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Case Study: “Opening the valve: From Software to Hardware”

Diksha Aneja
Section D

Valve software, co-founded by Gabe Newell, specialises in online gaming platforms and in house games.
Gabe worked in Microsoft for 13 years and he wanted to build a company focussed on generating new ideas.
The structure of Valve was such that it had no titles and it was based on ad hoc and temporary basis which
they referred to as spontaneous order but the job clarity was there. It is now looking to expand itself in the
hardware sector as well. All through the years it had operated successfully in the software side of the gaming
industry. Valves had a Decentralised Structure. It was a non hierarchical company; the employees were
unmanaged here. In such organisations, structure is fluid and flexible, with strong horizontal coordination.
The employees were aware that they had to provide what their customers demanded. Valve Software believed
in the strategy of unchanged successful teams to maintain their stability. Multidisciplinary project teams
known as ‘Cabals’, were formed organically. People decided to join the Cabal on the basis of their own belief.
The compensation in the Cabal was on the basis of internal rating system amongst the peers.

But soon valve realised limited growth opportunity because of non-suitability PC games through steam
without accessible living room and mobile hardware so valve decided to bring in their own hardware, which
required a more mechanistic structure for efficiency, specialisation, standard protocol which Valve lacked as
it followed an organic structure. Organic worked well earlier but with advent of technology, uncertain and
unstable external environment generates threats and opportunities. Strategic decisions had to be taken like
finding core competence and competitive edge to survive in hardware market. Valve knew that hardware
incomplete design cannot be put up in market for feedback which can be feasible in software and dilemma
like whether to adopt same or different process for manufacturing the various different components, whether
to go for mass manufacture and consoles, since it was not in position to do so because of its existing
organization structure.

The main focus of the company was on generating and nurturing new ideas. Valves believed in creativity. . It
used Participatory Management model which helped them getting and retaining the employees with skillset
and general values. The Valve used different strategies from miles and snow strategy typology. One of which
is Prospector strategy. With the growing technological environment, creativity is more important than
efficiency. It follows Differentiation strategy from porter’s competitive strategy for which company undertook
vast research and provide freedom to fail by the employees as long as model is updated Also, as the
organisation values creativity, research, innovation over efficiency, only viable strategy is Differentiation
approach where employees are rewarded for risk taking and creativity. It should be used by valves to
distinguish its products from others in the industry as low cost leadership was already occupied in the market
The structure of Valve is congruent with its competitive strategy. In both the cases, their essence is uniqueness.
The unmanaged structure as well the valve’s products, both are different from that of their competitors.
Valve’s should enter into the Hardware business. The structure should be kept flexible and not necessary that
it should be kept similar to that of its software division. In order to achieve this, there should be a separate
division of the Hardware part. Outsourcing won’t be a good idea for Valves. Valve’s has a unique and
respectable position in the market. In case the partner company is unable to meet Valve’s standard, it might
backfire to the reputation of Valves.