University of Eastern Finland
Faculty of Social Sciences and Business Studies Department of Business
HOW COMPETITIVE INTELLIGENCE IS PRACTISED IN THE FINNISH VIDEO GAME INDUSTRY?
International Business and Sales management Master of Science Karim Ourdedine (309053) Karimour@uef.fi
2 University of Eastern Finland
Faculty of Social Sciences and Business Studies Degree: Master of Science
Degree programme: International Business and Sales Management Autor: Karim Ourdedine
Title of the thesis: How is Competitive Intelligence practised in the Finnish video game industry?
Thesis Advisor: Irina Mihailova
Date: 21 August 2021 Number of pages: 71 Abstract: In a volatile and competitive environment organizations all over the world seek a better comprehension of their environment to successfully compete, grow and adapt. Indeed, the collection of strategic information on market players and its transformation into information that supports decision making and impacts the performance of the organization, drives organizations to adopt a process that transforms data into intelligence for decision making volatile and competitive environment, organizations seek a better comprehension of their environment to successfully compete, grow and adapt. Indeed, the collection of strategic and tactical information on market players and its transformation into information that supports decision making and impacts the performance of the organization, drives organizations to adopt a process that transforms data into intelligence in the decision-making process. The use of this knowledge referred to as competitive intelligence thus competitive intelligence can provide useful information to support both tactical and strategic decisions and reduce uncertainties. The Nordic country, Finland is considered one of the most important European countries in terms of the gaming industry impact. It has become more dynamic, professional, and well- established over the years than many other European countries. Due to the recent predominance of professional research on the evolution of the gaming sector and due to the scarcity of academic work in Finland on competitive intelligence in particular, my study proposes to focus on the Finnish gaming industry and will examines the reasons and methods they are applying nowadays relating the competitive intelligence function. My research will study the practice of competitive intelligence (CI) in the video games industry in Finland. To analyse this topic, I propose to conduct a research study in two main parts. In a first theoretical part, I will start in a first theoretical part with the review of the different available definitions of competitive intelligence, its comparison with related concepts, the objectives, the goals, the components and the scope and the cycle of competitive intelligence. In another section, I will present the gaming industry market on a global, European, Nordic, and Finnish level. In the second part, I will conduct a survey focusing on gaming companies in Finland. The exploitation of the collected data and the analysis of the results of this survey will allow me to present the main results and to discuss and compare them with the current standards to provide key suggestions to future decision maker in the gaming industry. At the end of this research-based thesis, I will present key findings and the main conclusions paired with suggestions for researchers regarding the impacts of CI across the gaming industry in Finland.
Keywords: Competitive intelligence, Gaming environment, Competitiveness, Business intelligence, Data exploitation, Information, Market intelligence, Strategic process, Decision making, Video gaming industry, Nordics, Europe, Finland
3 CONTENTS
1. Introduction……….4
1.1 Research objectives………..………5
1.2 The structure of the thesis………5
2. Theoretical framework and literature review………....…….6
2.1 From information to decision…….…………...……….………….……….6
2.2 The definition of competitive intelligence……….……...7
2.3 Competitive intelligence process and scope………....13
3. Research methodology ………...……….….16
3.1 Research approach……….…16
3.2 Data collection……….……….17
3.3 Data analysis………18
4. Empirical results………..19
4.1 The gaming industry market………..……….33
4.1.2 The world gaming industry……….…….36
4.1.3 The European gaming industry……….……….40
4.1.4 The Nordic gaming industry………...…….46
4.1.5 The video game industry in Finland ……….…….49
4.2 Key findings………..55
5. Discussion………...………...56
5.1 Theoretical contribution………...……….….….56
5.2 Managerial contribution……..………...……….57
5.3 Limitations………...……….…………... 57
6. Conclusion and suggestions for future research………...……….……57
List of references ……….……….……….……59
Appendix 1. Online questionnaire ………....…...65
Appendix 2. List of gaming compagnies in Finland …………...………68
4 1. Introduction
As an introduction, this chapter aims to create an overall picture of this master’s thesis and it will be divided as follow. In the beginning of this introduction part, we will study the background and motives for this research. After that the research gap and research problem of this study will be presented. Then the study objectives and research questions will be presented and lastly a brief explanation of the study structure will be presented. First and foremost, the notion of competitive intelligence, which developed in a significant degree in the 1990s in the United States, can be considered as a combination of multiple management concepts including business intelligence, market research or commercial intelligence and sometimes knowledge management.
Originally limited to the documentary aspect of collecting competitive data in the 1960s, competitive intelligence has rapidly become in the 1980s a quintessential and indispensable tool for decision makers in strategic decision-making, anticipating crises and exploiting new possible opportunities. The development of competitive intelligence has been stimulated by multiple factors including global competition, technological innovations and the increasing role of consumer and stakeholder pressure in the global market that will be explored later in this research.
Considering that, in a volatile and competitive environment, organizations seek a better understanding of their environment to successfully compete, grow and adapt.
the collection of strategic information on market players and its transformation into information that supports decision making and impacts the performance of the organization, drives organizations to adopt a process that transforms data into
intelligence for decision making is crucial and the use of this knowledge is referred to as competitive intelligence.
Hence, the competitive intelligence (CI) can provide useful information to support both tactical and strategic decisions and to reduce uncertainly in the process of decision making becoming a relevant tool in the modern competitive struggle
between companies and countries. Also, competitive intelligence is becoming a topic of interest for more and more organizations and economies these recent years.
Furthermore, the recent health and economic crisis linked to Covid-19, which has affected the whole world and almost all economic sectors, has demonstrated the role of competitive intelligence as an essential mean of proactive participation and agility.
The gaming industry has been able to generate larger global revenue than other major industries like the film and music industries and attract an increasing number of consumers of all ages and all backgrounds. This continued market growth has huge implications for companies operating in the sector, including developers, distributors, content creators and game platforms. The impact of video games on the global entertainment and trough history and culture is also considerable and worth noticing.
Finally, the innovations born in games are widely used in other sectors such as medicine, military, corporate training, and education. It can be said, that in Finland the video game industry has been one of the fastest growing industries over the last ten
5
years overcoming many slowdowns in the economy and more recently has even been able to resist the Covid-19 health crisis and the Finnish game industry has also taken the opportunity to develop several internationally successful game titles and managed to generate an annual turnover of over two billion euros with its two hundred companies.
In addition, the Finnish game industry's technological know-how is among the best in the world. Furthermore, games are developed for multiple platforms such as game consoles, different mobile operating systems, or personal computers. Lastly, the price- quality ratio of game development remains relatively good in Finland. Currently, the Finnish game industry faces international competition and constraints in terms of technological innovation and changing consumer demands therefore we can ask ourselves how does this industry anticipate change and monitor competition to keep growing despites these challenges? Because of the interest of this subject and the relevance of the game video industry in Finland, I propose to study the current practice of competitive intelligence in this sharply growing industry.
1.1 Research objectives
The main objective of the study concerns the competitive intelligence in the Finnish video games industry (larges, SMEs and starts-up). Due to the limited number of academic works on competitive intelligence in Finland and abroad, as well as the developing predominance of consultants and practitioners in the development of works about how competitive intelligence must be correctly practice in companies and organizations, there is an increasing need to increase the number of research works related to this field. The main objective of my thesis is to increase and raise the general knowledge of competitive intelligence and its actual state and usage within the Finnish video games industry.
To develop the general framework of this thesis work, I must answer the following research questions mainly in relation with what is the content and scope of competitive intelligence activity in organizations? The current state of practice of competitive intelligence in the video games industry and how does this practice compare with international “best practice” will be studied. Also, it will be relevant to note when the function exists in the company, does it have an impact on the understanding of the environment and on its actions and performances? The last research question will explore what are the characteristics, performance, and economic importance of the video gaming industry in the current Finnish economical setting.
1.2 The structure of the thesis
To answer the research objective questions, the research will begin with a first theoretical part with the review of the different available definitions of the competitive intelligence concept, and its comparison with related concepts. We will then review multiple aspects in relation to it which include the transition from information to decision making, the objectives, the components, the scope, and the cycle of competitive intelligence.
6
Furthermore, in another section, we will present the gaming industry market on a global, European, Nordic, and Finnish level. Moreover, in the second part, the methodology and results of the conducted survey focused on video gaming companies and industry professionals in Finland will be presented. The exploitation of the collected data and the analysis of the results of this survey will allow us to present the most relevant results, enabling me to discuss them and compare them with the current standards to provide key suggestions to future Finnish decision makers in the gaming industry.
2. Theoretical framework and literature review 2.1 From information to decision
For organizations, possessing the ability of foreseeing the future environment context is crucial for the expansion and the perennation of the organization activities, thus making strategic choices thanks to the use of the available information is essential in transforming an information into a strategic decision. However, while the terms intelligence and information are similar in essence, they do not actually appear on the same level of the intelligence pyramid. As it can be seen, moving up the pyramid, (see figure 1) we progress from quantity (data) to quality (intelligence) which enables decision-making and ensures competitive advantage for the organization. In this case the raw data refer to separate primary elements, once this data is structured in a certain manner, it is then transformed as a cohesive information set. Hence, this information with the addition of thoughts and experience becomes known as knowledge. Finally, this knowledge in a specialized field becomes with time and skills technical expertise in the discipline.
Consequently, the notion of "intelligence" can be considered as “actionable information” about a customer, a market, a competitor or the entire external environment of the enterprise and the organization. The information exploited by the analysis is then transformed into intelligence. The crucial aim of the processed information should lead to decision making and action by decision makers. The creator of the intelligence leadership forum Liam Fahey (2009) argues that “Intelligence is what can provide a competitive edge, not only thanks to strong knowledge, but mainly with the help of new accurate knowledge that enlightens decisions”. According to, Larry Kahaner (1996) if information is factual, made up of figures, statistics and scattered data, intelligence, on the contrary, is a set of elements filtered, distilled, analysed, and designed for action. Taylor & Farrell (1995) claim that "the transition of information into intelligence demands intellectual actions such as interpretation, analysis, and summarizing into a form which will be effortlessly understood by users. Additionally, it requires forecasting and thoughts about the future as opposed to simple remarks about current and previous historical situations”
7 .
Figure 1. The Intelligence Pyramid (Source: GIA White paper, 2004) 2.2 Definition of the competitive intelligence
Competitive intelligence is a concept that is still often poorly defined and misunderstood, particularly because different terms are sometimes used to describe the same type of service or function. Competitive intelligence is sometimes called
"strategic intelligence", "corporate intelligence", "business intelligence", as well as
"market intelligence". These multiple labels can be explained by the history of this niche sector, historically developed in the United States and the United Kingdom, therefore it is strongly influenced by these countries. As there are many definitions of this concept, I propose a non-limitative chronology of the most relevant definitions to this day:
According to previous research, the first definition of competitive intelligence proposed by Aguilar (1967) is the following: “environmental scanning is the process that seeks information about events and relationships in a company outside environment, the knowledge of which would assist top management in its task of charting the company’s future course of action”. In 1979, Montgomery & Weinberg define strategic intelligence as “systems can help managers to learn about the important environments with which their organization interrelates and to become aware of threats and opportunities that are posed”.
Michael Porter (1980) who is credited for establishing the five forces analysis, seen as instrumental in business strategy development today, declares in “competitive strategy techniques for analyzing industries and competitors, also the objective of a competitor analysis is to develop a profile of the nature and success of the likely strategy changes each competitor might make, each competitor’s possible answer to the extent of executable range of strategic moves other organizations might start and each competitor’s possible response to the to the display of industry alterations and broader environmental shifts that might occur”.
8
Richard Eells & Peter Nehemkis (1984) declare that “corporate intelligence serves as an information aid to the chief executive officer in the execution of his broad responsibilities, geared to the strategic questions of the chief executive officer’s choosing”. Vella & McGonagle (1987) take on the definition of this concept claim that
“competitive intelligence uses public sources to find and develop information on competition, competitors and the market environment”. Jan Herring (1992) vice president of business intelligence in an international consulting group adds that the
“successful strategies are derived from good intelligence concerning a company’s total business environment, including the competition. That relevant intelligence should represent both its most probable future competitive environment and the organization present competitive position”.
In addition, Douglas Bernhardt (1994) member of the board of directors of the society of competitive intelligence adds that “competitive intelligence is at once both a process and a product, rooted firmly in the notion that Increased understanding of competitors strengths and weaknesses leads to more effective strategy formulation”. Likewise, Ettore (1995) states that “competitive intelligence is a process of knowing what the competition is up to and staying one step ahead of them, by gathering information about competitors and preferably, putting it in use into a short- and long-term tactical plan”. Fuld (1994) from the academy of competitive intelligence claims that “it is easier to describe what intelligence is not, rather than what it is. It is not reams of data base printouts. It is not necessarily thick, densely written reports. In addition, most certainly it is not spying, stealing, or bugging it is more of a description of analyzed information”.
Prescott (1995) comments that “the purpose of a competitive intelligence program is to develop action-oriented implications for managers and made in a timely manner”.
Kahaner (1996) consider in his opinion that “competitive intelligence is a systematic program for collecting and analyzing information about your competitors’ activities and general business trends to further your own company’s goals”. Later, Walle (1999) declares that “competitive intelligence can help inform and strengthen the entire strategic planning process as well, yielding sound strategic plans that are more in tune with competitive circumstances and better able to withstand external pressures”. Miller (2000) says that “competitive intelligence is information that’s been analyzed to the point where you can make a critical decision”.
Fleisher & Blenkhorn (2001) explains that “competitive intelligence is the process by which organizations gather actionable information about competitors and the competitive environment and, ideally, apply it to the decision-making and planning process to improve their performance”. In the same year, Rouach & Santi state that
“competitive intelligence identifies relevant information quickly and helps the make more successful technological choices. It increases the chances of patent approval. It audits a company’s scientific and technical assets and compares them with its competitors. It finds out market opportunities and threats as well as suggesting the correct strategies to follow in unfamiliar fields”. The same year, Groom & David (2001), claim “that competitive intelligence is information that is analyzed and provides implications for strategic planning and decision-making”. Fleisher and Bensoussan (2002) concede that “Intelligence may be defined as the value-added product resulting from the collection, evaluation, analysis, integration and interpretation of all available
9
information that relates to many facets of an executive’s demands and potentially important to the decision-making process”.
Later, Bergeron & Hiller state in 2002, that competitive intelligence is “the collection, transmission, analysis and dissemination of publicly available, ethically and legally obtained relevant information as a means of producing actionable knowledge.
Furthermore, competitive intelligence is the production of actionable knowledge for the improvement of corporate decision-making and action”. One year later, Pirttimäki &
Hannula (2003) define business intelligence “as an organized and systematic process by which organizations analyze, acquire and transmit information relevant for their business activities. However, the term can refer to processes, tools or techniques to support the making of better and faster decisions.”
In 2008, Bose argued that “competitive intelligence allows a company to anticipate market developments proactively – rather than merely react to them. This in turn allows a company to remain competitive by improving its strategic decisions and leading to better performance against its competitors” In the same year Calof add that
“Intelligence helps your company sustain and develop distinct competitive advantages by using the entire organization and its networks to develop actionable insights about the environment (customers, competitor, regulars, and technology). It utilizes an ethical and methodological process that includes the preparation, collection, analysis, distribution and management”. On the other hand, Du Toit (2013) defines competitive intelligence as “a strategic tool to facilitate the identification of potential opportunities and threats”. The same author provides in 2015 a definition based on meta-analysis of 338 articles about competitive intelligence between 1994 and 2014 as follows: “a process or practice that produces and distributes actionable intelligence by planning, legally collecting, processing and analysing information in relation to the external and internal rival surroundings in order to assist decision-makers in the decision-making process and therefore provide a competitive edge to the organisation”.
Afterwards, Bulger (2016) announced that “competitive intelligence is the robust integration of insights from intelligence pools that are identified across the business environment and in collaboration with other functional areas and fields of study that are summarized to obtain a general overview of a market in its current and future state.
The final consequence of incorporated intelligence efforts is crucial to influence the decision and complementary suggestions”. The competitive intelligence forum noticed and underlined the fact that competitive intelligence “is the interpretation of signals from the environment for an organization's decision makers to understand and anticipate industry change”. The society of competitive intelligence professionals (currently the strategic and competitive intelligence professionals), or SCIP established in 1986 is the oldest and largest association of competitive intelligence and is self-defined as a non-profit “global community of business experts across industry, academia, and government who come together to build and share strategic intelligence, research decision tools, processes, and analytic capacities”, outline the fact that competitive intelligence as “the process of ethical collection, analysis and dissemination of accurate, relevant, timely, farseeing and executable intelligence regarding the effects of the competitors and the business environment as well as the organization itself”.
10
The SCIP organization argues that “competitive intelligence is a discipline that enables organizations to reduce strategic risk and increase revenue opportunities by having a deep understanding of their operating environment. It's using intelligence to increase competitiveness, not simply monitoring competitors. It does not matter, whether or not the company chooses to have a centralized function, or distributes responsibilities into another function, efficient competitive intelligence remains a tactical leverage point, without it, companies are slowed down when making critical expansion plans and investment decisions”.
Moreover, the society of competitive intelligence professionals define also competitive intelligence as “timely and fact-based data on which management may rely in decision- making and strategy development. It is carried out through industry analysis, which means understanding the players in an industry; competitive analysis, which means understanding the strengths and weaknesses of competitors; and benchmarking for example the analysis of individual business processes of competitors”. In 2020, SCIP and Crayon proposes the following definition of competitive intelligence “it is a field dedicated to capturing, analyzing, and driving action related to a company’s competitive landscape. Besides, competitive intelligence data includes anything and everything about a company’s competitors their businesses, their movements, and their strategies. This field can go by many names from competitive intelligence to market research to business strategy.”
Ultimately, when we discuss competitive intelligence, we are referring to leveraging information from a business’s market and competitors to help a business gain a competitive advantage. In the last “guide of competitive intelligence” SCIP add that competitive intelligence “is the process of capturing and analyzing information about your competitor to drive internal strategy changes and tactics. competitive intelligence is important because, while most companies have great understanding of what’s happening internally, external information is necessary to drive sound strategic decisions”.
These previous definitions describe competitive intelligence in terms of objectives, whereas others define it in terms of process. As a result of these definitions and the practices observed at business level, competitive intelligence is intended to increase current revenues and market share, generate new revenue, offer new products or services, and accelerate innovation, save expenses on research and development and avoiding major threats. The following chart (see Table.1) outlines in parts the different components and characteristics of the competitive intelligence (CI) concept originating from multiple references:
11
Table 1. Competitive Intelligence components and main references (Source:
Alessandro Comai, 2016)
From the fifty definitions of competitive intelligence, Rene Pellissier & Tshilidzi E.
Nenzhelele (2013) identified and outlined these following central characteristics to the concept of business intelligence, I have selected the most relevant ones that summarize it best in my opinion:
The process indicates that competitive intelligence is conducted step by step, following a systematic planned procedure with an established code of ethics and legal indicates that competitive intelligence activities observe applicable laws in countries or regions where it is practiced. Also, product is seen as a deliverable of a completed process. Competitive intelligence has its origin in the military and leads to actions or decision-making, and information refers to collection of facts or data.
External competitive environment indicates that information is collected from the external or competitive environment.
In all instances, competitive intelligence will support decision making in the areas of business and marketing strategy, new market penetration and implementation, products, and services development, setting the research but also partnership building and financial strategy.
The objectives and goals of competitive intelligence are numerous, and they can include, managing and reducing risks and use business information strategically, enable managers to make better strategic decisions and actions to improve the company's competitiveness and performance in financial terms and innovation. Also, it aims to detect opportunities and threats by monitoring weak signals, process and analyze the data and information collected to generate knowledge about competitors and the market.
12
Mangers need to address information requirements for decision making and problem solving and reduce reaction time and time to market. Finally, competitive intelligence goals include protecting intellectual capital and understanding where an organization is exposed, the use of intelligence to develop strategies that respond to opportunities and threats enabling them to gain or maintain a competitive advantage and market edge.
As practices and thinking evolve across industries, the concept of competitive intelligence also transforms and adapts with time. Thus, multiple terms related to competitive intelligence are often used by industry practitioners and authors nowadays, including:
The term of business intelligence (B.I) focuses on information technology and on the organization’s internal data. The term is commonly used in the Nordic countries such as Finland. Sharp, S. (2009). adds “When talking about business intelligence, people refer primarily to data mining, a process that is highly driven by information technology to gather sale statistics, customer satisfaction, and historical/current views of business operation, rather than providing a wide understanding of quantitative and non- quantitative issues”. According to Fred Hoffman (B.I) focuses on internal data to help improve companies’ operations and it is most often used by enterprise-level organizations to build predictive views of their business, using both historical and current data”.
The second concept is referred to as knowledge management (K.M): Davenport (1994) defines “Knowledge Management is the process of capturing, distributing, and effectively using knowledge.” Also, knowledge management is “concerned with improving the way information is taken and shared, to make it widely available throughout the organization”. Sharp (2009) noticed “that there is a strong association between competitive intelligence and knowledge management (K.M) since both fields rely on information.
However, it focuses more on the information that exists within an organization while competitive intelligence obtains information from both the internal and external environment of a firm” and it “must be part of the overall competitive intelligence process for capturing and sharing relevant information”.
Fred Hoffman adds that “the process of creating, sharing, using, and managing the knowledge and information of an organization is referred to as knowledge management.” On the other hand, mostly used in French-speaking countries the term economic intelligence (E.I) includes activities such as monitoring, information protection and influence. In this perspective, economic intelligence will be applicable in the private and public sectors and in the territories. Similarly, the term market intelligence “relates to the marketing mix and its price, place, promotion and product to manage market attractiveness” and Lackman (2000) consider market intelligence as the information relevant to a company’s market which is generated to make accurate decision making in determining market opportunity and market penetration strategy, rather than in any other business aspect”.
13
2.3 The competitive intelligence process and scope
The competitive intelligence cycle includes the following particular processes: defining, gathering, analysis and distributing information that are used in decision-making and, therefore, facilitate strategic planning in an organization (Jenster & Søilen et al., 2013- 2016). Competitive intelligence also involves three major functions: firstly, the collection and organization of data, then the analysis and interpretation of data and lastly the dissemination or communication of intelligence (Morgan & Michael, 2007).
The competitive intelligence process or competitive intelligence cycle is generally divided into five basic phases (see Fig. 2). These phases, which constitute what professionals call the CI cycle, are as follows: The first steep define the information needs of the decision maker then collecting the raw data comes from publicly available materials, which include periodicals, annual reports, books, internet sources, newspapers, and other open sources. Evaluating and analyzing the raw data collected to transform it into useful information or actionable intelligence. This operation is the most challenging stage in this process. Afterwards communicating the completed information in a usable format and in a timely manner to the most appropriate people in the organization should be done to end up taking the appropriate actions and decisions.
Figure 2. The Intelligence Circle (Source: Kenneth Sawka, 2008)
Regardless of the number of stages proposed by the different authors, these distinct phases of the cycle remain interdependent (see Figure 3). It should be underlined that the competitive intelligence cycle must be carried out in a strictly ethical manner.
14
Figure 3. The Intelligence cycles (Source: GIA White paper, 2004)
For this reason, companies and professionals have established charters of conduct for users and practitioners. For instance, the SCIP has established a code of conduct that outlines several recommendations, including:
To continually strive to increase the recognition and respect of the profession in order to elevate the profession as hole, to always be in compliance with all applicable domestic and international laws. Act as an Ambassador, to promote this code of ethics within one's company, with third-party contractors and within the entire profession. To accurately disclose all relevant information, including one's identity and organization, prior to all interviews in order to be transparent and to provide honest and realistic recommendations and conclusions in the execution of one's duties.
Hence, according to this chart of conduct ethical damage should not occur within the intelligence cycle and CI professionals must apply ethical standards when researching for data, gathering intelligence information, and analyzing the information to support decision makers. Also, practitioners must aim at being conflict-free, avoiding conflicts of interest in fulfilling one's duties and be strategically aligned to faithfully adhere to and abide by one's company policies, objectives, and guidelines (Source: SCIP 2021).
15
In relation to the scope of CI, according to previous research made by global intelligence alliance (GIA), depending on the authors, the scope of competitive intelligence can be divided into several levels, according to Ghoshal and Kim (1986) they “divide competitive intelligence into gathering and analyzing information on markets, new technologies, customers, competitors, and major social trends. The field of competitive intelligence can be broken down into eight elements of competitive intelligence according to Novintel a leading international provider of competitive intelligence products and services (See figure 4). Here the vertical axis represents the scope of competitive intelligence operations such as (companies, industries, or general trends in the business environment) in the other hand the horizontal axis represents the value chain, and the market region axis includes the geographical area of business information". However, the framework presented is very general and must always be adapted to the needs of each particular company and organization involved in the process.
Figure 4. Competitive Intelligence Elements (Source: GIA White paper, 2004)
Competitive intelligence in Finland (a term popularly translated as "markkina- ja kilpailijaseuranta", "market and competition monitoring", and more generally referred to as "business intelligence" and some other term that will be discussed afterwards, has its roots in the traditional function of information services and that existed in some Finnish companies since the 1960s.
The emergence of competitive intelligence as it is known today, as a process of collecting, distributing, and acting on information about the external environment of companies took place, according to observers, in two consecutive waves during the 1990s. Until 1995, there were few or no business intelligence services available, and competitive intelligence operations and structures were originally built based on existing information services departments looking to expand their mission to include processing and analysis.
16
At this stage, the telecommunications companies were the pioneers and powerhouses in Finland. Towards the end of the 1990s, industrial companies also began to show an increasing interest in this new practice. The emerging information and communication technology (I.C.T) infrastructure and Internet access also contributed to this high interest. Finally, the small size of the domestic market automatically pushes companies to look for new opportunities abroad, to monitor competitors and to follow innovations and trends in order to remain relevant. According to authors who have studied the development of C.I in Finland, several major factors have shaped this tradition and can be summarized as follows:
Geographical and cultural distance to target markets of many companies drives the need to export due to the small domestic market. Historically, the fall of the former Soviet Union in 1991, which resulted in a dramatic loss of export revenues and the recession of the early 1990s. Finland's accession to the European Union in 1995, allowed the rise of the telecommunications and IT sectors and enabled the search for new markets and new revenues by mainstream companies.
3. Research methodology 3.1 Research approach
The purposes of my research are firstly to try to find out about the use of competitive intelligence in the games industry in Finland and to verify the impact of this practice, where it exists, on the decisions of companies in this sector. The research is based on valuable secondary data analysis such as articles, journals, books, statistics, thesis, and reports.
To complement my work, I used a survey to collect relevant information. Thus, I have took several approaches such as joining well-known video game related groups in Finland (Play Finland & IGDA Finland) based on the advice of the Neogames coordinator and where I asked members to answer the survey and share it amongst other people in their circle, but not many answers came out from this method as not many top-level managers were present in there.
I also tried to make new connections with professional in the sector directly through LinkedIn after publishing my survey to my network and sending personalized direct messages. I have also contacted several people from Business Finland, and afterwards made several reminder post and personalized direct messaging for over 386 individuals (See Table 5). I consider that I used my network at the best of my abilities and this thesis helped me expand it as well, hoping to consolidate these newly made relation in the near future.
17
Table 5. Survey reaches and total answer count (Source: Webropol, 2021) 3.2 Data collection
At this stage of my thesis, to attempt answering the research questions, I planned to conduct a survey with a representative sample namely the Finnish game companies.
Firstly, I identified what I wanted to cover in my survey according to my research objectives for that I elaborated a survey with four main axes divided in 20 different questions that seek to understand if competitive intelligence is present and how it is applied across the industry (See Figure 28).
Figure 28. General survey main components, 2021.
I have started sending the online survey during the process of collecting data, starting the 10th of May 2021, here are the undertaken steps:
Firstly, to email addresses collected from the institutional websites of the companies (30 largest companies) and 230 companies from the latest Neogames report list.
7 questions corresponding to the background and respondent data
12 questions corresponding to the resources and organization
3 questions corresponding to the benefits and efficiency
3 questions corresponding to the support and education
18
Secondly, to associations and organizations that compose the Finnish gaming scene namely: Suomen Pelinkehittäjät ry, Business Finland, Neogames, Serious Gaming Cluster Finland, IGDA Finland ry, Finnish Game Jam, Finnish Virtual Reality Association, Women in Games Finland to share the survey with their members or to assist me in this process of collecting responses. And finally, to people working in the competitive intelligence function in Finnish gaming companies after a selection of the members from the LinkedIn professional network social platform.
The survey was posted with the help of the most used online survey tool in Finland and Nordic countries (Webropol survey). The survey was accessible online from all mobile devices and personal computers. In the middle of the month of July 2021, I have managed to collect at total of 25 answers after several efforts and reminders.
3.3 Data analysis
This research-based study applied a quantitative approach to assess the practice of competitive intelligence in the Finnish gaming industry. As a direct consequence of this methodology, the study encountered several limitations, which needs to be noted and be taken into account.
To begin with among these obstacles, it is worth noting the difficulty of accessing the exact email addresses and contacts of potential respondents, the low return of responses despite the number of reminders and channels used and the low involvement of professional organizations in the dissemination of information.
The reply rate for my survey account for (12.5%) and on average, academical researchers estimate that a good target response rate is around 10% of the sample.
This standard number may be 5-10% higher or lower, depending on the experience of the survey organiser and the effort they put into their campaign. Since, the data collection part was conducted around the summertime season it was difficult to reach the optimum number of respondent since it usual for compagnies to be at leisure during this part of the year.
Despite the use of LinkedIn, the network most used by professionals, access to people was limited even though messages were sent, and contact requests were made some successfully but not in most cases. I think that the low response rate can be explained as follow:
Firstly, competitive intelligence professionals were invited using the LinkedIn messaging tool and may have confused the invitation with other types of messages and communication. Secondly, CI professionals may not be allowed to complete a survey asking for strategic information about the business and its CI activity through the networks even if the privacy of the survey was outlined.
Among these obstacles, it is worth underlining the difficulty of accessing the exact email addresses and contacts of potential respondents, the low responses rate despite the number of reminders and channels used, but also the low involvement of professional organizations in the dissemination of information to their members.
19 4. Empirical results
This section purpose is to synthetise the empirical findings from the collected survey questions and to be able to describe the different and observed central trends.
I. General information
The answers to this survey come from founders (20%), CEOs (44%), directors (32%), and (4%), from other functions. In almost cases, the answers come from the top management of the companies contacted. It can be seen that, 44 % of the responses came from the Helsinki area, 12 % from Tampere, 12 % from Oulu, 8 % from Espoo and 8 % from Vaasa.
The last Neogames report 2020 confirm this trend by stating that” more than 50 % of Finnish game studios are again located in the capital region. The major game industry hubs outside the capital region are Tampere, Oulu, Turku and Kajaani”.
II. Compagnie size
More than half of the responses came from start-ups corresponding to 52 %. SMEs accounts for 44 % of the responses and on the other hand large companies take account for only 1 % of the respondents with eleven company involved.
Personal information
Founders CEO Directors Others
20 III. Business field
Regarding the business field of the participants 72 % of the respondents operate in the
“mobile” segment accounting for 18 compagnies, 36 % are concerned with developing
“computer games”, 20 % are involved with “console platforms” and 16 % in other segments.
21 IV. Annual Revenue
In regards, to the annual revenue of the respondents, 32 % of the responding companies have an annual turnover of less than 300,000 Euros. Those with a turnover between 300,000 and 1,000,000 Euros represent 40 %, those with a turnover between 1,000,000 and 5,000,000 Euros represent 12 % and those with a turnover of more than 5,000,000 Euros represent only 16 %. The 2020, game industry of Finland report, noticed that “at the end of 2020, there were 46 studios with an annual turnover of more than €1 million”.
In the collected answers, seven companies with a turnover of more than €1 million Euros annually participated, representing 15 % of studios mentioned in this report.
According to the above report “The median turnover of the 134 Finnish game studios participating in this survey was €360 000”.
V. Exportation of products or services
Regarding the exportation of products or services, 40 % of the respondents export their products and services against 16 % who have no export activity. However, export activity accounts for 44 % of the turnover of exporting companies.
22
VI. Availability of a function or department dedicated to competitive intelligence
It can be seen from this chart, that only 36 % of the respondents declare that they have a function or department dedicated to competitive intelligence compared to 64 % who have no activity within their company.
23
VII. Written formal competitive intelligence program in place
Within the compagnies who have a CI function, 20 % of the companies have established a formal written competitive intelligence programme in their organization and 28 % of the respondents plan to launch a competitive intelligence program within the following years. However, 52% of the respondents have no formal written competitive intelligence program currently in place.
24
VIII. investments in competitive intelligence over the following years
Here, a small number of the respondents (16%) are planning to significantly increase their investment in competitive intelligence activity in the following years. 80% of respondents do not expect to change their budget. However, 4% of respondents plan to decrease their budget over the upcoming years.
25
IX. The responsible of competitive intelligence in the organization
Competitive intelligence is reported directly to the CEO in 32 % of the cases, followed by the strategy function with 12 % and marketing and sales with 8 % and to the research and development function for 4 % of the cases. However, in 36 % of the cases, the competitive intelligence activity reports to other functions as design, products, and management.
X. Hierarchical lines between the head of competitive intelligence and CEO In the majority of cases amounting to 17 respondents (68%), the competitive intelligence activity is directly linked to top management. On the other hand, in 28% of cases, there is only one level of hierarchy between the function and the CEO. In one company only representing 4% of cases, there are two levels of authority between the function and the top management.
26 XI. Benefit from competitive intelligence
Financial performances are essential, and the benefits brought by competitive intelligence activity account for 40% of respondents benefit, against 4% of respondents which represents one single case. Moreover, 56% of respondents do not have any opinion on this subject.
27
XII. The investment in competitive intelligence paid-off in financial terms
In terms of return of investment in the CI function, 36% of respondents announce that they strongly agree that competitive intelligence activity have paid off in financial terms.
However, 64% of respondents do not have any opinion on this subject.
XIII. The efficiency of decision-making with competitive Intelligence
Here again, 36% of respondents strongly agree with the fact that competitive intelligence activity paid off in financial terms. However, 64% of respondents did not have any opinion on this subject.
28 XIV. The competitive intelligence team's size
Within compagnies who participated in the survey, 60% of respondents do not have any employee dedicated to competitive intelligence activity. 36% of respondents have one to three staff dedicated to the competitive intelligence activity. 4% of respondents have more than 10 staff employees dedicated to the competitive intelligence activity.
According to the game industry of Finland report 2020 “the median number of persons employed in the 134 companies interviewed is 8, and the average 25”.
29
XV. The organisation of competitive intelligence in the company
Regarding the organization of CI within compagnies, 48% of cases, declare that competitive intelligence activity is centralized. In 28% of the cases, it is decentralised, while in 16% of the cases, it is outsourced outside the company and two participants do not have a CI function.
30 XVI. Competitive Intelligence practices
The competitive intelligence is used for industry awareness (35%), to help the strategic decision (30%), to develop of new products (15%), to develop of new technologies in one case (5%), and to identify of new customer or market (15%) accounting for 3 participant companies.
XVII. Reasons for practicing competitive intelligence
The reasons why the participating companies use competitive intelligence are various, including knowledge of the industry for 14 of the participants (73.7%) and development of new products (73.7%) for the most part, closely behind the identification of a new customer or market (63.2%), strategic decision-making support (47.4%), development of new technologies (36.8%), and tactical decision support (31.6%) represent the less important reasons in their point of view.
31
XVIII. Budget allocated to competitive intelligence function
In this part, 88% of respondents allocate less than 50,000 Euros to the operating budget of the competitive intelligence activity, 8% between 60,000 and 100,000 Euros and only 4% more than 500,000 Euros.
32 XIX. Education and needs of the sector
The majority (68% of respondents) consider that the education system does not efficiently and comprehensively meet the human resource needs of the sector, compared to 32% who are satisfied with the actual establishment.
XX. Support from the Finnish government in terms of funding and international promotion
Lastly, more than half of the respondents (52%) believe that companies in the sector receive sufficient support and help from the government in terms of funding and the internationalisation of their business, compared to 48% who do not agree.
33 4.1 The gaming industry market
After reviewing the theoretical facets of the competitive intelligence concept, I will now introduce in this part the global industry market scene on a worldwide level, then on the European, Nordic, and Finnish level.
Video games can be classified in numerous genres based on the goals, actions performed during play, topic, and who is targeted by them. Most game genres include both single-player and multi-player modes and several numbers of games are also connected to the Internet making it possible for players to interact online at any time and from everywhere around the world. However, it is difficult to find standard definitions of genres. In addition, many video games are a combination of different genres. The table below (see Table 2.) attempt to summarizes the main existing game categories:
34
Table 2. Video Game genres definition (Source: Media council for children and young people, Denmark, 2008)
The first digital video games have been created within American studies establishments around the 1950s period. Two traits have been crucial to the access and expansion to a much wider public audience base. Firstly, numerous enterprises started producing game consoles that are able to connect directly to a television set;
hence the term TV games, or video games originated from there.
Secondly, desktop personal computers were increasingly being used to play video games. The video game marketplace grew unexpectedly during the 1980s. Since the late 1980s onwards, games consoles included portable machines after Nintendo introduced the “Game Boy” handed console in 1989.
Moreover, video games may be described as "electronic games that generate visual feedback on a video device". Dymek and Rehn (2003). With the growth of the Internet access in the 1990s, several games emerged that allowed for play over the internet the referred as online games. Beginning the 1990s, the gaming marketplace converted
35
into an entertainment and leisure industry with larger budgets being allocated and the consolidation of the largest actors in the development, distribution, and production of game consoles made it stand its ground as a serious business. In the development and spread of video games, a collection of firms from Japan, the United States, and Europe has steadily turn out to become the marketplace leaders. Nowadays, this relatively recently established console marketplace is currently dominated by three giants of technology two Japanese and one American namely, Sony, Nintendo, and Microsoft.
The industry consists of three crucial players, the hardware suppliers, game developers and publishers. Furthermore, the hardware systems that enable gaming can be categorized into three platform categories namely consoles, personal computers, and mobile and handheld devices. The supplies of consoles, computers and mobile phones are manufactured by a limited number of operators across the world.
Like the hardware sector, publishing is likewise ruled and controlled by a few global companies, however it is more geographically diverse, with a larger European presence. Nevertheless, the most important element that has driven the global growth in supply and demand is the widespread availability of personal computers, mobile phones, and easy internet access (See figure 5).
Figure 5. Digital media distribution (Source: We are social-Hootsuite, 2021)
According to the 2018, Clairfield International study, the gamers can be categorized into three different types (see Table 2) and recent games and business models aiming for in-game purchases are as follows: Freemium, Gamification and Serious Games.
36
Player segment Sales
Volume Hardcore
Mostly 28-year-old male gamer who will spend approximately between 1100 to 1400 euros on gaming equipment. He buys only the latest technology and spends long hours in the game.
70-80%
Casual
Regularly plays games, but not at a professional level. Also, he or she is more sensitive to the price factor.
15-25%
Mass market
A mass market player who does not invest a lot of time in the game, nor money in special game equipment. He or she actively seeks out free games or Free to Play offers.
5%
Table 2. Video Game player main categories (Source: Clairfield International 2018) 4.1.2 The world gaming industry
According to “We are Social and Hotsuite” video gaming is one of the world’s favorite pastimes, nevertheless this activity remains one of the most under-appreciated opportunities in marketing”. The following charts represent the main and most up to date trends in the global gaming industry in 2020:
In regards, to the total generated revenue in 2020 (see Figure 6), amounting to the large amount of 159.3 billion dollars, almost half of it is produced by smartphone games (40%) and the other majority is composed of console games (28%) closely followed by classic physical and downloaded computer games (21%), the rest is based on tablet (9%) and browser computer games with respectively (2%).
37
Figure 6. Global games market (Source: Newzoo report, 2020)
In the year 2021, the total amount generated went up to 175.8 billion dollars, (see Figure 7) with half of market being represented by the Asia-pacific region accumulating 88,2 billion dollars compared to 31.5 billion dollars regarding Europe, accounting for 18% of the global video game market.
Figure 7. Global games market per regions (Source: Newzoo report, 2020)
38
Regarding the global player count, (see Figure 8) it has been estimated to count around 3 billion people worldwide, with a rise of (5%) compared to the previous year, with (55%) of global players being in the Asia-pacific region, followed by the Middle East and African region and closely followed by Europe and the Americas.
Figure 8. Global games market by players (Source: Newzoo report, 2020)
The 2020 Global report “We are social & Hotsuite” claims that “around three and a half billion people around the world play video games today, with three-quarters of these people playing games on their smartphones” (See figure 9).
Figure 9. Playing video games from a device perspective (Source: We are social &
Hootsuite, 2020)
39
According, the Newzoo annual study, one of the most trusted and quoted sources for games market insights and analytics in the world, the global games market generates in 2019 revenues of $152.1 billion, almost 9.6% increase and in 2020 it generates revenues of $159.3 billion, representing a growth of approximatively 9.3%. Markets in the Asia-Pacific region have produced $78.4 billion in 2020, representing a growth of up to 9.3%, that represents half of all the global game revenues. The mobile gaming (smartphone and tablet) still the largest segment with revenues of $77 billion and a growth in the order of 13.3% especially in the Asia-Pacific and in the Middle East and Africa regions. On the other hand, browser games on personal computers continues to drop down to around 13% to remain at a turnover of the order of $33.9 billion.
Otherwise, the console games achieve a turnover of $45.20 billion representing an evolution of the order of more than 6.8%. By region, the Asia-Pacific Market generate in 2020, generate a turnover of $78.4 billion representing an evolution of the order of up to 9.3%. However, the Middle East and Africa regions grows faster with a rise to 14.5% from 2019. The previsions of the number of gamers worldwide will exceed three billion by 2023. A brand-new study published recently in 2021 by Accenture an eminent consulting firm shows of the direct ($ 200 Billions) and indirect ($ 100 Billions) value of the gaming industry much higher than previous industry estimates (see Figure 10).
Figure 10. Gaming the next super platform revenue chart (Source: Accenture, 2021)
40
On the one side, $200 billion comes from direct sales of consoles, video games and subscriptions, but also from in-game purchases and mobile advertising revenues. On the other hand, there is $100 billion that originate from adjacent industries, such as mobile devices, gaming PCs, as well as peripheral sales related to video games or revenues from electronic sports (E-sports).
According to the same study, China is the largest revenue generating country with the largest number of consumers, followed by the United States, Japan and the United Kingdom (see Table 4). The study adds that at least 14 other markets, including South Korea, Germany, France, Canada, Italy, and Spain, generate more than $1 billion in revenues. In addition, the popularity of games is growing, particularly in Latin America, the Middle East, and many countries in Southeast Asia.
Table 4. Gaming the next super platform (Source: Accenture, 2021) 4.1.3 The European gaming industry
The previous study by Ernst & Young, explain that the video games sector has seen the strongest expansion (+5.8% per year) between 2013 and 2019, more than doubling its turnover in six years with a total of 152% increase (see Figure 11). The sector has relied on strong growth in its online business, stimulated by innovation and the search for a greater experience for players and the move towards free-to-play models.
41
Figure 11. Turnover and growth 2013-2019 (Source: Ernst & Young Global Limited, 2020)
According to a study by “Ernst & Young Global Limited”, that was recently published in 2020, the cultural and creative industries represented a business of 643 billion Euros in Europe and two years prior in represented 4.4% of the EU's GDP in terms of total turnover. Indeed, between 2013 and 2019, the video games sector grew at a rate of over 4% per year and between 2019 and 2020 amounting to a total of 152%, (see Figure 12) hence, this sector has achieved the greatest increase in turnover and growth compared to another sector (books, music, newspapers-magazine, and similar medias).
Figure 12. Change in turnover and growth 2019-2020 (Source: Ernst & Young Global Limited, 2020)
42
The overall purpose of the charts below is to give us representative numbers of key elements, that constitute the European video gaming industry market and where is Finland position within it. Being a relatively young industry, the video game industry is continuously growing and benefits from innovative and dynamic players. The European games sector represented for 19% of this revenue, totalling $29.6 billion. Although Europe has the third largest share of total gaming industry revenues after the Asia- Pacific and North America regions, it has low annual growth rate. While global gaming industry revenue grew by 9.3% from 2019 to 2020, the European gaming market shows lower growth with a 7.8% year-on-year increase (Newzoo 2020).
According to the European games developer federation the total number of video games developer studio per country in 2018 was 4906 and the total number of publishers was only 137 and the people employed by the sector was around 77916 people (See figure 13).
Figure 13. Studios and publishers across Europe between 2018-2020 (Source:
European Games Developer Federation, 2020)
According to “Ernst & Young” group, the video games industry represents only one percent of European cultural and creative industries employment in 2019 with the majority involved in visual arts closely followed by music, audio-visual, and performing arts with over 10 000 000 persons employed. (See figure 14).
43
Figure 14. The people working for the sector in Europe (Source: Ernst & Young, 2019)
It can be said from this charts (see Fiugure 15) that only 20% of employees in the sector that includes game developer and publisher studios in Finland were women in the year 2018. In contrast, the rate was significantly higer in countries like Serbia and Bulgaria with a rate approximating 30 per cent but employing two times less people compared with Finland. The leader in terms of number of employed people was the United Kingdom with over 15 000 people, closely followed by France with a 2000 less people employed. In comparaison, Finland with had 3200 people employed but with more female inclusion up to six percent more.
44
Figure 15. Percentage of woman working in game studios per country (Source:
European Games Developer Federation, 2018-2020)
In this chart, it is interesting to note that the percentage of revenues captured by the top 10 studios is certainly high with a percentage between 79 and 100 per cent in 2018 (See figure 16).
45
Figure 16. Revenue generated by european games industry (Source: European Games Developer Federation, 2018)
In 2018, Finland has been known as one of the leading countries in terms of studios publishing new titles and new titles developed localy on its territory grounding the Finnish video gaming industry branding arround the world (See figure 17).
Figure 17. Publishers and new titles (Source: European Games Developer Federation, 2018)
46
In the chart below, (see Figure 18) it can be said that in terms of small and medium enterprise’s aid, support for research and innovation, and cultural state aid for production, Norway, France, and Greece lead all the other countries in this group.
Figure 18. Public support for developer studios (Source: European Games Developer Federation, 2020)
4.1.4 The Nordic gaming industry
Kent Thorén & Annu Kotiranta et al. wrote about the Nordic video games industry relating the changes that occurred and how the industry started to follow the global trend of producing video games. They claim that” with the division of hardware and software, the provision of rewritable software and the dissemination and democratization of personal computers in the late 1980s and early 1990s, new ventures to produce video games in the Nordic region has originated. Some of these companies have managed to survive in the long term, in contrast to all of the previous companies, which have only succeeded in producing a small number of games at best”.
They also have underlined the fact that a change was actually occurring following the early global development of technology “In the early 1990s the Nordic studios mostly created games for home computers. This gradually changed, possibly because the release of globally successful games, and increasing publisher attention, made a wider range of platforms reachable”. Sweden and Denmark were initially the leading Nordic
47
countries in terms of game production, followed by the Norwegian industry who is still very small compared to the mentioned leaders, however it has managed to produce some internationally popular acclaimed games. In the early 2000s, Finnish companies had some notable success with personal computers and console games. A presentation prepared in 2016 by Samuli Syvähuoko from (SisuGame Ventures) and KooPee Hiltunen from (Neogames) gives a comparative overview of the sector in the Nordic countries in terms of business revenues, employment (See figure 19).
Figure 19. Games Industry in the Nordic regions (Source: Neogames and SisuGame Ventures, 2014)
In this chart it is important to note that the position of Finland as a leader in the industry is made clear with a revenue twice higher (2.6 billion Euros) than the second in list namely Sweden (1.2 billion Euros) even though Sweden employ one thousand more workers (See figure 20).
