Startup Journey

SDG Games’ Distribution Strategy

About a month ago, I wrote about the Revenue Model for SDG Games. At that time, we identified that there were two models that were most attractive, one that we would pursue near-term (Markup) and one that we would like to pursue longer-term (Licensing). As we get closer to building out the full operating model for the business, I think it’s important that we dive another level deeper into the Markup model.

Like many others, the nature of the board game industry has been radically transformed over the past 20 years.

People have been playing board games since well before the time of Christ. An early form of backgammon was popular across the Roman Empire. The game of Go was invented in China around 400 BC and a form of the game Snakes and Ladders was invented in India around 200 BC. Versions of games similar to Chess are found in Scandinavia, India, and Persia around 500–600 AD. Naturally, prior to the industrial revolution, all of these games were handmade, one by one.¹

The industrial revolution, especially advances in paper making and the printing of products, created the board game industry. As work and home life became distinct, the market for leisure activities, including gaming, also grew. In the early 1800s, most boardgames focused on teaching Christian principles and morals, with best-sellers including The Mansion of Happiness and The Checkerboard Game of Life². By the end of the century, the focus of many games had shifted to materialism and accumulating wealth.

Throughout the modern history of the board game industry, small innovators have created games that captured the world’s attention. Examples include Milton Bradley (The Game of Life) in the mid-1800s, McLoughlin Brothers (District Messenger Boy) in the late-1800s, Parker Brothers (Monopoly, Risk) in the early 1900s, and Selchow and Righter (Scrabble) in the mid 1900s. However, in the 1980s, Hasbro began consolidating the board game industry, buying all the companies previously listed in this paragraph. Hasbro now has an estimated 80% share of the board game market³.

During that same period, the retail industry radically changed, with the growth of big box retailers including Toys-R-Us and WalMart driving many small, independent toy and game stores out of business. Independent game publishers have had a much harder time competing with Hasbro for limited shelf space in the games sections of the big box retailers, tightening Hasbro’s lock on the industry, and making it harder for gamers and their families to discover new titles.

The Internet has started to change that, impacting discovery, manufacturing, and marketing. The BoardGameGeek website was launched in 2000 and today includes a database of over 120,000 board games and a marketplace for gamers to buy and sell board games. The Internet also made it much easier for game developers to find and connect with low cost manufacturers around the world (most notably in China). The Internet also connected creators to on-demand production capabilities including high quality printers and 3D printing. The Kickstarter website and business was launched in 2009 as a platform to help creators find backers for their creative projects.

The end result is that today most new games take one of three paths to market:

Licensing: A game designer can license their game to an established game publisher which has existing manufacturing and distribution capabilities. For example, some retailers will only consider new games from publishers with whom they already have a relationship.

Self-Publishing/Crowdfunding: A game designer can decide to try to go it on their own. They can run a Kickstarter campaign to get enough pre-orders to fund an initial manufacturing run, find a Chinese manufacturer to produce the game at low cost, ship and warehouse the produced games, and convince distributors and retailers to carry the game.

Self-Publishing/Print-On-Demand: A game designer can take a lower risk path to going it alone by using a Print-On-Demand service like The Game Crafter (TGC). TGC provides a storefront through which customers can buy your game. No inventory is maintained. When an order is received, it goes into the production queue. It get’s printed, packed, and shipped directly from TGC to the customer.

Of these three approaches, the Crowdfunding path requires the most work and involves the most risk, but results in the highest profits for each game sold. However, you need to make sure you sell enough to cover the cost of all the games you manufacture.

Licensing requires the least work, but you lose all control over your game. You don’t know how it will be marketed (or even if it will be). One game publisher shared that they typically pay 7–10% royalties on Gross Sales Revenue (the amount they are paid by a distributor, which is often 40% of the retail price). If your game is marketing by a major publisher, it likely will have much higher total unit sales than if you go it alone.

The Print-On-Demand (POD) approach requires some up-front work to create the attractive digital files uploaded to the printer, and some level of self-marketing, but very little work managing the manufacturing, sales, and distribution. However, this approach likely results in the lowest sales volumes and lowest profits. The cost of manufacturing with POD is probably 4–5x that of having the game manufactured in China. That means that the cost of production makes distribution through traditional brick-and-mortar and online retail channels economically unviable.

The SDG Games Distribution Strategy

Given that SDG is a one-person organization across consulting/coaching and game design, for now the Crowdfunding approach is not realistic. That greatly simplifies our distribution strategy.

Optimally, one of our games will be attractive to a publisher. For that to be true, we likely will have to be successful in our initial independent marketing efforts. For now, we will focus on the POD model using The Game Crafter. We will market via social media, our website, and our e-mail newsletter. We will sell through The Game Crafter store, and sales will be fulfilled by The Game Crafter.

If/when we have enough success through POD with any of our games to prove market demand, we can begin approaching existing publishers about licensing. If we are successful licensing one or more games, then the publisher will take full responsibility for all aspects of game production and distribution.

Most startups will need a much more sophisticated distribution strategy, dealing with acquisition marketing, retention marketing, distribution, sales, and customer support. Let me know if I can be of any assistance in helping you develop your distribution strategy!

Sources:

¹The information on the ancient history of board games largely comes from “The Complete History of Board Games” by Byron at Geek Gear Galore https://geekgeargalore.com/boardgames/history-of-board-games/

²Some of the information on games in the industrial revolution comes from “Board Game History: The Birth of the Modern Board Game” by Shannon Appelcline at Mechanics and Meeples http://www.mechanics-and-meeples.com/2013/01/14/board-game-history-the-birth-of-the-modern-board-game/

³Some of the information on industry consolidation comes from “Hasbro: The Creature that Ate the (Gaming) World” by Shannon Appelcline at Mechanics and Meeples http://www.mechanics-and-meeples.com/2006/06/08/the-creature-that-ate-the-gaming-world/

SDG Games’ Product Plan

As we continue moving through the strategic startup journey for SDG Games, we have come to the point where we really need to formally define our initial product and to set a draft product strategy and roadmap. I will deal with these topics as three separate elements: initial product definition, product strategy, and product roadmap.

Initial Product Definition

The first product to be released by SDG Games is Journeys with Jesus, a route-building board game. As with most board games (and other consumer products), the product is fairly well self-encapsulated. Customer interaction is minimal and add-on services are difficult to envision or deliver.

That being said, one somewhat unique aspect of the product definition is the development of additional external content. The game involves completing 23 journeys taken by Jesus in the gospel accounts. We have already begun writing blog posts describing those journeys as an additional way for players to engage with the game and to further learn about the geography of the Bible. We anticipate potentially publishing these articles in book form as a supplementary product once they are complete.

Dennis Furia, a corporate brand strategist turned game designer, has recently introduced the Board Game Equity Pyramid as a tool for game designers to define the essence of their game, both to ensure they hit the target during development and to effectively communicate the value of the product in marketing efforts.

In many ways, the tool is similar to the Messaging Pyramid and Purpose Pyramid I use in my strategy work. I like Dennis’ linkage of Simon Sinek’s “golden circle” (why-how-what) to the three levels of the pyramid. That is consistent with how I use the Messaging and Purpose Pyramids and will help me in describing those tools to clients in the future. However, the Equity Pyramid doesn’t follow the same structure (e.g. 1 purpose — 3 pillars — 9 plans) as the tools I use. Instead, Dennis breaks the second layer into two parts: Theme and Gameplay and then the third level provides greater detail on these two key elements. I think this works well for board games.

So, here’s the Board Game Equity Pyramid for Journeys with Jesus (using Dennis’ template):

Product Strategy

Up to now, our entire focus has been on Journeys with Jesus. Now it’s time to think beyond this initial product and consider what comes next — when, why, and how. Before we can begin planning a product roadmap, we need to define a strategy that will help make product and timing decisions easier. Here is the Product Strategy for SDG Games:

Note that this cascades off of the SDG Games business strategy. The middle pillar of that strategy was “develop family games that honor God.” The three plans under that pillar in the business strategy (be creative, encourage fruit of the Spirit, reflect Biblical morality) hint at the pillars in this product strategy, but the pillars of our product strategy need to be more directive and expansive.

The first pillar (fun, diverse, and affordable) captures the requirements for building a successful game business. People won’t play (or buy) games that aren’t fun. Given our target market, we know that not everyone in this market will like the same kinds of games, so diversity will be key. We also know that, especially in the Christian homeschool market, budgets are limited, so we need to focus on affordability.

The second pillar (encouraging the fruit of the Spirit) is an essential element of developing games that will honor God. In Galatians chapter 5, Paul contrasts “the works of the flesh” with the “fruit of the Spirit”. He lists examples of the kinds of immoral behavior that are the works of the flesh and then he lists nine attributes that are the fruit of the Spirit: love, joy, peace, patience, kindness, goodness, faithfulness, gentleness, and self-control. While competitive games naturally involve some level of rivalry, we need to avoid the kinds of “cut throat” game play that are in conflict with love, joy and peace and instead seek game play that rewards patience, kindness, goodness, faithfulness, gentleness, and self-control. It likely will be one of our greatest challenges to develop games that engage players’ competitive spirit and yet reward love and kindness.

Finally, teaching scriptural truths is a key to our purpose of developing games that honor God, especially for our target market of Christian families seeking to teach their kids Biblical truths. Scripture needs to be a core element of every game we develop, we would like to cover the whole Bible over time, and we need to find ways to integrate scripture that are engaging to players of all ages.

I believe that if we are successful with these three pillars, we should have the best opportunity to accomplish the purpose of our product strategy.

Product Roadmap

With that strategy in mind, we can start to lay out a hypothetical timeline of game releases. We will need to test and refine this roadmap over time, but this establishes an initial baseline roadmap.

In the book Product Roadmaps Relaunched¹, C. Todd Lombardo, Bruce McCarthy, Evan Ryan, and Michael Connors identify 5 primary components of a product roadmap:

Product Vision: The benefit from the product when fully realized.
Business Objectives: What goals will the product accomplish.
Timeframes: Broad ranges to explain prioritization and to manage expectations.
Themes: What needs to be true for the product to realize its vision and obtain the business objectives.
Disclaimer: Clarifies that everything in the roadmap is subject to change.

Product roadmaps can take many forms to fit the culture, style, and needs of the organization, as long as they present the key elements required for an effective product strategy.

Here is the current product roadmap for SDG Games:

As with any startup, I expect much will change as we move forward, but this gives us a sense of what to work on, when, and with what goals in mind.

Sources:

¹Lombardo, C. Todd, Bruce McCarthy, Evan Ryan, and Michael Connors,. Product Roadmaps Relaunched: How to Set Direction while Embracing Uncertainty. Sebastopol, CA: O’Reilly Media, 2018.

How Big is the SDG Games Market?

In an earlier article, I explored the target market for SDG Games, and in the process I came up with a rough market sizing. That was important to make sure that I was identifying an initial market that was big enough to matter, but specific enough to ensure that we could focus on real specific needs of real people. Today, I want to start building the market sizing for potential investors. Investors care about the initial market, but they also want to understand “how big is big” — what could happen if the product and company really take off.

A common way that startups explain market sizing to potential investors is by talking about it at three levels:

Total Addressable Market (TAM): The total market for your type of product.
Serviceable Addressable Market (SAM): The portion of the TAM that your business can realistically serve. This might be constrained for example by geography or specialization.
Serviceable Obtainable Market (SOM): The portion of the SAM that you might actually be able to obtain. This is a reasonable revenue goal for your business given your capabilities, other competitors, and the needs of the market.

When talking about exciting new opportunities, many of us like to grab hold of big market numbers mentioned by market research firms. Often these numbers come from research reports that the firms are hoping to sell for thousands of dollars. Each company has its own methodology for sizing the market and may even have its own definition for the market. Without buying the report, you probably can’t know whether the market they are describing is the one that you’re going after.

Even so, the most common market sizing mistake that entrepreneurs make is to say something like “the mobile app market is $200B and rapidly growing; if we just got 1% of that, we could grow our startup to a multi-billion dollar business”. A statement like that will likely ruin your chances to raise money from any experienced investor. It shows a lack of understanding of the complex mobile app market and a lack of appreciation for the detailed challenges involved in building a multi-billion dollar business.

In my opinion, the best approach is to build the market sizing bottom-up. For TAM and SAM, how many potential buyers are there and how much are they likely to pay? Multiply those two numbers together and you have the market size. For the SOM — what steps are you going to take to reach the addressable market? Given that plan and competitive realities, what share of the SAM could you reasonable achieve?

So, how does that apply to SDG Games?

Even though I don’t see value in using top-down market numbers from research firms in planning and fund raising, I still like to seek them out as a sanity check. If our bottoms-up numbers are bigger than the market sizing from industry experts, then we know that something is wrong with how we are thinking about the market.

A quick Google search uncovers four very different market forecasts:

Grand View Research estimates that the global playing card and board game market will reach $22B by 2025.
Arizton estimates that the global board game market will reach $30B by 2026.
Statista estimates that the global board game market will reach $10B in 2021.
Pipecandy estimates that the global board game market was $13B in 2019, with $4.4B of that in North America (primarily the U.S.).

This tells me that if any of our estimates exceed $10B for 2021 (the most conservative estimate), we should challenge our own calculations.

Pipecandy’s North American estimate can also give us a sense for spending per household. If the U.S. market is $3B, and (according to Statista) there were 83M families in the U.S., then each family spent, on average $36 on board games (some spent more and some less).

Since SDG Games’ mission is “to help Christian families connect more deeply with the Word through entertaining games”, then we will define the Total Addressable Market as the spending on board games by Christian families in the U.S. Specifically, we will limit the TAM to be households with children in the home. We previously calculated this to be 16 million households. At an average annual spend on board games of $36, this would size the TAM at $576M.

We also previously narrowed our target market to be Christian families who use games in their homeschooling (playschooling). We estimated this to be around 85,000 families. However, from our research, we also identified that these families spend much more on games than the typical family. (We estimated 12 game purchases per year at an average price of $35.) That gives us a SAM of $36M.

If we aggressively pursue this market, we will carefully select marketing and sales channels to reach the Christian homeschool market. This likely would include homeschool conventions, homeschool websites and magazines, and homeschool bloggers. Playschooling families will likely spend most of their gaming budget on titles better aligned with core school subjects (math, language arts, history, other social sciences). Given these distribution and competitive challenges, we’d be doing really well to sell one game a year to 10,000 families. That would set our Serviceable Obtainable Market at $350,000.

Therefore, the market size for SDG Games can be represented by this simple diagram:

This market sizing information will help us to plan appropriately. We shouldn’t burden the business with more expenses than that market opportunity can support. It also gives us a sense for how much funding we could raise and the types of potential investors. We will speak more to that in coming articles.

SDG Games’ Revenue Model

One of the most common questions asked of a startup is “what is your business model?” In most cases, I think what people really want to know is, what is your revenue model — how do you make money?

A common definition of a business model is “how a business creates value for its customers and captures value from its customers.” It is helpful to break this definition into its two parts. A company’s operating model describes how a business creates value for its customers. The company’s revenue model describes how the company captures value from its customers. The value proposition is what links the two together, so another way to think about the business model is “how a business delivers its value proposition (operating model) and gets paid for that value (revenue model).” Today, we are focused on SDG Games’ revenue model. In a future article we will look at the company’s operating model.

A company’s revenue model can be represented by a simple diagram showing the most significant decisions involved in capturing the created value:

In the center of this diagram are the three key elements of the revenue model:

How will you acquire new customers?
What customer transactions will create value for the company and in what form will that value be realized?
How will you retain customers and gain ongoing or future revenue from them?

There are many different forms of revenue models that different companies have successfully implemented in different industries and markets. It is a fun and interesting exercise to think about how some of these models might work for SDG Games:

Markup: This is the traditional model for tabletop games. The customer pays to purchase the game at a price above the fully loaded cost to make and distribute it.
Advertising: Theoretically, we could give games away (or price them at less than cost) and instead make money by selling advertising. This would involve creating an additional value proposition for advertisers.
Loss Leader Product: We could sell games at an unprofitable price with the expectation that we would sell other products (e.g. books) to game buyers and the profit from those sales would more than make up for the loss on the games.
Rental: We could rent games to families at a fraction of the normal purchase price with the expectation that we could rent each copy of the game enough times to make it a profitable business.
Subscription: Families could subscribe to SDG Games and would receive games and extensions as they became available.
Licensing: We could license our game designs to a game publisher who would then manufacture and sell the games to their customers.

Evaluating these different options involves deeply understanding what would be required for success in each model and what is true about SDG Games’ capabilities, resources, and our guiding principles. It also requires developing a perspective on the potential financial rewards from each model and our confidence in achieving those results. That is a lengthy process, but let me jump to the conclusion of the process with the summary page from a Strategy Sieve for these options:

Strategy Sieve to Evaluate Possible Revenue Models for SDG Games (bigger scores are better)

The top two options are for SDG Games to be a game publisher, manufacturing games and selling them to Christian families for a price with a markup above cost, and for SDG Games to license games to a game publisher who would then make and sell them to Christian families.

These two revenue models are represented below:

The Strategy Sieve not only helps us identify the best option, but also helps us see the strengths and where we might face challenges for each approach.

The Markup revenue model is attractive because we have control over the entire process. We will make decisions about how the product is made, marketed, and delivered to customers, so we have the highest possible confidence that all will be done in a way that loves our neighbors and honors God. However, we don’t really (yet) have the resources and capabilities to make and market games. We don’t have relationships with manufacturers or retailers.

The Licensing model is attractive because existing game publishers have proven that they can succeed at making and marketing games. They have the relationships that we lack. But we have to trust that they will do all in a manner that doesn’t violate our principles.

Honestly, although Markup (barely) outscored Licensing, my comfort level is much higher with partnering with an established publisher rather than trying to do it all ourselves. However, I think we will need to pursue the Markup model first to prove that there is market interest in our games before any publisher will consider licensing them.

Thankfully, there are some resources available to help us overcome some of our resource and capabilities challenges, but we’ll talk about that when we get to the article on the operating model. For now, we will move forward with the near-term Markup model while maintaining the future option of switching to the Licensing model.

SDG Games’ Minimal Viable Product

One of the key elements of the Lean Startup movement is quickly getting a “minimal viable product” (or MVP) into the hands of customers and learning whether or not your hypotheses about customers, problems, and your value proposition are correct. The MVP is really just the first in a number of iterations as you learn and adjust on the road to a successful market launch.

The most important hypotheses for a startup business are those dealing with the customer and the value proposition. Do you understand the customers and their needs, and does your product or service (and the way you are delivering it) meet those needs in a compelling way? While the customer discovery process can give you some level of confidence, you won’t really know until you put a product in the hands of a customer.

The minimal viable product is the fastest, cheapest form of your product that clearly communicates the core of your value proposition. This isn’t the product that you’ve dreamed of. It’s not beautiful. It doesn’t have all the features that you’ve imagined. In fact, LinkedIn founder Reid Hoffman famously said “If you are not embarrassed by the first version of your product, you launched too late.”

Read the full article linked here to learn more about MVPs, Validated Learning, and SDG Games’ MVP.

SDG Games Business Strategy

For the past several weeks we’ve been walking down the startup strategy path for SDG Games, a new business concept that has grown out of my desire to learn more about Biblical geography. The initial business concept was captured in a startup strategy strawman. We identified and then further developed an initial target customer persona. We captured our value proposition and validated a level of problem-solution fit. Now, we are far enough into the journey to develop an initial hypothesis for a business strategy.

What is a business strategy? My favorite definition says that a strategy is a framework for making hard decisions easier. A business strategy is the top level strategy for a business. It guides all decisions in the business, including investments made in product development, marketing, sales/distribution, and operations. My favorite framework for capturing and communicating a strategy is the Purpose Pyramid.

At its simplest, the Purpose Pyramid documents a strategy at three levels:

What is the purpose of the strategy? For a business strategy, this is the purpose or mission of the company.
What three pillars support the purpose? What must be true for the business to be successful in its mission?
For each pillar, what plans are being pursued right now? What actions are being taken to establish or strengthen the pillars?

Additional elements can also be incorporated for a more complete picture:

What is the panorama within which the strategy is operating? What is the external and internal situation impacting the strategy?
What non-negotiable principles define how the strategy will be developed and implemented?

For the purpose of this article, I will focus on the Purpose, Pillars, and Plans.

All aspects of the business strategy need to be faithful to what is true — what is true about the situation creating the opportunity; what is true about the market being served; and what is true about the passions and capabilities driving the creation of the business. SDG Games is a business driven by my Christian faith and focused on serving Christian families. That will be reflected below as we walk through developing the business strategy. When I develop strategies for business that aren’t as explicitly faith-driven, the passions, capabilities, market needs, and situational opportunities for those businesses similarly are reflected in their strategies.

The original purpose I drafted for SDG Games was “educational games for the glory of God.” That’s not a bad description of the business’ products and motivation, but it doesn’t really provide a compelling mission for the company, so I used the five-whys approach to dig deeper:

Why do I want to develop educational games? To provide a fun way to help me and others learn things related to scripture.
Why do I want myself and others to learn things related to scripture? So that we can better understand what scripture is telling us.
Why do I want us to better understand what scripture is telling us? Because scripture is one of the main ways that God communicates with us.
Why does God communicate with us? So that we can know Him, understand ourselves, and have a relationship with Him.
How can we have a relationship with God? By being reconciled to God through the finished work of Jesus Christ, the Living Word.

That exercise helped me focus on what the most important outcome is of better understanding what we read in the Bible — to have a deeper and stronger relationship with Christ. That being said, the games SDG Games is developing are intended for use by Christian families, and those families may have kids who are not yet Christians. God may choose to use the ability of these kids to better understand what they are reading in the Bible to draw them into a saving relationship with Christ.

The purpose statement should capture three important elements: what SDG Games sells (games) to whom (Christian families) and how that creates value for our customers (better connecting to God’s written word [the Bible] and the Living Word [Jesus Christ]).

SDG Games’ purpose is to help Christian families connect more deeply with the Word through entertaining games.

What needs to be true if SDG Games is going to accomplish this purpose?

My test for whether or not we have the right pillars is two-fold. If we have the right pillars then:

If we are successful in all three pillars we should expect to be successful in achieving our mission.
If we fail in any of the three pillars we should expect to fail in achieving our mission.

SDG Games’ three pillars supporting its purpose are:

Develop educational content that honors God.
Develop family games that honor God.
Operate a business that honors God.

Obviously, there’s a common theme across all three pillars — that of honoring God. To keep this article (somewhat) brief, I’m not diving into the non-negotiable principles portion of the Purpose Pyramid, but for SDG Games these principles are honoring God and loving our neighbors. For this business, however, honoring God is more than just a principle that guides how the business operates, it is a definitional element of the content, game play, and business practices required to achieve our purpose.

Specifically, the content SDG Games produces must honor God by being faithful to scripture, humble, and pointing to Christ. Our games are focused on teaching Biblical truths, so as much as they can, they have scriptural content woven throughout. Additionally, I plan on creating supplemental materials, like study guides or books, that complement the games and can be much more direct in their presentation of Biblical truths. All of this content must accurately reflect scripture where scripture speaks. But where the Word is silent, we must deal with that silence with humility and not presume to have all the answers. And all of it should point to the hope we have in Christ. I believe this approach is the best way to honor God with our content.

Developing family games that honor God requires creativity, encouraging the fruit of the Spirit, and reflecting Biblical morality. While most of what we know about game design we’ve learned from playing other games, I believe that SDG Games should be more than just “the Christian version of X” (where X stands for a popular secular game). There’s clearly a place for that in the market, but I believe that for SDG Games to honor God, we need to more actively reflect God’s own creativity. And developing games that are fun for multiple ages to play, that teach important Biblical truths, that encourage the fruit of the Spirit, and that reflect Biblical morality will require tremendous creativity.

One of the biggest challenges is developing games that have enough rivalry and competitiveness to engage players while still encouraging “love, joy, peace, longsuffering, kindness, goodness, faithfulness, gentleness, self-control” (fruit of the Spirit from Galatians 5:22–23). Finding that balance will be critical. Meanwhile, the Bible includes many examples of sinful behavior, but God doesn’t approve of or even tolerate sin and neither should our games. There will be times when our games or complementary content will accurately quote scripture that reports the sinful behaviors of men, but our gameplay can’t reward sinful behavior or present sin in a positive light.

Finally, operating a business that honors God involves integrity, quality, and healthy relationships. If we have great products but are dishonest and underhanded in our dealings with others, then we are likely to hurt people’s connection with the Word. On the flip-side, if we operate with strong integrity, but produce inferior products, then we won’t be serving our customers well. Colossians 3:23 tells us we are to do our work as to God, and we should be ashamed to present a poor quality product to the Lord. Finally, we need to be focused on cultivating healthy relationships with vendors, distributors, and customers. Of all the people we work with, I imagine some won’t be Christians, but hopefully it will be apparent that we are. God may choose to use our interactions with them as an important connection for them to His truth!

While our immediate plans involve developing, producing, releasing, and marketing specific game products to market, those tactical plans will be shaped by the strategic requirements outlined above and reflected in the purpose pyramid below:

SDG Games Value Proposition

Over the past few articles we have developed a better understanding of our target customer. While SDG Games products likely will appeal to a very broad audience of Christian families, we’ve decided to focus first on the busy homeschooling Christian mom who wants to integrate faith, learning, and fun for her family. In this article, we’re going to explore whether we have a value proposition that fits that mom’s desires.

The Lean Startup process identifies three critical “fits” that a successful startup moves through on its way to a sustainable business:

You achieve Problem-Solution Fit when you understand a specific problem that specific customers have and you have identified a specific viable solution to that problem.
You achieve Product-Market Fit when you have launched your solution as a product or service and the target market has validated that they value the product as demonstrated by significant traction (sales).
You achieve Business Model Fit when you have successfully created a scalable and profitable business to deliver the solution to the market.

One of the huge benefits of taking a Lean approach is that you don’t invest in the next level of fit until you’ve tested and proven that you’ve achieved the current fit. So, for example, you don’t invest in launching a product until you’ve validated that you have identified a viable solution to a real customer problem.

In Value Proposition Design¹, Alex Osterwalder and team defined a value proposition as “the benefits customers can expect from your products or services.” In that book, they shared the Value Proposition Canvas (VPC) as a helpful tool in documenting a complete value proposition.

Or rather, a nearly complete value proposition. Their model captured the products and services offered and how the company delivers value in a way that helps create the gains and eliminate the pains that the target customer associates with the jobs they are trying to do. However, I think that the VPC is missing two critical components. The first is an easy to communicate statement of the value proposition and the second is an indication of the way that the company will always stand apart from competitors.

With those shortcomings in mind, I have developed the Customer Value Map (CVM):

The Customer Value Map starts with the Customer Profile we have been working with over the past few chapters, adds on the Products/Services, Value Creators, and Pain Killers (similar to the VPC), and also indicates the Market Discipline. The Market Discipline² indicates the foundational basis for competition by the company whether that be operational excellence, product leadership, or customer intimacy. Finally, the CVM summarizes the company’s value proposition in the form of a simple positioning statement.

Over the past few articles, we’ve developed the left half of the Customer Value Map. We first developed a draft Customer Profile, with our initial hypotheses for the customer persona, her jobs, her anticipated gains, and the pains that hinder the achievement of those gains. We then forced ourselves out of our comfort zone and engaged with real people to test and refine the hypotheses. In this customer discovery process, we more deeply understood the customer and developed empathy for the task before her.

Similarly, we can’t simply draw up the right half of the Customer Value Map on a whiteboard and declare that we’ve achieved Problem-Solution Fit. No, our initial draft will be a set of hypotheses that need to be tested. Once again we need to get out of the building and engage with customers.

I won’t belabor the process that we have followed for SDG Games. I think the extended descriptions I provided for developing the Customer Profile in previous articles give you a good sense for how to engage with customers and gain their insights. I will, however, reemphasize the importance of not mixing Customer Discovery with Value Proposition validation. Hearing from customers about their jobs, pains, and gains must not be tainted by introducing into the customers’ thoughts the unique capabilities you are developing. First you hear from them about their current situation. Later you can share your proposed solution and get their reaction.

For the SDG Games Value Proposition, I specifically used interviews/conversations, Facebook group questions and discussions, and sharing early product prototypes with Christian families to get their reactions and to validate the hypotheses.

Below is the Customer Value Map for SDG Games. The left half is the Customer Profile that we defined in our last article. The right half reflects our value proposition.

Starting in the top right of the value proposition, ours is a Product Leadership business. We don’t expect to be the lowest cost provider of games to this market (that would be an Operational Excellence discipline), nor do we expect to custom produce games to meet the unique needs of each customer (that would be Customer Intimacy). Instead, we will continuously seek to innovate in bringing together the best game play and faithful scriptural content in new and fun ways.

Moving clockwise around the value proposition, our Products are the games themselves and published content (books) that provide additional learning material related to the games.

Moving into the Pain Killers section, at times, our potential customers struggle to find educational materials that are educational, faithful to Biblical truths, and fun and engaging. We believe that our games (and supporting books) will play at least a small part in meeting this need. The nature of homeschooling is very integrated and our target persona (the homeschooling mom) not only needs to educate her kids, but also keep the whole family happy. We believe that our games will be fun for the whole family, helping tie together family time with learning time in a fun way.

Finally, in the Value Creators section, while we can’t “save” the homeschooling mom’s kids, we can help those kids learn content that will help them better understand and appreciate what they read in God’s Word, while also helping them learn other basic skills (math, map reading, memorization). Even better, the kids (and parents) will have fun while learning.

The above Customer Value Map reflects the value proposition for the first game we hope to take to market (if all other steps are successful). In our discussions, some moms question whether the Biblical content we are teaching is as important as some other we could teach. Our first product also isn’t as affordable or quick to play as some moms desire given their budget and time constraints. Product-Solution Fit doesn’t require addressing all of the customers’ Pains and Gains, but we do hope to address these additional value elements in future games.

Going back to the definition of Product-Solution Fit, we have identified some of the challenges that homeschooling moms face (integrating faith/learning/fun, keeping the family happy even when busy educating the kids, etc.), and we believe that we have identified a way to help, at least to some small degree, with those challenges.

So with a level of Product-Solution Fit, we can now start to focus on what it will take to successfully launch a product to market.

Sources:

¹Osterwalder, Alexander, Yves Pigneur, Gregory Bernarda, and Alan Smith. Value Proposition Design. Hoboken, NJ: Wiley, 2014.

²Treacy, Michael, and Frederik D. Wiersema. The Discipline of Market Leaders. Reading, MA: Addison-Wesley Pub., 1995.

Customer Discovery for SDG Games

A couple of weeks ago I shared with you the Customer Profile I’d developed for the initial target customer persona for SDG Games. Kelly Jo is a (fictional) homeschooling mom with a couple of kids. I developed some hypotheses about the jobs, pains, and gains for this persona. How could I test these hypotheses?

Steve Blank says that the number one goal of customer discovery is “turning the founders’ initial hypotheses about their market and customers into facts.”¹ And the phrase he’s famous for saying in how to do customer discovery is “get out of the building.” Customer discovery is all about spending time with potential customers to deeply understand how they live and work so that your offers truly fit their needs.

For customer discovery to test my hypotheses for SDG Games, I pursued three approaches: an online survey, interviews, and participating in Facebook groups.

For decades, businesses have relied on customer surveys to learn about customer needs and preferences. Surveys can be effective at developing quantitative perspectives on specific clearly defined questions. For example: “36% of CTOs at medium sized enterprises prefer monthly contracts.” Surveys are much less effective for gaining qualitative perspectives, especially on emerging topics. To be effective, a survey also requires a large enough response to provide statistically meaningful results. The response to my survey was not broad enough to draw statistically meaningful results, however, one key takeaway from the results received was that there were additional “pains” that I had failed to reflect in my original hypotheses, specifically the challenge of internal family dynamics. For example, one respondent said “I have multiple children under the age of 5” and then explained how that made it hard to keep their attention for long.

Because of the shortcomings of customer surveys, especially for startups with innovative and unconventional concepts, the Lean startup community has tended to focus more on customer interviews. This is the approach that I most often recommend to startups. So as part of SDG Games’ customer discovery, I spoke with moms who are currently or have previously homeschooled.

Before I explain what I learned, let me describe a customer discovery interview. These interviews are NOT about the product or concept. When you lead a customer discovery interview, very few statements should come out of your mouth, instead, you should almost exclusively ask questions. You are here to listen, not to be heard.

Here’s an example of how my side of an SDG Games customer discovery interview might go:

Thanks for your time. I really appreciate it. This is all about learning from you, so we aren’t going to talk about my product at all. I’m certainly not trying to sell you anything. If you’re interested in hearing what we’re working on, if we have time, I can certainly give you a quick overview at the end, but let’s really focus on you and your needs totally independent of what I’m working on.
As a homeschooling mom, how would you describe your job? What is your job description?
Wow, that’s a lot. Which of those different functions is most important?
Which takes up most of your time?
That’s really interesting. When things are going really well in all those different aspects of your job, what does it look like? What are the near term benefits of what you’re doing?
And when you think longer term, what are the long term blessings of being a homeschooling mom?
Okay, but I’m guessing things don’t always go great. What are some of the biggest challenges you face in doing your job? What makes it hard?
Are there specific roadblocks that sometimes makes it feel like it’s impossible for you to be successful in all those things you described as your job?
Let’s talk about one of those. What have you tried to overcome the time management challenges?
Did that work?
Were there aspects of that approach that you thought were really good? What aspects really didn’t work?
Are there approaches that you’ve thought about but haven’t tried?
Why didn’t you try it?
Thank you again for your time and your insights. This has been super helpful to me! Do you have any questions for me?

As you can guess, this doesn’t follow a fixed script, it flows with the conversation, and every conversation is different. At each step in the process, I might probe more to make sure I understand what they are saying, or I might follow a rabbit-trail that they introduce to see if it produces any really insightful perspectives.

Through the customer interviews, I think my hypotheses on the jobs and gains were pretty much confirmed. On the pains, however, I realized that I had missed some that were at least as big as any I’d previously identified. Specifically, time and budget are big issues for most homeschooling moms. Teaching is a lot of work, as is managing a home. Unlike a job or even a traditional classroom, the teacher’s authority is balanced with motherly love, and the students have demands on Mrs. Teacher that go beyond anything a classroom teacher will typically need to address.

Money is also a big deal in most homeschooling families. Parents need to bear the costs of curriculum, books, teaching tools, and materials usually without any kind of government or donor support. Additionally, most homeschooling families are single income households. That typically means that there’s not a lot of money left over for special “treats” like board games.

So, my two main takeaways from the survey and interviews are:

Do everything possible to reduce the game cost.
Make sure the game doesn’t take too long to play, or at least that there’s a “fast” option.

Surprising to me, the most valuable perspectives in customer discovery actually came from Facebook. There’s a very active Christian Homeschooling Families group on Facebook with over 45,000 members. Many in this community actively share their lives with each other, looking for input and help on things well beyond the classroom. “NHSR” (not homeschool related) is a very common tag in this group. That gave me a very good perspective into what is really shaping the jobs/gains/pains for these potential customers.

As I’ve studied the discipline of customer discovery, I’ve often come across the concept of “going home” with customers or “a day in the life” of customers. This has always seemed like an optimal situation, but one that is very hard to pull off, and probably impossible to do at any scale. However, this Facebook group gave me an opportunity to glance into the lives of hundreds or thousands of active community participants.

One of my big takeaways from this exercise is that the Christian homeschooling families target market is not as homogenous as I’d represented in the customer profile. There are significant differences based on the ages of kids being homeschooled, the number of kids in the home, and the importance of integrating faith into the educational process. There are also different philosophical approaches to homeschooling with phrases like “unschooling” and “Charlotte Mason method” having specific implications for how families approach homeschooling.

I also discovered a relatively new approach to homeschooling called “gameschooling”. There’s a very active “Gameschooling” group in Facebook with over 31,000 members. This isn’t specifically for Christian families and there’s clearly a mix of Christian and secular homeschoolers, but the “about” for the group starts with “We believe that homeschooling can be *almost* all fun and games!” which is very encouraging for SDG Games’ mission.

Although it’s clear from this community that most of the families are using games as a relatively minor part of their overall education, these families are clearly much more likely to consider buying an educational game than the broader homeschooling population. From some specific posts and general comments in both Facebook groups, I would estimate that the typical Christian homeschooling family might buy one game a year, while the typical gameschooling family might buy one game each month.

From this observation, it seems like we should narrow our initial focus a bit further to Christian Gameschooling Families. In my previous article I identified the market of Christian Homeschooling Families at 200,000 to 1 million. Using the Facebook group size numbers (and an estimate that 20% of the members of the Gameschooling group are Christians), I would estimate there are approximately 30,000–150,000 Christian Gameschooling Families in the U.S., which is still a large enough market to initially target.

With all that in mind, above is an updated version of our Customer Profile.

My time on Facebook also was encouraging in terms of the direction of our first game. On January 2 of this year one member of the Christian Homeschooling Families group posted: “Looking for recommendations for family games (not electronic, but board games etc). My children are 11–16 all boys. Thank you!” Over the next few days, there were 313 follow-up comments from community members providing their recommendations. In all there were over 700 recommendations or affirmations of games by name, with the most recommended games being “Settlers of Catan” (62), “Ticket to Ride” (53), “Uno” (33), and “Monopoly” (29). Since our first game has aspects similar to the Ticket to Ride games, it seems to affirm that what we’re developing is likely well aligned with the homeschooling market.

Next we need to answer the critical question of whether or not we have a value proposition that can resonate with our initial target market. Stay tuned!

Sources:

¹Blank, Steven Gary., and Bob Dorf. The Startup Owners Manual: The Step-by-step Guide for Building a Great Company. Pescadero, CA: K & S Ranch, 2012.

The SDG Games Customer Profile

One of the most important early decisions that a startup can make is who they are setting out to serve. A startup generally is built upon a key hypothesis that someone needs something (and that the solution the startup has in mind will meet that need). Clearly identifying that “someone” sets the stage for testing that hypothesis and (if the hypothesis is right) eventually being very focused in marketing to the right audience.

In the last article on SDG Games, we identified the problem that the business was setting out to solve as: “When most Christians read the Bible, they don’t know much about the geography being discussed, and so they lose valuable context in the stories that God has provided ‘for teaching, for reproof, for correction, and for instruction in righteousness’ (2 Timothy 3:16).”

So, as we set out to identify the target market for SDG Games, we can start with a fairly broad definition of “Bible-reading Christians.” Even if we narrow that down slightly to those in the United States, we are still dealing with a very broad market. According to the Pew Research Center’s Religious Landscape Study about 71% of Americans identify as Christian, and 45% of those read their bible at least once a week, so the Bible-reading Christian market would be nearly a third of the U.S. population.

In one sense, that’s good. That means that there is a very large potential market for SDG Games. But in another sense, that’s not good. There’s no way we can develop a deep understanding of the needs of a market this broad and diverse. As a startup, we need to focus on meeting the specific needs of a specific group of potential customers. If we can delight them, they can become advocates and evangelists for the broader market.

Given the nature of the first game that we are developing, we think it will appeal best to families playing games. So, the first step in segmenting the market would be to focus on those Christians who regularly read the Bible and who are parents. According to the Pew report, 30% of adult Christians are parents, and a slightly higher percent of parents regularly read scripture daily than non-parents, so a conservative estimate is that Bible-reading Christian parents make up an estimated 9% of the adult population — or about 22 million people. According to Pew, 58% of Christian adults are married (52%) or living together (6%), so doing simple math, 22 million parents translates to about 16 million households. That’s still a pretty big and diverse population!

Going one step deeper, since a key focus for SDG Games is that our games be educational, perhaps our initial target market should be Christian Homeschooling Families. There’s an estimated 4.0–5.0 million homeschooled children in the United States. Based on household size data from the National Center for Education Statistics, I estimate that there are an average of 2.27 homeschooled children per homeschooling family, so that means there are around 2 million homeschooling families in the U.S. These families homeschool for a variety of reasons and there’s is significant demographic diversity, but homeschooling has been particularly popular among conservative Christian families. I would guess 10% — 50% of all homeschooling families are Christian, so somewhere in the range of 200,000 to 1 million households. That’s a big enough market to go after, but a focused enough market to deeply understand and target.

Identifying the target market (Christian homeschooling families) is good, but to deeply understand the needs of this market, we need to take our thinking down to the level of the individual decision maker and how she will value what we have to offer. Marketers often use the concept of a persona to achieve this. They give the persona a personal name, describe her occupation, her family status, her demographics, and then a variety of factors on what, where, and how she buys the things she buys.

So here’s a hypothetical persona for our target customer:

Name: Kelly Jo
Age: 35
Occupation: Homeschooling Mom/Homemaker
Family: Married with 2 Kids: Zach age 12 and Erin age 9
Websites/Magazines: Facebook, SimpleHomeschool.net, The Old Schoolhouse
Where Shop: Amazon, ChristianBook.com, Sonlight.com

As part of deeply understanding this hypothetical customer, we need to create a profile of how products like ours might fit into her life and work. The approach that I like to use is borrowed from Value Proposition Design, a book by Alex Osterwalder and his team at Strategyzer. It can best be understood as asking Kelly Jo three questions and imagining her answers: What jobs are you trying to do? What do you hope to gain by doing those jobs? What are the obstacles, risks, and bad outcomes that make it painful to accomplish those jobs and achieve those gains?

I imagine Kelly Jo describing her jobs as teaching her kids the content and skills they need to be successful in life, raising her kids in the faith, keeping the house running smoothly, and enjoying life together.

In the near term, the gains she hopes to get out of these jobs include the satisfaction of seeing her kids learn and mature (and learning alongside them), the joy of seeing them come to faith in Christ, and having fun doing it all. In the longer term, she has hopeful expectation of seeing her kids be successful in their families, careers, and faithful walk with Christ.

However, the pains encountered along the way include the challenges in integrating those activities and goals (e.g. teaching important content/skills without compromising Biblical truth, keeping on academic schedule in a way that is enjoyable for all, getting everything done in the home and classroom). Sometimes Christian-specific resources fall short on the quality or fun aspects. Sometimes academic resources contradict Biblical teaching. It’s hard to make school fun. And the laundry and dishes sometimes pile up while we complete a big school project.

We can’t hope to introduce products that will deliver all those gains or eliminate all those pains, but understanding them all helps us as we develop our games to keep Kelly Jo’s overall needs in perspective.

Based on those hypotheses, we can represent all of this with a customer profile:

Of course, all of these are hypotheses which will be tested. More about that in my next article in this series.

The SDG Games Startup Strategy Strawman

What are the hypotheses that have started this strategic journey?

Modern startups recognize that the path from initial concept to successful launch is not a straight line. In fact, it involves almost literally going in circles.

In 2008 Eric Ries wrote a blog post titled “The lean startup” which reflected changes that he’d been observing in the entrepreneurial environment. The name stuck and a few years later he expanded it into the best selling book The Lean Startup.

For each of my first few startups we followed the old model. My co-founders and I had a great idea. We spent a few months researching and writing a business plan. We pulled together the resources to make it real. Built everything and launched.

That business plan was full of “truth” statements that started with phrases like “we will…”, “customers will…”, and “the market will…”. We really believed all those statements! In reality, once we launched we found out that customers didn’t…, the market wouldn’t…, and we couldn’t actually do all those things. Sometimes it all worked out okay as we figured it out as we went. But statistically, 9 out of every 10 new businesses failed to survive that startup phase.

The new model described by Ries focused on high tech startups that could leverage new technologies and new development approaches to try a radically different model. Instead of spending months developing a lengthy document full of statements claiming to be true, startups could recognize that what they had was a collection of hypotheses that needed to be tested. Technology made it (relatively) easy to rapidly and inexpensively test those hypotheses to find out whether or not they actually were true.

The lean startup methodology replaces the lengthy business plan phase with a period of rapid iteration and learning. For any given hypothesis, the team builds a test, runs an experiment, evaluates the results, modifies the hypothesis, and then repeats the whole process over again until they know what is true. This is called the “build-measure-learn” loop.

Startups are still wrong (at least) 9 times out of 10, but those mistakes are made in rapid inexpensive experiments that don’t kill the company, but rather lead to the most successful launch possible (or sometimes abandoning a bad idea before much money and time is lost).

While this lean startup methodology is best understood in terms of product development, I believe that it also applies to strategy.

When I work with startups, I encourage them, very early in their life, to develop what I call the Startup Strategy Strawman.

In business, a strawman proposal is a simple concept provided as a starting point for debate with the hope and expectation that team members will quickly “poke holes” in it, pointing out its weaknesses and identifying ways to make it stronger. Apparently, the U.S. Department of Defense originated the term and had a series of names to reflect the strengthening of the work — from strawman to woodenman to tinman and eventually to stoneman.

So, the Startup Strategy Strawman is a starting point for the business strategy. It captures the key initial hypotheses behind the startup concept, with the expectation and hope that flaws will be found and the overall strategy significantly strengthened before actual business launch.

A Startup Strategy Strawman should at the very least contain three hypotheses:

Problem: What problem are you trying to solve? Who has this problem?
Solution: How are you going to solve this problem?
Cash Flow: Ultimately, how will this solution be funded? For a business, this is usually reflected in the revenue model. For a non-profit, it may be a broader funding strategy.

So, for this SDG Games startup business idea, what is the Startup Strategy Strawman?

Problem: When most Christians read the Bible, they don’t know much about the geography being discussed, and so they lose important context in the stories that God has provided “for teaching, for reproof, for correction, and for instruction in righteousness” (2 Timothy 3:16).
Solution: Develop games that Christians of all ages will enjoy playing that will engrain in their minds an understanding of Biblical geography so that they will naturally envision the places and journeys involved as they read God’s Word.
Cash Flow: We will sell these games for a profit to Christian families.

In the spirit of lean startup and strawman proposals, please let me know your reaction to these hypotheses. Feel free to drop me a note at [email protected] to “poke holes” in this concept.

In coming articles, we will test and refine these hypotheses.