A Lesson from Valve on The Importance of Innovation

A Lesson from Valve on The Importance of Innovation


Valve Corporation has a lesson to teach about innovation: original ideas aren’t cheap

Michael Abrash wrote a blog entry on the Valve Blog about how he got to work at Valve and recounted an interesting story about Gabe Newell, the CEO of Valve.

In the early 90’s, Gabe, then a Microsoft employee, commissioned a survey to see what was actually installed on people’s PCs. To Newell’s surprise, the most installed software actually was not Windows. Windows was only in second place at the time. What was the first? First place actually belonged to to id Software’s Doom video game. It was at this time Gabe left Microsoft to start Valve, one of the best video game development companies in the nation. They are the creators of the famous Half-Life and Portal series. They also have their own online game distribution platform called Steam, which has over 50 million users.

Gabe started Valve because he found the results of the software survey to be very telling. How could dozen people in their mid-20’s manage to get their software installed on more PCs than the product made by the largest software company in the world? Simple. The nature of productivity has changed. The honeymoon period for the Industrial Revolution was over. The revolution that changed the way we viewed growth and scalability was the same revolution that has treated each person as a component to a bigger part, only requiring the employee to do the same thing over and over again.

However, Doom’s success has shown that doing the same thing twice is almost pointless because there is no value produced the second time. Take Facebook or Twitter for example. Many programmers could write scripts to create Facebook, Twitter, Angry Birds, you name it, but they won’t achieve the same success because all the value comes from the first, creative act.

This means, the Industrial Revolution way of doing business—the hierarchical management—is obsolete. This old paradigm of productivity focuses on doing the same thing over and over again, only changing with small increments. Innovation is bottled-necked at the top of the hierarchy, assuming that those at the top have better, more disruptive ideas than other employees. However, that isn’t always the case. With the workforce now seeing employees bring their own electronic devices, everyone is a valuable information worker. Each employee is capable of producing your company’s disruptive technology or service

So what did we learn?

  1. In 1996, Gabe realized that there is no value in replicating software because all value is generated from the first, creative act. It is now 2013, yet the popular view on gamification is the implementation of points, badges, leaderboards, and other game mechanics to build B2C and B2E applications. Although I would like to have a more precise definition of the g-word, I’m glad the definition is still up in the air. This gives space for you to come up with a creative game design that engages and motivates people. Simply copying points and badges will make your users catch on to your scheme because it has already been done before.
  2. Same goes for following the hierarchical system of organization. If you just view your job as performing the same couple tasks over and over again, you aren’t really innovating. In B2E settings, gamified applications should aim to remove the “top-down” structure, allowing more creative expression from individual employees.

So…how do you define the g-word? After all, this industry is fast growing but still relatively new. Customers and employees are tired of getting points and badges for completing tasks, being ranked on leaderboards for performance, and spending time playing games that are all similar to each other. If YOU find new ways to motivate and engage target audiences, then YOU will bring a lot of value to your company. As Valve says, “First mover dominates.” Are you going to the one of the first-movers in this new industry?


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  1. Given the fact that Doom wasn’t the first FPS, #1 above would appear to be completely fallacious. It’s true that there’s no value in replicating software, but it just isn’t the case that “all value is generated from the first, creative act.” It’s pretty well established that there is no first-mover advantage. Doom wasn’t the first FPS, but it didn’t simply replicate what had come before, it improved on previous iterations. There’s nothing wrong with doing the same thing again, if you’re improving or even just changing it in some way. Farmville wasn’t the first farm-themed appointment-mechanic-based game either. In the case of both Doom and Farmville, an enormous amount of value was created by the improvements (whether in gameplay or in marketing) to the original specimens. The “first, creative act” is valuable, but it isn’t everything.