Innovation and it's place in business

Preface

Karl Pilkington once said “They say the more you know, the more you don't know”. It is comments like these that I find so funny. It's comments like these that put him off trying to learn. But I think otherwise; its comments like these that are thought provoking. I would respond “The more you know, the more you realise you don't know”. Its blunt statements like these that makes me want to analyse the plausibility of it. I love the variety of interpretations and viewpoints.

So, when I came across Valve's employee handbook, I envisioned a great place for designers and innovators where exciting work has been done. I realised that these people are not just game makers. These are fun, interesting people who collaborate to make wonderfully innovative experiences and products. It is then through reading Mike Abrash's account of him working at Valve, that got me interested. Valve is special. Without realising, the games that I have played and enjoyed tremendously were made by creative people. Games that have character, humour as well as the great passion originating from engineers, artists, musicians, writers, and of course designers. These products are detailed and have depth and nuances that feel just right; maybe this is why I enjoy Valve products so much. However, this is not to say that Valve is the only company.

Introduction

This dissertation is about innovation; where it comes from and how technology brings new innovation to open new markets. The role of a firm is to generate profit by efficient use of resources, to be creative and to be able to evolve. This is the story of how the founders of Valve identified the changing value of innovation and how they have been able to use innovation to become frontrunners in their prospective industries. This dissertation will give insights into the growing importance of innovation and its place in today’s business world because innovators are able to drastically affects society and our daily lives. We now live in a society where there's fierce competition and just innovation alone will not always mean success.

We will look at the history of a firm's role; the father of modern economics, Adam Smith, who has always been the foundation in which economies thrive within. Others have also given hints to the purposes of a firm and how businesses profit, but the invisible hand and the theory of general equilibrium still prevails. However, should this be true in a world over 200 years ago? From the beginnings of bartering, innovation have taken place throughout businesses all around the world. The invention of money, the division of labour, communication and technology are examples. But it is clear that the majority of businesses are unable to become true innovators. There are only a few leaders in each industry, the rest follow in their footsteps. Yanis gives great insight into the innovative structure of Valve.

Fast forward to today's world; we are now living in the internet-age, just as Adam Smith lived in the time of the Industrial Revolution, where mass production created a large gap between the poor and the wealthy. Allocation of resources are seemingly no longer common practices, and firms can be seen as the last slivers of communism. Now we are living in a new era where the internet is breaking boundaries for many industries and the rise of the Digital Age gives great context into the world in which Gabe was entering into. Throughout history, there have been many advances, but there have only been a few who were able to deliver and fully utilise the opportunities. Innovation has seen to open up new markets, however only a few have ventured into and return prosperously.

Knowing that being innovative is important, and everyone knows what can happen when it does happen, it affects us in our daily lives. So how has the digital-age or the internet-age affected us? Similarities can be seen just as when trains, telephones, televisions and computers were invented and what new markets have opened up as a result? This study will be examining what innovations can do, and how Gabe Newell was able to start Valve with an intention to make innovation as its produce. After all, not everyone can benefit from innovation; identifying what will the best and most profitable for a company is difficult. Mike Abrash and Yanis Varoufakis are witnesses of Gabe's creation, and from here we can start to deduce what Valve is. What's more, they have even made a new employee's handbook to shed light on what's like to be at Valve.

So, why Valve? Well, they were able to overcome the biggest problem in the gaming industry and push the limits of their creativity to produce innovative and quality products every time. Valve has become Pixar in their industry; creating something that's fresh and never been done before every time. Arguably, they can be the newest and most interesting company to enter the gaming industry within the last 20 years. Tapping into the benefits of the internet era, they are in a perfect situation. Manufacturing and the physical world is now oversaturated and the digital 3D world is expanding. Gabe Newell saw this, and has been breaking boundaries in this new world ever since. We will be looking at Valve's innovations from their Source engine, Steam platform, Source Filmmaker and most recently, Steam machines, and how these have been a successes.

If Valve can be so successful, why are there not more companies following suit? Clearly, this business structure must have its problems. There have been places where similar practices have been implemented giving freedom to employees to do as they wish, but not to the extent that Valve has done. Places like Google are one example, and it can be a huge risk to the company. After all, it seems counter-intuitive to pay your employees to do what they want. Being successful is a lot of hard work, and maintaining such a place requires high levels of trust, faith, money and exceptional people.