This company went from selling video games at a flea market to making games for a global audience. Here’s how

Tuesday: Return Driven Strategy FROM THE DESK OF MILES EVERSON: Are you familiar with Return Driven Strategy (RDS)? This pyramid-shaped framework has 11 tenets and 3 foundations. When properly integrated into your business strategy, these principles will help you achieve true wealth and value creation. Professor Joel Litman and Dr. Mark L. Frigo explained this framework in detail in their book, “Driven.” Today, let’s look at a case study related to the second tenet of RDS: Fulfill Otherwise Unmet Customer Needs. Continue reading to know more about this video game company and how its early business model paved the way for the success it enjoys today. CEO, MBO Partners Chairman of the Advisory Board, The I Institute

This company went from selling video games at a flea market to making games for a global audience. Here’s how! CD Projekt, known for its critically-acclaimed “The Witcher” video game series and “Cyberpunk 2077,” is one of the most recognizable names in gaming today. Gamers across the world have spent thousands of hours playing the aforementioned titles. Aside from its core business, the game developer owns and operates GOG.com, a digital distribution platform for personal computer (PC) games. While CD Projekt is best known for its video games and digital distribution platform, most people rarely talk about the business model that laid the foundations for the success the company enjoys today. To know more about that, we have to look at how the firm started… During the 1990s, gaming saw a widespread increase in popularity. Players from across the world spent hundreds of hours playing games on consoles and personal computers (PCs). Due to such developments in the sector, demand for games spread across North America, Europe, and Asia. In particular, there was an emerging market for games in Poland. In the early 90s, the country’s economy and culture took an entirely new shape as it was transitioning from a communist state into a liberal democratic state. One of the results of that change was people wanted to buy video games. The problem? Game developers had yet to officially distribute their titles to the Polish market. Because of this, gamers turned to pirates who sold, reproduced, and distributed illegally obtained copies of games at around GBP 3, a very cheap price at the time. Given the market environment, pirates held a significant advantage. Despite this, avid gamers Marcin Iwiński and Michał Kiciński founded CD Projekt in 1994 with the purpose of selling legitimate video game copies to Polish gamers. Initially, the company imported software releases in CD-ROM disks from the U.S. Iwiński and Kiciński spent countless hours selling these products at a flea market in Warsaw. Eventually, they were able to secure official distribution agreements with video game companies like American Laser Games, Acclaim, Blizzard, Blue Byte, Interplay, and Psygnosis. CD Projekt charged GBP 15 for its games—a significantly higher price compared to the illegitimate copies pirates sold. So, to add value and attract customers, the company sold its products in Polish boxes and manuals. This tactic proved to be a hit among the firm’s target market. Since its strategy of importing games proved successful, CD Projekt took things a step further when it took on the challenge of full video game localization. At the time, the games the company imported were voiced and written in English. Since not everyone could understand the language, it was an opportunity for the firm to set itself apart from the rest of its competitors. [Video game localization - The process of translating a title’s dialogue, voice lines, and menus into the language of the country or region it’s being sold to.] With the strategic goal mentioned above in mind, the gaming firm secured the rights to localize and distribute “Baldur’s Gate,” a popular video game in the U.S., for the Polish market in 1999. As part of CD Projekt’s efforts, every copy of the game was packaged with a parchment map sealed with wax, a “Dungeons & Dragons” rulebook, and an audio CD. Despite a retail price of GBP 30, the Polish version of “Baldur’s Gate” was met with commercial success as over 100,000 copies of the game were sold. According to Iwiński, over 18,000 copies were purchased on the first day of the game's release in the country alone. Due to the success of its first localized title, the gaming firm became the Polish distributor for major companies like Atari, Konami, Microsoft, and Sega. Additionally, CD Projekt secured exclusive rights for Ubisoft game releases on PlayStation and PlayStation 2 gaming consoles. In 2003, the firm began work on the first game of its “The Witcher” video game series, which was successfully released in 2007. In 2008, CD Projekt established Good Old Games (subsequently renamed to GOG.com in 2012), a video game distribution service for PCs. The titles offered in the platform are free of digital rights management (DRM) restrictions and come with bonus content. [Digital rights management - Whenever any form of digital media is purchased, what’s being bought isn’t the content itself, but the license to consume it on a specific platform. In the case of video games, DRM restrictions are put in place to prevent players from accessing the full functionality of a pirated title.] At present, the company is focused on the development of its video games, aside from operating GOG.com. — The success of the gaming company’s importation and localization business in its early years can be explained through RDS’ second tenet: Fulfill Otherwise Unmet Customer Needs. According to Professor Joel Litman and Dr. Mark L. Frigo in the book, “Driven”: “The path to the creation of wealth is through the customer by fulfilling their unmet needs. This is the recipe for achieving high returns on investment. High-performance businesses deliver an offering that the customers believe is not otherwise available.” By bringing legitimate copies of video games to the hands of Polish gamers, CD Projekt was able to provide one of its target audience’s unmet needs. Even though the gaming firm had competitors who sold products at a cheaper price, it was still able to secure the patronage of its customers. How? Through adding features to its offerings that its competitors couldn’t match! In doing so, CD Projekt enjoyed a loyal following despite the higher prices of its products. Remember: To thrive in a highly competitive market environment, you must fulfill the unmet needs of your target market in a way that no other competitor can match. This will enable you to enjoy the patronage of your customers regardless of your product’s cost, allowing you to maximize your earning potential. Also, if you're looking to gain a better understanding of Return Driven Strategy, we highly recommend checking out “Driven” by Professor Litman and Dr. Frigo. Click here to get your copy and learn how this framework can help you in your business strategies and ultimately, in ethically maximizing wealth for your firm. Hope you found this week’s insights interesting and helpful.     Stay tuned for next Tuesday’s Return Driven Strategy! As a professional, it’s likely you have your own aspirations in your career and life in general. However, the journey towards achieving your goals is not always easy. You will experience challenges and setbacks, but that doesn’t mean you should easily give up. Learn more about the importance of developing self-advocacy skills in next week’s article!