Monday 19 December 2011

Long Run Costs and Economies of Scale

 I work for a large oil and gas company, and recently we held an event called the ‘Oil and Gas Board Game Day’. We have been holding this annual event for a number of years, and the event is so popular that there is always a waiting list of people who would like to take part. I think people enjoy these types of events, and companies can achieve benefits from the team building it encourages. The oil and gas board game people have built a fairly simple game that mimics the process of oil and gas exploration, drilling, and expansion. In a large company, we have such a division of labour that we really get caught up in the day to day operations of our own departments and we seldom get to interact with other departments. The board game forces members of many different departments (accounting, information systems, administration, drilling, engineering, etc) to come together and make decisions as a team.  I think what attracted a lot of people to the game was the presentation. The game is played out on a massive 10’x 10’ wooden box, which is actually the game board with a paper map of Alberta on top of it.  Teams must decide where they would like to run imaginary seismic surveys by using a battery powered studfinder over the paper map. The modular wooden box beneath hides the shapes of the oil and gas reservoirs and traps, and based on the surveys, teams can punch a hole in the paper with a long wooden stick  to mimic drilling a well. If the stick hits wood, it’s a dry hole, but if it stands up, you have struck oil. It’s a great interactive experience, and the 3D aspect adds a really fun dimension. Basically, they took the rulebook of an old boardgame, and turned it into a 3D experience so the player feels more like they are inside the game. 
Their game is loosely based on the rules of the game ‘Oil Power’, released in 1982.

If I was to start a business, I would like to do something similar using large scale interactive variations of different boardgames. I think that kids would enjoy coming into school and presented with a massive 20 foot tall and fully interactive inflatable vertical Snakes and Ladders board, or have their soccer field converted to a giant Monopoly board. Obviously I would have trouble securing the rights to brand name games, but there is room for similar rule-sets to many popular games. I think this idea could be used during such events as kids’ birthday parties, work functions, high school assemblies, and exhibitions such as the Calgary Stampede on the PNE. I think the output units would be measured in the number of people who attend an event and are able take part in full game session. Different games would be able to include different amounts of players, so I would need to figure out how to balance a desire to include lots of people in a session against keeping the game fun. Testing the game would make it possible to measure the marginal amount of fun each player experiences as new players are added.   My fixed input would be the board game itself, and the variables would be the labor involved in running the game, as well as the players who will hopefully enjoy their time.  Testing would determine the optimal amount of laborers needed.
This type of business would have to start small, until I could assess the demand for such a business, or how I’d like to expand it, or scale it back once I know my average costs.  I think a business like this could handle a market the size of the city of Calgary, and possibly the outlying towns once I have a handle on the cost of fuel.  This type of business would probably have trouble in a rural community because it would need a large market population to exist or else the costs may not allow me to achieve minimum economic scale. If successful, I could see it prospering into a firm with a small office,  a space for testing games, and an area for storing/maintaining/manufacturing the games. I would probably employ an expert carpenter (salary) and perhaps a journeyman or two (paid an hourly wage),  a graphic artist, an office manager, and a few general laborers. I’d also need some sort of master of ceremonies to be the announcer of the games.  I would probably outsource such work as accounting, and marketing/advertising.
The costs would include:

Sunk Costs
Fixed Costs
Variable Costs
-          Initial testing and market research
-          Research into legalities of game rules / IP / copyrights
-          Consultations with experts (graphic artists, carpenters, lawyers, etc)
-          Actual large gameboards and related parts
-          A van or truck to transport game boards
-          Tools to maintain games
-          Salaries of crucial staff
-          Rent for storage facility and office space
-          Any costs for legalities (copyrights, etc)
-          Wages of hourly employees
-          Maintenance of gameboards (cleaning products, paint, etc)
-          Custom features requested by customer (banners, custom game pieces, etc)
-          Fuel / transportation


There is a similar company in Australia (Yardparty) that already provides a similar service.
http://www.yardparty.com.au/
Ultimately, I would love to turn these games into large scale 3D versions of themselves:

2 comments:

  1. Hi Mike,
    This is a great idea. Obviously, bringing the games to clients would be very important for corporate events, but do you think these sorts of games would be popular as permanent fixtures at places like the corn mazes or even Calaway park? If not, at least they could be important marketing opportunities to do some testing. Do you think partnering with an event planning company would save you from competing with them and instead focus on building and operating the games?
    Cheers,
    Glenn

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  2. I think partnering with event planners might be a great way to first test the games and maybe share some of the risk involved. Once I learned everything I needed to learn from event planners, and if the idea proves popular, I think I would venture out on my own so I could focus on the creative aspect and making the event s I put on the best they can possibly be. As for a permanent fixture, that would work as well. I'm sure some sort of royalty could be worked out. Thanks Glenn.

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