Staying Afloat in a Challenging Business

Here is an extended version of the magazine article I wrote this month.

I believe there are some core principles that a company must adopt in order to sustain a successful business while building a brand. If one were to sum up it all up into one word, it would be “roots”.

The fact is it’s not easy to go out and build a brand overnight. If you start by planting some roots and continue to feed them while adapting to changing trends you stand a pretty good chance of survival. This requires, among other things, vision, strategy, and a team that actually believes in what you’re doing.

It also requires the commitment that you should not abandon your roots and plant new ones somewhere along the way. Using the PC Gaming hardware segment as an example, many PC gaming companies started in fairly open waters in an unknown niche – which allowed them to plant roots and grow. Companies like Falcon-NW, Alienware and Voodoo are obvious examples of this. There are also companies that entered the market late, with somewhat humble beginnings and managed to survive. One company that comes to mind, Velocity, came out of nowhere and is now one of the better known gaming pc companies out there.

History will show that companies who fail are usually ones who do not adapt with change effectively. Such companies are completely obvious to what’s happening around them, they tend to be arrogant when they analyze their competition, and they all but ignore what their customers are really looking for. If you look at our industry you can easily pick out a few companies who have fallen victim to such challenges.

Then there are those companies who stick to the same way of doing business for years. These companies stay too close to their roots and they grow on a single trajectory until they eventually end up in a tailspin and they either die a slow expected death – or they make emergency reparations to fix what’s broken. Typically companies like these end up fragmented and disjointed.

Some companies believe that they need to make dramatic changes to survive and they usually hire new leadership to accomplish such change. Change is usually a good thing, but when you forget your roots and plant new ones you will most likely end up in a similar dire situation as many who have failed before you. There are examples of companies that have tried this, failed, and all but destroyed their once incredibly strong brand.

Another type of failure is the company who starts off in a race to be at the top of a niche without any fundamentals. Some examples of these fundamentals are history, strategy, substance, service, and appropriate DNA. Without fundamentals you cannot establish roots, which makes it nearly impossible to survive in any market. Companies who attempt to build a luxury brand overnight are an example of such wrecks. They take out large ads in major magazines and ultimately they stop paying the bills, the lights turn out, and it’s over.

There have been many companies that view the “gaming” industry from a distance with dollar signs in their eyes. Expecting a cakewalk they end up falling victim to their own blind arrogance. It’s just not as easy as it looks I guess. The bottom line is you cannot build a business in any niche without appropriate DNA – and even with the best DNA, without a compelling brand you can almost guarantee a slow but eventual death.

So those are the general points for sustaining a successful business, now it’s time to talk about saturated markets.

In a segment full of new companies, young blood, and new ideas it’s very difficult to compete without new innovation. We are starting to see the effects of mass market commoditization in the gaming space, which is making it challenging for even the longest standing companies to survive. At one point the gaming/enthusiast companies were looked at as strategic accounts for big companies because these enthusiasts would influence large OEMs and mainstream buying decisions.

Thanks to consolidation a quick look at the horizon shows that some big OEMs are becoming strategic monsters. We will certainly see new innovations this year that will not be as easy to replicate as a custom paint job – this is fantastic news for consumers - because like any saturated industry, PC gaming has reached the point of getting stale.

There is little doubt that the landscape is changing – there are some exciting times ahead, and I personally believe we have not seen the last of major events in this space, not by a long-shot. I also see boutique companies potentially consolidating with each other -- odd to imagine, but anything is possible.