Stars, Hay Day, and Increase Seashore are every far more than billion greenback income earners. These are huge companies…but we haven’t been treating them like they’re! I’ve written about this prior to now, however at Supercell, we had fully missed this facet of our firm. For years, we didn’t realise the complete potential of our nice video games as a result of we frankly preferred our small groups a lot.
If somebody from the surface came around the Conflict of Clans staff some years again, it seemed like a prototype staff to them!
We’re fortunate to be in our scenario the place Supercell groups have created 5 superb video games. The query going through us now (which we’ve got at all times confronted) is how can we make every sport even higher by including new content material and options, and bringing it to a whole bunch of hundreds of thousands (or really billions) of individuals?
The next sounds so apparent trying again that I really feel like an fool penning this (and lots of have in all probability known as me an fool on this matter!), however we are able to do what we do solely due to our gamers and we should always do every part in our management to make our video games higher for them, even when it means our groups must be greater. Gamers could not care much less how massive or small our groups are, all they care about is to have the ability to play an incredible sport. And if it requires a much bigger staff, then it’s our downside to determine the right way to make that greater staff work for us.
For many people, greater groups had been scary at first as a result of they require a bit extra construction and course of, even “center administration” which has been a curse phrase at Supercell for years. However now that we’ve got operated with these new, greater groups for a while, we’ve realised that not all of that’s dangerous. Actually, it may be nice. Initially, with greater groups we are able to do extra for our gamers which is a superb feeling within the first place. Second, in case you get the construction proper, it really helps folks to focus and have the ability to do higher work.
Supercell has at all times been about these impartial groups that we name cells. Principally, what we did right here was to redefine what a stay sport cell is, and this time we embedded all of the important skillsets (additionally outdoors sport improvement) into it. We began to think about them as their very own “corporations”, with their very own management groups and such. These “sport items” have began to develop in measurement. We’re nonetheless nowhere close to the dimensions of another sport groups in our enterprise which might be 500+ folks in measurement, so we’re nonetheless speaking lower than 100 folks (thus far).
We’re additionally experimenting with alternative ways to organise ourselves inside these greater groups. One of many concepts that we’re at present attempting is what we name “sub-cells”, which is only a new model of our cell mannequin. It’s precisely what it feels like: the big impartial sport cell with one frequent mission is break up into a number of sub-cells, all of which contribute to the general mission of the bigger cell.
It’s a journey, and we’re taking the primary steps, however can already see the advantages for our gamers. We’ve by no means been in a position to do as a lot for them as we needed, and from right here, it’ll solely get higher.
NOTE: As a result of we’re rising our sport groups, we’ve got been on a quicker hiring tempo than ever earlier than. We’re additionally beginning to rent in a number of places in Europe outdoors of Helsinki, which is new for us. I admire that 2023 and 2024 have been troublesome years for online game corporations, with quite a lot of layoffs and even closures. Our open jobs are a drop within the bucket in comparison with the variety of jobs misplaced, however hopefully, with another studios, additionally hiring, we are able to create some constructive momentum in our business.
One Tradition
Given all of the modifications, an vital query emerged: does this create two very completely different cultures between New and Reside sport groups, and can that tear the corporate aside? My reply is provided that we let it occur, and we should always not let it occur.
At its core, Supercell’s tradition has at all times been in regards to the thought of impartial cells, every cell being chargeable for their choices. Meaning we’ve got at all times had alternative ways of working between the cells. We see this range as a characteristic, not a bug. If everybody at Supercell applies this understanding, then these modifications really serve to double down on the unique thought of why we based Supercell.
That stated, we should always not child ourselves. This IS an enormous change to on a regular basis work. There are extra folks within the firm, you can’t presumably know everybody anymore, there may be extra construction within the greater stay sport items, and so on. And there will certainly be massive variations in how stay sport items work in comparison with new sport groups.
Concurrently, we’re VERY conscious of the dangers of a quickly rising headcount, and are having fixed and lively discussions round proactively managing it — we wish to watch out to solely fill the wants we’ve got, however keep away from rising uncontrollably and shedding ourselves within the course of. True, we’ve got had some gaps that haven’t been crammed for lengthy. Nonetheless, we additionally have to be extraordinarily aware that it takes time to actually onboard and combine folks to Supercell, and our methods of working, whereas additionally studying from the brand new joiners.
However regardless of all of that, we’re nonetheless one Supercell, with one tradition. As we develop, there is likely to be extra methods of working, however in the end we’re rooted in the identical values and ambitions: creating the perfect video games that will entertain as many individuals as attainable and which might final for many years and extra.
New Management Staff – A Power Multiplier
As I used to be fascinated by all of this, and having all these discussions, I additionally acknowledged that if I actually needed Supercell to alter, we wanted everybody to take possession and accountability. That accountability and setting that instance begins with me. Any errors and flaws in our considering had been in the end my errors, not anybody else’s. And if Supercell needed to change into higher, it might want to begin with me and my staff, which is the management staff.
Returning to my presentation on the offsite final August. I spoke very brazenly about my emotions and errors to everybody on the firm. I advised them how I had failed because the lead of my staff, and in addition placing collectively the very best staff in place. At Supercell, after we fail (or succeed), we have fun the learnings that come out of that with champagne. I’m not certain if it was the champagne, however talking brazenly about these errors really helped me really feel significantly better. Additionally, it was unbelievable to get the help from Supercellians at that second. It meant the world to me.
Anyway, for this subsequent chapter of Supercell, I needed to encompass myself with individuals who have seen what we’re experiencing proper now and have helped corporations efficiently navigate these challenges earlier than. That’s why I began to rebuild the management staff, and after a loooong search was in a position to persuade Sara (our new Head of Reside Video games) and Fernanda (our new CMO) to hitch us. It was not simple to search out these two as a result of I wanted leaders who not solely had been profitable at working issues at scale, but in addition individuals who understood Supercell’s tradition and what was nice about it. I really feel very, very fortunate that they’ve joined us!
Whereas I’m extraordinarily glad and proud in regards to the new management staff that we now have right here, I wish to make one thing very clear. Supercell has by no means been, and isn’t, in regards to the management. Not outdated or new. I’ve at all times disliked the tendency of the company world to show
CEOs and founders into these hero figures who are available and save the world. I need Supercell to be completely different. My proudest moments at Supercell have at all times been those the place one thing superb has occurred, and I’ve had nothing to do with it and in reality have been the final one to listen to about it. There have been many, many moments like that within the historical past of our firm and that’s what defines the Supercell tradition and the magic round it to me.
So Supercell is all about our nice folks, groups and tradition. Not about any single particular person or people. We succeed or fail relying on how nice our groups are and whether or not we’ve got been in a position to create a tradition the place these groups can do their finest work. And that is the place the management staff may also help: I see it as a power multiplier which, if profitable, could make Supercell the place the place the perfect folks can do the perfect work of their careers.
Journey
So, we’ve now been on this journey for some time. It’s a cliche however a journey it truly is, and that is only the start of it. A few of the modifications we’ve got made will show to be the suitable ones, others will show to be mistaken ones. However that’s okay, so long as we be taught from them rapidly after which change them for the higher.
I advised Supercellians that any longer, we should always all begin to suppose change as one thing that could be a fixed. Sure, generally change can really feel uncomfortable. However we have to get comfy feeling uncomfortable. We must always consider change as a constructive factor, one thing we have to do on a regular basis to change into higher. So long as we alter for the higher every single day, and may do this over a decade or two, with some luck, ultimately we are going to land to an incredible place.
Monetary Outcomes
And naturally, we’ve acquired our annual financials, which Finnish legislation requires us to publish, and which we’ve got shared right here for fairly a while now with some commentary.
Earlier than I get to the precise outcomes from final yr, I wish to clarify how we take into consideration monetary outcomes basically. We see them as one thing that permits us to do extra of what we’re captivated with. We now have been fortunate to be very worthwhile for years now, which is vital as a result of it allows us to take a really long run view on every part, together with conserving the standard bar for our video games very excessive and enabling us to attempt new dangerous issues. Nonetheless, we don’t see monetary outcomes as the tip aim however simply means to the tip, which is to create higher video games for our gamers. The monetary outcomes are an vital sign, nevertheless, as as to if we’re doing a great job for our gamers. If we’re not creating content material and experiences that gamers really feel are price paying for, then bluntly put we’re not creating ok content material and experiences.
It is very important emphasize that we didn’t anticipate that not one of the modifications I described above would have any influence on these outcomes. We’re nonetheless very a lot in constructing mode. If we’re profitable on this, the outcomes will observe, however it’ll take a while.
All of that stated, listed here are the monetary outcomes:
Income of €1.7bn (down 4.2% in comparison with 2022) EBITDA of €580m (down 8.2% in comparison with 2022) Company taxes of €110m paid in Finland.
There are two fairly completely different tales behind these figures. The apparent one is that our video games declined through the first half of 2023 because the cellular video games market total has continued to say no. The opposite one is that for our stay video games, each quarter final yr was higher than the one earlier than it, and proper now we’re on a robust development trajectory. Probably the most shining instance of that is Brawl Stars, which greater than tripled its participant base since final summer season and is now in actual fact the largest Supercell sport as measured by variety of gamers! The reason being, fairly merely, that we’ve got been in a position to do extra for our gamers when it comes to creating new content material and options to our video games. As I stated above, we take a really long run view on the modifications I described above, and we’re very a lot in constructing mode, however that stated I’ve been positively stunned that it’s already beginning to present within the outcomes.
Wanting Forward
On the time of penning this, it’s already February 2024, and I believed I’d shut with just a few ideas about this coming yr. To summarize my emotions, I can not recall when was the final time we had began a brand new yr from such an incredible place as we’ve got this yr.
Initially, we’ve got greater and higher groups than we’ve got ever had. In consequence, we are able to do extra for our gamers than ever earlier than. It is very important observe that the majority of those greater groups have in place just for 1-2 replace cycles. So I’d wish to suppose that is only the start, and I’m extraordinarily excited to see what these groups will do for our video games and gamers as they change into higher and higher at working collectively on this new setup.
Second, I’m extremely enthusiastic about our new video games for this yr. A few of you have got in all probability performed Conflict Mini, Squad Busters and Mo.co, that are all nonetheless in improvement however of which we’re very happy with. And there may be extra coming! However extra about them a bit later, hopefully within the not too distant future! 🙂
Lastly, I needed to thank the entire gamers, the tens of hundreds of content material creators who’re the spine of our group, and naturally all of the Supercellians. I really feel very fortunate to be surrounded by folks such as you and have a possibility to be a part of one thing as distinctive as what we’ve got right here. Thanks.