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GameStop's Game-Time Decision

What they want to be as a company. Is it time for reinvention?

The post is not about what happened on Wall Street or Reddit, it’s about GameStop and its leadership decision. A decision point of what GameStop, the company wants to be as a company. Is it time for a reinvention?

Andrew Sorkin’s piece in the New York Times piqued my interest. He wrote:

”This likely won’t end well. But imagine a happy, fairy-tale ending to this story: Perhaps GameStop sells shares to reinvent itself. In this scenario, the company would raise billions of dollars to become a genuine e-commerce platform with its games. Think of Netflix’s transformation from a DVD-by-mail company to a streaming giant.”

My entrepreneurial wheels were turning. With my investigative hat on, it was time to do some research.

GameStop’s sales began a downward trend as early as 2013. A seismic market shift posed a direct threat to GameStop when Xbox One and PlayStation launched. Every game for those consoles was available through digital storefronts operated by Sony and Microsoft.

Based on GameStop’s next move, Leaders responded to this existential threat by diversifying. In 2013, GameStop entered the mobile space by acquiring Spring Mobile and continued to double down and became AT&T’s largest authorized retailer with 1,421 AT&T Mobility stores. That decision has left them in deep debt.

I am not privy to what is happening behind-the-scenes at GameStop today. Here is my thought process on what should have occurred when sales were on the decline.

In strategy sessions, I assume, leaders would have received data and evidence of all the areas affecting the decline with proposed solutions to test. What was the next decision?

Here are three scenarios:

Scenario #1

Leadership biases and opinions trumped what they learned, causing them to disregard the evidence. They decide not to explore and validate the solutions presented, including emerging technologies that could deliver value and reverse the decline.

Below are reminders of what happens when leaders opt for their own opinions, attempting to predict the future.

  • Think of Kodak’s strategy session when it uncovered digital photos as a potential threat. What did they do? Their opinion was that digital would not replace the film for their customers. 
  • We could say the same for Blockbuster, who did not believe Netflix could disrupt them. 
  • There’s always Nokia in 2004, whose engineers came to leadership with a new internet-ready phone with a high-resolution camera and a large color touchscreen, and the idea to have an app store. Leadership shot down the idea. The iPhone launched three years later. 
  • Examples of how so many brick-and-mortar stores failed to read the tea leaves and ignore the threat of online competition are many. Consider the iTunes effect on record stores, and Amazon’s devastation on so much of Main Street commerce.

Scenario #2

Leadership launched entrepreneurial teams.

Leadership launches entrepreneurial teams to work on the problem by leveraging the research just handed them from the strategy session. The work gets prioritized. These are High-Performing teams that have methods and processes to move fast and validate ideas. Teams include leaders who will support and empower them. They know how to ask the right questions and measure progress.

Each team has a different focus area. The teams interact with customers to validate problems identified to become grounded. These teams are skilled at various techniques to gain a deeper understanding of the customer and the problem. They gather additional insights, and a pattern emerges. Revisiting the initial idea that came out of the strategy session, they determine if it requires change based on what they learned.

They know what customers say they will not always do. More times than not, there are surprises. They run a variety of experiments that will produce evidence rooted in customer behavior. The teams continue testing assumptions, amassing proof, and reducing risk before continuing in any one direction. They learn from every experiment, not only what happened but why it happened. With every experiment, they get closer to creating and delivering customer value.

Side note: I know this sounds great if you are not in a pandemic with retail stores. However, work does not stop when there are obstacles. When you have teams operating with an entrepreneurial mindset, they will always find creative ways to gather evidence. At the pandemic’s height, I worked remotely with one of the largest medical device suppliers in the EU with Leaders, Coaches, and Teams solving a problem for customers. Those customers were doing work in clinical laboratories. There is always a way.

Scenario #3

Leadership determines to focus and executes one solution from several that emerged from the strategy session or one they believe will most quickly and easily solve declining sales.

Leadership believes they need to move fast, and they opt for speed over validation. There was a Harvard Study in 2018 done by the late Clayton Christensen. It reported 95% of new products and services would fail. There are plenty of examples of this in every organization. Look at all the well-funded initiatives that only had a pitch deck and spreadsheet with no evidence rooted in customer behavior. If there are zero customers or far fewer than would be worth pursuing, what does that spreadsheet look like then?

Below are a few initiatives GameStop pursued.

  • Majority stake in Jolt Online Gaming in 2009 and Kongregate in 2010 and sold them both.
  • Bought Spawn Labs, an early cloud gaming start-up, and Impulse, digital distribution and multiplayer gaming platform, in 2011, sold it.
  • Launched GameTrust, its own first-party game but only released a few titles before stopping it.
  • Turned a few test stores into hangouts for customers in 2019

Decision Point

The decision point that presented the best outcome and likely would have prevented the sales slide is Scenario #2. Even in Scenario 3, I wonder what the outcomes would have been if Entrepreneur Teams were first asked to explore and bring forth evidence to either iterate or prevent the build or purchase altogether.

The decision point that presents the best likely outcome is Scenario #2. Even in Scenario #3, imagine the result if Entrepreneur Teams were first to explore and bring forth evidence to either iterate or prevent the build or purchase altogether of those initiatives.

By Pam Krengel