Established as Amazin' Software by an ex-Apple marketing executive named Trip Hawkins, Electronic Arts (EA) was a pioneer in the home computer-game industry. From the outset, EA published games created by outside developers-a strategy that offered higher profit margins and forced the new company to stay in close contact with its market. Activision's path to success in the industry wasn't quite as smooth as EA's. Activision was founded as a haven for game developers unhappy with prevailing industry policy. Positioning itself as the industry's first third-party developer, Activision began promoting creators as well as games. The company went public and rode the crest of a booming market.
Enter Robert Kotick, a serial entrepreneur with no particular passion for video games, who bought one-fourth of the firm and took over as CEO. Kotick looked immediately to Electronic Arts for a survey of best practices in the industry. What he discovered was a company whose culture was disrupted by internal conflict-namely, between managers motivated by productivity and profit and developers driven by independence and imagination. The key to getting Activision back in the game, Kotick decided, was managing this complex of essential resources better than his competition did. So, Kotick moved the company to Los Angeles and began to recruit the people who could furnish the resources that he needed most-creative expertise and a connection with the passion that its customers brought to the video-game industry. Between 1997 and 2003, Kotick proceeded to buy no fewer than nine studios, but his concept of a video-game studio system was quite different from that of EA, which was determined to make production more efficient by centralizing groups of designers and programmers into regional offices.
The strategy has paid off big time. The company, now known as Activision Blizzard, has squeezed past EA to become the bestselling video-game publisher in the world not affiliated with a maker of game consoles (such as Nintendo and Microsoft).
Case Questions
- How might different competitive strategies help to explain why Electronic Arts lost its leadership in the video-game market to Activision Blizzard?
- How would you use the adaptation model to advise Activision Blizzard on the best way to maintain its leadership in the video-game market?
- If you ran a small video-game start-up, what would be your strategy for competing with EA and Activision Blizzard?