Harvard Case - WMS: Revenue Model Innovation for Gaming Solutions
"WMS: Revenue Model Innovation for Gaming Solutions" Harvard business case study is written by Mohanbir Sawhney, Pallavi Goodman, Ori Broit. It deals with the challenges in the field of Strategy. The case study is 16 page(s) long and it was first published on : Jun 23, 2016
At Fern Fort University, we recommend WMS implement a multi-pronged strategy to innovate their revenue model and capitalize on the evolving gaming landscape. This strategy involves leveraging their existing strengths, embracing emerging technologies, and expanding into new markets.
2. Background
This case study focuses on WMS Industries, a leading manufacturer of gaming machines, facing declining revenues and increasing competition from online gaming platforms. The company needs to find new ways to generate revenue and stay relevant in a rapidly changing industry.
The main protagonists are WMS's leadership team, who are tasked with developing a strategy to address the company's challenges and secure its future.
3. Analysis of the Case Study
Industry Analysis:
Porter's Five Forces: The gaming industry is characterized by high competition due to the presence of numerous players, low switching costs for customers, and high bargaining power of suppliers. The threat of new entrants is also significant due to the ease of setting up online gaming platforms. However, the threat of substitutes is relatively low, as traditional gaming remains a popular form of entertainment.
Industry Lifecycle: The gaming industry is in a mature stage, with declining growth rates and increasing competition. This necessitates innovation and diversification to maintain market share.
SWOT Analysis:
- Strengths: Strong brand recognition, established distribution channels, experienced workforce, and a solid track record in the traditional gaming market.
- Weaknesses: Reliance on a declining traditional market, limited online presence, and a lack of agility in adapting to new technologies.
- Opportunities: Expanding into new markets like mobile gaming and esports, developing innovative game mechanics and content, and utilizing emerging technologies like AI and VR.
- Threats: Increasing competition from online gaming platforms, changing consumer preferences, and evolving regulations.
Value Chain Analysis:
- WMS's value chain is heavily reliant on manufacturing, distribution, and sales of traditional gaming machines. To innovate, they need to expand their value chain to include software development, online gaming platforms, and digital content creation.
Business Model Innovation:
- WMS needs to move beyond a product-centric business model and adopt a customer-centric approach. This involves understanding the needs of different player segments and offering tailored gaming experiences.
- Diversification: WMS can diversify its revenue streams by expanding into new markets, such as online gaming, mobile gaming, and esports. This diversification can mitigate the risks associated with relying solely on the traditional gaming market.
- Vertical Integration: WMS can consider acquiring or partnering with companies in the online gaming space to gain access to new technologies and expertise. This vertical integration can strengthen their position in the evolving gaming landscape.
Strategic Planning:
- Strategic Intent: WMS needs to clearly define its strategic intent and communicate it effectively to all stakeholders. This intent should focus on innovation, diversification, and customer-centricity.
- Strategic Positioning: WMS needs to develop a clear strategic positioning that differentiates them from competitors. This positioning should emphasize their expertise in traditional gaming, their commitment to innovation, and their focus on delivering engaging and immersive gaming experiences.
- Balanced Scorecard: WMS can utilize a balanced scorecard to track their progress towards achieving their strategic goals. This scorecard should include financial, customer, internal process, and learning and growth perspectives.
4. Recommendations
1. Digital Transformation:
- Develop a robust online gaming platform: WMS should invest in developing a state-of-the-art online gaming platform that offers a wide range of games, features, and payment options.
- Embrace mobile gaming: WMS should develop mobile-first games that cater to the growing mobile gaming market.
- Explore esports: WMS can capitalize on the rising popularity of esports by developing games and organizing tournaments.
2. Business Model Innovation:
- Implement a subscription-based model: WMS can offer subscription packages that provide access to a premium selection of games and features.
- Introduce in-game microtransactions: WMS can generate revenue through in-game purchases of virtual items, currency, and other enhancements.
- Partner with online gaming platforms: WMS can collaborate with existing online gaming platforms to distribute their games and reach a wider audience.
3. Strategic Alliances:
- Acquire or partner with online gaming companies: WMS should consider acquiring or forming strategic alliances with companies that have expertise in online gaming, software development, and digital content creation.
- Collaborate with technology providers: WMS can partner with technology providers to leverage emerging technologies like AI, VR, and blockchain to enhance their gaming experiences.
4. Marketing and Brand Management:
- Develop a strong online presence: WMS needs to establish a strong online presence through social media, digital marketing, and content creation.
- Target new customer segments: WMS should focus on attracting new customer segments, such as younger generations and mobile gamers.
- Promote innovation and engagement: WMS should highlight their commitment to innovation and create engaging content that showcases their games and features.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: The recommendations leverage WMS's existing strengths in game design and development while expanding into new areas like online gaming.
- External customers and internal clients: The recommendations address the needs of both existing and potential customers by offering a wider range of gaming experiences and platforms.
- Competitors: The recommendations aim to differentiate WMS from competitors by focusing on innovation, customer experience, and emerging technologies.
- Attractiveness: The recommendations are expected to generate significant revenue growth and improve profitability by expanding into new markets and diversifying revenue streams.
6. Conclusion
WMS needs to embrace innovation and digital transformation to thrive in the evolving gaming landscape. By implementing a multi-pronged strategy that leverages their existing strengths, embraces emerging technologies, and expands into new markets, WMS can secure its future and become a leader in the global gaming industry.
7. Discussion
Alternatives:
- Focusing solely on traditional gaming: This option carries high risk due to the declining traditional market and increasing competition.
- Merging with a competitor: While this could provide immediate scale and market share, it may not address the underlying need for innovation and digital transformation.
Risks:
- Technological disruption: Rapid technological advancements could render existing strategies obsolete.
- Regulatory changes: Evolving regulations in the gaming industry could impact WMS's operations and revenue streams.
- Competition: Intense competition from established online gaming platforms and new entrants could erode market share.
Key Assumptions:
- WMS has the resources and expertise to successfully implement the recommended strategies.
- The gaming market will continue to grow and evolve, creating opportunities for innovation and diversification.
- Consumers will embrace new gaming experiences and platforms, such as mobile gaming and esports.
8. Next Steps
- Develop a detailed implementation plan: This plan should outline the specific steps, timelines, and resources required to execute the recommended strategies.
- Secure funding: WMS needs to secure sufficient funding to invest in new technologies, platforms, and marketing initiatives.
- Build a strong team: WMS should recruit and develop a team of experienced professionals with expertise in online gaming, software development, and digital marketing.
- Monitor progress and adapt: WMS should regularly monitor the progress of their implementation and make adjustments as needed to ensure they remain competitive in the evolving gaming landscape.
By taking these steps, WMS can successfully navigate the challenges of the gaming industry and position itself for long-term growth and success.
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Case Description
In 2014 WMS Gaming, a manufacturer and seller of slot machines to casinos, was considering a redesign of its existing revenue model. As technology evolved and customer demand for gaming solutions intensified, new and innovative revenue models were being adopted in other technology markets. Most notably, the subscription revenue model, in which customers paid a monthly subscription fee rather than a large upfront fee, was becoming widely adopted in the software industry. Product manager Dayna Stone had the task of evaluating several revenue models and recommending one that most suited WMS's business needs and at the same time took customer needs and wishes into consideration. Complicating this decision were several factors that would have to be kept in mind. Americans' love of gaming had led to a mushrooming of casinos, which meant increased competition for casino dollars. Yet the financial crisis of 2008 and its aftermath had weakened demand for casinos. In addition, casinos, depending on the type of customers they attracted, differed in their appetite for innovation and maintenance of their slot machines. Students will step into the shoes of Dayna Stone as she undertakes the task of weighing these factors and selecting the right revenue model.
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