Microsoft is in talks to acquire Mojang AB, the Swedish company that makes the Minecraft videogame, for more than $2 billion, according to the Wall Street Journal. Faithful readers, you know what that means: It's now timely to explore just what entrepreneurs can learn from how Mojang reached this potential valuation. From my perspective, there's one classic innovation lesson in Minecraft's ascension. And it's summarized like this: Your customers don't want to buy an iron and an ironing board; they want wrinkle-free clothes.
In other words, it's the most rudimentary piece of innovation advice. Yet companies routinely neglect it: How do you solve the crucial problem your customers want solved? With its do-it-yourself features and its user-first approach, Minecraft has mastered the art of offering maximum flexibility about how to complete the customer's job-to-be-done.
The metaphors for gauging the job-to-be-done are numerous:
- "People don't want to buy a quarter-inch drill. They want a quarter-inch hole." --Theodore Levitt, marketing professor, Harvard Business School
- Fast food customers don't really want milkshakes, per se. They want something filling they can gradually consume without making a mess during a long drive. (Courtesy of HBS professor Clayton Christensen's video, "What Job Causes You to Hire a Milkshake?")
As for the wrinkle-free clothes, that metaphor comes from two professors at BYU's Marriott School of Management who are part of the Levitt-Christensen lineage: Nathan Furr and Jeff Dyer, who explored this terrain in their recent book, The Innovator's Method.
What do all of these metaphors have to do with Minecraft? Just this: Minecraft doesn't demand that you use a quarter-inch drill. Rather, it lets you approach your task in a way that makes you smile. "In Minecraft, if you don't see the thing or the world you want to play in, you build it yourself," notes Ethan Gilsdorf, a gaming and geek culture expert. "It appeals to the same audience that loves Dungeons & Dragons and other role-playing games. You don't just consume someone's story, you tell your own story. And build a bunch of cool stuff along the way."
This do-it-yourself factor became a crucial differentiator for Minecraft. Board games and video games, almost by definition, have largely forced players to operate within defined or scripted fictional settings.
Then Minecraft came along and figuratively said: Play however and wherever you want. Emphasis on the you. "Minecraft is the kind of game that seems ruled by its fans, not the company that made it," adds Gilsdorf, author of Fantasy Freaks and Gaming Geeks: An Epic Quest for Reality Among Role Players, Online Gamers, and Other Dwellers of Imaginary Realms. "It has developed its own community and culture, rather the players feeling like they are being force-fed rules and updates in some top-down marketing scheme."
Moreover, the game rewards the hard work of high degree-of-difficulty tasks. "That replica of a Space Shuttle launch pad or the city of Minas Tirith (from The Lord of the Rings) takes thousands of hours to make, and because of that, the results are more satisfying creatively," observes Gilsdorf. All of which is to say that Minecraft allows its players to feel a strong pride of authorship--and an incentive to socially promote the game in the interest of sharing their beloved creations.
Don't get me wrong: There's more to Minecraft's success than just this. For one thing, the company has been brilliant about pricing. As the Wall Street Journal said in its report, "instead of giving its game away and charging for in-app purchases, as many newer game makers do, Mojang charges flat fees for its games. The Xbox version costs $20, while a download on a PC is $27 and the mobile version is $7."
But at the risk of stating the obvious, this pricing model has worked well for one plain reason: Customers really want the game. The result? Mojang is an immensely profitable company with a genuinely beloved product. How profitable? "Mojang made a profit of 816 Swedish kroner ($115 million) last year on 2.07 billion kroner in revenue ($291 million)," the Wall Street Journal reported.
Not bad, for a company that launched in 2009 and that, to this day, has only 40 employees in its Stockholm offices. To be sure, such profitability speaks to the power of a smart pricing strategy, a low headcount, and the low-cost distribution of virtual products.
But it also speaks to the unquenchable demand you can create when you deliver what customers crave most.