The Uncomfortably Comfortable Supercell Talk
Supercell CEO’s annual blog post is a personal, inspirational, and sincere communication method from the top brass of a major mobile games company.
But readers of this analysis should also understand that it is more than that: the annual blog post serves as the CEO’s shareholder letter that Supercell publishes together with their financials. In other words, despite the casual form, it is still very much a piece of public relations (PR) crafted together with the CEO and a team of internal and external communication professionals.
Similar messages from CEOs of a public company would immediately get dissected by stock market analysts, determining what’s PR fluff and what’s the actual beef. However because Supercell is not a public company, these posts are not analyzed with the same zeal.
Luckily, you - our dear reader - have the Deconstructor of Fun crew who combine public data and insights to read between the lines and interpret what was left unsaid by one of the most influential game executives in the World, Mr. Ilkka Paananen.
The Facts
Supercell continued to decline for the third year in a row. The company’s revenue was at an impressive €1.7bn range (down 4.2% compared to 2022) while EBITDA reached to a hefty €580m (down 8.2% compared to 2022). Supercell hasn’t released new games since 2018. Their live games portfolio is not growing. As a result, Supercell has fallen from the top-10 mobile publishers list.
Supercell’s revenue (black) and profits (red) are very impressive for a company with just few hundred people. Nevertheless, the company has seen a decline year 6 times out of last 7 years. (image: Helsingin Sanomat)
The Actions
The blog posts in past years have underlined the actions that the company is taking to combat the downward trend that has been persistent with the company since 2017.
In fact, last year there were 8 action points that Supercell was undertaking to get back on the growth path. We broke those points down in this blog post: The 8 Things Supercell is Doing to Level Up and will reference to some of the points later in the analysis.
This year’s blog post was no different as it focused on three elements the company is changing:
1. New Game Teams = “Startups”
Supercell’s game leads were originally seen as “mini-CEOs”. After all, the individuals were each managing businesses worth hundreds of millions of dollars annually. Or oversaw the creation of the next billion-dollar franchise for the company.
Now the folks starting a new game team will be treated like “startup entrepreneurs”. This name change signals four process changes:
Firstly, there will be a more systematic approach to forming new game teams. This change is to combat the self-admitted issue where Supercell failed to be rigorous enough about the composure of new game teams.
Secondly, the new teams will operate under the constraint of a set budget also known as ”a runway”. The bigger the team, the larger the burn and the shorter the runway. This constraint will be a forcing mechanism to “get shit done” as Mr. Paananen eloquently put it in his blog post.
Thirdly, teams will operate in an environment of full transparency. In practice, this means constant testing with players. The role of the tests is to either help the team to pivot from an idea that doesn’t have traction. Positive test results on the other hand would encourage the company to increase funding for the team and thus grow their runway and perhaps team size.
Finally, new teams will be put into a distraction-free environment, which can mean anything from exiting most of the company's Slack channels down to moving to another office.
These are drastic measures that give a glimpse of what the development of new games has been in the past. Based on the changes you could assume that the new game teams were staffed sub-optimally, worked too slowly, didn’t test what they were working on, and didn’t have many constraints that would allow outsiders to question or even stop the project.
2. Live Game Teams = ”Scaleups”
Mr. Paananen said in his blog post “For years, we did not realize the full potential of our great games because we frankly liked our small teams so much.”
Supercell has 5 games each of which has more than a billion dollars in lifetime revenues. Yet while the company has shown its love to games like Clash of Clans, Clash Royale, and Brawl Stars, it has neglected Hay Day and Boom Beach, both of which would be the crown jewels for 99.9% of game companies around the world. It seems like at least Hay Day, which has exceeded two billion over its lifetime, is finally given headcount and marketing support. At the same time, the other three key titles are increasing in team sizes as well.
Along with the renewed focus on the legacy portfolio, the game leads of live games are treated like CEOs of startups that are scaling. Live game leads will be called General Managers, which reflects their broader role and larger team size. This is a common title for the managers of large game teams in companies like Zynga and EA.
While all these changes are very new for Supercell, it sounds pretty much like what other companies of similar standing have been doing for a decade already.
3. New Members of the Leadership Team
As Mr. Paananen stated, a true change starts from the top. And in this case, two new members have joined the Supercell leadership team in 2023. Sara Jansson Bach has taken over as the new Head of Live Games while Fernanda Romano has taken over as the new CMO. Both ladies have experience from larger organizations, which is much needed as Supercell is scaling rapidly
Last year the company experienced a nearly 30% headcount growth with 175 new employees joining. That’s monumental for a company that has been allergic to middle management, processes, and larger teams for over a decade. And by looking at the open positions, the hiring spree shows no slowdown.
The Analysis
At the Supercell all-hands when the CEO was presenting the changes. (source: Supercell)
Holding true to the fundamentals of the company, Mr. Paananen stated in his presentation to the company that “PROCESSES AND STRUCTURES WILL NOT BE THE SOLUTION”. Yet it’s hard to describe the annual blog post as anything else than a discussion about the new processes and structures.
For example, when writing about how new game teams will be started, Mr. Paananen states “Going forward, we will be much more rigorous and are implementing a dedicated system/process to evaluate potential new game teams on this front.”
Mr. Paananen also tells about how externals have warned him about how this hypergrowth and focus on structures and processes might affect Supercell’s unique culture. While the leadership team has clearly considered the implications of the changes, we will see the full repercussions in a couple of years. Setting up two separate organizations (new games and live games) along with growing the organization by a third every year is bound to lead to an evolution of Supercell.
Yet again, it’s hard to argue that Supercell’s ways of working don’t need to evolve. The decline and lack of new games can be seen because of a level of complacency. And the CEO is doing absolutely the right things by shaking the organization from its top down to its core.
It’s also important to point out that there were three key topics that the blog post didn’t mention. Topics that were raised as focus points in the last year’s post:
There was no mention of Supercell’s North American fully remote PC games studio that was formed a couple of years ago and has since then scaled to just 10 or so people.
There was no talk about M&A and Supercell’s portfolio companies, which have been front and center in previous blog posts.
There was no reference to Supercell’s proprietary engine, which seemed like a strategic focus based on last year’s post. On the contrary, the company informed that teams could use whatever engine they choose, at least early in development.
The Worry
Supercell’s approach to new game development makes us worried…
Over the years, we’ve grown uncomfortably comfortable reading about Supercell’s declining numbers and the actions that the company will be taking to counter the downward trend.
In fact, the issues and the counter-actions discussed in the latest blog don’t differ much from the article we published nearly four years ago 10 Years of Excellence - Deconstruction of Supercell. In this analysis we concluded that Supercell would benefit from focusing on Live Services to sustain existing games, stepping up their marketing effort, and pursuing M&A as a lever to grow both audience and revenues. We also stated that the company will have to wrestle with how to scale without losing the culture that led them to where they are today.
Giving the business ownership to General Managers on live titles is an approach largely adopted by most gaming companies. So, there’s hardly anything new to discuss here. Supercell just needs to make sure they have people who can and want to operate in this model.
But when it comes to new game development, Supercell’s approach sounds less convincing as it echoes the principles of Lean Startup by Eric Ries.
In his book, Eric Ries argues for four principles of product development for startups, which sounds much like what was described in the blog post for the new game development at Supercell.
Yet the four principles of a lean startup also present four core problems that are widely recognized as unsolvable issues with the lean startup methodology:
Encourage rapid experimentation at the cost of compelling strategy. The risk here is that teams start simply working on ideas before having a compelling strategy. Not spending any time analyzing what the players want or what the competitive landscape looks like means that the team is making games that they feel are fun. Hardly an approach to attack a mature market like mobile games.
MVPs lead to failing fast and pivoting too soon to something unknown. Focus on getting games at players’ hands as soon as possible leads to the development of MVPs (minimum viable products), which often fail to impress players and as a result lead the team to pivot from an idea that could have had legs if it was tested in a bit more polished state. Failing fast should not be an objective of a startup or a game team.
Overfocus on testing results often in incremental products. When you have limited resources and a tight runway, you’re not really encouraged to try something radically new. At least not for a long time. Yet what Supercell has excelled at has been bringing truly innovative games on mobile. Whenever they steered away from this resulted in the death of games in soft launch. Just consider Clash Quest or Hay Day Puzzle, which were perhaps the most incremental product Supercell has ever soft-launched.
The emphasis on product over growth overlooks the most challenging aspect of a successful product. Thinking from the get-go about how the game will grow is vital. That means elements such as IP, social gameplay, and/or usage of other growth channels than performance marketing. Handing over a core game with solid KPIs for a marketing team to launch and scale is an outdated strategy.
An argument is often made that the lean startup method should be replaced by the deliberate approach, where the team is driven by a holistic product strategy rather than trying to fail fast and pivot into a success. A great example of a deliberate product development approach is exemplified by Scopely
Nevertheless, even though Supercell’s strategy for the new game development sounds a bit like a blast from the past, it wouldn’t be the first time that the company out-executes against a less-than-perfect plan.
The Takeaways
Supercell’s new strategy is very much influenced the startup world.
As Phillip Black put it accurately in our This Week in Games episode “Supercell doesn’t owe us shit!”. What Phil meant was, that there’s no need for Supercell’s CEO to do these blog posts. This is not a public company. Nor is it a company that is looking for funding or an exit.
The goal of these posts is likely to control the narrative and build the company brand. By all accounts, these goals are achieved consistently every year.
Yet by making these public posts, the company is welcoming constructive criticism, which we at Deconstructor of Fun have been religiously providing since 2018. You can even say that we’ve grown comfortable with the uncomfortable feeling of critiquing one of the most successful gaming companies in the history of gaming.
It would be tempting to hold on to your strengths that are bringing you nearly $2B a year with a staff of just a few hundred people. But it is evidently clear that the founder CEO is nowhere near to riding off into the sunset. In fact, it is admirable how Mr. Paananen attacks the complacency that seems to have settled in the company after a decade of excellence.
