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At Slush 2024, Supercell CEO Ilkka Paananen spoke with Harvard Business School professor Jeffrey Rayport in a fireside chat entitled ‘Game On: Getting Uncomfortable to Reignite Growth at Supercell’.
Below you can read the full transcript of the session, which dives into the cultural evolution enacted over the last one to two years at the Clash of Clans developer and Paananen’s thought process for the company’s changes
Head here for the full video (also embedded below), which starts at 33:20 in.
Transcript
Jeffrey Rayport: Ilkka it is so much fun to be here with you on stage at Slush. The last time you and I were together it was in the hallowed halls of Harvard Business School. We had just written a case about Supercell, and it’s about the situation that we’re going to be talking about today.
So let me jump right into it. I’m going to ask and put the audience in Ilkka’s shoes here, so going back to the summer and the fall of 2023, and there was great news at Supercell. Two billion in revenues on the topline, nearly a billion in revenues on the bottom line, hundreds of millions of people are playing your games everyday, every month.
But then you had things on your mind in the summer of last year. One of which was Supercell wasn’t growing. You’ve gone five years without a hit game. That meant you were losing share and had even dropped out of the top 10.
Now it’s September now, 2023, you’re headed to an offsite, an all-hands meeting, everyone at Supercell. Is this good news, is it bad news? What’s on your mind?
September now, 2023. Is it good news, bad news? What’s on your mind?
Ilkka Paananen: Well I was actually quite worried about the company at that point. We founded Supercell to create these games that as many people as possible would play for years and games that would be remembered forever. And if you think about the big picture, the fact was that we hadn’t actually been growing for a number of years, and at the same time the market was growing, therefore we were losing share.
And if that trend would have continued for say a decade, at some point the fact is we would fade into being irrelevant and therefore we wouldn’t actually reach our mission, which of course is a huge problem.
And then the more I thought about it, I guess I approach it from this perspective there’s two options we have: Either we change the mission, so actually we are not here to create these games that are remembered forever, or we somehow change something about the company in order to get to better results and therefore we have a better chance at some point of reaching our dream.
Rayport: But Ilkka, this is sort of a crazy situation, meaning that as a CEO it’s easy to drive radical change when the company isn’t doing well. But by all outward appearances, the company was doing phenomenally. So you get to the offsite, what is it that you actually proposed by way to solve the problem on the one hand, great financial moves but on the other hand, limited growth?
Paananen: Well I think, before even I go to the change, the first step was just to make sure that everyone in the company is on the same page so that they actually all understand the context. We did things … we actually watched a timeline where we were seeing Supercell’s position dropping year over year and finally even out from the top 10, and of course it’s a very painful thing to watch.
But I think it’s a necessary thing for us to do and really face the truth, and obviously then you want to change, but change has to start from me, and at Supercell we have this habit of celebrating failures, and especially celebrating the learnings that come from these failures and we do that by drinking champagne actually.
And I had a pretty big bottle, not big enough, but a pretty big bottle of champagne on the stage and I took a sip just to show people that hey, we all make mistakes.
But really if you go to the problem and what’s the solution, the fundamental problem was that if you think about our mission, for us to be successful in that mission, we need to be really great at two different things. The first one is that we have to be great at creating new games, and then second, once we’ve created a great new game, we have to make it even better for that game to be remembered forever.
The problem was that we were trying to solve these two very different problems using exactly the same type of approach. That approach of course had made us successful, but it wasn’t relevant anymore, it didn’t work out anymore.
So therefore we decided to split the problem into two different parts. In essence we start to think of new games as their own startups and we applied what I would call the old Supercell culture to those parts. And then the live games part you start to think about them as startups which have already found a product market fit, therefore they become scaleups.
And then the question is ok, now we’ve created something that’s awesome, but how do we create something even better? And then you get to things like scaling and so on.
Rayport: But you’re really describing taking one company and creating two companies, and the new games side where you’re originating games sounds like Supercell in the early days and the live games sounds like it’s starting to look like something more traditional from the games industry which is not what Supercell has looked like from the beginning.
Paananen: Well I guess the irony is now that I look back we actually decided to double down on the fundamental values of Supercell and on the culture. Because we founded Supercell on this idea that we’re all about the game teams that we call the cells and it’s actually these cells who are completely independent and they sort of run the show.
In a way I feel this solution actually doubled down on that type of thinking but it just got a lot more serious about it. So say on the new games side, as you can think about them as startups, we had always said it’s all about the team, but then we actually decided to get a lot more systematic about creating these new game teams.
For example we formed this new initiative that we called Spark, and what Spark is all about is that we apply a very systematic approach in creating these new game teams and we have a mission of, we want to be the world’s best company in creating these new game teams.
As an example, we have a professional psychologist as part of a team who kind of evaluates the team. Because at Supercell, what makes us very different as a games company is we actually don’t greenlight or approve game ideas, that’s not what we do, we greenlight and approve teams.
But once they are a team at Supercell, or cell as we call them, we trust them 100% and then that cell can build whatever game they want, as long as it gets us closer to our mission.
So we just got a lot more systematic about team building on the new games side.
And then on the live games side, or on the scaleup side, we just realised that we had been way too happy with our thinking of these small cosy teams. And it sounds terrible, but in essence we had put our own interests ahead of our players’ interest. So even if we very well knew with bigger teams we could do way more for our players, we still decided to stay in our own comfort zone because that’s how it always had been and that approach had made us successful.
But what we started to do on the live game side, we started to think about them as their own independent business units, almost companies within the greater company, and we actually did start to grow them quite a bit. And of course with growth comes things like structure and process, and both of those two things, even middle management, and all of those things used to be almost like curse words at Supercell.
But then we decided ok, we have to change something, we have to really place our players first. And if that means that we have to go to the uncomfortable zone, then so be it.
Rayport: Yes. I should mention that for those that want to go deeper, Ilkka you wrote about this in February of this year in one of your famous blog posts. But that is a really interesting one, which is the question of, where is your primary loyalty?
I mean you built this company around a structure that was designed to attract the best gaming talent in the world. The best people, the best teams, the best games. And part of that was to create these small, autonomous cells and push decisions rights, greenlighting games, launching games, all of that down to the cell level.
Now you’re talking about the live games side of the company where you just said multiple layers of management. I remember talking to your head the Clash of Clans team or cell, who was talking about the fact that he came to a company meeting in January of 2023, and introduced the idea of hiring the first middle manager at Supercell, and there was this huge backlash of ‘oh my gosh not a middle manager at Supercell, that means the dream is over’.
So this issue of are you primarily loyal to a structure or culture, or you’re saying actually the primary loyalty is to outcomes for our players?
Paananen: Well obviously the obvious answer is that of course that ultimately we owed it to our players to figure out a better way of working. But I would say the fundamental idea of Supercell, still I believe this very strongly, I oftentimes have called myself the least powerful CEO. And what I mean by that, is that in our organisation the more decisions the team makes the better, and as you say, we want to delegate all of those decisions to the teams.
And in an ideal world the teams would make all the decisions, therefore I would make zero decisions, which would in turn make me the least powerful CEO. But I think that is very much still true. All of these live games, they are very independent companies if you will, and decision making has been pushed to them.
But then they’ve been actually doing quite a lot of radical innovation on how do we actually work within those bigger teams? And there are ideas and concepts such as what they call the sub cells. So imagine a bigger live games cell and then that consists of these smaller sub cells, and there’s a certain amount of independence between those sub cells, and of course they should be all aligned and work towards the same common goal. But we’ve done things like that.
And also we just had this fundamental discussion about structure in general. And oftentimes people think about, and we certainly used to think about structure as almost a negative thing and process as something that slows you down.
But then we came to the realisation that there’s also such a thing as a good structure and good process, and what that means is that a good structure actually enables people to focus on what’s the most important thing, which is the work. It creates clarity and a lot of those types of good things.
Now we try to actually talk about what is a good process, what is a good structure, and I feel that we’ve gotten a lot more comfortable with that idea.
Rayport: So I remember the beginning of 2023, you were beginning to think about these changes. I mean just to give folks a sense of the drama of this, the Clash of Clans cell had 17 people on it and Clash of Clans is doing more than a billion in revenues every year.
So it’s remarkable to think about this question of your success in a sense forced the idea of thinking differently about how in fact you ran the organisation. But my question is, Ilkka, as long as you and I have known each other, you’ve talked about things like getting big by thinking small, as you just said being the least powerful CEO in the world. But you walked into that offsite and did something very CEO-like, which was ultimately to do a pretty radical reorganisation of the company. How do you square those two thoughts?
Paananen: Well there are these certain moments in time there where somebody like me just has to step in and maybe shake the tree a little bit. And then I guess one of the learnings for me personally has been it’s one thing to be successful but the really hard thing is to repeat success. And success can be a dangerous thing because oftentimes you start to look to the past and what has made you successful and you tend to stick to those ideas and then you don’t realise the world around you has changed.
I guess the irony is it would have probably been even easier to change and we probably would have done it faster had we been less successful. But sometimes I guess the leaders just need to step in. The way I think about Supercell, obviously none of our hit games have been my ideas, I don’t work on those games, it’s all about our amazing people, amazing teams. So I don’t tend to focus that much on the product, which many people find surprising.
My product, what I focus on, is actually the organisation, it’s the culture. And now we clearly were at this point where that had to change.
Rayport: I think everyone here from Finland knows you do release, as a private company, annual financial results. But that doesn’t happen for another couple of months. On the other hand I’ve seen Sensor Tower stats which suggest that revenue has doubled, installs have doubled, so it seems like this is working.
Paananen: Obviously I can’t comment on the figures but what I can say is yes it definitely is working. All of our live games have grown this year, it’s been a fantastic year so far. Also, I want to make this super clear, all the credit really goes to our amazing people, amazing teams. I’m so grateful for the teams and people who actually jumped on this change.
We talked about this idea that we actually have to get comfortable feeling uncomfortable , and I have the greatest amount of respect for our people who really decided to make that bold change, despite all the success they’ve had. I’m very happy so far. But on the other hand I feel it’s early days for us.
Our ultimate dream is we want to create these games and this company that will last essentially forever and that will be remembered forever, which will have a big impact on people around the World. And we’d love to be seen as an iconic company. We look up to companies like LEGO or Nintendo and those types of companies.
You know, Nintendo is more than 100 years old by now, and for decades and decades they have released amazing games that people all around the globe love and play. And if you think about us through that lens, we have a long, long way to go still.
And I feel that these changes are just the beginning and we are still really trying to learn everyday how do we actually work better in this new setup and with more people that we have. But I’m super excited and what all of these changes and these bigger teams on the live games side enable us to do is basically can do just more for our players and we can do better for our players.
Rayport: I love the fact that you talked about, it means the challenge in the entertainment industry, the creative industry, obviously the games industry, there are many companies who can generate one hit game, Supercell has been extraordinary to create a string of hit games.
But I come back to that notion that it would be very challenging for anyone coming into like your all hands in September of that issue of, one version of this is to take that mission, that grand mission about creating games that are remembered forever and change the mission, and the other version of it is actually change the company to now deliver on the mission.
When you’re standing at that offsite, you mentioned at the beginning Supercell’s tradition of celebrating failure with these champagne receptions, which everyone who knows about Supercell knows that and loves that.
But it’s not of course about taking wonderful champagne and toasting failure. It’s about toasting the learnings that you can extract from failure. So here you are Ilkka, standing in front of the entire company, with as you said this very large bottle of champagne, having a champagne toast essentially saying that the failure was not at the game level, it was at the company level.
So what were the learnings that you were extracting from the last few years, and what were the learnings that you shared with the company at that time?
Paananen: Of course I want to start from the obvious: Of course all of this ultimately was my fault. Ultimately I’m responsible for how the organisation works and especially organisational design and the culture. So you know, it’s definitely all my fault.
So I think there’s a few learnings here. The first one is what I just referred to. It is dangerous when you get a lot of success, and of course Supercell we’ve been super super lucky in our lives, and we’ve been lucky to put out a number of these massive hit games.
But sometimes success can be also a dangerous thing and people tend to focus too much on what has made you successful rather than ok, what should we do at this very moment of time, rather than looking to the future.
Maybe the other learning is that, oftentimes when people talk about culture, and they talk about how the culture is changing, oftentimes that is perceived in a negative light. So I say that, ok, our culture has changed, you might think that oh, it must have changed for the worse.
And I think the really big learning at least for us is that actually the culture should evolve and it should change all the time, but it should change of course for the better. But it just makes sense that, as the company grows, you learn more as years go by, I mean all of those learnings should be applied to the culture. As our games need to get better every single week, so does our culture.
Rayport: So it’s just so interesting to me that most people I know in corporate life, whether startups or large scale enterprises, they think about culture as something that just happens. It’s sort of like something like the weather, like the weather here in Helsinki can be very surprising and cultural change very surprising.
You’re talking about a really different way of thinking about it, which is culture is an input, not an output, something that you’re actually using to craft this thing that you’re primarily focused on, which is not at the game level, but at the company level.
Paananen: You know, how I think about results, including financial results, they are just an outcome. Maybe sometimes it’s better not to focus so much on the outcome, focus on what actually goes in, focus on the inputs, and focus on the things that you can control. And I absolutely believe you control the type of people you have in the organisation, you can control what type of teams you’re building, you can certainly control the culture.
And that’s also how we spoke about it, let’s focus on the things we can control. And also maybe the other thing is that whenever you change something, there’s always a million things that could go wrong, and some people have a tendency to focus on all of those things that can go wrong.
But then we had this very honest discussion that hey, of course there are things that can go wrong, but let’s not focus on them. So instead of focusing on those million reasons that go wrong, let’s focus on that one thing that will make this great. And having that mental mindset I think is quite helpful.
Rayport: But the big risk here was that having designed the company around this unique culture, and the unique culture was designed as we talked before to get the best talent, now is it still a magnet for talent having made all these changes?
Paananen: Absolutely and actually even more so. And actually on both sides of the business. So on the new games side, like on Spark, we also did something that we hadn’t ever done before, we actually opened up that Spark program, which is all about creating these new game teams, we actually opened it up for external people to apply, and it’s been actually a really big success.
And we’re looking for people who maybe instead of wanting to found their own startup, maybe they just want to create a fantastic new game and that’s all they want to focus on. And our goal with Spark at Supercell has been that we want that to be a better option for you than creating your own startup.
So if you’re the type of person that wants to just focus on creating the game, working with the very best people in the world, this is your place. It’s been incredible just to see how many people have applied and joined and have been working through this program from all around the world. People are literally moving to Helsinki – you know this weather that we have here – to create new games with the very best people and it’s been super inspiring to see that.
And then you know on the live games side, the same thing. Now that we have these bigger teams we can actually make a much, much bigger impact. And you know, obviously hundreds of millions of people play our games every single month, so the type of impact that you can have on the live games side is massive, and it’s only gotten way bigger and better with these bigger and stronger teams.
Rayport: I remember when we were together at HBS (Harvard Business School) last Spring, part of what you were saying was that, without building bigger teams or bigger cells, in a sense you were under-serving that brilliant intellectual property that the company had created, which is kind of a fascinating thought.
Now I have a very different question for you … in the US, in Silicon Valley especially, everyone is talking about this idea of founder mode. And if founder mode is supposed to be the received wisdom for what folks like you Ilkka should be doing, you just did the opposite of what founder mode would dictate. Meaning that you don’t have your hands all over every little thing in the company, you’re saying far from it, that’s not your job.
Paananen: I have mixed feelings about the founder mode thing. On the one hand I get where it’s coming from, but I think what I and our leadership feel at Supercell is the complete opposite. So we still very much believe in just hiring people who are smarter and better than you and then trusting those people 100% and delegating it to them and empowering those people and also empowering those teams.
And that’s also what we did, even starting from our own team, which is the leadership team, so we’ve actually hired a lot of people with experience from bigger scale organisations. And I feel that for me it’s been a great change also, I feel that these days I again learn something new from these very smart people every single day, and you know of course hopefully also making me better, but more importantly making the company better.
Rayport: What I find fascinating about it is that in a sense that the rationale for founder mode is that on day one the CEO or founder is the product visionary and so that person, she or he, needs to swoop in later to keep people faithful to the product vision.
It strikes me that your vision from day one was at the company level, like your product, Ilkka’s product, is the company, not any individual product within the company. And in that sense then you’re coming into the offsite and doing the reorg was a bit of founder mode but with a very different approach.
Paananen: Yeah I guess you’re right. And you’re right also when we founded Supercell more than 14 years ago it’s actually interesting even thinking about that now we actually spoke probably more about the type of company and cul;ture we wanted to build than we spoke about the type of games we would like to build.
And as you say, especially for me the product is this sort of cell structure, the culture, the organisation. And then our whole ethos is we want to hire the very best in the world to create these games and we want to create an environment where these people can do the best work in their careers, and with some luck create the best possible games.
Rayport: Yeah, it’s just incredibly inspiring, but incredibly interesting to think that if ultimately the entire game, that is the entire dynamic of the company is around attracting best talent, then in some sense, if you could create the best product called a company and you put best talent inside that, then in a sense the brilliant products are a by product of having gotten all those other things right.
Paananen: Yeah true. Ultimately my view of a games business is that for you to be successful you need essentially three things. Obviously you need to be lucky, and we’ve definitely had our fair share or even higher share of luck, of course. But luck you can’t control. But the two things that you can control is what type of teams do you have and what type of culture you have. And we, and I, tend to focus on those latter things.
