Yearly Ilkka Paananen, the CEO of Supercell leads his crew in an annual monetary information launch and – famously – publishes a weblog outlining his state-of-play for the video games trade. It reveals his hopes and fears and various hints at what this large of gaming shall 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 provide possibly 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 ordinary. How would individuals react? Would they really feel anger, disappointment, worry…or, would they get fired up and impressed? And what would they consider the very large modifications I used to be about to announce? Would they assume that our tradition, that all of us are so pleased with, was about to alter for the more severe? However I suppose greater than something, I actually felt for our individuals. I used to be about to problem them, and ask so much 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 reside video games and had fallen behind the very best firms who had finished so. Moreover, we had not launched a brand new recreation since Brawl Stars in 2018. The consequence, I confirmed intimately, was Supercell falling from the #1-ranked international writer of cell video games in 2016 to outdoors the Prime 10 in 2023. It was painful, however sincere and needed, in order that all of us shared the identical context. Subsequent, I walked everybody by means of 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 firms in our trade.
I want to share these modifications with you on this submit, however let’s first rewind to how we got here to those selections. One thing completely needed to change, however what? How? What had been the dangers?
“Don’t Do It”
In final 12 months’s weblog submit, I outlined Supercell’s two-pronged problem of rising reside video games and concurrently creating new ones. We had been fighting each. I used to be delighted to get a ton of suggestions from inside and outdoors Supercell. I spoke to dozens of individuals, together with founders, buyers, artists, incubators, accelerators, and members of academia to get their enter.
I used to be shocked that the overwhelming majority of individuals spent most of their time warning me about what might go fallacious if we began altering issues at Supercell. In a technique or one other, most informed me: “don’t do it.” Some implied it, others had been fairly direct, however the message was clear. I used to be additionally shocked that this message was extra true of suggestions from individuals outdoors of Supercell vs. from my colleagues inside. I might have anticipated the other.
To provide you an thought, amongst different issues, I acquired enter reminiscent of:
“You guys are the one cell 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 earnings and also you’re not completely happy??”
“Have a look at [great game company], they did what you’re planning on doing and that was the start of the top. All the very best individuals merely left.”
“Concentrate on reside 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 individuals and tradition we now have at Supercell, so the concept I might drive one thing that will destroy it…effectively, there aren’t any phrases to explain how that will really feel. Disturbing doesn’t fairly cowl it.
On the similar time, nonetheless, it was unimaginable to disregard the information. One of the best-in-class firms grew their reside 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 Cellular, and others).
With these stark information and annoying (however invaluable) enter from dozens of good, skilled individuals, how might we take into consideration what to do? I reminded myself of some key psychological frameworks to assist us focus:
1. Can we give attention to the previous or the longer term? Until we imagine that Supercell’s greatest days are forward of us, we shouldn’t be right here anymore. Now we have to give attention to the longer term.
2. Can we give attention to issues we are able to management or people who we can’t? This appears apparent,
however it’s so simple to think about some outdoors pressure that will destroy our tradition. All of us personal it, so it’s as much as us to make sure the very best components of it don’t change. Now we have to give attention to what we are able to management.
3. Can we give attention to the various methods one thing may fail or on the few methods it’d succeed? My colleagues usually 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 would have gone fallacious and explanation why groups ought to have failed. Nevertheless, in every occasion, there was a gaggle of people that believed in why one thing would work they usually dedicated themselves to ensure it did. Now we have to give attention to how & why we might 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 neighborhood, and to everybody at Supercell, previous & current. We had to enhance and shouldn’t let worry of failure drive our selections.
Two Birds, Two Stones
The main thought behind the deliberate modifications was what I wrote about in my earlier weblog submit: creating a brand new recreation from scratch and working/rising a reside recreation as a service are fairly completely different issues. We would have liked completely different options for every. We’d make modifications to how we method new video games and reside video games, and we’d change our management crew as effectively.
New Video games as Startups
Sooner or later, I spotted that the psychological mannequin we might apply to new video games was one thing very near house. As a serial founder/entrepreneur and as an energetic 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 recreation groups as their very own startups, inside Supercell? What useful concepts might we apply? Seems fairly a couple of!
• Group of Entrepreneurs: We imagine that new recreation groups have the very best likelihood of success, partly, if they’re began by a crew of loopy bold, resourceful people who execute quick, aren’t afraid to take dangers, and make aggressive (typically painful/scary) modifications shortly. Actually, we now have not been rigorous sufficient about deciding about beginning new recreation groups at Supercell. Too usually we now have ended up with groups which haven’t had all of the required skillsets or the crew dynamics haven’t been what they need to be once you begin a loopy journey like this. Our bar ought to be as excessive as it might be for beginning a brand new firm. Going ahead, we shall be rather more rigorous and are implementing a devoted system/course of to judge potential new recreation groups on this entrance. One of the 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’ll share thrilling information within the close to future about how individuals outdoors of Supercell can take part on this course of and have a chance to grow to be founders of considered one of Supercell’s subsequent new recreation 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 @!#$ finished as shortly/effectively as attainable. Backside line: you higher have one thing nice earlier than you run out of cash. This one is/was actually arduous for us! I began this thread feeling strongly that we completely want arduous constraints (e.g., every new recreation crew will get an agreed-upon funds. In the event that they run out of cash, earlier than proving the sport with gamers, the sport is lifeless). Not so easy! So many issues/situations to beat: if a crew needs to construct a “large recreation,” then they arguably want a big funds, negating the sensation of an actual constraint early on. OK, however what if we slice a bigger funds into smaller components/milestones (quite common)? This results in a greenlight course of, which I’m actually VERY allergic to.
Many nice firms work this manner, however studying from my previous errors (I created a greenlight course of at my earlier firm) I might not wish to see a course of like this at Supercell. I’ve simply seen too many occasions that recreation 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 method, and I imagine we now have our place to begin, which depends on trusting that we actually have the very best crew of entrepreneurs (see the purpose above). Additionally, we’ll ask our new recreation groups to decide to key timelines, milestones, and resourcing plans to succeed in them, after which brazenly share them with everybody within the firm. In different phrases, we’ll exchange the same old fastened budgets or greenlight processes with the stress of transparency. Whereas I don’t imagine for a second that constructions or processes would create nice video games (it’s the individuals and groups that do!), our “course of” going ahead shall be 1) a scientific method to forming the very best groups, 2) trusting the groups, and three) forcing the groups to function in an setting of full transparency. Sounds easy, proper? Will that be ample? Inconceivable to know but, however we’re all dedicated to attempting.
• Exterior Validation: Within the startup world, the widespread knowledge is that you simply wish to get your product in entrance of actual prospects as quickly as attainable to validate the “product market match”. In a similar way, new recreation groups should put their recreation in entrance of gamers as quick as attainable. Now we have not been best-in-class at this, and our new recreation 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 crew is aware of it has to pivot. Both method, it’s an excellent end result! Issues come up if/when new recreation groups wait too lengthy to get participant suggestions and it feels too arduous or too late to alter course. That’s the worst end result for everybody. Notice: I don’t imagine you create hit video games by asking gamers what they need, however I do imagine it’s a must to present them early and face the truth of their suggestions. We’ll implement this considering for brand new recreation groups at Supercell, encouraging and difficult new recreation 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 Atmosphere: Early-stage startups face one set of distractions within the type of every thing it takes to begin & run an organization. New groups inside massive firms face a special set of distractions, within the type of all of the pure processes and “noise” that come from being part of a company of tons of if not 1000’s of individuals (Supercell is now 550+ individuals). We wish new recreation groups at Supercell to keep away from each! Being part of Supercell means new recreation groups don’t want to fret about authorized, HR, payroll, taxes, actual property, IT, and so on. – every thing that it takes to begin and run an organization. Nevertheless, we additionally need new recreation groups to have the ability to focus and keep away from the distractions of a giant group. Meaning having the ability to reduce company-level actions reminiscent of recruiting, inside occasions, deciding on inside comms and slack channels, and so on. We’re both eradicating components or making them optionally available for brand new recreation groups. As an excessive instance, one new recreation crew determined to maneuver out of our predominant workplace into their very own little house close by. We had related discussions relating to know-how. Whereas all 5 of Supercell’s international video games had been constructed utilizing our inside proprietary engine/instruments, new recreation groups can select to make use of no matter they need in early levels of prototyping and proof of idea. Now we have new recreation 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 essential.
Our aim right here is to make Supercell the very best place for the very best groups to create the very best 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 thing in our management to make {that a} actuality and have so much happening for us. At Supercell, you don’t want to fret about constructing an organization and every thing that comes together with it, all it’s good to fear about is constructing a fantastic recreation. I do know this can be a unending effort and we’ll 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 implies that they’ve in a position to develop one thing that their prospects love), they transfer on to the following part 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 part, they grow to be “scaleups”. This scaling part may be very completely different and requires completely different sort of considering. I imagine the identical applies to video games and we’d profit from taking in some classes from the scaleups.
At Supercell, we now have discovered “product market match” with 5 completely different video games. Nowadays, 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 utterly 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 appreciated our small groups a lot.
If somebody from the skin came around the Conflict of Clans crew some years again, it regarded like a prototype crew to them!
We’re fortunate to be in our scenario the place Supercell groups have created 5 wonderful video games. The query dealing with us now (which we now have all the time confronted) is how will we make every recreation even higher by including new content material and options, and bringing it to tons of of tens of millions (or really billions) of individuals?
The next sounds so apparent wanting again that I really feel like an fool penning this (and plenty of have most likely known as me an fool on this matter!), however we are able to do what we do solely due to our gamers and we must always do every thing in our management to make our video games higher for them, even when it means our groups ought to be greater. Gamers could not care much less how large or small our groups are, all they care about is to have the ability to play a fantastic recreation. And if it requires a much bigger crew, then it’s our drawback to determine easy methods to make that greater crew 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 now have operated with these new, greater groups for a while, we’ve realised that not all of that’s unhealthy. In truth, it may be nice. To start with, with greater groups we are able to do extra for our gamers which is a superb feeling within the first place. Second, for those who get the construction proper, it really helps individuals to focus and be capable to do higher work.
Supercell has all the time been about these impartial groups that we name cells. Mainly, what we did right here was to redefine what a reside recreation cell is, and this time we embedded all of the crucial skillsets (additionally outdoors recreation growth) into it. We began to think about them as their very own “firms”, with their very own management groups and such. These “recreation models” have began to develop in measurement. We’re nonetheless nowhere close to the dimensions of another recreation groups in our enterprise which may be 500+ individuals in measurement, so we’re nonetheless speaking lower than 100 individuals (up to now).
We’re additionally experimenting with alternative ways to organise ourselves inside these greater groups. One of many concepts that we’re presently 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 recreation cell with one widespread 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 wished, and from right here, it can solely get higher.
NOTE: As a result of we’re rising our recreation groups, we now have been on a quicker hiring tempo than ever earlier than. We’re additionally beginning to rent in a number of areas in Europe outdoors of Helsinki, which is new for us. I respect that 2023 and 2024 have been tough years for online game firms, with lots 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 trade.
One Tradition
Given all of the modifications, an necessary query emerged: does this create two very completely different cultures between New and Reside recreation groups, and can that tear the corporate aside? My reply is provided that we let it occur, and we must always not let it occur.
At its core, Supercell’s tradition has all the time been in regards to the thought of impartial cells, every cell being liable for their selections. Meaning we now have all the time had alternative ways of working between the cells. We see this range as a function, 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 mentioned, we must always not child ourselves. This IS a giant change to on a regular basis work. There are extra individuals within the firm, you can’t presumably know everybody anymore, there’s extra construction within the greater reside recreation models, and so on. And there will certainly be large variations in how reside recreation models work in comparison with new recreation groups.
Concurrently, we’re VERY conscious of the dangers of a quickly rising headcount, and are having fixed and energetic discussions round proactively managing it — we wish to watch out to solely fill the wants we now have, however keep away from rising uncontrollably and dropping ourselves within the course of. True, we now have had some gaps that haven’t been stuffed for lengthy. Nevertheless, we additionally should be extraordinarily conscious that it takes time to essentially onboard and combine individuals 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 may be extra methods of working, however in the end we’re rooted in the identical values and ambitions: creating the very best video games that will entertain as many individuals as attainable and which might final for many years and extra.
New Management Group – A Power Multiplier
As I used to be occupied with all of this, and having all these discussions, I additionally acknowledged that if I actually wished Supercell to alter, we wanted everybody to take possession and accountability. That duty 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 wished to grow to be higher, it might want to begin with me and my crew, which is the management crew.
Returning to my presentation on the offsite final August. I spoke very brazenly about my emotions and errors to everybody on the firm. I informed them how I had failed because the lead of my crew, and in addition placing collectively the very best crew in place. At Supercell, after we fail (or succeed), we have fun the learnings that come out of that with champagne. I’m not positive 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 wished to encompass myself with individuals who have seen what we’re experiencing proper now and have helped firms efficiently navigate these challenges earlier than. That’s why I began to rebuild the management crew, 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 affix us. It was not simple to seek out these two as a result of I wanted leaders who not solely had been profitable at working issues at scale, but additionally 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 completely happy and proud in regards to the new management crew 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 all the time disliked the tendency of the company world to show
CEOs and founders into these hero figures who are available in and save the world. I would like Supercell to be completely different. My proudest moments at Supercell have all the time been those the place one thing wonderful has occurred, and I’ve had nothing to do with it and actually 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 individuals, 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 now have been in a position to create a tradition the place these groups can do their greatest work. And that is the place the management crew may also help: I see it as a pressure multiplier which, if profitable, could make Supercell the place the place the very best individuals can do the very best 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 just the start of it. Among the modifications we now have made will show to be the suitable ones, others will show to be fallacious ones. However that’s okay, so long as we study from them shortly after which change them for the higher.
I informed Supercellians that any longer, we must always all begin to assume change as one thing that could be a fixed. Sure, typically change can really feel uncomfortable. However we have to get comfy feeling uncomfortable. We should always consider change as a constructive factor, one thing we have to do on a regular basis to grow to be higher. So long as we alter for the higher every single day, and might do this over a decade or two, with some luck, ultimately we’ll land to a fantastic place.
Monetary Outcomes
And naturally, we’ve received our annual financials, which Finnish legislation requires us to publish, and which we now have shared right here for fairly a while now with some commentary.
Earlier than I get to the precise outcomes from final 12 months, I wish to clarify how we take into consideration monetary outcomes on the whole. We see them as one thing that permits us to do extra of what we’re obsessed with. Now we have been fortunate to be very worthwhile for years now, which is necessary as a result of it allows us to take a really long run view on every thing, together with conserving the standard bar for our video games very excessive and enabling us to attempt new dangerous issues. Nevertheless, we don’t see monetary outcomes as the top aim however simply means to the top, which is to create higher video games for our gamers. The monetary outcomes are an necessary sign, nonetheless, as as to whether we’re doing an excellent 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 adequate content material and experiences.
You will need to emphasize that we didn’t count on 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 can take a while.
All of that mentioned, listed below 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 in the course of the first half of 2023 because the cell video games market total has continued to say no. The opposite one is that for our reside video games, each quarter final 12 months was higher than the one earlier than it, and proper now we’re on a robust progress trajectory. Essentially the most shining instance of that is Brawl Stars, which greater than tripled its participant base since final summer time and is now in reality the most important Supercell recreation as measured by variety of gamers! The reason being, fairly merely, that we now have been in a position to do extra for our gamers by way of creating new content material and options to our video games. As I mentioned 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 mentioned I’ve been positively shocked that it’s already beginning to present within the outcomes.
Trying Forward
On the time of penning this, it’s already February 2024, and I believed I might shut with a couple of ideas about this coming 12 months. To summarize my emotions, I can’t recall when was the final time we had began a brand new 12 months from such a fantastic place as we now have this 12 months.
To start with, we now have greater and higher groups than we now have ever had. Consequently, we are able to do extra for our gamers than ever earlier than. You will need to word that the majority of those greater groups have in place just for 1-2 replace cycles. So I’d wish to assume that is just the start, and I’m extraordinarily excited to see what these groups will do for our video games and gamers as they grow to be higher and higher at working collectively on this new setup.
Second, I’m extremely enthusiastic about our new video games for this 12 months. A few of you’ve most likely performed Conflict Mini, Squad Busters and Mo.co, that are all nonetheless in growth however of which we’re very pleased with. And there’s extra coming! However extra about them a bit later, hopefully within the not too distant future! 🙂
Lastly, I wished to thank the entire gamers, the tens of 1000’s of content material creators who’re the spine of our neighborhood, and naturally all of the Supercellians. I really feel very fortunate to be surrounded by individuals such as you and have a chance to be a part of one thing as distinctive as what we now have right here. Thanks.
