What to do when it all goes to hell

“ What to do when it all goes to hell” Escape Factory Post-Mortem James Gwertzman Former CEO, Escape Factory Ltd Managing Director, Sprout Games, LLC

Goals for Talk
Share lessons we learned the hard way
Prevent your deal from being cancelled
If cancelled, prevent your studio from closing
If closing, prevent financial ruin & heartbreak

Company Milestones

Project Mistakes

People Issues
Startups can’t afford hand holding
In some cases we chose potential over experience
Strategy was hit or miss… and misses are expensive
Startups can’t afford personality conflicts
Startups can’t afford to change people
Changing people takes a very long time
Instead you can either:
Change job to match person
Replace person
Focus of performance reviews was on self-improvement
Should have been focused on finding right job
Too slow to fire people when it didn’t work
Impact of a negative person on team was tremendous

Hiring Track Record
Hired 30 people
2 “weak performers”
Easy to identify & fire or shift responsibilities
Minimal impact on company & schedule
2 “bad cultural fits”
Harder to identify
Harder to fire because often strong performer
Big impact on company & schedule
4 “left voluntarily”
All left because they were in the wrong job
Potentially huge missed opportunity

No Full-Time Producer
Producer is absolutely a full-time job
Finding great producer took 18+ months
Great producers are very hard to find
Joined team 2 months before project cancelled
During search, president was also producer
But president and producer are both full-time jobs
President (optimist) not good fit for producer (pessimist)
Lack of full-time producer caused:
Production pipeline inefficiencies
Communication gaps
Overly optimistic schedules

Wrong Organization Structure
Wrong org structure is very expensive
Symptom: too many meetings
Org structure must match core values & personalities
Core values stressed collaboration & independence
Reward great ideas ahead of ego or rank
Zero tolerance for mediocrity
Close collaboration
Disciplined approach to development
Ridiculous amount of fun
Hire & retain best people in industry
Hired to match core values

Actual Org Structure

Idealized Org Structure

Never Hired Admin Assistant
Founders’ time is simply too valuable
Good assistants are relatively cheap
Ideally you will find someone who can:
Keep your financial books & pay your bills
Manage your office
Play “mom” (or “dad”) to your employees
Sort through incoming resumes
Free you to focus on building a great game

Didn’t Feed the Dragon
Publisher investment driven by P&L forecast
P&L forecast based on sales-force forecast
Sales-force forecast based on… what?
Developer’s reputation
Great playable demo
Sexy art & videos
Target platform & genre
Enthusiastic marketing team
Passionate & committed producer
Didn’t produce enough “demo” materials
Seemed like a waste of time…

Company vs. Game
Invested too much in the company?
Ladder levels
Endless process discussions
Performance reviews
Profit-sharing plan
401K plan
Highly automated build tools
Made a big bet on success of first game.
Much of that can come later…

Why was our project cancelled?
Weak P&L (low sales forecast)
Platform choice: Xbox (not PS2 – engine issue)
Target Demographic: 10-12 (vs. GTA3)
Genre: “platformer” (vs. GTA3)
Publisher slipped other projects, losing 2003 revenue
We cut a key “unique selling point” during budgeting
We were looking at a 3-6 month schedule slip
Forced to redesign main character half-way through
Operating in “Zero tolerance” environment

Dealing with Cancellation

Have Disaster Plan Ready
Figure out accurate financial picture
How much money do you owe?
How much do you have?
You may already be out of business…
What is best way to spend remaining $$$?
Start a new project?
Marketing/Sales blitz?
Do you have the right team to restart?
What projects are realistic?
Do you have the energy to restart?

Pay Yourself First
Founders took minimal salary and repeatedly went without pay
Allowed us to hire one extra person
But burned through founder savings
When crisis hit, no safety net for founders
Limited options in dealing with cancelled project
Once deal is signed, pay yourself first
Just don’t be greedy…
If money tight, better to lay-off weakest employees than starve your strongest
Saves money, demonstrates high-standards
Often increases productivity

Minimize Long-term Debt
Starting a company requires enormous optimism, faith, and self-belief
Money is place where that’s inappropriate
Must be total pessimist when managing finances
No debt unless you KNOW you can pay it off
Line-of-credit to bridge milestone payments: OK
Long leases for expensive h/w, s/w: not OK
Line-of-credit to build demo for possible deal: not OK
Debt reduces your options

Always have deals on table
CEO’s primary job is bringing in business
Time to sign projects is when you don’t need them
I should have been far more actively networking while SQ was under development
Instead I was too head’s down with game
Acting as producer for over a year
Trying to solve too many problems, write code, etc
Let the team solve more of their own issues
Ideal CEO: “No aptitudes, high vocabulary”

Be Realistic
Natural impulse is to find another deal
“ We’re bigger & better now… We should have no problem finding another deal!”
But the market may be very different
Publisher more willing to bet on hungry startup than unsuccessful studio
Startup is blank slate for publisher to fill with hopes & dreams
“ Project cancellation” smacks of failure despite: team, technology, lessons learned
Team probably more expensive now
Different point in console life-cycle

Console Life Cycle Affects Deals Unit Sales Deal Signing Ease 2 nd Wave: Publishers approve many new projects. No teams have prior experience. 3 rd Wave: Bar goes up; Publishers prefer teams who published in wave 1. Launch Titles 2 nd Wave Titles 3 rd Wave Titles

Self Confidence Issues?

Be Open with Employees
Be honest about what’s going on
Smartest thing we did at Escape Factory after project was cancelled
Anxiety is bad enough without rumors
People will want to know how they can help
We promised to tell people when to start sending out resumes
We also helped employees get jobs

Why did we shut down?
Assumed we would find another project…
Market much more competitive 2 nd time around
Assumed team was most valuable asset
“ 20 person team ready-to-go”
Didn’t really check market value; should have gotten bids
We were too expensive for available projects (ports, etc)
Started shopping new concepts
Morale boost, but LONG, expensive process we couldn’t afford
Didn’t really slash costs
Deferred salaries: illegal; ended up paying it anyway
Rent: still owe $30K+; should have bargained up-front
Took on new debts
Ran up line-of-credit to pay for team

Escape Factory Headcount

Escape Factory Net Worth

Looking forward
Sprout Games
Casual game studio
True “mass market” games
www.sproutgames.com
New philosophy:
Spend no money… Unless truly critical
Revenue = Profit
Very small partnership
Personally satisfying
Actually making games vs. building company

Reading Recommendations
http://www.gamasutra.com/
Read every article; invaluable background & “best practices”
Organizing Genius , Warren Bennis
Insights into creating “Great Groups” (such as Disney, Apple)
Software Development, A Legal Guide, NOLO
Critical to reducing your legal bills
Employer’s Legal Handbook, NOLO
Eventually you’ll need to fire someone… Are you covered?
Managing the Professional Service Firm, David Maister
Written for the traditional service firms, but highly relevant
Built to Last, James Collins
Great survey of great companies to imitate

Thanks To:
Gabe Newell, Valve
Rick Goodman, Stainless Steel Studios
Tony Goodman, Ensemble Studios
Chris Taylor, GPG
Ron Moravek, Relic
Brian Fleming, Sucker Punch
Mike Ryder, Buena Vista Games
Josh Davidson

Call To Action!
Don’t be afraid to take risks
Don’t be afraid of failing
Pay someone to be paranoid
And listen to them!
An articulate vision is your best asset
Will help hire team, attract $$$, attract deals
Know your competition
If you can’t beat them, get out

Why were we late?
Pre-production was largely wasted
Team not yet fully staffed up
Engineering team especially understaffed
Game-design focused on writing massive design doc vs. prototyping & iteration
Licensed engine – no free lunch
Unless you’re making identical genre game
Biggest advantage – faster prototype

People Issues
Mistakes:
Hired a few “bad cultural fits & kept them too long
Had some people in wrong jobs
Results & Symptoms:
Created rift between teams
Wasted lots of time dealing with fallout
Lower productivity from people involved
Solution:
Be super hardcore about hiring/firing
Listen to your gut & your team
Act quickly to move people around if in wrong jobs

Great hiring process not enough
Candidates had 1:1 interviews with 6+ people
Everyone else met candidate over snack
Consistent & simple criteria:
Passion
Effectiveness
Horsepower
Cultural Fit
Company-wide wrap-up: “hire / no-hire”

Must listen to the results
“ We can change this person”
Nearly impossible to change a person
Startups can’t afford personality conflicts
Performance reviews focused on changing person to match their job
Should have focused on finding right job
“ Low experience but high potential”
You can’t afford to grow/train new people

Office Space
Mistakes:
Leased more space than we needed (initially)
Results & Symptoms:
Lowered energy & passion than before
Private offices meant less looking over shoulders (“hey, that looks cool. What is that?”)
Longer walks between offices = less random visits
Solution:
Keep office slightly too crowded; cram together

Not violating values is hard
Close collaboration
Requires great professionalism & maturity, especially in a creative organization
How to balance with “disciplined development” and schedules? Okay to rush to hit milestone?
How to reconcile with above points?
If work isn’t fun is something wrong?
Hard to do as a startup
Room for junior team members?

Core values must be reinforced
Mistakes:
Some core values occasionally ignored (e.g., sub-par work to meet milestone)
Potential contractions not openly discussed (e.g., “discipline” vs. everything else)
Results & Symptoms:
Values seen as empty promises
Can’t assume team on same page if not reinforced
Employees could pick & choose their values
Solution:

Lots of Passion
Passion & energy are sexy
People want to be inspired
Employees, partners, bankers, etc
An alternative to the “mundane”
Create “Skywalker Ranch of Gaming”
Controversial Call to Action
Downside: hard to maintain…

Call To Action … So what's our dream? That we'll be the studio that finally elevates the video game into an art form where it rightfully belongs alongside film and theatre. An art form that unites epic stories, beautiful cinematography, and rich drama with the forgotten magic of childhood play. We can't wait for the rest of the industry to do it because most developers are too deeply sunk into the culture of "by hardcore gamers, for hardcore gamers" and most publishers are too busy chasing whatever sold the most last year…

Exciting Clear Vision
Unique time to enter game industry
Internet: disrupts channel, allows multiplayer games
Mass-market potential
High powered hardware = greater creative freedom
Company goals:
Break new ground , inspire copy-cat imitators
Look back as most fun, creative, productive times in our lives
Entertain millions of people of all ages & interests
Cultural impact on par with Star Wars
Build games that:
Suck the player in through great stories, compelling characters, addictive game-play, intuitive UI, and breathtaking worlds.
Encourage and reward players to think and be creative.
Provide a social game experience with competition and collaboration.
Offer players an escape from the mundane with the opportunity to be the hero.

Company Culture
Close collaboration

Regular Post-Mortems

What to do when it all goes to hell

by James Gwertzman on Jun 11, 2009

Accessibility

Categories

Tags

Upload Details

Usage Rights

1 Embed 1

Statistics

What to do when it all goes to hell — Presentation Transcript