FT.com
August 27, 2013 5:55 pm
By Richard Milne
Ilkka Paananen says his goal is to make himself “the least
powerful CEO”. Yet he runs a fast-growing company that is a leading light of
the Nordic region’s flourishing technology start-up scene.
Supercell was set up in 2010 in Helsinki as a gaming company
with a focus on Facebook. But after a disappointing first game, Mr Paananen bet
the company on the iPad. In the middle of 2012, it put out two tablet games –
Clash of Clans, a battle strategy game, and Hay Day, which has a farming theme
– and by the first quarter of this year it was pulling in $179m in revenues and
$106m in operating profits. About 10m people a day currently play the games.
It may still have only two games and just 100 employees, but
Supercell is making more money out of mobile gaming than Electronic Arts, which
has more than 900 games for the iPad and iPhone including such stalwarts as
Monopoly and Fifa 13. Moreover, the two games are in the top ranks of the
highest-grossing apps for both the iPad and iPhone in countries from China and
Japan to the UK and US.
In many ways, Mr Paananen is seeking to create a new type of
company, one better suited to the digital era than that of video games for
consoles.
The first, if superficial, sign of difference is at the
entrance – everyone must take off their shoes before going into the open-plan
office in an old Nokia building. But the shift is deeper. Supercell is brutal
at killing off games that fail to meet its high standards, which is why it
still has just two titles.
Mr Paananen has a subversive streak. He gives the impression
that failure at the company is in some ways celebrated more than success. The
new games are developed by teams, or cells – hence the name, which also denotes
a powerful thunderstorm – of five to 10 workers, all working independently. If
a game is killed off, every member of the team receives a bottle of champagne.
The reward for success? “Beer.”
It’s a people thing
When Ilkka Paananen set up Supercell in 2010, he wanted it
to be a different kind of start-up:
·
Think like professional sports “We started to think
that maybe these companies should be put together like you would put together
professional sports teams. It’s all about the people, so you need to get the
best.”
·
The management roles in such a company - “The
sole goal of the founders and management would be just to get the best people
together and put that as the number one priority. What if that was more
important than any of the financial goals?”
·
Minimalist role as CEO - “What I try to focus my
energy on is just creating the [right] environment for people. I spend a lot of
time on recruitment. But even more important is trying to spend time with the
people we have already [and] removing all the roadblocks there could possibly
be.”
On the wall a map of the world shows where all the people
playing the games are. A constant stream of players’ comments is displayed.
The decision over the fate of a game does not reside with Mr
Paananen, however, or even a central committee. Instead, only two groups have
such power: the team developing the game, and the players (or “users”, as he
calls them). Games are tested by all employees; if they meet with approval they
are released in Finland or Canada – both small but tech-savvy markets – to try
them out on the public. If the users or the developers don’t like a game – as
happened with one called Battle Buddies – the plug is pulled and the corks are
popped.
“I believe we build this company on top of the lessons that
have come from all these failures we’ve had and the thing is, the quicker we
fail, the quicker we learn and the better we will become at creating these
games,” says Mr Paananen, wearing a Supercell T-shirt, jeans – and black
socks.
But he is also clear that developing new products – the
mantra of most companies – is not his top priority. The main thing is to keep
existing players happy and returning day after day.
Supercell, which recently won a Founders Forum award,
sponsored by the FT, has embraced the new freemium zeitgeist in mobile gaming.
Users play for free but can pay to progress or speed things up. These payments
bring in $2m a day. A data scientist sits in each game team, analysing how
people play the games in order to suggest changes such as making a task easier
or harder.
Mr Paananen says: “Our goal is to create games for the first
time for the mobile platform that people will play not for weeks or months but
for years.”
The 35-year-old entrepreneur began in mobile gaming, but of
time. Fresh out of university, he started Sumea in 2000 to develop games for
the very different mobile phones of that era. There were no app stores; all
selling was done through telecoms operators. He sold Sumea to Digital Chocolate,
a mobile gaming business, in 2004 and stayed for six years.
By 2010, Mr Paananen wanted to strike out independently
again. He set up Supercell with the intention of recruiting a whole team “like
in football in the Premiership” to make the best possible games. Gunshine was
released for Facebook and did moderately well at about 200,000 players, but it
was no blockbuster. So Mr Paananen revealed his brutal streak and changed the
strategy of the whole company to focus on the iPad.
“We killed Gunshine and decided to, basically, bet the
company on the tablet platform,” he says. The decision is all the more striking
because Supercell had received its first big funding only a few months before
when Accel Partners, the venture capital firm, invested $12m. Mr Paananen
describes it as the hardest challenge he has faced; several employees left.
He stuck to his guns, however, and the two big hits arrived.
Another financing round followed in February; the $130m of investment valued
Supercell at close to $800m.
Mr Paananen plays down the pressure to find a third game but
it is still there, and there are other pressing issues too. The financing
round was not strictly necessary, he concedes, but it reduced the need for an
initial public offering.
It also allowed employees – all of whom now get stock
options – to sell some of their shares on the same terms as the six founders
and the venture capital firms. Mr Paananen says the transparency, and feeling
that everyone is in the same boat, were extremely important.
So, if he wants to be the least powerful chief executive,
just what is Mr Paananen’s role? He says much of it is to keep that pressure
off his employees so they can work on new games and improve the existing ones.
Ensuring its cell structure does not end up with people working in silos is
also crucial.
More challenges loom. A launch on Google’s Android operating
system is under intense discussion, with the aim of unlocking Asian markets
such as China and South Korea. Supercell is growing fast too, currently with
around 20 job vacancies to fill.
As befits a new company in a new industry, Mr Paananen
underlines that he does not have all the answers – but he makes clear that he
would like to keep the agility that a start-up has: “We don’t want to be Nokia.
We want to stay as small as we can and I think we’re still trying to figure out
what that means. Does it mean we’re comprised of these small cells but the
number of cells that you can add is X? I still don’t think we’re coming
anywhere near the limits though.”
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