BRIAN KENNY: If you’re looking for your teenager, chances are you’ll find them staring at a screen enmeshed in a video game because they, along with 85% of their peers are hopelessly devoted to gaming. According to a recent survey by Digital Wellness, teens and tweens spend as much as two to three hours a day on video games and apps. With popularity fueled by the COVID lockdowns, gaming is second only to social media in terms of screen time. And if the rapid growth of professional e-sports leagues is any indication, gaming is about to get supercharged with a projected audience of 640 million in 2025 tuning into watch and gamble on their favorite gamers. In just a few years, e-sports has garnered half as many views as the typical NBA game. Gaming, it seems is a surefire win for any firm with the means to get in the game.
Today on Cold Call, we welcome Derek van Bever and Akshat Agrawal to discuss the case, “Google Stadia: Game On or Game Over.” I’m your host Brian Kenny, and you’re listening to Cold Call on the HBR podcast network. Derek van Bever is a senior lecturer at Harvard Business School who studies strategy and innovation among other things. He is a repeat customer here on Cold Call. Derek, welcome back.
DEREK VAN BEVER: Thank you very much, Brian and hi, Akshat.
BRIAN KENNY: It’s been a while since we’ve had you on the show. Akshat Agrawal is the co-author on this case and is a very recent graduate of Harvard Business School. He is currently working at Codium, an AI firm. Akshat, thanks for joining us.
AKSHAT AGRAWAL: Thanks for having me.
BRIAN KENNY: Great to have you on the show, and congratulations on your recent graduation. How’s the real world treating you?
AKSHAT AGRAWAL: I wish I could go back.
BRIAN KENNY: I think that’s probably a common refrain that we would hear from our graduates, but it’s great to have you on the call today. We love having the case authors together. This is a really interesting case and I think a lot of people will be able to relate to it simply because gaming is so popular. I am not a gamer. I’m going to put that out there right now. The closest I have come to being a gamer was probably playing Atari Tennis. Most of our listeners don’t know what that is. Derek, do you know what Atari tennis is?
DEREK VAN BEVER: I’ll do you one better. The game of choice when I was in my heyday was Pong, so Akshat gave me both a doctorate in the current gaming industry as well as sharing so much of his experience prior to HBS working on the Google Stadia team. So this was a real privilege for us to be able to learn from someone who had been inside.
BRIAN KENNY: Been inside. That’s awesome.
DEREK VAN BEVER: Exactly how it had worked and the decisions that were made along the way.
BRIAN KENNY: So let’s just jump right in. Derek, I’m going to ask you to start by telling us what the central issue is in the case and what your cold call is when you start the discussion in class.
DEREK VAN BEVER: Yes. So many of your listeners who are alumni will remember the course “building and sustaining a successful enterprise,” the Clay Christensen course, BSSE in our shorthand. This case, which Akshat first came to me mid-semester and said, “Boy, do I have a good idea for a case.” This case deals with one of the central issues in our course, which is the issue of corporate capabilities. This goes all the way back to work that Joe Bower had done here at the school and addresses the question, how is it that companies can be capable of some things and incapable of others? We’re accustomed to thinking about people on our team and saying, “Oh, can she do that? Can she not do that? Is somebody ready for this position?”
The same thing applies to companies and the shorthand that we use is we talk about RPPs: resources, processes, and priorities. So the question here, a company like Google with 45 billion dollars of R&D spent annually, how could Google be incapable of anything? And that’s really where we’re off to the races. So as we’re dealing with this area of cloud gaming, my cold call to start the class is simply, is Stadia a good idea or a bad idea? Not for Google, but just in general, which gives the gamers in the room a chance to talk about what’s important to them in their gaming lives. And then we follow that up with, ah, okay, so whether or not you think cloud gaming is a good idea, is it a good idea or a bad idea for Google? And then we’re off to the races.
BRIAN KENNY: Okay. Great. Akshat, I usually ask case authors where they got the inspiration to write a particular case. Apparently you lived it. So that’s where part of that inspiration comes from. For our listeners who aren’t that familiar with gaming, can you maybe lay out the landscape for us a little bit? Where does gaming fit in the media landscape and where does Stadia fit in the gaming landscape?
AKSHAT AGRAWAL: Absolutely. So I was shocked to learn this the first time I saw this stat, but amongst the entire entertainment and media industry, gaming is actually the largest sector by far. I think it was on track to do or it did more than 180 billion in revenue in 2020 alone and that’s grown rapidly throughout the pandemic and beyond. So this is a big industry. People really like games, and I think it’s the preferred form of entertainment for many, many people. The big players in the space are people you’ve likely heard of. The Sonys of the worlds with the PlayStation, Microsoft with the Xbox, Nintendo, but Google and Apple have also been in the space via mobile gaming, which is a huge revolution that happened over the last decade and now makes up a significant chunk of the market. I would say those are the big players on the platform side. Of course, we have to remember the actual artists and creators and game makers themselves. This is a very hits-driven business, so we see a lot of consolidation in the space. There’s a few big studios like Activision Blizzard, EA and the like. And interestingly, we’ve also seen a lot of M&A activity between platforms and the studios with Microsoft’s acquisition of Activision Blizzard. So those are probably the big players in the space, and it is a huge space for sure.
BRIAN KENNY: Yeah. Yeah. It sounds that way. Derek, maybe you can tell us a little bit more about Google Stadia and what their vision was when they entered the space. How were they hoping to disrupt, I guess?
DEREK VAN BEVER: Sure. Well, when you think about all the other aspects of our lives that have gone fully digital, so whether it’s Netflix or Spotify, the idea, the vision that you could actually play games without having to buy an expensive console and without being tethered into your living room was just a hugely compelling vision. So they said, “Gee, what if we could eliminate the need entirely to buy gaming consoles and expensive hardware? And what if in fact we could put the latency of the network so close to individual users’ homes that we could pull off this very difficult technological challenge in a way that was just as seamless as if somebody had an Xbox at home or if somebody was just a longtime gamer accustomed to their prized console?” And so in some ways it seems like just a logical vision of the future that cloud gaming would be the next phase in gaming. Akshat, you had talked about how gamers think about their consoles and how cloud gaming fits in a gamer’s life. Can you talk a little bit about that?
AKSHAT AGRAWAL: Gamers really care about performance. How snappy does the gameplay feel? They’re willing to invest a lot in these consoles, which take up a lot of space in your living room and they have a lot of allegiance to these things. And a lot of them care about, Hey, I want to get the best picture quality, the best frame rate, or how quickly, how crisp the image is. They invest a lot in these platforms when you think about it. Like you said earlier, Brian, teens and tweens are spending multiple hours a day investing in these games, unlocking achievements, so there’s a tangible sense of attachment. You don’t easily just switch between platforms. And so I think that’s an important part of the psyche here to understand.
BRIAN KENNY: Yeah. They can spend a fortune on their chair from what I understand, the accessories that go along with the setup. But you mentioned frame rate. Obviously the infrastructure is critically important to the experience of the gamer. What were some of the innovations that Stadia was able to come up with to start to chip away at that?
AKSHAT AGRAWAL: Absolutely. This is a great question and it gets to the heart of why Google is uniquely positioned to deliver on this technology. So when you think about it, we are able to stream movies and music, but still not really stream games. After Stadia, there hasn’t been a major cloud gaming attempt again. The difference between these two use cases is that music and movies are one-directional streams. The data is coming from a data center to your phone, you’re not sending anything back, and as a result, we have this concept of buffering. The thing can buffer on your device, and then you can just get a nice smooth listening or viewing experience. The difficulty with gaming is it’s not one-directional, it is two-directional because the data center will send you a picture; based on that picture, you’ll press a button and that button, that signal has to be sent back to the data center so it knows what’s the next picture it should show you. Except this has to happen hundreds of times per second in order for you to feel like it is a fluid experience. To feel like it’s comparable to what’s in your living room.
DEREK VAN BEVER: Akshat had to explain this to me so many times. To say a blink of an eye, a blink of an eye is way too slow when we’re talking about the performance that he and his team were building.
BRIAN KENNY: Does it get more complicated too, Akshat when you’ve got multiple players where you’ve got these multi-game experiences?
AKSHAT AGRAWAL: Absolutely. Right. Throughout all of this, latency is really the key factor. And so to your question, Brian, on what were the technological innovations that enabled this? I’d say there were a couple. One is Google has deep expertise in streaming in general, and this is because of YouTube. YouTube accounts for probably like 30% of the Internet’s bandwidth at any given time. So you know that Google has built up deep expertise in how do we handle this network traffic? How do we become really efficient at streaming? On top of that, when you think about how data centers are typically located, you’ll have a big data center that’s somewhere where land is cheap, power is nearby and accessible, and these tend not to be where people live. But if latency is your key constraint, you actually need the data center to be close to where people live because the one thing that you can’t overcome is the speed of light. And if you need this latency so low-
BRIAN KENNY: Even Google can’t overcome the speed of light, is that-
AKSHAT AGRAWAL: Believe it or not-
BRIAN KENNY: Is that what you’re saying?
AKSHAT AGRAWAL: Google cannot overcome the speed light that we know about.
DEREK VAN BEVER: Even Akshat has not overcome it yet, but I’m hopeful.
AKSHAT AGRAWAL: So one thing that Google did, which is very unique, is this concept of having a network on the edge. So instead of having one giant data center where all this traffic is served from, instead, there were a lot of smaller data centers located closer to where people actually lived, and that allowed us to overcome that fundamental latency constraint. So I’d say it’s the combination of these two things, which are both incredibly difficult technical challenges. They require you to have a large degree of infrastructure know-how already built out, and that is something that Google is one of a few companies that can deliver on that.
BRIAN KENNY: So you would think people would just be falling over themselves to get to this product. Lining up to sign up for it, Derek, but that wasn’t the case. The case goes on to talk about some of the challenges that they faced in trying to get people to jump on board. Can you describe some of those?
DEREK VAN BEVER: Yeah. So this goes to this issue of capabilities. Something that Akshat alluded to a moment ago was that the gaming business is a hits business. It’s a blockbuster business. And Google for all of its various and deep strengths is not fundamentally a publishing company. They’re not a studio. They don’t have expertise in this area, they don’t have experience here, they don’t have staff here. And so just trying to understand how do we have to change to be able to be a publisher of hits? That’s just a brand new question even for Google. Second, for reasons that we’ll go into some competitive, some status-oriented, they had a very confusing business model. So their thought was that they would have a subscription business model, but they also wanted their users to buy the games. So for example, I asked my son if he was at all interested in cloud gaming and he wasn’t super excited about it. And then when I explained that you had to not only have a subscription and buy each individual game, that was it for him. Third is, there are at least two critical segments in this user base. The serious gamers and then the casual gamers, they’re very different in their job to be done. Akshat, you really hit on this. Could you talk to us about segmentation in this industry?
AKSHAT AGRAWAL: Absolutely. We could segment the market really, really finely, but if we look at it from a high level view, there’s like professor said, two categories. There are your hardcore serious gamers who are spending multiple hours, who have a high willingness to spend. They probably make up the most amount of spend in the market, but they really care about things like the best performance because they’re willing to spend to get just that slightly higher framework rate, that slightly crisper picture. On the other hand, there are your casual gamers. They will spend more time doing mobile gaming, which is less sophisticated, less performant overall, they might not the same amount of time. And mobile gaming is really what unlocked this segment over the last decade. They’re a big segment, don’t get me wrong.
BRIAN KENNY: So is that like Candy Crush? Would you put them in that category?
AKSHAT AGRAWAL: Candy Crush is a great example. You have people who are really spending a lot of time playing that, but their preferences are different.
BRIAN KENNY: I play Candy Crush, just so you know, I’m cool.
DEREK VAN BEVER: I caught that. That’s good.
BRIAN KENNY: I guess it’s also important to note that while Stadia is doing all of this, Microsoft and PlayStation are not sitting back and doing nothing. The case talks about the next generation gaming consoles that they were going to bring into the market. Can you talk about how that might’ve changed the equation here as well? Akshat?
AKSHAT AGRAWAL: The way that Stadia initially positioned itself was competing with the Xboxes and the PlayStations for that premium hardcore gamer segment. And this was through a lot of different stuff that we put out. For example, at one point the messaging was Stadia is the most powerful place to play. What if we could bring the power of the data center into your living room with the highest frame rates at the best resolutions, 4K at 60 FPS, which was at that time better than anything that Xbox or PlayStation could put out. We’re going after their most prized customers that drive the most amount of spend. And so the competitive response was expected, which was they one-upped us. They came out with the PS five and the next version of Xbox, which had even better specs.
And so if you’re now catering to a market, a segment that really only cares about where can I get the best performance and the best experience, we’re now getting into a sustaining competition against those incumbents on who can provide the best experience. And for cloud gaming in general, you are on the back foot because the latency for something that sits in your living room is going to be a lot less than the latency of something that sits in a data center, even if that data center is only a few miles away. So we’re at a fundamental disadvantage if we’re talking about competing on the axis of performance.
BRIAN KENNY: And what about competing on the axis of game titles because the case gets into that too. Maybe Derek, you can explain to us what the AAA title carries with it.
DEREK VAN BEVER: Yeah. So I was thinking about something that you were just talking about. If you’re Google and you’re thinking about entering the gaming business and you say, “Who is our competitive set? Is it these myriad casual gaming studios that come out with these tiny little one-hit-wonder momentary hits or are we peers with Microsoft and Sony? Are we peers with the Xboxes of the world?” And of course, your almost instant temptation is, of course, that’s our reference set. And so as Akshat said, we enter in sustaining competition and AAA game studios, those are their bread and butter, but the incumbents are their bread and butter. So when we enter and say, “Hey, there’s a new kid in town. Would you like to work with us?”, they might say yes in a first meeting, and then they go back and think about it and they’re like, “Ooh. Are we actually biting the hand that feeds us by now saying that we want to work with Google in addition to Microsoft and Sony?” So you have to be careful there.
But again, yeah, this is a hits business. So a blockbuster lands for a short period of time, and when Google comes and says, “Let’s distribute your game on a subscription basis, so you’ll make your money, you’ll monetize this a little bit at a time.” The AAA game studios looked at that and said, “That’s not as good as for me striking while the iron is hot and selling this game while the gamers think that this is the thing I need to buy.” Those two models were just fundamentally different.
BRIAN KENNY: So did they back off that subscription idea? Is that a realization that they had at some point?
DEREK VAN BEVER: Well, this is the question at the time of the case, the general manager of this unit is preparing for a budget review, and this is the question, where do we go? Do we take the high road or do we take the low road? Do we continue with the subscription model, or would we move to on the casual gaming segment, more of an advertiser-based, in-app purchase world that the Candy Crushes of the world operate in? That’s the question that they were facing.
BRIAN KENNY: Okay. All right. Akshat, I want to come back to you and talk a little bit about Stadia’s pricing model. I’m wondering how it compared with Xbox and with PlayStation, because you don’t have to buy the console, that’s an added expense. It would seem like they have an opportunity maybe to make this a little bit more affordable for people. Is that fair to say?
AKSHAT AGRAWAL: It is fair to say. And I think it comes back to the tension between what are the jobs to be done? Who are you serving here? Like professor said, this is a hits business from a game publisher’s point of view, they really want to maximize. When you strike gold, you want to maximize. You don’t want that to be washed away inside of a subscription. So there was a lot of pushback from publishers to include some of their hits in the subscription model. But why are subscriptions good? Who do they fundamentally cater to? They fundamentally cater to people who want an all-you-can-eat model. And those tend to be more of the casual gamers. Versus if you’re a hardcore gamer you have, these are the titles that I like, these are the franchises that I like, and I’m willing to spend $50, $60 on one of those games. So you see these are the different business models that cater to these different segments. And in trying to address both, you end up with a hybrid pricing model, which is where Stadia landed, right?
BRIAN KENNY: Yeah.
AKSHAT AGRAWAL: Some the subscription includes access to Stadia and it includes some games which tend to be more of those long-tail games. But you still have to pay to get access to those really premium AAA titles.
BRIAN KENNY: This is maybe a naive question, but from a non-gamer, I’m wondering if you buy one of these AAA titles, let’s say Grand Theft Auto … That’s the one that I know. I know there’s probably a lot of others out there. How long does that take me to figure out as a gamer? Do I get entertainment out of that for a day, a week, a month?
AKSHAT AGRAWAL: It’s a good question. It really depends on the games. Some games have very, very high replay value, but from a publisher’s standpoint, it’s really those first one to two years that the game is going to drive the majority of its revenue. It’s very time-bound in that way. There aren’t as many evergreen games as there are, for example, evergreen TV shows, things like The Office come to mind, where that’s going to continue generating significant revenue into the future. Games have a much shorter shelf life as it turns out, because people always want the new thing. The new thing is always, it looks better, it plays better. There’s rapid evolution in that technology.
BRIAN KENNY: Akshat, can you talk a little bit about the investments that Google made in the infrastructure to try and create that experience and make it as good as it could be? And did that give them any a competitive advantage over the console-based games?
AKSHAT AGRAWAL: Yeah. The idea of competitive advantage here is really interesting. The truth is, it did give us a competitive advantage, but not necessarily against the console-based games. We were able to deliver an experience which for the first time felt like you were playing a console, but from anywhere. Anywhere with an internet connection on any device, which was really magical. And you can see in Reddit communities, this is blowing people’s minds. And for the casual gamer segment, they’re really finding a high degree of fit here. Because if you were used to playing Candy Crush on your phone because you’re not going to buy another console and Candy Crush is the best game available, if suddenly you can play a really interesting deep AAA game on your phone, that’s a great experience for you. So it does deliver a competitive advantage, but perhaps against that mobile gaming segment of games that are used to being published on your phones. And those game publishers are used to building games that fit within the computational capabilities of a phone. But in the console segment where you have a lot of computational power where you have these AAA titles already, and the willingness to spend on a per title basis, it wasn’t clear that there was a competitive advantage by building in the data center.
DEREK VAN BEVER: Akshat, to probe that, was it clear that in the pro gamer segment, were they asking for this capability?
AKSHAT AGRAWAL: It again goes back to jobs to be done. If you ask a pro gamer what is more important to you, is it the performance of your game or is it the cost and convenience of how you can play that game where you can play that game? Most pro gamers will tell you, if my frame rate drops even by 10 frames per second, I don’t want anything to do with it. I want the crispest clearest picture possible. On the other hand, you’ve got a different community of users who don’t really care. They’re not playing games where 10 frames per second really matters. What they really care about is, Hey, I’m picking my kids up from school after work. I can get a quick gaming session in on my phone while I wait in the car. Or, I don’t have to go and spend 400 bucks on a console and 60 bucks on a game. I can kind of get an all-you-can-eat subscription for 10 bucks a month. And that really scratches my itch. So it’s different for different segments.
DEREK VAN BEVER: Yeah. You’re reminding me. We had a student in the first class in which we taught this case, and he said, “Well, listen, I’m not a serious gamer, but …” And then he went on to describe how he had built his home console from scratch. I think it was like water-cooled. I had this image of this little situation room in his house with like you said, the chair and everything. And so for him, the idea of doing anything that didn’t involve this love object of his was just off the charts. It was not interesting to him. It’s a very interesting segment of users.
BRIAN KENNY: It also makes me wonder … And this is not addressed in the case. Whether or not these serious gamers just have some brand snobbery where it comes to Google versus Microsoft or Sony. Will Google ever be able to stand at the same level as those other two giants in the space?
DEREK VAN BEVER: Huh. That’s speculative. I don’t. Is there a lot of loyalty? Is there loyalty to the title Akshat or to the producer? How do people think about that?
AKSHAT AGRAWAL: I think there is a high degree of loyalty. Getting back to the gamer psyche, especially for core gamers. They really care about the platforms that they’re on because they’ve invested a great degree in unlocking those achievements, building out friend graphs on those platforms. You’ve got your group of friends who you play on Xbox Live with. And there is a great degree of loyalty to the titles. Those titles are often available across platforms, so there’s that to consider. But I would say amongst the programmers, there is a lot of loyalty. And by the way, this is the same thing that Xbox had to … Rather Microsoft had to overcome when they first entered the market with Xbox. At that time, PlayStation was already a very strong competitor and already a big brand that people loved. So absolutely, going into this, Google was fighting an uphill battle because gaming wasn’t part of the brand, but it’s certainly something they could have built up over time.
DEREK VAN BEVER: Yeah. There is one other thing that relates to the question that you asked Brian, which is in the course of researching this case, we came across a site called the Google Graveyard. And what it is simply a collection of all of the initiatives that Google has tried over the years. And they’re very creative and they’re very experimental, and they’re willing to give up on ventures when they don’t immediately hit or don’t meet their expectations. So the Google Graveyard is littered with experiments all over the map. And so in the the Ben Thompson’s Stratechery, really serious analyst world, people were looking at Google doing this and saying, “Are they really in this for real or is this just a pilot and they’re going to pull back?”
BRIAN KENNY: I’m also wondering, did they look at other potential business models? Did they look at a freemium model, for instance? Was that something that they considered? Should they have considered that?
DEREK VAN BEVER: Well, Akshat and I were talking about questions before this, and the whole case lands with, so what should Google do? Should Google go up market or should Google go down market? And my sense was that Akshat, having lived through this experience, was deeply opinionated about what Google might have tried next. So Akshat, if you had the question in class, so: What should Google do? Should they go up market and try to compete with the Microsofts and Sonys of the world, or should they go down market and try to carve out a space in the casual gamer segment?
AKSHAT AGRAWAL: We’ll never know. There’s no counterfactual, but we can only hypothesize. I think this gets back to the first thing you said, professor, around RPPs. Resources, priorities, and processes. And when we think about priorities here, one reason that Google even went up market is because for a company like Google to justify a huge investment, you need to have a huge potential for return in the short period of time. For a company like Google that has many, many projects it could invest in. And knowing that the majority of the spend comes from these premium gamers, you can understand why the business case for a company like this or of a product like this inside Google was rooted around really winning over people who would otherwise send their dollars to the Xboxes and the Sonys of the world.
But when you look at the capabilities of the organization, you can’t help but to wonder what would’ve happened if we went after the casual segment. Think about things like YouTube. Most casual gamers spend as much time watching games on YouTube as they do playing games. Think about the fact that we have the biggest ads business in the world where if we had decided to go down market, we would’ve built servers that were less premium because you didn’t really care about performance as much. Could that have been supported by an ads model? You would’ve been targeting a set of games where the publishers were more open to a all-you-can-eat subscription model because they were less hits driven. They were that long tail of game publishers.
So a lot of things suggest that you could have built a really, really compelling offering for core gamers here. But you also have to remember that Google already was a behemoth in the mobile gaming segment. So I’m sure that it was also a difficult decision, Hey, do we launch something that essentially competes with our own Google Play Store? So these are all things to consider and it really highlights RPPs. Is this actually something that the company can prioritize? Does it make sense in the context of this specific company?
BRIAN KENNY: Yeah. Yeah. Derek, let me turn to you because you know so much about Clay’s work and disruptive innovation. Is what Google was trying to do here. Were they trying to disrupt, was that their vision for what Stadia could be? If we can find a way to deliver this experience without all the console and tying people down to one thing and put it in the cloud, was that truly what they were trying to create? Was it disruption within the space?
DEREK VAN BEVER: In Clay’s strict terminology, they might’ve thought that they were trying to disrupt, but when we look at them, it looks very clearly to us like they were entering on a sustaining trajectory in competition with the incumbents. So there was a pretty clear choice of how to enter, and they were entering in very contested territory where witness what happened over time, they were met with a pretty intense and immediate competitive reaction. Microsoft and Sony did not want Google in this business, and they made that clear.
BRIAN KENNY: So what would you advise them to do if you were sitting in the boardroom and they were developing this strategy?
DEREK VAN BEVER: Well, as with most things in BSSE, what we observe is that coming in from underneath an industry so that the incumbents look the other way and give you time to get your feet underneath you would’ve been the strategy for the long term. And as Akshat has said already, if we had had the patience to build a business around the capabilities that we possess, huge advertising expertise, very strong attachment through Android and through the Play store to casual gamers, we could have very patiently moved our way up market. And in fact, as our technological capability to deliver the cloud gaming experience improved, we could have that trajectory of improvement that we always look for, but that wasn’t the choice that they made.
BRIAN KENNY: Well, this has been a great conversation as I knew it would be. I’ve got one question left for each of you, and I’m going to start with you, Akshat. Just building on what Derek just said, what lessons do you think people can learn from Stadia’s experience if they want to get into the cloud gaming business? What should they be thinking about doing?
AKSHAT AGRAWAL: I come from an engineering background. I consider myself to be a technologist at heart, and I’m always enamored by amazing technology. And fundamentally, that is what Stadia was. That is what Google is really good at. It’s a technology that really makes you stop and say, wow. The first time you played Stadia, it was like a wow experience that, Hey, how can I be playing a game this fluidly, this amazingly. I don’t have any consoles in my living room. Is this really being streamed from miles and miles away? It really blows your mind. But I think the lesson from Stadia here is you can have the best technology, but that is half the equation. The rest around positioning your product. What is your strategy? What are the jobs to be done? You need the amazing technology, but you also need to really understand all of the other parts of the equation.
BRIAN KENNY: Derek, I’ll give you the last word actually. For our listeners who don’t know, can you just tell us what happened to Stadia at the outset? Are they part of the Google Graveyard, but also what’s one thing you want listeners to remember about this case and take away from it?
DEREK VAN BEVER: Well, the first thing that I said was it’s hard to imagine that a company, an organization with the resources of Google can’t do anything that it wants to do. Literally 50 billion of R&D every year with that much money why can’t you just do anything you want? And yet, I always remember Clay with that big index finger of his and saying, “Point me to the place in Google, point me to the place in the organization where the capabilities reside. Where is the place within Google that really understands the publishing business in games? Where is the place within Google where they understand a business model that is going to make this technology come to life?” And those things were just absent. So to close with the wisdom of Clay Christensen, your capabilities can become disabilities if you’re trying to do something that you’ve never done before. And you have to have the modesty and the humility to understand that building capability requires really patient long-term commitment.
BRIAN KENNY: So what happened to Stadia?
AKSHAT AGRAWAL: I think the technology is magic, and I think Google is uniquely capable of delivering that magic. And so I hope that in the future Google does try again. I think we would all benefit from something like cloud gaming coming to fruition, and I think Google can do it. So I hope I’m optimistic that someone will have the courage within Google to try again in the near future. But for the time being, Stadia is sunset, and we’re all eagerly awaiting the next attempt at cloud gaming.
DEREK VAN BEVER: Can I say one of the persistent themes in BSSE is after we’ve studied a case, we say, if their protagonists had a do-over, what would they do differently? And what held Google back is not mysterious. And it’s not impossible, but it does take the humility to say, “Hey, you know what? We were really not good at this. And we really made some bad assumptions about what game studios, what their incentives and motivations were. And we really didn’t understand the users and how they made the decisions to hire certain kinds of gaming solutions into their lives.” This is the biggest segment. I was looking at the numbers. It is orders of magnitude larger than movies or music. And so there is absolutely gold here, but you’ve got to be patient and you’ve got to be humble as you pursue it. And I don’t know if those are attributes we would attribute to Google, but if they’re listening, let’s see it again at some point.
BRIAN KENNY: A little humility could go a long way.
DEREK VAN BEVER: 2.0. yeah.
BRIAN KENNY: Well, if they get it right, maybe even I will become a gamer. We’ll see.
DEREK VAN BEVER: I don’t know about that, Brian.
BRIAN KENNY: Derek and Akshat, thank you for joining me on Cold Call.
DEREK VAN BEVER: Great seeing you, Akshat.
AKSHAT AGRAWAL: Nice to see you. Thanks for having me.
BRIAN KENNY: If you enjoy Cold Call, you might like our other podcasts, After Hours, Climate Rising, Deep Purpose, IdeaCast, Managing the Future of Work, Skydeck, Think Big, Buy Small, and Women at Work, find them on Apple, Spotify, or wherever you listen. And if you could take a minute to rate and review us, we’d be grateful. If you have any suggestions or just want to say hello, we want to hear from you, email us at coldcall@hbs.edu. Thanks again for joining us, I’m your host Brien Kenny, and you’ve been listening to Cold Call, an official podcast of Harvard Business School and part of the HBR Podcast Network.
