Mckinsey 7S Activision Blizzard Inc Analysis

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Activision Blizzard Inc McKinsey 7S Analysis

Activision Blizzard Inc Overview

Activision Blizzard Inc (ATVI) was formed in 2008 through the merger of Activision and Blizzard Entertainment. Headquartered in Santa Monica, California, the company operates as a leading interactive entertainment company, developing and publishing games across various platforms. ATVI’s corporate structure comprises distinct business units, primarily Activision Publishing, Blizzard Entertainment, and King Digital Entertainment. As of the latest fiscal year, ATVI reported total revenues of approximately $8.31 billion and a market capitalization that fluctuates based on market conditions, but has been around $68 billion. The company employs roughly 9,500 individuals globally.

ATVI maintains a significant international presence, with operations and distribution networks spanning North America, Europe, Asia-Pacific, and Latin America. Its industry sectors include console, PC, and mobile gaming, with market-leading positions in franchises like “Call of Duty,” “World of Warcraft,” and “Candy Crush.” The company’s mission is to connect and engage the world through epic entertainment. Key milestones include the releases of iconic game titles, the acquisition of King Digital in 2016, and recent strategic shifts towards mobile gaming and esports. Currently, ATVI is navigating industry disruptions such as evolving consumer preferences, the rise of cloud gaming, and regulatory scrutiny regarding workplace culture. A major recent development is the acquisition by Microsoft, which is expected to close in 2024, pending regulatory approvals. This acquisition represents a pivotal strategic priority, aiming to leverage Microsoft’s technology and distribution capabilities to enhance ATVI’s market reach and innovation.

Part 2: The 7S Framework Analysis - Corporate Level

1. Strategy

Corporate Strategy

Activision Blizzard’s corporate strategy centers on creating and distributing high-quality interactive entertainment across multiple platforms. This involves a portfolio management approach that balances established franchises with new intellectual property development.
Capital allocation prioritizes investments in high-growth areas such as mobile gaming and esports, while maintaining support for core console and PC franchises. Investment criteria emphasize projects with strong potential for recurring revenue streams and high player engagement.
Growth strategies encompass both organic development of new titles and strategic acquisitions to expand market share and capabilities. The acquisition of King Digital Entertainment exemplifies this approach, providing ATVI with a significant foothold in the mobile gaming market.
International expansion focuses on leveraging existing franchises in emerging markets, particularly in Asia-Pacific and Latin America. Market entry approaches vary, ranging from direct distribution to partnerships with local publishers.
Digital transformation strategies involve leveraging cloud gaming technologies and data analytics to enhance player experiences and personalize content offerings. Innovation strategies emphasize experimentation with new game mechanics and business models.
Sustainability and ESG considerations are increasingly integrated into ATVI’s strategic planning, with initiatives focused on reducing environmental impact and promoting diversity and inclusion within the organization.
The corporate response to industry disruptions involves adapting to evolving consumer preferences, embracing new technologies, and addressing regulatory challenges proactively.

Business Unit Integration

Strategic alignment across business units is facilitated through centralized strategic planning processes and performance management systems.
Strategic synergies are realized through cross-promotion of franchises, shared technology platforms, and centralized marketing and distribution functions.
Tensions between corporate strategy and business unit autonomy are managed through clear communication of strategic priorities and delegation of operational decision-making to business unit leaders.
Corporate strategy accommodates diverse industry dynamics by allowing business units to tailor their strategies to the specific characteristics of their respective markets.
Portfolio balance and optimization are achieved through regular reviews of business unit performance and strategic fit, with potential divestitures or acquisitions to enhance overall portfolio value.

2. Structure

Corporate Organization

Activision Blizzard’s formal organizational structure is hierarchical, with a corporate headquarters overseeing three primary business units: Activision Publishing, Blizzard Entertainment, and King Digital Entertainment.
The corporate governance model includes a board of directors responsible for overseeing strategic direction and corporate governance practices. Board composition includes independent directors with diverse backgrounds and expertise.
Reporting relationships are clearly defined, with business unit presidents reporting to the CEO. Span of control varies depending on the size and complexity of each business unit.
The degree of centralization versus decentralization is balanced, with corporate functions providing centralized support services while business units retain autonomy over product development and marketing decisions.
Matrix structures and dual reporting relationships are limited, with a focus on clear lines of authority and accountability.
Corporate functions include finance, legal, human resources, and technology, while business unit capabilities encompass game development, marketing, and sales.

Structural Integration Mechanisms

Formal integration mechanisms across business units include cross-functional teams, shared service models, and centers of excellence.
Shared service models provide centralized support for functions such as IT, finance, and human resources, reducing duplication and improving efficiency.
Structural enablers for cross-business collaboration include common technology platforms, shared data repositories, and cross-functional training programs.
Structural barriers to synergy realization include siloed organizational structures, conflicting priorities, and lack of communication between business units.
Organizational complexity is managed through clear organizational structures, well-defined roles and responsibilities, and effective communication channels.

3. Systems

Management Systems

Strategic planning processes involve annual strategic reviews, long-range planning exercises, and regular performance monitoring.
Performance management systems include key performance indicators (KPIs), balanced scorecards, and performance appraisals.
Budgeting and financial control systems involve annual budget cycles, monthly financial reporting, and variance analysis.
Risk management and compliance frameworks include enterprise risk management programs, internal controls, and compliance training.
Quality management systems and operational controls include ISO certifications, Six Sigma methodologies, and process improvement initiatives.
Information systems and enterprise architecture include enterprise resource planning (ERP) systems, customer relationship management (CRM) systems, and business intelligence (BI) tools.
Knowledge management and intellectual property systems include patent databases, trade secret protection programs, and knowledge sharing platforms.

Cross-Business Systems

Integrated systems spanning multiple business units include financial reporting systems, HR management systems, and customer data platforms.
Data sharing mechanisms and integration platforms include data warehouses, application programming interfaces (APIs), and data governance policies.
Commonality versus customization in business systems is balanced, with standardized systems for core functions and customized systems for business unit-specific needs.
System barriers to effective collaboration include incompatible systems, data silos, and lack of integration between business units.
Digital transformation initiatives across the conglomerate include cloud migration, data analytics, and automation of business processes.

4. Shared Values

Corporate Culture

The stated core values of Activision Blizzard include innovation, creativity, collaboration, and player focus.
The strength and consistency of corporate culture vary across business units, with some units exhibiting stronger adherence to core values than others.
Cultural integration following acquisitions has been challenging, with some acquired companies retaining their distinct cultures and values.
Values translate across diverse business contexts through consistent communication, training programs, and leadership role modeling.
Cultural enablers to strategy execution include a culture of innovation, a focus on player satisfaction, and a commitment to diversity and inclusion.
Cultural barriers to strategy execution include a lack of collaboration between business units, a resistance to change, and a siloed organizational structure.

Cultural Cohesion

Mechanisms for building shared identity across divisions include company-wide events, employee recognition programs, and internal communication channels.
Cultural variations between business units reflect differences in industry dynamics, business models, and organizational histories.
Tension between corporate culture and industry-specific cultures is managed through open communication, cultural sensitivity training, and leadership development programs.
Cultural attributes that drive competitive advantage include a culture of innovation, a focus on player satisfaction, and a commitment to quality.
Cultural evolution and transformation initiatives include leadership development programs, diversity and inclusion initiatives, and employee engagement surveys.

5. Style

Leadership Approach

The leadership philosophy of senior executives emphasizes strategic thinking, innovation, and collaboration.
Decision-making styles and processes vary depending on the issue at hand, with some decisions made centrally and others delegated to business unit leaders.
Communication approaches and transparency are emphasized, with regular communication from senior executives to employees through town hall meetings, email updates, and internal communication channels.
Leadership style varies across business units, with some units exhibiting a more entrepreneurial and decentralized leadership style than others.
Symbolic actions and their impact on organizational behavior include executive compensation policies, employee recognition programs, and corporate social responsibility initiatives.

Management Practices

Dominant management practices across the conglomerate include performance-based compensation, data-driven decision-making, and continuous improvement.
Meeting cadence and collaboration approaches vary depending on the business unit and functional area, with regular meetings between business unit leaders and corporate executives.
Conflict resolution mechanisms include mediation, arbitration, and escalation to senior management.
Innovation and risk tolerance in management practice are encouraged, with initiatives such as innovation labs, venture capital investments, and employee innovation challenges.
Balance between performance pressure and employee development is maintained through performance management systems, training programs, and career development opportunities.

6. Staff

Talent Management

Talent acquisition and development strategies focus on attracting and retaining top talent in the gaming industry, with initiatives such as university recruiting, internship programs, and employee referral programs.
Succession planning and leadership pipeline programs identify and develop high-potential employees for future leadership roles.
Performance evaluation and compensation approaches include performance appraisals, merit-based pay increases, and stock options.
Diversity, equity, and inclusion initiatives aim to create a more diverse and inclusive workforce, with programs focused on recruiting, retaining, and promoting employees from underrepresented groups.
Remote/hybrid work policies and practices have been implemented to accommodate employee preferences and improve work-life balance.

Human Capital Deployment

Patterns in talent allocation across business units reflect strategic priorities, with more resources allocated to high-growth areas such as mobile gaming and esports.
Talent mobility and career path opportunities are facilitated through internal job postings, cross-functional assignments, and leadership development programs.
Workforce planning and strategic workforce development initiatives align talent resources with strategic priorities, with programs focused on upskilling and reskilling employees.
Competency models and skill requirements are used to identify and develop the skills and competencies needed to succeed in the gaming industry.
Talent retention strategies and outcomes include competitive compensation and benefits packages, employee recognition programs, and career development opportunities.

7. Skills

Core Competencies

Distinctive organizational capabilities at the corporate level include strategic planning, financial management, and risk management.
Digital and technological capabilities include game development, data analytics, and cloud computing.
Innovation and R&D capabilities include game design, artificial intelligence, and virtual reality.
Operational excellence and efficiency capabilities include supply chain management, manufacturing, and distribution.
Customer relationship and market intelligence capabilities include customer service, market research, and competitive analysis.

Capability Development

Mechanisms for building new capabilities include training programs, partnerships with universities, and acquisitions of companies with specialized expertise.
Learning and knowledge sharing approaches include internal training programs, online learning platforms, and knowledge management systems.
Capability gaps relative to strategic priorities are identified through skills gap analyses, competency assessments, and strategic planning exercises.
Capability transfer across business units is facilitated through cross-functional teams, knowledge sharing platforms, and mentoring programs.
Make versus buy decisions for critical capabilities are based on factors such as cost, time, and expertise, with a preference for building capabilities internally when possible.

Part 3: Business Unit Level Analysis

For this analysis, we will focus on three major business units:

Activision Publishing: Focused on console and PC games, primarily the “Call of Duty” franchise.
Blizzard Entertainment: Known for PC games like “World of Warcraft” and “Diablo.”
King Digital Entertainment: Specializes in mobile games, most notably “Candy Crush Saga.”

1. Activision Publishing

Strategy: Dominate the FPS market with annual “Call of Duty” releases and expand into new genres.
Structure: Relatively centralized, with strong control from the corporate level to ensure brand consistency.
Systems: Rigorous project management and quality control systems to meet annual release deadlines.
Shared Values: Emphasis on high-quality graphics, immersive gameplay, and competitive multiplayer experiences.
Style: Performance-driven leadership with a focus on meeting sales targets and critical acclaim.
Staff: Highly skilled game developers, designers, and marketers with expertise in the FPS genre.
Skills: Expertise in game development, marketing, and distribution of AAA titles.
Alignment: Strong internal alignment, but potential misalignment with corporate strategy if innovation is stifled by the focus on “Call of Duty.”
Industry Context: Highly competitive FPS market requires constant innovation and adaptation to player preferences.

2. Blizzard Entertainment

Strategy: Focus on creating high-quality, long-lasting PC games with strong community engagement.
Structure: More decentralized than Activision, with greater autonomy for game development teams.
Systems: Emphasis on quality assurance and community feedback to ensure games meet high standards.
Shared Values: Commitment to creating immersive worlds, engaging storylines, and strong community bonds.
Style: Collaborative leadership with a focus on empowering game developers and fostering creativity.
Staff: Highly skilled game developers, designers, and community managers with expertise in PC gaming.
Skills: Expertise in game development, community management, and esports.
Alignment: Strong internal alignment, but potential misalignment with corporate strategy if the focus on quality over speed leads to delays in game releases.
Industry Context: PC gaming market requires a focus on quality and community engagement to maintain player loyalty.

3. King Digital Entertainment

Strategy: Dominate the mobile gaming market with casual games that appeal to a broad audience.
Structure: Highly decentralized, with a focus on rapid iteration and experimentation.
Systems: Data-driven decision-making and A/B testing to optimize game mechanics and monetization strategies.
Shared Values: Emphasis on creating fun, accessible games that can be enjoyed by anyone.
Style: Agile leadership with a focus on empowering game developers and fostering innovation.
Staff: Highly skilled game developers, designers, and marketers with expertise in mobile gaming.
Skills: Expertise in game development, data analytics, and mobile marketing.
Alignment: Strong internal alignment, but potential misalignment with corporate strategy if the focus on casual games leads to a lack of innovation in other genres.
Industry Context: Mobile gaming market requires a focus on accessibility, engagement, and monetization to succeed.

Part 4: 7S Alignment Analysis

Internal Alignment Assessment

Strongest Alignment Points: Across all business units, there is strong alignment between Skills and Staff, reflecting the company’s ability to attract and retain top talent in the gaming industry. Additionally, Strategy and Systems are generally well-aligned, with each business unit having systems in place to support its strategic goals.
Key Misalignments: A potential misalignment exists between Shared Values and Style in some business units, with some employees feeling that the company’s emphasis on performance pressure can conflict with its stated values of collaboration and creativity. Additionally, there may be misalignment between Structure and Strategy, with the centralized structure of Activision Publishing potentially stifling innovation and the decentralized structure of King Digital Entertainment potentially leading to a lack of coordination.
Impact of Misalignments: Misalignments can lead to decreased employee morale, reduced innovation, and slower decision-making.
Variation Across Business Units: Alignment varies across business units, with Activision Publishing exhibiting stronger alignment in some areas (e.g., Strategy and Systems) and weaker alignment in others (e.g., Shared Values and Style).
Alignment Consistency Across Geographies: Alignment is generally consistent across geographies, but there may be some cultural differences that impact the implementation of certain elements.

External Fit Assessment

Fit with External Market Conditions: The 7S configuration generally fits external market conditions, with each business unit having a strategy and structure that is appropriate for its respective market. However, the company needs to continue to adapt to evolving consumer preferences and technological advancements.
Adaptation to Different Industry Contexts: The company has been successful in adapting its 7S configuration to different industry contexts, with each business unit having a unique set of skills and capabilities that are tailored to its specific market.
Responsiveness to Changing Customer Expectations: The company is generally responsive to changing customer expectations, but there is room for improvement in terms of anticipating future trends and developing new products and services that meet evolving needs.
Competitive Positioning: The 7S configuration enables the company to maintain a strong competitive position in the gaming industry, with each business unit having a unique set of strengths that differentiate it from its competitors.
Impact of Regulatory Environments: Regulatory environments can have a significant impact on the 7S elements, particularly in areas such as data privacy, consumer protection, and workplace culture.

Part 5: Synthesis and Recommendations

Key Insights

Activision Blizzard possesses a diverse portfolio of successful gaming franchises, each operating with distinct strategies and structures.
Interdependencies between elements are crucial, with strong alignment between Skills and Staff driving innovation and performance.
Conglomerate challenges include balancing corporate standardization with business unit flexibility and fostering collaboration across diverse cultures.
A key advantage is the ability to leverage shared resources and expertise across business units.
Critical alignment issues include potential misalignments between Shared Values and Style, and between Structure and Strategy.

Strategic Recommendations

Strategy: Portfolio optimization should focus on high-growth areas such as mobile gaming and esports, while maintaining support for core console and PC franchises.
Structure: Organizational design enhancements should focus on fostering collaboration between business units and empowering game development teams.
Systems: Process and technology improvements should focus on streamlining decision-making and improving communication.
Shared Values: Cultural development initiatives should focus on promoting a culture of collaboration, creativity, and respect.
Style: Leadership approach adjustments should focus on empowering employees and fostering a more collaborative work environment.
Staff: Talent management enhancements should focus on attracting and retaining top talent in the gaming industry and promoting diversity and inclusion.
Skills: Capability development priorities should focus on developing new skills in areas such as data analytics, cloud computing, and artificial intelligence.

Implementation Roadmap

Prioritize Recommendations: Focus on quick wins such as improving communication and streamlining decision-making.
Outline Implementation Sequencing: Start with cultural development initiatives, followed by organizational design enhancements and process improvements.
Identify Quick Wins: Implement employee recognition programs and improve internal communication channels.
Define Key Performance Indicators: Measure progress on key initiatives such as employee morale, innovation, and financial performance.
Outline Governance Approach: Establish a cross-functional team to oversee implementation and monitor progress.

Conclusion and Executive Summary

Activision Blizzard’s current state of 7S

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