2.1 External Environment
The success of companies which is deeply related to the ability of survival and growth is dependent on the external environment (Nelson & Winter, 1982). According to Witcher (2020), external environment comprises conditions outside the company, and they change constantly. Companies have to monitor and review strategy on a regular basis to exploit opportunities or deal with threats. The range of external factors relevant to the business is known as environment complexity which gets greater with the increase in these factors (Buchanan & Huczynski, 2019). Complexity arises from diversity, interdependence, dynamicity and uncertainty, yet it can offer opportunities to improve organisational effectiveness and make organisation more competitive (Secundo et al., n.d.). Complexity fosters innovation because it allows the exploration of opportunities that may not be apparent to others, as not all variables can be predetermined by competitors (Chia & Holt, 2019).
2.2 Video Game Industry and Financial Independence
Video games have contributed significantly to the global entertainment economy even though it is relatively newer than movies and music (Marchand & Hennig-Thurau, 2013). In the year 2023 alone, it has contributed to revenue of around 400 billion USD globally (Statista, 2024). Additionally, based on Statista (2024), around 400 million units of video games were sold on the steam platform alone.
In recent years, the gaming industry has experienced a significant rise in independent game studios, bringing a new wave of innovation, creativity, and distinct perspectives to the gaming world (Herd, 2023). Based on Juul (2019), financially independent developers have the choice to make the game better by providing creative control and also helps to make games more personal. Independence also means keeping most of what is earned and having complete freedom (Develop:Brighton, 2020).
But the video game industry is also complex and competitive. According to Cabras et. al (2017), the video game industry features intensive innovation in process and product. The industry experiences many disruptive and emerging technologies affecting companies operating within, which in turn completely changes industry production processes, risk and opportunities (Cabras et. al, 2017). Differentiation is extremely hard, as the number of video games released per year is growing every year with 12,068 games released on the steam platform in 2024 alone (Steam Spy, 2024). Getting people to discover games made by companies is the hardest challenge (Whitson et al., 2018). Furthermore, video gaming takes place in interactive networks like consoles, mobile devices, etc (Marchand & Hennig-Thurau, 2013). As noted by Schreier (2017), video games are interactive; technology is constantly changing and unpredictable; games are extremely hard to design and produce. Game development is a creative and technologically demanding practice that depends on both individual creativity and collaborative team efforts to address various technical and design challenges. The tensions between individualism in creative processes and the necessity for a cohesive collective vision within game development teams highlight new challenges for creative teams, where complex interpersonal and professional social dynamics intersect (Freeman & McNeese, 2019).
Thus, the survival of independent game companies in such a complex and competitive environment is even more challenging. In general, the successful survival rate of independent entities for a long period of time is very low (Burgelman & Grove, 2007). Banks and Keogh (2021) emphasise that commercially successful games made by independent companies are very low in numbers and those companies find it hard to produce a second successful game. Although independent game development has grown in popularity, it remains a risky venture, with only a small number of developers managing to turn their efforts into sustainable, long-term businesses or careers (Banks and Keogh, 2021).
2.3 Emergent Strategy
Shamir (2023) states that the traditional approach to strategy is deliberate strategy, which is a hierarchical and highly centralised format where decisions are taken by the head of the organisation, detailed planning is done and is highly focused on control. Here, a company aims to achieve the best market position possible by leveraging its unique capabilities and resources, strengthening that position through systematic, long-term planning using predictive methods, and typically maintaining these plans for several years (Reeves et al., 2012). Deliberate strategy is a formal analytical approach that offers an organisation a structured framework or organised plan to guide its progress toward long-term objectives (Witcher, 2020).
However, emergent strategy is more suitable for independent companies operating in this complex and competitive environment. Competitive advantage disappears in less than a year in the current world and companies cannot afford to spend months at a time creating a single long-term strategy (McGrath, 2013). Complex environment dynamics can overwhelm the capacity for strategy-making which can affect the longevity of organisation (Burgelman & Grove, 2007). Neugebauer et al. (2016) also argues that emergent strategy is more favourable for such a complex and non-stable environment.
Emergent is a process approach to strategy that is adaptive, bottom-up, and based on dispersed knowledge and learning (Foss et al., 2022). Emergent strategy is more relaxed, and the final outcome is never finalised, based on the thinking that it is impossible to control the ever-changing reality (Shamir, 2023). Mintzberg (2007) says emergent strategy is about learning as opposed to deliberate strategy which is about control. Those who formulate and implement strategies, can develop strategies through a series of actions and decisions and strategies may emerge without individuals consciously realising it, although they may become aware of these strategies once they have taken shape (Mintzberg, 2007).
Because of a combination of global competition, technological innovation, social feedback loop, economic uncertainty, carefully crafted classical strategy may become irrelevant within months or even weeks (Reeves et al., 2012). Additionally, Mintzberg (1994) argues that the forecasting of technological innovation or price fluctuation is impossible unlike repetitive patterns. For data to take formation, it takes time, and they also lack richness like qualitative property, missing important nuances leading to detachment from reality when following a planning approach (Mintzberg, 1994). There are frequent examples of business where the more deliberate and direct action is taken, the more it achieves the opposite of what was intended (Chia & Holt, 2019). Rational, deliberate, strategy-making directed at specific goals is unrealistic because it ignores how actions are driven by invisible historical and cultural elements (Chia & Holt, 2019). Deliberate strategy is also unaware about the unattainability to understand everything or control situations as there are too many variables, limits, and influences, making such a perfectly planned strategy impossible to achieve (Chia & Holt, 2019). Even though companies realise that the environment where they exist is highly volatile, they rely on a strategy which is suitable for a predictable and stable environment (Reeves et al., 2012).
In this research, when it is being referred to as emergent strategy, it means it is emergent dominant with a slight mix of deliberation as it is impossible for strategies to be entirely emergent or deliberate. According to Mintzberg (2023), most of the strategies combine the two as organisations don’t just plan, they also learn; organisations don’t just think to get strategy, they also carry out activities to see strategy. Strategy making resides on a continuum from planned to emergent strategy making, where most strategies are made in a mixed way (Neugebauer et. al, 2016). Mintzberg (1994) emphasises that companies think in order to act; to be sure but they also act in order to think. Companies try things, and those experiments which work start, to form a pattern that become strategies.
2.4 Less Reliance on Planning
Scholars of emergent strategy argue that the strategic process evolves through spontaneous events that follow unplanned and unpredictable paths (Shu, 2017). In uncertain and unpredictable environments, emergent strategies enable organisations to quickly take action to seize emerging opportunities (Brinckmann et al., 2010). Unlike the planning school, these researchers advocate for a focus on learning and the adoption of flexible approaches to adapt strategies when dealing with significant environmental uncertainty (Brinckmann et al., 2010). The characteristics of strategy making in such scenarios should be constant experimentation and learning (Shu, 2017).
The unpredictable nature of video games makes it challenging to schedule (Schreiner, 2017). It can be difficult to formulate a clear strategic vision from ventures operating in an uncertain environment (Gioia et al., 2012). Ries (2011) argues that the temptation of applying a good plan, a solid strategy and thorough market research can be problematic for companies when they face infinite uncertainty. In such an environment, for independent companies with resource limitation along with difficulty of having clear direction from the start, it can be even more difficult to implement them (Shu, 2017). Mintzberg (2019) emphasises that the key issue is that organisations cannot always anticipate where a strategy will originate, let alone meticulously plan the strategy itself.
When there is not sufficient information to formulate a concrete plan or when the urgency is high, the planned method of strategy is ineffective (Ansoff et al., 2019). Additionally, forecasting the future is almost impossible (Witcher, 2020). Formal planning documents rarely capture the entirety of an organisation’s strategic behaviour or monitor its ‘strategic learning’ as key decisions are executed (Boxall & Purcell, 2022). Based to Boxall and Purcell (2022), at times, they omit the most crucial tensions that executives are grappling with, rendering them ineffective within the organisation and potentially misleading to investors. According to Blank (2013), such plans are typically speculative and formulating them is usually a considerable waste of time and they seldom endure their initial interaction with customers. Additionally, the facts upon which planning are done are generally wrong even though the planning follows good strategic principles (Ries, 2011). According to Perri (2019), thinking of strategy as a plan puts a company into the build trap. Companies should build the things the customers want and will put money on, but they often build products that nobody wants and building such products do not bring value even if they are done on time and on budget (Ries, 2011).
Sutherland (2014) argues that the person involved in the act may be highly intelligent but most of them are just having wishful thinking which is what they put into the plan. The presence of an environment with dispersed and tacit knowledge along with cognitive limitations of entrepreneurs, managers and dynamic internal and external conditions are a major challenge to planned strategy making (Foss et al., 2022). As employees make thousands of decisions every day based on information they have and their self-interest, execution happens (Neilson et al., 2008). According to Boxall and Purcell (2022), when organisations grow and become more diverse, complexity also grows which creates a challenge of ‘cognitive limitations’ in developing good strategy.
The process where planning is emphasised, leads to planning being more important than reality (Sutherland, 2014). According to Blank (2013), things like long development cycles, high cost of getting the first customer or getting the product wrong causes companies to fail in the planned approach of strategy. Extensive organisation-wide planning is both expensive and time-consuming while often it also responds too slowly when faced with rapidly evolving threats and opportunities (Ansoff et al., 2019). Consequently, there are numerous situations where such comprehensive planning may prove either ineffective or not valuable (Ansoff et al., 2019).
However, based on Brinckmann et al. (2010) the planning-oriented scholars argue that a systematic, prediction-oriented, and formal approach leads to better success of companies. The execution of well-designed plans accelerates action by removing unnecessary steps, avoiding time-consuming errors and midcourse adjustments, and establishing a shared understanding that mitigates coordination issues (Moorman & Miner, 1998). Based on Boxall and Purcell (2022), complex firms must have elements of strategic planning for better communication across all organisational levels. It is crucial to define where you want to compete, outline your approach to winning, and plan how you will transition from one advantage to the next. McGrath (2013) claims that, while it may be tempting to dismiss the value of planned strategy, the opposite conclusion should be reached: it remains essential. Planning is useful for coordination, to ensure that everyone is directed toward a common direction. It can also be important to gain tangible and moral support from outsides like financiers, suppliers, government agencies, etc (Mintzberg,1994). Planning can involve navigating the noise of failed experiments, seemingly random actions, and chaotic learning to uncover new approaches or perspectives (Mintzberg,1994).
There is a need to be creative and rigorous at the same instance as strategy is still about finding ways to create and grab value through differentiation which is a difficult job. The need for tools that can help identify surprising, creative breaks are important along with tools to analyse the competitive landscape, company’s resources and competencies (Brandenburger, 2019). According to Brandenburger (2019), many powerful analytical tools developed over the years will always be necessary for understanding competitive landscapes and evaluating how companies can effectively allocate their resources and competencies. Asking the right question is crucial because it encourages thoughtful consideration of complex issues, rather than shutting them down with hasty decisions (Mintzberg,1994).
2.5 Adaptive, Learning and Experimentation
It is established that emergent strategy emphasises adaptation. Adapting to the environment is core to the survival of any company (Ansoff et al., 2019). To keep up with economic and geopolitical progress, competitor behaviour, evolving customer demands and expectation, new laws and regulars, innovative technologies and unexpected challenges, organisations must constantly change with it; not doing so can risk the organisation’s survival (Buchanan & Huczynski,2019). Adaptation is the adjustment of the system according to the external environment (Moorman & Miner, 1998). Reeves et al. (2012) argues that when strategy is adaptive, it is more flexible and experimental which is better in an unpredictable environment.
Shamir (2023) states that emergent strategy demands continuous adaptation which is provided by learning, thus making learning a fundamental aspect of emergent strategy. Strategies emerge gradually through a process of learning (Mintzberg, 2019). Based on Freedman (2013), learning provides organisation efficiency through commitment to knowledge, renewal mechanism and being open to the external environment. Lasting change in behaviour after acquiring knowledge based on experience is known as learning (Buchanan & Huczynski, 2019). However, learning should be done by constantly interacting with the external environment by utilising a ‘pattern recognizer’ to identify each distinct pattern (Shamir, 2023).
Openness for experimentation and adaptation also opens the door for innovation (Rothauer, 2018). Also, the presence of uncertainty suggests that companies adapt experimental “trial-and-error” learning approaches for strategy formation (Martins et al., 2015). According to Foss et al. (2022), it is impossible to test the strength and weakness of strategy of any firm without testing the strategy in its environment. Foss et al. (2022) adds that the data needed to develop a complete plan cannot be made available instantaneously, but they can be only learned through experience and trial and error and are created through action in the environment. The focus should shift from maximising efficiency to building flexibility (Reeves et al., 2012).
Frederiksen and Brem (2017) argues that there is a lower impact of planning effort where there is greater uncertainty. Companies also tend to spend way too much money through the planning approach without testing the critical assumption which can be disastrous (McGrath, 2013). Deliberate strategies aimed at achieving economies of scale and scope usually create a culture that rewards efficiency and elimination of variation which can reduce the opportunity to experiment and learn, thus reducing the adaptive nature of a company (Reeves et al., 2012). According to Mintzberg (1995), planning has always been about analysis while strategic thinking is about synthesis which involves intuition and creativity. All the knowledge, skills, experience, values and attitudes are part of the synthesis and it’s about balancing continuity and evolving from reflective learning (Rothauer, 2018).
However, according to Idenburg (1993) emergent strategy is criticised to be lacking coherence and leaves the possibility for all kinds of irrational mechanisms. Overemphasis on exploration may also lead to lack of focus and not being able exploit existing opportunities (Buchanan & Huczynski, 2019). Even though a company can pivot toward a more attractive opportunity after a false start which can occur with exploratory nature of the company, the experimentation can waste time and resources which are valuable and if the company runs out of money after each consecutive experiment (Eisenmann, 2021). Focusing solely on experimentation and commencing development efforts, without carrying out early crucial research about customer needs and if the end product meets the needs will result in false start (Eisenmann, 2021). March (2006) states that while the upside of correct decisions of exploratory activity is very high, the downside of wrong ones can lead to major disasters.
According to Frederiksen and Brem (2017), planning and execution should be carried out together, providing positive feedback-loops. Based on Reeves et al., 2012, planning cycles can be shrunk to shorter duration and become continual and instead of being a blueprint they can be rough hypotheses based on available data. Companies that achieve long-term success have the clear idea of what should never change, what is flexible to change; they have core values and a core purpose constant, even as their business strategies and practices continually adapt to the evolving environment (Collins & Porras, 1996). How organisations run business and treat their stakeholders is also shaped by value (Burns, 2022).
2.6 Bottom-Up
There is a huge gap between organisational capabilities and strategic plans which is an attempt to control, predict, and dominate the future (Clegg et al., 2004). Mintzberg (1994) emphasises that the planning style represents a calculating style of management, not a committing style where a committing style is required for engagement of people in a journey in which everyone on the journey helps shape its course. Calculating style of management focuses on destination and calculates what people must do to get there without concern for the member’s preference (Mintzberg,1994). Additionally, according to Child (2015), organisational cost can significantly go up in a hierarchical organisation which can obstruct its success and decision making can be of poor quality.
According to Foss et al. (2022), in addition to prioritising learning in a complex environment, substantial influence over strategy-making must be delegated to various employees within the organisation. Decentralisation becomes essential as the factors to be considered grow increasingly numerous and no single centralised entity can fully comprehend them (Hayek, 1994). It is impossible for the strategist to have full, detailed, intimate knowledge of the situation in question but dispersed among many people because of the limitation of human learning and the prevalence of uncertainty (Foss et al., 2022). Also, most of the relevant knowledge that is required to make a firm’s strategy is tacit knowledge which cannot be communicated (Foss et al., 2022).
Employee involvement should be equivalent to the degree of change and communication is a key factor (Quirke, 2008). According to Foss et al. (2022), almost everyone has a unique advantage due to their exclusive information, which can be valuable, and this potential can only be realised if decisions based on that information are either entrusted to them or made with their involvement. Each person acquires specialised and in-depth knowledge in a particular area, making him only the fit person to fully understand its uses and limitations (Chia & Holt, 2019). Even if companies use advanced tools, it is impossible to concentrate this dispersed knowledge into the hands of top management (Foss et al., 2022). The fleeting, subjective, tacit and dispersed nature of knowledge is a potential source of advantage (Foss et al., 2022). Fleeting business opportunities can be seized quickly, employees are motivated to innovate and take risks when decision making is distributed throughout the organisation (Gadiesh & Gilbert, 2001). Freedman (2013) argues that an organisation that leverages the experiences and insights of all its members is likely to be more effective than one where decision-making and leadership are solely the responsibility of senior management.
According to Freedman (2013), to create an environment where anyone can exercise initiative, abandoning individualist behaviour and instead fostering trust, engagement, and spontaneous collaboration is important. This also promotes open communication which helps to develop employee self-worth, suggestions are taken, mistakes are seen as learning opportunities, employees feel trusted, secure and confident (Buchanan & Huczynski, 2019). This nature of emergent strategy can also help with employee motivation as employees willingly contribute their intellectual effort while experiencing positive emotions and meaningful connections with the team (Buchanan & Huczynski, 2019). MacLeod and Clarke (2009) state that employees are also better engaged as they are involved in the decision-making process. According to Freedman (2013), positive work experience can benefit the organisation as it provides personal fulfilment to employees. According to McGrath (2013), great leaders initiate conversations that question instead of reinforcing; seek contrasting opinions and honest disagreement which aligns with the view of emergent strategy. The need for less formalised leader role designations is growing (Hanna et al., 2021).
The importance of power and influence grows even more when organisations become less hierarchical and rely on networks and teams (Pfeffer, 2010). According to Keltner (2017) every relationship and social interaction has some element of power, and it is not just something that is related to leaders and senior managers. The misutilisation of power could be detrimental for the efficiency of organisation and morale but, in many cases without power, it can be difficult to push organisation toward specific goals thus resulting in accomplishment of little value (Freedman, 2013). Freedman (2013) argues that addressing the issue of power is unavoidable part of any strategy as it determines how decisions might be best formed and implemented, and emergent strategy may be reluctant to address the issue of power for being mutually supportive and enthusiasm for organisation as learning which can be problematic. Leaders and managers without power have challenges getting anything done as power can be used in a positive way to solve problems, generate agreement and drive change (Buchanan & Huczynski, 2019).
Additionally, when everyone in an organization has decision-making power, it can lead to chaos and balancing decentralized decision-making with unified strategic action within a single company can be quite challenging (Gadiesh & Gilbert, 2001). Child (2015) claims that sometimes, lack of clear roles and priorities can lead to problems in flat hierarchy.
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