Cash flow is king

Posted by Christopher S Penn on Jan 3, 2012 in Business, Money, Strategy, World of Warcraft | 3 comments

I’ve been playing World of Warcraft now for almost 4 years. For the insiders, I started right before the Sunwell and patch 2.4.2. One of my absolute favorite parts of the game is playing the in-game market, the Auction House. This is a live commercial exchange where you can sell your goods to other players and vice versa in a digital bazaar of sorts. Some of the best business lessons, some of the most important business lessons, can come from playing this aspect of the game.

One of the most basic but most powerful lessons about this aspect of the game is that when it comes to running a business, only one things matters: positive cash flow.

I switched realms recently to the Earthen Ring. In my first 30 days, I had to restart my Auction House businesses from scratch. The first step to doing so in-game (and in real life) is to get some working capital, some starter money. In order to be able to buy and sell, you need cash. Fortunately, as in real life, there are decidedly unglamorous but profitable jobs you can take. Here, for example, is the Jaggedswine Farm, outside the gates of Orgrimmar. When you kill these pigs, you get a chunk of boar meat.

Boar meat is decidedly uninteresting. It’s unexciting. However, in order to level a character’s cooking skill in game, it’s a necessary ingredient. Thus, a lot of people need it, even if they don’t want to get it themselves. Combine a boring, time-consuming task with a demand for the finished good, and you have the opportunity to make some money.

Once you get some starter capital, building your fortune becomes a matter of making smart deals and keeping cash flow positive in your in-game professions. In the case of one of my characters, it’s about keeping my costs for producing glyphs from exceeding the profits. I know how much the supplies for my profession will cost me. I know roughly what the finished goods will sell for. If I can keep cash flow positive, then there’s no limit to how much I can grow my business. Conversely, if I have negative cash flow, no matter how much I sell my items for, I will lose in the long run.

Cash flow is king. If you on a personal level are not cash flow positive, you need to fix that as soon as possible. Go start doing some affiliate marketing. Ask for a pay raise at work or change jobs if you’re able to do so. Publish a book for sale – it costs nothing besides time and an Internet connection these days. Whatever you do, get earning more than you’re spending.

This is the core business lesson that the Auction House teaches us: unless you consciously choose otherwise, always be making a profit. Always be spending less than you’re earning. Always be minimizing expenses while maximizing profits – and focus on maximizing profits so that you can grow. Cash flow is king. Cash flow is the lifeblood of your business, and as long as it’s positive, the world is your oyster.

Or boar. Mmm, boar.

No actual animals were harmed in the writing of this blog post. A whole bunch of digital boars got mercilessly slaughtered, however, and their innards sold for 4 gold, 37 silver.

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How sparkleponies might just save the world

Posted by Christopher S Penn on Dec 9, 2011 in Economy, Technology, World of Warcraft | 4 comments

One of the most dangerous things about a consumer-focused material goods economy, from an environmental perspective, is that in order for you to have a sustainable business, you have to consume resources. Not only do you have to consume resources, you have to consume a lot of them. That’s at odds with the long-term environmental goals we need to reach in order to keep things habitable for us on this little blue marble called Earth. There are other worlds out there that might sustain us, but moving the human race 600 light years to Kepler 22b isn’t really an option at this point.

So how do you keep a consumer economy running while mitigating its impact on the ecology? Here’s one answer that came up last night in World of Warcraft: sparkleponies. Its proper name is the Celestial Steed, which you can buy for your in-game character for $25. (on sale now apparently for $10). Here’s another variant, called Tyrael’s Charger.

Yes, it’s a shiny pony with angel wings that your character rides around.

What does this have to do with anything? In this case, it’s getting consumers to buy a virtual good, a consumer item that has no manufacturing cost of real world resources except electricity and the server farm that World of Warcraft runs on. What’s more, once the infrastructure is in place, there’s almost no actual cost to make one more sparklepony or one million more of these. They’re just rows in a database.

They’re rows in a database, however, that people will pay money for. Things like convenience and status in a virtual world are just as important as in the real world, and as we integrate technology into our lives more and more, these virtual goods become just as valuable as the physical goods we’re used to buying.

This trend can only accelerate. The faster we deplete natural resources, the more expensive it will be to manufacture physical world commodities. Thus, if you want to be ahead of the curve and taking advantage of consumer willingness to purchase virtual goods, figure out some way to add digital products or services to your current offerings. You’ll save the environment and make money at the same time.

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Gear, skill, and marketing

Posted by Christopher S Penn on Sep 6, 2011 in Advertising, Marketing, Strategy, World of Warcraft | 0 comments

Over the weekend, I enjoyed leveling my new hunter in World of Warcraft and learning more about the class. It’s quite a lot of fun. One of the things that occurred to me as I was leveling, however, was that hunters, like all of the other classes in World of Warcraft have the exact same buttons to push from one hunter to the next.

That led me to the question of, well, what makes a good hunter then, if my Concussive Shot is no different than anyone else’s? The other two areas you hear about in the game besides abilities are gear and skill. Gear, of course, is the equipment that characters wear and use, like armor and weapons.

Of the two, the one you hear the most about from other players is gear:

• “I would have been so much better in that dungeon if I had better gear!”
• “I would have survived much longer in that battleground if I had better gear!”
• “I would be a top raider if I just had better gear!”

The reality is, however, that better gear doesn’t make the player significantly better after the basics are covered. Using the correct abilities at the correct times against the correct enemies is what defines the top players of the game. One popular figure in the Warcraft community, Gevlon, actually created a special team of people who had intentionally low quality gear and then went and killed the biggest, baddest enemies in the game to prove that skill matters more than gear.

What does this have to do with anything marketing related? Let’s think about this for a second. We have pretty much the same “buttons” to push in marketing, don’t we? We can tweet, post to Facebook, blog, podcast, etc. – all of the basic tactics that are common to us as digital marketers. That means that the areas where you’ll differentiate yourself are in the marketing equivalents of gear and skill – tools and strategy.

What’s the first thing you hear from marketers everywhere? You guessed it – we need more tools, better tools, what are the new tools to be using, who’s got the best tools? Marketers are asking about their gear equivalent, instead of how to become better marketers with the tools and tactics they already have.

So how do you change? How do you grow? First, recognize that both in Warcraft and in marketing, focusing on tools and tactics or gear and abilities has very rapidly diminishing returns. Once you have the basics in place, there’s not much point in chasing down minor percentage increases that come from different tools, and the costs scale exponentially.

Second, recognize that skill development is paramount after the basics. You need to be out in the field, out testing, out questing, out learning your class, out learning your market as much as possible in order to develop and grow your skills. In Warcraft, there are these target dummies in every city in the game. They do nothing except let you test your basic abilities and skills to achieve maximum results. Marketers don’t necessarily have target dummies to test on, but we can and should be testing all the time in our work to find out what’s working, what combinations of tools and tactics deliver for us.

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What Gaming Technology Can Do For Your Business

Posted by Christopher S Penn on Aug 19, 2011 in Advertising, Marketing, World of Warcraft | 0 comments

If you think video games are all about slacking and not getting anything done, think again. If you think there’s nothing which your business can benefit from the gaming world, think again doubly so. Gaming today demands as much, if not more, of your tools and technologies as business does. Today, I want to highlight a few pieces of technology that World of Warcraft players use that could find great use in your business.

Mumble. How many times have you been on a conference call where the quality of the audio is… shall we say, less than stellar? Mumble is an open source voice communication server that focuses exclusively on quality and very low latency, which means that it’s intended for use when real-time conversation is essential. Gamers use it to coordinate their raid teams (groups of 10/25 people who are working together to kill Internet Dragons) and thus low latency is essential to coordinate the team’s activities. A delay even of two seconds can mean the difference between your entire team living or dying.

One of my favorite features is its built in noise-gating. Have you ever been on a conference call or webinar where someone’s got their mic open and you hear chewing, typing, sneezing, air conditioning, and anything except what you want to hear? Mumble filters that out, because such occurrences are as frequent in gaming as they are in business.

Imagine having a conference call or team meeting where everyone can clearly hear each other, where voice quality is superior to Skype and the telephone, where certain speakers have priority, where calls can be cleanly recorded and archived, and the cost of the conference call system is totally free? That’s Mumble. Running your own server in-house is just a matter of installing it; there are also plenty of hosted services that will provide per-seat licensing.

Icecast. Suppose you want to have more than just a few people listening in? Some of the top World of Warcraft guilds want people to be tuning in as they tackle world first bosses, killing off giant Internet dragons, and nerdraging out loud. Very few of them are going to pay conferencing services to do this for them, which is where applications like Icecast come in. Using streaming MP3s (which virtually every PC can access through programs like WinAmp and iTunes), Icecast can broadcast to hundreds or thousands of listeners, depending on your Internet connection.

For internet startups and companies on very tight budgets, Icecast might be just the thing you need for hosting audio streams for webinars and online events. It’s available for all platforms and is fairly straightforward to set up – I set up a test Icecast station on my Mac and was up and running in 30 seconds. Having a Google+ hangout and you want more than just 10 people listening in? Icecast your browser’s audio and you can open up the meeting to thousands.

Headsets. Gamers love premium audio for the rich, immersive experience and will pay top dollar for it. Headsets not only have to be functional, they have to be exceptionally comfortable for hours upon hours, far longer than your average conference call. In addition, headsets for gaming need to have a solid microphone that sounds good and will put up with a lot of abuse.

I recently bought the Plantronics GameCom777 headset. It’s designed exactly along the specifications required for spending time playing World of Warcraft. But as I’m sure you’ve guessed by now, it’s also a terrific headset for working in the office. It’s got plugs that support both my iPhone and my desktop, works with Skype and Mumble as well as GoToMeeting/GoToWebinar, as well as audio and video production. Conference calls? No problem. I can seamlessly switch from the desktop to my mobile phone instantly and sit on a call for hours at a time if need be.

How many webinars have you sat through where the presenter is on their mobile phone screaming the presentation into your ear? I don’t want to be that guy, and a decent quality headset is the answer to it. Here’s the other neat twist, especially for the accounting folks out there: most “business” headsets are inferior quality to gaming ones at triple the cost and are uncomfortable to boot. If you’re shopping for audio gear for your team, bypass the office supplies stores (and their markups) and head for the video games aisle at your big box stores instead.

There’s a lot business can learn from the gaming world; there are cost savings to be had everywhere and innovations that benefit business teams based on the very stringent demands of gaming teams. The only question is, are you as a business leader open-minded enough to look beyond the office and see what others are using to get results in a totally different field?

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The Rogue Salesman

Posted by Christopher S Penn on Aug 12, 2011 in Advertising, Marketing, Sales, World of Warcraft | 0 comments

As of late, I’ve been playing a rogue in World of Warcraft (subtlety PvP for those who play), which is an interesting damage-dealing class. Rogues use stealth, hard-hitting attacks, and all sorts of counterattacks to make themselves highly effective against other players.

One of the interesting things about the rogue class is that they spend a lot of time positioning, watching, observing, and looking for opportune moments to strike. This is largely because unlike other classes, rogues have a very limited pool of resources on which their attacks depend. In combat, they remain stealthed, waiting for the right opportunity and then unleash a strong opening attack that consumes their immediate resources (energy). Assuming the attack is successful, they gain additional resources (combo points) with which to either counter the opponent’s defenses or finish them off.

Sound familiar? This is effectively what a skilled salesperson does. Let’s compare:

1. Extensive observation. If you’re good at sales, you spend a lot of time looking for the right opportunity, instead of just rushing headlong onto the battlefield and hoping things go your way. You let others make all the noise and attract all the attention, while you look and listen for opportunities to make the biggest difference possible.

2. Strong opener. Rogues and salespeople both share the common worldview that in many cases, you only get one shot. You don’t open weak or with your least effective materials. Having watched carefully and understood what the opportunity is, you open strong. Sometimes, if the opportunity is aligned well enough and the need is great enough by your prospect, you win on the opening move.

3. Rewarded success. Every minor yes, every objection successfully handled, every step forward is an additional minor win that helps you stack up resources for the finisher. Sometimes the pace of the sale means you use recuperative abilities to catch your breath and reinforce your own position. Sometimes the pace of the sale means you get a few moments to reposition. Whatever the case is, successes give you more leverage for closing.

4. The finisher. Like rogues, the good salesperson closes strong, using their finishing moves appropriately to end the sale.

It’s telling that for a good rogue, 99% of the fight is spent in stealth, watching the battlefield, waiting for the right opportunity, prospecting for resources to take or objectives to capture and for opponents to let down their guard. A well-played rogue is rarely visible, rarely heard from, rarely noticed until it’s far too late to do anything about them.

The same is true for a really good salesperson. They spend most of their time doing research, understanding the situation, maybe having quiet conversations, slowly positioning and getting ready to bring out exactly what’s needed at the right moment. 99% of the time, they’re not selling in the traditional, used-car salesman sense – and when they are selling, if they’re doing it right, you won’t really notice until after it’s over and you own the goods.

Obviously, there are some subtle differences between rogues and salespeople – generally speaking, a good rogue leaves their opponents dead, stabbed multiple times with poisoned knives while a good salesperson creates an enduring relationship that follows their client from company to company and job to job. But the similarities on good technique, positioning, tons of observation, and pursuing the right opportunities at the right times are universally applicable.

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3 Powerful Business Lessons from World of Warcraft Inscription

Posted by Christopher S Penn on Jul 29, 2011 in Advertising, Marketing, World of Warcraft | 1 comment

For those that don't play, one of the most lucrative "industries" in World of Warcraft is a profession called inscription, in which you make glyphs, little pieces of paper with magical runes on them that enhance player abilities. These magical sticky notes can be sold and traded in the in-game economy.

There are 3 items I want to highlight that teach 3 different lessons.

Bleached Jawbone. This is a peculiar little relic that you pick up from a vendor in the Twilight Highlands. It's needed to make a highly-sought item for players who enjoy player vs. player combat. Unlike most inscription supplies, you must be a certain level of character in order to obtain it, and it's located outside of a major city. There are two market opportunities with this item:

1. You have to go out of your way to get it. People will pay a premium for convenience. In your own marketing, what things do your customers need that they have to go out of their way for, and can you offer the convenience of those items at your business?

2. You have to be a certain level to get it. In many cases, people who are leveling up their professions need this item, but because they haven't reached the character level they need to be in order to buy it, it's inaccessible except on the in-game marketplace. As a result, you can charge a premium for it - lack of skill or advancement in your customers creates a niche. What products or services can you offer to people who haven't reached a certain skill set yet? If you're selling marketing services, for example, can you offer advanced search engine optimization tools to people who are ready to make use of the tools but can't yet obtain them?

Glyph of Deadly Throw. One of the interesting things about the inscription profession is that you don't learn all of the products you can make at once. You have to do daily "research" to discover new glyphs you're capable of making, and if you don't do your research, you don't have new products or services to offer.

This glyph, which is used by rogues, was one I just learned last night. What's powerful about this is that your average, lazy player isn't going to remember or be diligent about their inscription research, and so the number of players who can offer a full suite of products to the market will be surprisingly low, a tiny minority of players in the game. There will be glyphs that only a handful of players can actually make, ensuring a near-monopoly on those niche markets.

The logical extension to the real world marketplace is obvious: those who continue to research, innovate, and find little niches will be far more profitable and face less competition than those who settle for the same majority of products and services that everyone else settles for. Everyone starts from the same basic tools, especially in niches like social media. Everyone can tweet. Everyone can make a page on Facebook. None of these things will create a profitable niche for you. Only through actual research will you create the innovation that will drive your profits.

Glyph of Death and Decay. In my inventory management software, I can see that another player has listed this glyph for 10 gold, whereas I listed at a fallback price of 197 gold. At first glance this seems like an incredibly bad move on my part. Here's why this isn't.

First, I know that the cost of materials to make this particular glyph is about 15 gold. I've told my software never to sell for less than the price of materials, because that's a guaranteed way to go broke.

Second, I know my market. The market for this particular glyph churns very frequently, which means the money-losing seller will have their product bought, leaving only mine left unsold. I know this particular seller doesn't play very often, so the risk of getting undercut by him is fairly low. When the next buyer who wants this enhancement for their character checks the marketplace, mine is the only item left for sale, and I get to earn 197 gold instead of losing money.

There are two lessons in this particular item. First, know what your costs are (including time) so that you avoid selling at a loss. Second, if you know your market well, if you know how your customers and prospective customers buy your goods and when in the business cycle you can obtain a lock on their business, you don't have to compete on price; you can simply sell at whatever the market will bear.

The business lessons of these 3 items may seem basic, but as with all basics, they can be incredibly powerful if you master them.

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