Glu Mobile bills itself as “the leader in 3D Freemium mobile gaming,” but every element of that description has evolved over the company’s life. With hits like the Deer Hunter franchise and Gun Bros, and a portfolio of familiar names like Contract Killer and Frontline Commando, Glu’s current level of success is the result of an agile management approach and a keen eye towards “reading the tea leaves,” as CEO Niccolo De Masi likes to describe his view of the future. The mobile gaming space is the very essence of an evolving, dynamic industry with demanding customers and mutating platforms. I chatted with Niccolo about the challenges of running an agile enterprise in this competitive and fickle marketplace.

Niccolo joined Glu as its President and CEO in January 2010 and brings to Glu a strong background of senior management and executive experience in the mobile gaming and content sectors. Prior to joining Glu, Niccolo was the CEO and President of Hands-On Mobile, a mobile technology company and developer and publisher of mobile entertainment, and previously served as the President of Hands-On Mobile from March 2008 to October 2009. He has also worked as a physicist with Siemens Solar and within the Strategic Planning and Development divisions of Technicolor.

TechRepublic: Do you think of Glu Mobile as an agile enterprise?
Niccolo: Glu is one of the best examples of a company that is nimble, entrepreneurial. You can call it agile – I think all of these things go in tandem and from top to bottom. I’ve been through two platform transitions in the mobile entertainment space, both in the mobile music space and now at Glu in the past nine quarters in the mobile gaming space. I think we have an unprecedented perspective on what you have to do to be nimble and agile enough to get through these.

First of all you have to make sure the company survives and thrives. It helps that at Glu everybody here is a professional manager – I think that’s an interesting strength because everyone is rowing for the same reason. No-one here owns half the company with the rest in a master-slave relationship. Everyone is here because we want to be. Glu had its IPO in 2007, I’m the second CEO since then, and there are no founders left. Everyone here is incented the same way in a bottoms-up bonus and options scheme. We’re all here because we believe we can make Glu successful and we have no-one to blame but ourselves if we don’t do that. We’ve been going for 10 years; I’ve been here since 2010.

We’ve been migrating the business from being a mobile business that was providing a service to carriers. We were focused on making games work on Java through hundreds if not thousands of different handset types, and being a good partner for the carrier. As we have changed the business model, and I changed it as soon as I arrived, we changed the focus from feature-phones to smartphones, we changed the culture of the company to being about Business to Consumer, and looking out for customers directly as opposed to looking after the carriers. We stopped licensing other people’s brands, and focused on building our own. The first six or nine months of that were tough. We have ultimately had to replace approximately 50% of the staff I started with. That’s what you have to do to change your culture as well as upgrade skills. We restructured the company’s entire aura to be a kind of agile, bottom-up environment; rather than being a place where Niccolo, in an ivory tower, writes down what we’re doing with the roadmap, we have 25 development teams, about 600 people, we have a process that’s very different than most other companies I’ve run into.

TechRepublic: So tell me a bit about your roadmap and product development process.

We do a complete bottoms-up roadmap. Yes, we make sure that teams don’t make the same game, but other than a total portfolio conflict, we have a greenlight process that’s multi-stage and allows the teams to work with headquarters and say “here are 2 or 3 concepts we’re passionate about, here are the 3 concepts we have the skills and experience to build,” and we greenlight the concepts and they go and build the prototypes of their favorite one. They come back with the prototype in a month, and if we’re all happy and they’ve hit the quality level we expect, they go forward to the next milestone. If we don’t like it, we go back to one of the other concepts and try that. If they haven’t hit the quality level, the completeness level, the execution level we’re expecting, we tend to kill things there. What this has done for Glu is to provide a compelling culture. We’re the only place where you can build console-quality, free-to-play games for mobile devices but where you have an almost Pixar-level of creative control of your projects. You’re in the framework of a company that has resources, distribution, etc.

It’s exciting for me because I think this is scalable. We pay people bonuses based on revenue delivery every year; we hand the decision to our teams whether or not they want to continue supporting the current project or move on to another, new title. They’re incented the same way I am, to show shareholders quarterly revenue growth. Within the teams we run technically good agile processes, but what matters more for the company is this; making a game is like making an animated film, so it’s not just an engineering project, you have to meld the creative vision with the art, with the engineering, with the QA, with the project management, with the production and design, all this stuff has to come together. We focus much more on the whole process being agile than just the engineering, because you’re not successful unless every piece of this is in lockstep at every milestone.

TechRepublic: You mentioned that you had to change out about 50% of your team to evolve to a more agile environment. Talk to our readers about the human elements of migrating to an agile enterprise.
Niccolo: Well, Glu’s board had run through a six month process before they hired me. They went through a range of different individuals with different visions for the company. They spent a lot of time with big company people, who’d been at places like Disney and Activision. I’ve run two companies before this, but they were sub-billion dollar revenue, and sub thousand employees. After they spent more time with me, they were compelled by the idea that, while Glu has been public, it really was a late-stage startup. It needed to reinvent the entire business. When you look at our results you’ll find that we’ve been replacing feature-phone revenues with smartphone revenues every quarter for the past six or seven quarters. We’ve been replacing it incrementally and over the course of this year you’ll see almost all of it get replaced, and then the company can start growing total top line much faster.

What I’ve learned from other companies is that you have to make sure when you arrive that you have a plan, that your board has hired you to execute upon. The CEO has to carry not just the overall strategy but the product strategy, and carry it in sufficient depth so he can provide boundaries to where people are iterating. You can’t arrive and say, we’re going to make games; that doesn’t work. You have to arrive and say we’re going to develop original IP freemium games that will be action-adventure with console quality graphics, and we’re going to be a leader in this even though nobody is doing it now. We’re going to start investing in this in early 2010 because in 2011 this is where the market will be.

The ‘people style’ that I think works best in this environment is that you must have people who are action oriented. You have to have an action bias and you need people who will iterate by action and work with optionality. Those who have made it through the trough to stick around at Glu are willing to work with the management style that says ‘give me the options for how we’re going to work around x situation, show me what options you’ve thought about, let’s pick the best one and try that…if it doesn’t work, let’s go and try the second option or reevaluate the options.’

We don’t try things in series, that just wastes too much time. If you don’t know what your options are you shouldn’t be trying any of them because the easiest and cheapest thing to do is to think about all the options rather than enacting them. I think a lot of companies waste a lot of time trying and failing at A, then moving on to try and fail at B and C. The best way of guiding the company’s actions in an agile way is making sure you have people who act as much as they think. You can’t have too much mental procrastination. In a lot of markets, the difference between winners and failures comes down to, who acts when, and who is willing to iterate faster, because no-one gets it right on the first shot. There are people who just can’t deal with change. I frequently hear, “oh, Niccolo always changes his mind.” I respond that you should really worry if your CEO never changes his mind, because he’s most likely to plow the company into the ground. My constancy of purpose is to make Glu a great bottoms-up machine for making profitable games sustainably, predictably, and reliably. How we do that is a constant work in progress.

Read the rest of our interview with Niccolo De Massi.

TechRepublic: So how do you deal with a market where technology, competition, regulation, and the customer’s expectations are all mutating at a breakneck pace?
Niccolo: Every quarter we have an all-hands meeting, and I finish these meetings by reminding everyone that there are two things to Glu; one, this opportunity is what we make of it, because there’s no one to hold accountable but ourselves, we can do whatever we want as long as it works, and, secondly that every quarter we enter new business opportunities and we withdraw from opportunities. Whether it’s a new advertising network or a new game genre or a new distribution channel, we’re always going to look for new network effects to invest in, and we’ll withdraw from things with too high an opportunity cost for us.
TechRepublic: Let’s talk about top-down vs. bottom-up strategy. If I’m a game developer with a brilliant idea, how do I manage that from the developer level? If I’m an executive how am I matching developer’s great ideas with the corporate imperatives of investment, portfolio, competition, etc.?
Niccolo: Glu has an action bias, so if you want people to take your idea seriously, we believe talk is cheap – show me! The riskier the idea the more we want to front-load the prototyping of the risks. If we’ve never built this kind of technology before, prove out the concept early in the process. Same thing with art style of game mechanics. The great thing about the creative culture here is that nobody wants to build games that are like other people’s. They want to build something that’s differentiated but recognizable. That’s really what Glu specializes in. If you’re coming in with a bottom-up idea it’s about showing – show me that you can make the gladiator figure work, show us you can hit the visuals, show us you can make the gameplay loop fun.
TechRepublic: So can I grab the resources to build a prototype so I have something to show, or do I need permission? Help me understand how this works at Glu…
Niccolo: Obviously there’s a balance. We provide guidance as to when a team should stop updating an existing game. When we’ve determined that it makes sense to start winding down development on an existing game, team members start peeling off to work on these sorts of prototypes. That’s the opportunity for members of teams to say, here are three best ideas that we think this team can execute on. We’ve never had, so far, the situation where a team is passionate about something without the experience to pull it off. When my predecessor was here and direction was more top-down, we had episodes where folks who were hard core gamers at home were being asked to build a farming game. You’re just asking for a problem when you do that. They won’t be passionate, they won’t put in extra time, it won’t be their baby, they’re not going to look for it to be the greatest game ever created.

If you can align people with passion, experience and expertise, you’ll be remarkably successful…we’ve been successful with teams of 15, pretty democratically, proposing the two or three games that they think they have the best chance of executing on. We don’t let people just randomly stop supporting current revenue products, but we’ve never really had that issue; usually they want to update them too long, because they’re passionate about them. We motivate the right behavior with an aggressive quarterly bonus plan based on total revenue of their studio, so if they can make that revenue by supporting current products, by all means do. As that title gets long in the tooth, you’re going to want to be developing the next one in parallel. Teams have been remarkably entrepreneurial about making decisions about doing a version 2 versus creating a sequel, for example.

The only thing we worry about top-down is, do we have people with the experience, expertise, and passion, and are they working on things that align with that; don’t force the square peg in the round hole. Make sure that people are being rational about maximizing their earnings potential. And we have to prevent portfolio conflicts, so we don’t let people build the same racing game for release in the same month.

TechRepublic: How have you guys gotten beyond the typical product management scenario, where every product manager is the champion of his own game vs. looking across the entire portfolio for the good of the company?
Niccolo: That comes down to a sense of urgency and it comes from the top. We’ve had to churn most of our prior management team to get to a group that’s OK with the iterative, optionality program. A lot of the new executive team were rising stars in the organization, and open-minded because they weren’t part of the old regime. I put my emphasis of action on ensuring that you don’t have fiefdoms where everyone has an empire that they’re looking after. The compensation alignment is important here. Our executives get paid for company results, with only about half coming from something specific that they control. It’s entirely cultural. If the CEO acts flailingly irrationally, or with a lack of urgency, then everyone else will do the same thing. If the CEO keeps a pace of constant urgency, constant paranoia about how you could be better, people tend to get with that program or they don’t last very long.
TechRepublic: So when you look at some of the old line industrial companies like GM and Kodak that have had challenges staying relevant, and you look at your philosophy of agility, is agility a deciding factor, in your view?
Niccolo: I’m a big fan of studying what’s happened to the music business or what’s happened to Kodak, and I draw inspiration from what I’ve learned. Platform shifts destroy companies. Intel is a positive example, looking at how they got themselves out of the DRAM business and moved into the microprocessor business, but most companies are not nearly as successful at negotiating change. That’s the model that I hope Glu can emulate. But agility needs to be balanced with reading the tea leaves correctly. Getting the timing wrong, too early here or too late there, companies can expend all of their resources flailing, and never building that thing that will replace the products that are going away. Kodak was a flailer because instead of picking one business they tried to be in chemicals, digital, printers, they tried all sorts of stuff. If they had read the tea leaves as well as Intel did, they would have selected the niche in which they could bring value and build a business there.

Glu used to sell our games for $10 a download, and I saw the “freemium” strategy working in China, Japan, Korea, and said this is coming to the US and we have a chance to pioneer and lead. We stopped development completely of all games tied in to feature films when I got here, because I looked out at EA and said, “I can’t beat EA, support our legacy business, and build a smartphone business and develop a freemium model, all at the same time.” We have to burn our bridges and throw the whole company into making the new thing work, as if you’re a startup.