Clever Geek Handbook
3 June 2025

The Granularity of Growth

Recommendation

This is a useful, methodical book. Rather than offering general platitudes on growth and strategy, Patrick Viguerie, Sven Smit and Mehrdad Baghai offer data-driven ways to generate growth. However, neither the approach nor the book is easy. The approach requires leaders to undertake hard, detailed work with rigorous honesty as they examine their companies and markets more specifically (that’s where the granular detail comes in) than most will want to. The authors are firm on the necessity of maintaining this intense level of awareness as markets change around you. The book requires a bit of patience, as the authors sometimes get overly invested in tiered structures, pacing readers through different categories of growth directions and structures that become a bit too abstract and technical. That aside, anyone looking for specific ways to address growth will find this helpful. BooksInShort recommends it to CEOs, strategists and students of business growth.

Take-Aways

  • Big, growing companies have a better chance of surviving, but growth is difficult.
  • To generate growth, focus on granularity: look at your business in a more “fine-grained” fashion, so your analyses contain more elements.
  • A large company can use its scale – that is, its size – to facilitate granularity.
  • Granularity disrupts generalizations and exposes growth pockets in mature markets.
  • Three cylinders drive growth: portfolio momentum, M&A and market share.
  • The market you compete in is more vital than your relative performance.
  • Develop a growth map of strategic plans on three time horizons: soon (known markets), intermediate future (adjacent markets) and distant (new markets).
  • Your “management processes” must unify four other main components: “growth direction, granular strategy, scale platforms” and a “granular blueprint.”
  • Track performance by granular clusters of employees, using specific, standardized and performance-based metrics.
  • A granular path puts extra pressure on your leadership. It is hard and growth takes time.

Summary

The Core Challenges of Growth

Growth is tough for any company, but due to sheer scale, it is even harder for a large, mature company to keep growing at anything like the rates it demonstrated in its early years. The longer a company is in business, the likelier it is to be in a mature field where innovation evaporates. If you lead a large company, how can you make it grow?

“A compelling growth strategy...is clear about which cylinders will drive growth in each time horizon.”

First, define growth broadly – it is any increase in profits, no matter how you acquire them. Second, focus on granularity, which means looking at your business in a more “fine-grained” fashion, so that your analyses contain more elements. This focus will reveal more “pockets of opportunity.” Most strategic thinking about growth, in either mature or young industries, is too broad to be useful. Mature industries have small areas that are growing and even young “growth” industries have stagnant areas.

“If overestimating the benefit of sheer size is the first mistake many companies make, overestimating the synergy between different businesses is the second.”

Revenue growth is essential for corporate survival. In a study of U.S. companies over the course of two business cycles, 1984-1994 and 1994-2002, the companies with both revenue growth and high stockholder value generation (“growth giants”) were far more likely to survive than those with only one strong factor or the other, or those that were weak in both. Those with low growth despite high value creation were most likely to fail.

“There are three ways to increase your portfolio momentum: Reallocate resources to pockets of high growth, shift your portfolio or grow your markets.”

Growth giants outperformed their competitors even in supposedly low-growth mature industries. This underscores the importance of a granular approach, and proves that firms don’t have to change industries or markets to grow. Instead, “look deeper” into markets where you compete and let your understanding of their specific possibilities drive your growth strategies.

“To deliver both granularity and scale, a company must design its strategy and organization model to create an architecture for growth.”

Granularity matters because it helps you compete and it disrupts generalizations. You can view markets on several levels of granularity. The global economy is at the highest, most general level. Then you can get more specific: industry, subindustry and category – down to the individual consumer. Look at the influence of a single trend, such as aging. It has little effect on the global economy (0.1 % annually). However, it has a varying impact in different regions (just 0.03% in Italy) and different industries (e.g., an aging population needs more health care and fewer toys). At the subindustry level or below, each trend’s consequences contrast sharply and pack more of a punch.

How and Where to Grow

Growth is an engine driven by three “cylinders”:

  1. “Portfolio momentum” – This “organic revenue growth” is generated according to how well your existing portfolio of investments performs, that is, through choices made earlier. Among the companies studied from 1999 to 2006, “the average large company grew at 10.1%” annually. Portfolio momentum generated 6.6% of that sustained growth.
  2. “Mergers and acquisitions” – Numerous studies challenge the profitability of mergers, but from 1999 to 2006, M&A generated 3.1% of the studied companies’ growth.
  3. “Market share” – This measures how much of a given market a company controls. During the study period, market share generated only 0.4% of overall growth. The ratio differs a bit by region, since large U.S. companies tend to lose market share over time and European companies tend to gain a bit. Location is essential for growth. Where you compete is “almost four times more important” than beating your competitors.
“Scale and granularity are not opposed: Scale enables granularity, and granularity doesn’t necessarily inhibit scale.”

You don’t have to fire on all cylinders to do well, but articulating numerical goals in each of these areas creates greater precision and provides specific benchmarks for measuring performance. In the top quarter of companies studied, “firing” on each cylinder meant 8.5% annual growth in portfolio momentum, 4.5% annual growth in the M&A cylinder and 2.3% growth in market share. Combining the idea of cylinders with granularity gives you a powerful analytical tool. Examine performance in each cylinder (how well it is firing) according to such granular breakdowns as geographical distribution, industry or subindustry, growth and so on. Use the information to correct poor performance and to identify new opportunities for expansion in each cylinder.

“Strikingly, a company that grew more slowly than GDP for the first economic cycle was five times more likely to disappear as a going concern before the end of the next cycle than a company that expanded more rapidly.”

Portfolio momentum is hard to maintain and increasing it is harder still. In one study, companies that hit “strong tailwinds” lost momentum and their overall growth slowed. Only a few increased momentum by shifting their portfolios and diversifying. Some 95% of the positive changes came from the “market growth of the initial portfolio.” To shape your momentum, reallocate the resources in your portfolio to shift investments to growth areas.

“All growth strategies involve choices about moving – or where, when and how to evolve the portfolio mix over time.”

M&A activity can add momentum, though measuring its impact takes time. Eventually, more than half of all M&As produce positive outcomes, though many result in higher operating costs. The right kind and size of M&A for your firm depends on your context and purpose. Larger deals work well for market consolidation or for shedding failing assets, while smaller deals work well when you’re building a platform, especially if the deals support a unified growth strategy. Successful companies are proactive and active in their M&A choices: They move quickly, divest early and trade on an ongoing basis. They monitor internal growth and let new businesses act as independent units. Most firms divest failing assets because they don’t want to admit they’ve made mistakes or face the emotional challenges of firing workers.

“Saying that M&A can be successful and that acquisitive companies are frequently rewarded doesn’t tell us how companies use it to grow.”

Gaining shares of new markets also generates momentum, but success requires moving one step at a time, testing small moves before risking larger investments. Moving a large company into new growth markets takes time. Realigning your portfolio could take as long as five years. Share gain has less impact on overall growth than the other cylinders have. However, it provides a larger percentage of short-term gains, and it matters psychologically, since companies in a market measure their performance against each other and companies tend to grow or shrink across their market segments. Market share also needs attention if everyone in your industry is competing to carve up the existing pie in a limited-growth environment.

Planning for Growth

As you develop your long-range growth plans, envision them as fitting a “growth map” that covers three possible realms:

  1. “Extend and defend core businesses” – This requires specific action from each cylinder. For portfolio momentum, realign your assets to fuel the units that are most ready to grow. Acquire new businesses to fill gaps in your portfolio, and divest those that are stagnant. To gain market share, focus on raising performance.
  2. “Build emerging businesses” – Shift momentum to markets where you don’t now compete. Make acquisitions that solidify your current power and diversify your portfolio. Gain market share by invigorating your business “proposition” or “delivery model.”
  3. “Create viable options” – This look at new opportunities is more speculative, so avoid wild risks. Instead, move with small, measured steps “into white space.” Build new units. Acquire companies with the knowledge that you’ll operate a range of businesses in shifting terrain. To gain market share, reshape your business model.

“To Move or Not To Move”

As you move from planning to acting, recognize that the question isn’t whether to move. To grow, you must move. The question is how to move and in what direction. Among the growth giants in one study, 70% expanded existing businesses, while the other 30% diversified. If your company has little momentum, expanding beyond your current portfolio will bring the most benefit. If your company has momentum, you will get good results from M&A, but you’ll earn the best outcome from moving within your “existing portfolio,” so you don’t travel away from a beneficial tailwind. Many companies suspend acquisitions instinctively when the economy stalls, moving to a conservative position to defend what they can. Ideally, you want to do the opposite: “Firing the M&A cylinder is the most value-creating step you can take during a downturn.”

“So the question is not so much “Should we enter new markets?” as “Do we have distinctive insights and capabilities that we can bring to bear on our chosen markets?”

As you think about where to move, cultivate an “expansive mindset.” Define your business broadly, so you don’t have more than 5% of the market. While the farther a business is from yours, the more “complicated and challenging” the acquisition is likely to be, still “advantage trumps adjacency.” Good opportunities will repay you for grappling with their complexities.

“Integration is where many if not most acquisitions fall apart.”

Scale and granularity used to be opposed. For example, think of mass production on the early assembly lines. Every Ford car was the same. However, information technology changed things. Now, scale can and should enable granularity in companies that combine proper strategic growth with appropriate organizational patterns. This “growth architecture” will vary from company to company. To define your best approach, review your current direction and status as objectively as possible. Is your company aligned with the economy? Do your investments take advantage of your strengths? How do you rate in the following five components of a well-designed organization?

  1. “Growth direction” – This is the plan for how your firm can grow in “multiple cylinders across time horizons.” If you are weak in all five components, start with this one. If you have this one, but not the other four, seek leaders who can develop granular strategies.
  2. “Granular strategy” – This identifies the sequential steps you’ll take to develop new possibilities, “capture granular growth opportunities and build real advantages.” If you only have a granular strategy and a granular blueprint, to keep you going long term, you need to add leaders with vision who can help you find new markets quickly.
  3. “Scale platform” – This describes how big organizations make the most of their size. If you have both growth direction and scale platforms, you are off to a great start.
  4. “Granular blueprint” – This sets out how a firm “matches the texture of the market.” Here, you’re seeking that “sweet spot” where you get the maximum benefit from granularity at the least cost. This will differ by industry and cylinder, and it will evolve as IT enables your business to track more details.
  5. “Management processes” – This uses “strategic planning, resource allocation and performance management to link the other elements.” A business that is good primarily at planning should focus on its processes. Less commonly, a business with good design and processes but limited planning needs strategy to adapt to a changing market.
“When mapping out a growth direction...define your market sufficiently broadly that your market share is no more than five percent.”

Don’t design from the top down for lower-level decisions. Instead, focus on crucial choices about “where to compete and what to buy.” Then shape your organization to respond to the market. Guide your growth with a “cluster-based growth model.” To do so, divide your organization into clusters of as few as 50 people in knowledge work or as many as 300 in other areas. Establish a scorecard that tracks specific, measurable, standard performance goals at each level, and determine how to monitor them throughout the company.

“There is no such thing as a growth industry; most so-called growth industries have mature segments, and most mature industries have granular growth pockets.”

Working on a large scale has traditional advantages, such as lowering production costs. It also has less familiar ones, such as the possibility of raising efficiency across the board. Both will change over time, but keep harnessing all possible advantages of scale. To maximize those benefits, use systematic, system-wide reporting structures that guide specific, high-quality data from all units and about all levels of granularity. To get the most benefits of scale from M&A, turn to the guidance of a CEO with a coherent strategy and a longer timeline (unlike short-term consultants). The goal is to integrate acquired companies fully into your business in a structured fashion.

“Economic downturns create great opportunities for portfolio moves, yet few companies seize them.”

Implementing a granular approach to growth is challenging. Focusing on very specific aspects of your organization will reveal a lot of underperforming and failing areas. This will generate increasing pressure on you as a leader, but real new growth takes time – it can take five years or more. Implementing this strategy means doing more work while generating the excitement to mobilize your entire organization for a sustained effort.

About the Authors

Patrick Viguerie and Sven Smit are directors at McKinsey & Company. Mehrdad Baghai is co-author of The Alchemy of Growth and managing director of Alchemy Growth Partners.

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The Granularity of Growth

Book The Granularity of Growth

Making Choices That Drive Enduring Company Performance

Marshall Cavendish,
 


3 June 2025

Developing Great Managers

Recommendation

Training managers is a great idea in theory but often not so great in practice. Managers are intensely busy professionals who don’t have any extra time. Lengthy training sessions just put them further behind and add to their stress. Consultant and speaker Lisa Haneberg and the American Society for Training and Development have developed a training approach that avoids those problems. Using their “Power Hour” curriculum, which consists of what they call “learning conversations” about relevant management problems, managers can upgrade their skills quickly. Although not much in this book is new, BooksInShort recommends it to management trainers, and to middle and senior managers who are responsible for developing other leaders and management teams, and who want a quick review.

Take-Aways

  • Managers are busy and often stressed. They have to juggle competing priorities. Some become underachievers.
  • If performance is off in your organization, retrain your managers.
  • Do not conduct management training in lengthy sessions that run over several days.
  • Instead, hold a series of short sessions. One hour is ideal.
  • Schedule them about once every two weeks, and vary the meeting time and day.
  • “Learning conversations” are the basis of the “Power Hour” training approach.
  • Use Power Hours to educate managers and to reinforce important messages.
  • The quality of your trainers makes all the difference.
  • The best trainers are managers with deep business expertise.
  • They should be superb conversational catalysts who can promote meaningful, engaging and instructive dialogue among trainees.

Summary

Training Managers

Managers are the engines of your business; they keep everything moving toward the destination. If your company is not getting the results you want, your engine may need a tune-up. This is where “Power Hour” training can help. Power Hours are hour-long management training modules.

“Your customer relations can only be as good as your internal relations with one another.”

During Power Hour sessions, trainers make connections between the information and skills they are teaching and your company’s goals. The organization and scope of this training arise from these basic precepts of management training theory:

  • “Managers are much too busy” – Training sessions must be short and sweet.
  • “Managers...suffer from fuzzy priorities, competing priorities, scope creep and meeting overload” – Training should show them how to deal with these challenges.
  • “Many managers feel overwhelmed and stressed” – Training should reduce managers’ stress, not add to it.
  • “Many managers work well below their capabilities” – This is usually because they do not know how to use their time effectively. Training sessions should help them focus and prioritize their activities.

Setting Up the Training

Choose your trainers carefully. Select competent managers who know your business. Trainers should be skilled conversational catalysts who can encourage instructive dialogue and promote “playfulness” in discussions. Spread training sessions out over time. A schedule of one training session every other week works well. Vary the meeting hour and day so more managers will be able to attend.

“Managers will love the way Power Hours fit into their schedule, and they will love the interactive and relevant nature of each of the topics discussed.”

Try to “enroll” – rather than sell – the most important stakeholders in the Power Hour concept so they feel a personal investment in the training approach. Ask a primary stakeholder to host some pilot sessions in his or her department. Explain that Power Hour training will enable the organization’s managers to perform better, which will improve the company’s operations and its bottom line. Stress that the training schedule respects the managers’ busy workdays.

The Power Hour Format

All Power Hour sessions are structured similarly. Participants know what to expect, because the Power Hour agenda is always the same:

  • “Brief discussion of prework” (10 minutes) – The trainer starts a discussion of a current event or a development in the business world, distributes the day’s handouts and encourages conversation about the homework.
  • “Presentation of the conceptual model or topic” (15 minutes) – This is a minilecture about the focus of the day.
  • “Initial discussion of the concept” (10 minutes) – Trainees become involved in the conversation.
  • “Exercise/application” (15 minutes) – Exercises are job-related, and participants can do some of them in small groups.
  • “Final discussion and assignment of homework” (10 minutes) – Homework is also work-related. It “puts the topics discussed into action.” Trainers can use the questions and exercises in the curriculum or develop their own.

Power Hour Session Topics

Power Hour sessions focus on four types of management concerns: “job perception, expectations, time management and team development.” Each session has a “learning objective,” presents a question for participants to discuss and concludes with an exercise or homework assignment. The curriculum covers these 20 topics:

  1. “Management in modern times” – Managers receive information and demands, or “inputs,” from many sources, and out of all that “mucky muck,” must devise appropriate work plans for their teams. Learning objective: Pinpoint productivity “enablers and barriers” and make a plan to eliminate the barriers. Question: “What can managers do to improve the efficiency and importance of...inputs?” Exercise: Working in small groups, managers identify 10 ways they can encourage better, more helpful inputs from others.
  2. “What’s expected of you” – Managers generally understand the specific tasks for which they and their teams are responsible. However, many do not know what additional duties their organizations expect of them or how their team goals fit into the overall strategy. Learning objective: “Define expectations.” Question: “What clues might indicate what your managers value most?” Exercise: Participants develop 10 questions they can use to clarify what the company needs from them.
  3. “Managing and improving your reputation” – Managers don’t always understand the benchmarks their supervisors use to evaluate their “performance and managerial style.” Nor are they aware of their reputations within their organizations. Learning objective and exercise: Managers conduct self-assessments of their reputations. Question: “How should a person go about repairing his or her reputation?”
  4. “Your management A-B boxes” – In this “conceptual model,” managers use two “A” boxes and two “B” boxes to self-assess and realign with changing goals. In the first “A” box, they describe how they currently manage and, in the second, what the results are. Then, they use two “B” boxes to identify, respectively, the outcomes they want to achieve over the next year and how they might change their management approach accordingly. Learning objective: Managers learn processes that can help them meet their targets. Question: “What types of practices get in [your] way when trying to improve results?” Exercise: Participants fill in their “results B” boxes, then their “management B” boxes, and discuss their findings.
  5. “Your management filter” – In management, expectations lead to goals, which lead to actions. Thus, aims and expectations provide the essential “filters” managers use to focus their activities and allocate team resources. Learning objective: Participants examine the value of their “decision filters.” Question: “How do you know that your actions and decisions are in alignment with your intentions and goals?” Exercise: Participants describe and discuss their decision filters.
  6. “Mind your metrics” – Managing requires measuring. Good metrics reveal what customers (both internal and external) want, and help managers and teams evaluate performance accurately. Learning objective: Managers determine the best way to track and quantify achievement. Question: “Look at the measures you have in place today. Do they focus on what matters most?” Exercise: Participants discuss the contributions they and their team make to the organization, and how to measure them effectively.
  7. “Grand slam home runs” – Every team has goals. A grand slam home run goal is one that leaves other group targets in the dust. Learning objective: Develop one grand slam goal. Question: “Do you know what your manager would consider to be a grand slam home run goal?” Exercise: Participants list their team’s goals, then shape them into grand slam home runs.
  8. “Defining excellence” – Developing a shared understanding of the word “excellence” is crucial. Learning objective: Managers learn to explain excellence to their teams. Question: “Do you think that your employees would do things differently if they had a crystal-clear view of how you measure excellence?” Exercise: Participants discuss what excellence is in meetings, productivity and so on.
  9. “Communicating expectations” – Team members perform best when they know what their managers and organizations require of them in terms of solving problems, generating ideas and meeting deadlines. Learning objective: Managers establish and communicate their expectations of their employees. Questions: “Do your employees know what you expect of them? How?” Exercise: Participants develop “one- or two-sentence expression[s] of their expectations for their team members.”
  10. “The art of planning” – Managers often put off planning. They need to create a planning regimen and stick to it. Learning objective: Develop a plan for the week to come. Questions: “How do you plan? What are your most effective habits or rituals?” Exercise: Participants fill out a “weekly planning checklist” that includes meetings, “must not miss items” and a grand slam home run goal.
  11. “Results-oriented responses” (RORs) – These actions include accepting responsibility for outcomes, taking the initiative, developing different approaches to problem solving and meeting commitments. Learning objective: Managers learn what a results-oriented response is. Question: “How do you know whether your approach to the situation is helping or hindering your results?” Exercise: Managers examine difficult tasks using the results-oriented responses method.
  12. “Meetings that rock” – Meetings cost money, because they require workers who are receiving expensive salaries to sit idly around a table rather than to produce. Learning objective: Managers learn to hold meetings that are necessary, focused, relevant and outcome-oriented. Questions: “What percentage of your meetings do you dread? Why?” Exercise: Managers plan a meeting itinerary for their units.
  13. “Mastering your time” – Multitasking does not work. It is an inefficient waste of time. Instead, managers should learn to “chunk,” or set aside, times when they work on only one thing. Learning objective: Introduce the chunking time-management method. Question: “What have you done to manage and reduce work interruptions?” Exercise: Managers plan a chunking schedule for upcoming tasks.
  14. “Internal service excellence” – In addition to producing for external customers, departments must also produce for internal customers. For example, managers serve their direct reports, and direct reports serve them. Learning objective: Define service excellence. Question: “If your yearly bonus or raise was determined by the grade your internal customers gave you, how well would you do?” Exercise: Participants discuss how they and their teams can improve their service to internal customers.
  15. “Your leadership legacy” – Through their actions and performance, managers create their legacies. Learning objective: Participants define “how they wish to be regarded.” Question: “If you were hit by a bus today or decided to move to Tahiti, what would you be known for?” Exercise: Managers list one achievement they would like to leave as a legacy, rate themselves on a one-to-ten scale and discuss the results.
  16. “Knowing how and when to say ‘no’” – Sometimes, the best thing a manager can do is to say no – for example, to inessential meetings, poorly conceived projects and unnecessary paperwork. Learning objective: Participants learn to say no decisively rather than weakly and to explain the reasons for their refusals. Questions: “Do you say ‘yes’ or ‘no’ too much? Which? Why?” Exercise: Participants identify two tasks to which they should say no, and to whom they should say it.
  17. “Aligning your department for success” – Aligned business units work efficiently and the employees within them understand their roles. Sometimes, though, “conflicts among technology, processes and roles” disrupt the balance. Learning objective: Understand what alignment is and why it is important. Question: “If you could make just one adjustment to better align your department...what would that be?” Exercise: Managers list one important upcoming goal for their team and determine whether the group is aligned properly to achieve this goal.
  18. “The art of employee one-on-ones” – Such sessions “improve dialogue and execution.” They should take 30 to 60 minutes. Learning objective: Explain the importance of one-on-one meetings. Question: “What makes a one-on-one a good or bad experience?” Exercise: Participants develop agendas for and schedule one-on-one meetings with their supervisors.
  19. “Enlivening minds at work” – When managers have good relationships with their direct reports, teams function better. Managers must find ways to energize their staffers’ minds. Learning objective: Participants learn about successful ways to engage employees, as well as how to identify barriers to engagement. Question: “What are some of the causes of disengagement?” Exercise: Participants brainstorm how they might stimulate the minds of their team members.
  20. “Encouraging collaboration” – Many managers believe that they promote collaboration, but few actually do. Often, managers emphasize the individual goals of their direct reports rather than their team’s shared targets. Learning objective: Develop techniques that spur collaboration. Question: “What does great collaboration look like?” Exercise: Managers discuss how to increase collaboration among team members.

About the Author

Lisa Haneberg is a consultant, speaker and author. Her areas of expertise include leadership, management, and organizational and personal achievement.

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Developing Great Managers

Book Developing Great Managers

20 "Power Hour" Conversations that Build Skills FAST

ASTD Publications,
 


3 June 2025

Changing the Game

Recommendation

Video games are so commonplace that you probably don’t see them as a launching pad to the next frontier of innovation, but David Edery and Ethan Mollick will make you think twice about that. They present an eloquent, persuasive case for the enormous potential that video games have to transform business. The authors illustrate the way that a growing number of organizations are utilizing virtual worlds to advertise their goods and services, train their workers and attract potential employees. They’ll amaze you as they recount how rapidly video games have progressed since Pac-Man and Space Invaders first appeared in bowling alley arcades. BooksInShort applauds the authors’ scholarship and research, and their ability to illuminate this topic for a corporate audience. Anyone involved in technology innovation, or personnel training and management, could learn a lot by playing along. Video games are serious business and they generate serious money.

Take-Aways

  • Many businesses are beginning to incorporate video games in their work.
  • No definitive evidence links video games to violent behavior or childhood obesity, despite disapproving voices that contend otherwise.
  • Companies use “in-game” and “around-game” advertising to promote their products.
  • “Advergames” incorporate the advertiser in the action of the game.
  • Simulation games have proven effective in helping doctors reduce medical mistakes.
  • Many companies use video games to recruit potential employees.
  • Video games for workplace training must be entertaining and informative; finding the proper balance between those two elements is the challenge.
  • Video games teach employees the three fundamental skills required in an “interconnected world”: teamwork, systematic thinking and virtual learning.
  • Smart companies take advantage of their relationships with passionate “user communities” and interest groups.
  • Video games can address complex problems by linking many people together.

Summary

Riding the Video Game Wave

Video games aren’t just for kids – or even just for adults who enjoy acting like kids. Many businesses are beginning to recognize the benefits of incorporating video games into their daily practices. Companies can use games to promote their products and services, improve customer relationships, recruit talented employees and raise workplace performance. For instance, surgeons who use video game simulators while training in medical school make fewer mistakes in the real world. Microsoft uses games to entice employees to volunteer for boring yet necessary tasks.

“Games, and most especially video games, not only belong in the workplace but can make all the difference between success and failure.”

Video games are a huge business. They generate more income than “Hollywood box office revenues.” Microsoft video heavyweight Halo 3 earned $170 million in the U.S. within a day of its launch, surpassing the movie debut of Spider-Man 3 and the release of the novel Harry Potter and the Deathly Hallows. Video games permeate multiple aspects of society, yet many managers find the notion of “games” in the workplace unacceptable. Nonetheless, properly utilized video games have enormous training potential and can help ensure organizational success. Video games foster highly prized workplace traits, like teamwork, innovation and problem-solving ability.

“More than any other industry, video game companies have succeeded in harnessing the positive aspects of user innovation.”

Almost everyone has played a video game – whether poker on a PC or bowling on a Nintendo Wii. That’s important because “games must be played to be truly understood, or, at the very least, they must be carefully observed.” Millions play games casually while millions more participate passionately. Games such as World of Warcraft have hordes of paid subscribers who spend hours strategizing and executing elaborate battle plans while teaming up with fellow players worldwide. World of Warcraft requires players to perform routine tasks repeatedly – something that is typically difficult to reinforce in the workplace. Popular video games also foster the growth of online communities where motivated players interact creatively and even develop new content. Any company would welcome that type of employee initiative.

“In any game, players are rewarded for learning the rules of the game and applying those lessons properly.”

Despite games’ upside, some critics, such as the American Psychological Association, take video games to task for perpetuating violence and contributing to childhood obesity. However, other organizations, such as the American Sociological Association, state that no link exists between video game violence and crime. In fact, British Board of Film Classification research suggests that movies and television cause more hostility in viewers than video games. And, no evidence indicates that overweight children spend any more time playing video games than they spend watching TV or surfing the Internet. Actually, some observers hope that the Nintendo Wii console, which requires active physical participation, may help combat the U.S. obesity epidemic.

Boon for Advertisers

Smart companies have learned to take advantage of the powerful advertising offered within video games. Banner ads greet players who visit Web sites featuring free games. These “advertisements around games” are similar to ads that run before movies, on TV shows or in newspapers. They’re not cutting edge, but they reach huge audiences and they are relatively easy to design and execute.

“Learning is not ‘work’ in the context of a game – it is puzzle-solving, exploration and experimentation.”

“Advertisements in games” tend to be more compelling and effective. The landscape in a video game might include virtual billboards advertising popular soft drinks or automobiles. In Tom Clancy’s Splinter Cell: Pandora Tomorrow, the main character uses a Sony Ericsson cell phone. Some advertisers go one step further and make their products an integral part of a video game’s plot, just as the movie blockbuster E.T. incorporated Reese’s Pieces candies. Such “highly integrated product placements” are expensive since, as primary components of the games, they must be included in the early stages of development. That means advertisers make serious financial commitments months before the games are released. In-game advertising requires careful thought and planning. Your brand must be a good fit. You want players to have a positive association with your product, so avoid promoting your brand at the virtual site of a massive earthquake or nuclear accident.

“Far-sighted companies are using games to recruit, train, motivate and make employees more productive.”

“Advergames” are the ultimate in-game ad vehicle. Gaming firms can design games around particular products and make the games available to the public for free. Chrysler, for example, spent “well under a million dollars” in 2001 on a game where players drove off-road Jeeps through a jungle. Vehicle sales beat expectations by more than 300%.

“Creating a balanced recruiting game takes time and iteration. Don’t expect to create something perfect on the first, second or even third try.”

Cereal companies and fast-food restaurants also have done well boosting sales with interactive games. Virtual worlds, such as World of Warcraft, encourage players to remain “engaged with a brand.” In Virtual Laguna Beach and vHills, based on MTV Network’s hit shows, visitors can shop for clothes like those worn by TV characters. Such “adverworlds” foster connections with real-life products and should promote interactive behavior among players.

Games Make Learning Fun

Video games provide more than entertainment. They can inform, educate and instruct. For example, a man with no medical training was able to give life-saving first aid at a car accident scene because he learned the right procedures playing the video game America’s Army.

“Simulations can give employees real experience, even if the simulations take place in virtual worlds.”

A growing number of organizations now use video games to train employees and recruit talent. U.S. companies invested more than $46 billion in corporate training in 2006, but spent only a minor percentage of it, $150 million, on training games. Part of the problem is that early educational video games were primitive and boring, so educators disregarded them and believed they could have little impact on learning. However, recent studies show that employees respond more favorably to video training than to classroom instruction. Game researcher Bill Ferguson developed a concept that educational games should be “Eighty Percent Fun.” Then they only need to be 20% as “efficient” as traditional classes, since employees “willingly learn outside of formal training.”

“Choose a level of simulated detail that accomplishes your goals without going overboard on extra realism.”

Ideally video games should motivate employees to train voluntarily, so developers struggle to create games that are both entertaining and effective. Sun Microsystems, which prides itself on being a cutting-edge organization, teaches thousands of workers, many of them home-based, about its culture with a video game called Rise of the Shadow Specters. The game places Sun employees in a virtual city that’s been invaded by aliens. As they battle the enemy and restore the city, players learn about the company’s values, culture, business divisions and technologies while getting the clear message, “Sun is a cool company to work for.”

“Games in the workplace are most effective when players want to win because winning is fun, not because losing hurts.”

Fun is a vital in any training game, but instruction is the ultimate goal. Companies use selected video games to teach employees three essential skills they need to excel in an “interconnected world”:

  • “Working in teams” – The extent to which team members communicate and interact greatly affects the outcome of creative projects. In Everest, players work in teams of five to overcome illness, horrible weather, personality clashes and conflicting objectives to climb the world’s tallest mountain. Games like World of Warcraft can boost leadership skills. Games can cut across hierarchies and teach organization, assertiveness and delegation. Often, people can transfer principles learned in fantasy games to their work. To maximize the game experience, have an “outside observer” critique players’ performance.
  • “Thinking in systems” – Managers often misunderstand the consequences of their actions and underestimate the importance of interpersonal relationships. They focus on their duties and decisions without seeing the overall picture. For example, a salesperson in the field may place additional orders without regard to the company’s production capabilities. Two Harvard Business School professors designed Uptick, a game that shows students how market realities affect investment theories.
  • “Learning from virtual experience” – Overwhelming evidence suggests that professionals benefit greatly from playing simulation games. Doctors perform better, truck drivers have fewer accidents and businesspeople deal more efficiently with their colleagues and clients.

Playing the Recruiting Game

For the past few years, the U.S. Army’s Web site has promoted the wildly popular game, America’s Army, which significantly improved the Army’s image among young, eligible males. The game, free on the site, places players on the battlefield – but only after they have completed the proper training. Basic and advanced training scenarios, including drills, illustrate the realities of Army life and may encourage or discourage potential soldiers from enlisting.

“User innovation communities will appear around your product whether you like it or not.”

To recruit through games, you must present a realistic picture of your company so you attract candidates from your target audience. The idea is to pique the interest of potential employees while filtering out those who lack basic qualifications. Effective recruiting games are challenging to design, and must strike a balance between being fun to play and achieving corporate objectives. French cosmetics giant L’Oréal uses an online game, e-Strat Challenge, to test the business acumen of thousands of students worldwide who seek careers in the beauty industry. Working in teams of three, players manage competing virtual cosmetics companies. They must weigh production, research, marketing and design decisions. Ultimately, L’Oréal invites 16 teams to Paris for the final round and gives the winning team a “free trip anywhere in the world.” L’Oréal has hired 200 employees through e-Strat and 400 more using additional games.

A Passion for Innovation

Whether it’s video games, baseball cards, Corvettes or Pez dispensers, people love exchanging ideas with those who share their passions. Video games inevitably spawn communities of users whose enthusiasm creates a platform for enhanced communication and content innovation. Fans of Battlefield 1942 voluntarily invested more than 1,000 hours modifying the popular game.

“Though many companies don’t recognize it, user innovation turns out to be one of the most important sources of breakthrough innovations.”

On the other hand, years ago a community of clever users (dubbed “phone phreaks”) figured out how to “manipulate” the system to get free long-distance calls from AT&T. Such theft is exactly why many firms see user communities as a threat. AT&T’s legal pursuit of the hackers merely emboldened them, leading to a long, damaging legal battle. Video game companies are exceptional in their willingness to embrace user communities. Many game developers assign managers to oversee user communities and encourage positive, instead of negative, innovation. Deal honestly with your user groups. Give them good toolkits and online discussion forums so they remain engaged and interested. You don’t have to reveal every secret, but provide an avenue for users to access your product.

Answers in Cyberspace

Games have the potential to unlock the answers to highly complex dilemmas. “Distributed innovation games” are intended to spark the creative problem-solving powers of individuals outside of a company – or even an industry. People who are not in a particular field may see things in new ways and provide innovative solutions.

“More lifelong game players have entered the workforce, so the idea of using games for teaching no longer seems quite so odd.”

In the game Foldit, players attempt to manipulate pieces of a protein into shapes that will be most effective against particular diseases. Although you might expect scientists to get the highest scores, game designer Seth Cooper says the most successful players “don’t have any biological, or even academic, background at all.” Cooper and his colleagues plan to continue taking advantage of gifted players’ volunteer efforts by designing games that will provoke ideas to help develop “biofuels and vaccines.” In 2007, World Without Oil invited players to cope with the fallout from an oil shortage. The game demonstrated how participants handled the crisis without waiting for government help. Such video games have an extraordinary potential to connect people through cooperation, creativity and intelligence. Many organizations already capitalize on that power, but they’re only scratching the surface. The real revolution in gaming lies ahead.

About the Authors

David Edery is the Worldwide Games Portfolio Manager for Microsoft’s Xbox Live Arcade. Ethan Mollick studies innovation and entrepreneurship in the game industry at MIT’s Sloan School of Management.

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Changing the Game

Book Changing the Game

How Video Games Are Transforming the Future of Business

FT Press,
 



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