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Data Driven Businesses (Case Study: Zynga)

August 11, 2010

A recent TechCrunch article on Google’s alleged investment in Zynga reported that

…Zynga’s revenues for the first half of 2010 will be a stunning $350 million, half of which is operating profit. Zynga is projecting at least $1.0 billion in revenue in 2011…

While these numbers have not been confirmed by Zynga, it is clear that since its founding in mid-2007 it has grown meteorically by every externally observable measure — number of employees, traffic to their games, general brand awareness, etc. If the reported revenue numbers are close to accurate, Zynga will eclipse Google as the fastest growing company in history (Google earned a profit of $105.6 million on revenues of $961.8 million during 2003 after 5 years in business). So what is Zynga doing right?

The answer can be found in what Andrew McAfee of MIT’s Center for Digital Business calls “IT’s Three Key Organizational Transformations.” McAfee writes

I see companies in all industries using computers to accomplish three broad and deep transformations: they’re becoming more scientific, more orchestrated, and more self-organizing.

Zynga, perhaps better than any other company, has built these ideas into the way they are growing their business.

Scientific — The key in this new approach to business is in adopting an experimental approach to every decision making process in an organization. McAfee uses the word “scientific” to associate the ideas behind the scientific method with this emerging model of a data driven business. At Open-First we call this PHAME — state a problem, develop a hypothesis, define actions which will test the hypothesis, establish metrics around the test, and run the experiment.

Making your business more scientific requires both technology and behavioral change. Zynga has achieved both — every aspect of their interactions with customers generates data. A team of experts provides analytical tools to present this data to employees. Every employee learns that decisions must be made based on the data, and not on “intuition.”

At Open-First we are studying companies like Best Buy and Zynga amongst others to understand how a new set of mobile, social, and data intensive technologies and practices are changing business. Our OPEN 2020 collaborative research initiative is exploring how business practices are changing in the 21st century as technology affects employee and consumer behavior. We welcome additional companies to join this project, please contact us via email: [email protected]

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