56 Employees laid off in the Atlanta Office in the summer of 2014. 20% overall layoffs overall in the company. Couple of months into the summer, the San Francisco office is shut down. Gross profits were down year over year. R&D costs increased by $40 million with severe impairment charges due to cancellation of “World of Darkness”. EBITDA was down by 46 % for the first six months when compared year over year. The company laid off the Chief Marketing officer as well as the Chief Financial officer. “CCP does stand at a precipice now which they have not approached before, and further major setbacks such as the one caused by WoD would prove dire”, reported the coverage on themittani.com

In the name of Asine Hitama, What the heck was going on?

Come 2015, this week, Oculus announced that its consumer Rift unit would ship with EVE: Valkyrie. Reactions to the Valkyrie VR demo have been phenomenal. It has been hailed as a game-changer for virtual reality experience by ars-technica and the game is expected to be available on both Oculus and PlayStation VR platforms.

What did CCP games do to bring itself out of the world of darkness and dust? How did it execute on the turnaround strategy? Are their lessons to be learnt for other gaming houses and up and coming indie content developers.

The Ability to Dream Big

Founded in Reykjavík in 1997, the company launched its ambitious sandbox spaceship game, Eve Online, six years later. Boasting a complex player-made economy and dramatic space battles, it was like nothing else out there – a living, breathing sci-fi universe. In the next ten years it had attracted 100,000 subscribers on its EVE online platform.

With this huge success under its belt, it launched its expansion program and acquired “White Wolf” in 2006. With this acquisition, CCP started on a path of massive investment into the new multi-player game world of darkness while also trying to focus on its core EVE portfolio as well as its new game Dust 514.

Many companies never move beyond their one hit wonders. Often the owners would sell the asset at premium prices and move on to new ventures. It takes a different set of mindset to dream big and map out the expansion aspirations.

Don’t overlook the execution playbook

A well devised growth strategy, be it organic or through acquisitions is merely just that, a strategy. In order to be successful, one needs to have a solid execution playbook. This is critically important when you have acquired a new company and are trying to work through cultural barriers and different management styles. Right off the bat with the White Wolf acquisition, problems started to emerge at CPP Games. CCP retained most of the White Wolf staff. As part of the post merger integration exercise, the new employees were provided with pre production and training skills but the company could not ramp up to full production on WOD as the training and pre-production dragged on. There was also significant constraint in available resources to support the development portfolio. “There were plenty of developers who would get redirected to create Eve content for three to six month cycles… During these times, World of Darkness development was significantly slowed down.”, said a former developer. On the WOD platform, there was no clear vision for the game from the leadership. Developers reported constant build and rebuild efforts to position the asset in the MMO space. This constant build and rebuild approach meant massive issues in the development process and dramatic uptick in cycle times. In 2009, things started going south pretty fast and the blame game started. Interestingly, the line employees were blamed. The management did not take responsibility for the failures.

The key lesson here is that in order to be successful in your growth strategy, you will have to take time to work with your immediate leadership team and develop the vision for the portfolio and also its unique assets. Taking the time to clearly see the product roadmap for the assets and articulating the most appropriate resource strategy will be paramount to the success of your strategy. Very often, this is overlooked and can cause massive culture problems as well as confusion in the rank and file teams. This can very quickly erode the morale of the team and lead to blame games.

Courage to let go

Every entrepreneur has had to deal with this dilemma at one point or the other. It is no easy matter to walk away from a product that essentially stood at the core of your expansion dreams at one point. It is even more difficult when you have invested countless hours and infused massive capital into the development of the asset. In late 2011, CCP games decided to pull the plug on world of darkness. It announced massive layoffs in 2011 and only kept a very small team focused on WOD. Eventually, this team would cease on any development efforts on WOD. Around this time, the company also took a step back and asked itself the most important question. “Who are we and what are our real strengths?” With that came the realization that EVE was the place to be. That was their identity and core strength and it required razor sharp focus. The company also hired an outsider, Sean Decker as Senior Vice president in 2013. With that the streamlining process started at CCP Games.

Often times, we get stuck with that one idea, that one pet content that we can’t shake off no matter how many times we revisit the definition of sunk costs. We need to be aware of it and make courageous decisions no matter how hard they are. With a new platform, we do not have the luxury to over build. Build quickly, put it out there and move on.

Rebuild with Renewed Focus 

In 2015, The Company let go of most of its prior senior management. In Jan, Chief Operating Officer (COO) Jón Hörðdal and Chief Technology Officer (CTO) Halldor Fannar left CCP. With the focus singularly on EVE, it brought in new leadership talent. It made some critical investments in 2014 that paved its way into the world of virtual reality. Most notable was the decision to support and back Oculus during the kickstarter campaign. The company also received a $30 Million capital infusion in Nov from Novator and NEA to focus on virtual reality games. It was also able to finally divest what remained of White Wolf to Paradox publishing in an all cash deal in late October. Although the morale is still low (See Glassdoor reviews), things look to be turning around finally at CCP. Last week, it announced that Maria Sayans would be joining CCP games as the new Chief Customer Officer. Maria comes to CCP from Electronic Arts. There is a lot of excitement from the gaming community around the potential new offerings from CCP games. It has also been getting a lot of fan support for its new VR game “Gunjack” that is available on Samsung Gear VR. UploadVR reported in Nov that Gunjack is one of the best Gear VR experiences. Perhaps, the company has been able to turn itself around and will get a second act via its upcoming virtual reality games.

In Summary

Not every company has the will or the strength to go through this kind of dramatic transformation. Rebuilding and repositioning is an art in itself and requires a very different mindset. As new entrepreneurs, we need to remember that there is always a second chance if we learn from our experiences, leverage our strengths and be brave when faced with uncertainties.

The Virtual reality content development is a brand new area and there are indeed a lot of uncertainties in both terms of technology and in terms of best practices. As we plan and develop our VR content portfolio, we need to ask ourselves what our key strengths are and where we can create the best value for our customers.

If we can dream big, focus on our execution with laser sharp singularity and develop the courage to learn from our mistakes and move forward with the intention to rebuild and grow, it will definitely be a very memorable 2016!

Let the Creative Out. Happy Holidays!