Rewards, Motivation, Competition: How Businesses Can Benefit from the Rise of Gamification

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Gamification may be a new term to most people, but for many members of the business community, it has come to signify a new way to create value for their companies, customers and employees, among others. What exactly is gamification, what is it not, and how will it be changing the way we do business in the next few years? Knowledge@Wharton asked these questions and others to Wharton’s Kevin Werbach; Rajat Paharia, founder of Bunchball, a tech company that enables businesses to implement gamification, and Daniel Debow, co-founder of Rypple, a social performance management company. Werbach is a professor of legal studies and business ethics, and is the co-organizer, along with New York Law School professor Dan Hunter, of a two-day conference at Wharton on gamification titled, “For the Win: Serious Gamification.” 

An edited transcript of the conversation follows.

Knowledge@Wharton: Thanks to all of you for coming. I’d like to begin with a question about what gamification is and how it is relevant to business. Kevin, do you want to start?

Kevin Werbach: Sure. I generally define gamification as the application of techniques or mechanisms from game design to business problems and other kinds of non-game problems. So when you think about it, what is it that makes a game fun, what is it that makes it engaging, what is it that makes people want to come back and use it? We can take some of those same techniques and apply them to making online experiences fun, potentially making work experiences more rewarding and potentially encouraging and motivating people to do other things that are beneficial.

Knowledge@Wharton: What would some examples of that be in the business world?

Rajat Paharia: There are a lot of great examples. To put a finer point on what Kevin was saying, at the end of the day it’s all about driving a certain kind of activity or behavior or participation. Every business out there is based on customers of some sort [engaging in] some kind of behavior, whether it’s purchasing something or subscribing to something or watching something. All of those drive business value for the business. So if you can drive that behavior among your consumers, your users, your customers, then you can drive real business value.

This can run the gamut anywhere from a media company that has television shows and wants to drive contact consumption and sharing — so I want more people to read blogs and watch videos and do things like that because that drives advertising revenue — to a company like Microsoft that wants to get people to use more of its products so that they are more likely to upgrade in the next upgrade cycle rather than use a competitive product. All the way to a B to B company using it to generate leads by having the great IT security competition where people can show off how much they know about IT security, and in the process the company generates leads and the people get a sense of accomplishment, satisfaction and winning a competition.

Knowledge@Wharton: Daniel?

Daniel Debow: People have been doing contests for a long time, so gamification is an excellent name for a lot of people who are thematically bringing these ideas together…. There are actually games going on all the time in all sorts of things we do. That’s not really new, right? That’s game theory. That’s people thinking about the workplace in terms of rewards and competition. And then the second part of it is being really creative about different ways to solve the problems. That’s half of what gamification is; it is saying, “Hey, let’s break the barriers of what we’re doing and try and apply things from different domains.” The third part, and this is actually where I think we spend the most of our time, is design. It’s trying different ideas and really thinking about the human psychology of why people will engage in any behavior. At the end of the day, design and thinking creatively and recognizing what’s really happening and trying different things are absolutely central to innovation in business.

Knowledge@Wharton: We often hear about how the millennial generation needs to be constantly rewarded, praised, given feedback, etc. So to what extent is gamification a generational phenomenon?

Paharia: I actually don’t think it is, because it’s based on satisfying these fundamental human needs and desires we have for reward, status, achievement, competition, self expression, even altruism. Those things cross genders, they cross demographics, they cross any segmentation you want to apply. We’re all motivated by some combination of those. Maybe not by all of them, like I might not care about competition, but I will care about individual achievement and getting to the next goal or being recognized for something. And because of that, I think it’s easy to say that generation G, the kid generation that has grown up with Xbox Live, is especially motivated by these things. But you also see them motivating 43-year-old women in Farmville. And you see them motivating young adults in Xbox Live. And you see them motivating kids in Club Penguin. You know, 50 plus, 100K income plus on sites like Comcast, right? It’s fundamentally human, and because of that it applies to everybody.

Debow: Yes, when we first started explaining the idea for Rypple and we were trying to apply a lot of these concepts to something that people think is pretty painful — performance management, getting feedback at work — people said exactly that. It doesn’t matter what age group; it depends on who you are and what motivates you, what makes you think differently. And again, I would go back and say part of the insight is that people have been playing games at work for a very long time. The rewards are different, but status like corner offices and titles, these are things that people are rewarded for and motivated by…. Gamification is just pushing that envelope.

A quick anecdote: I remember a long time ago I went to law school and my civil procedure professor said, “I want you to understand that the legal system is just a giant game.” So the idea that you can look at a system of how humans interact as a game is not unique to what I think gamification is doing today.

Werbach: Yes, it’s important to distinguish games from gamification, and they often do get mixed together. But there’s fascinating, important developments in terms of the significance of games. So the video game industry is a $50 billion business. It’s bigger than Hollywood by most metrics. The vast majority of people under a certain age have grown up with video games their entire life, not just the millennial generation, but people in the workplace, in their 30s, 40s and even 50s are familiar with these kinds of interfaces and techniques. So there’s a great deal that’s interesting that’s happening around games.

But gamification specifically is about taking things from games and putting them into things that are not games, per se. So this is not about going into an immersive 3D world, for example, to do simulation and training where you put a pilot in something that feels like the plane cockpit. That’s what I would call a serious game. It’s related. But it’s something that’s recognizably a game, a virtual environment.

What companies like Rajat’s and Dan’s do is take those techniques and put them into situations that don’t necessarily feel like a game. They don’t necessarily look like a game, but they are and they take advantage of what games can do. And as they said, that can really apply across the board to any demographic.

Knowledge@Wharton: Can you give some more examples of those applications in the business world?

Werbach: Some of the ones that are frequently pointed to as examples: Nike has a system called Nike Plus where they put a little accelerometer into your shoes and you can keep track of your runs and then plug it into your computer and do competitions with your friends, track and see leader boards. Four Square uses point systems and leader boards and concepts like being the mayor. Those are some of the examples that people are familiar with and talk about a lot.

But really what these other two guys are doing and the other companies are doing is more significant because they are solving particular business problems as opposed to just building a stand alone service as a game. So I’ll let them comment more specifically.

Debow: Ours is not a platform to do this in any context. Ours applies to a very specific and often painful problem. People don’t like performance reviews because the world of work has changed so much in the last 50 years. But the way we’ve been managing people hasn’t changed. Our insight was why don’t we apply these techniques to make the process of getting feedback, recognition, setting goals to be much more real time, social and collaborative.

So a simple example: People today would send an e-mail and say, “Hey, you did a good job on that.” And then it’s lost. So we wanted to, for lack of a better term, gamification it by allowing people to create a badge, to send it to a peer, to add meaning to the badge, and then allow others to see why this person got recognized. The key thing is it doesn’t go away. It becomes part of your personal profile forever. Very quickly we began to learn that people started to create value. They started to value this thing that they were being given because it was meaningful. But also it added to their long-term reputation, and they viewed their career as something they wanted to build credible brand around. If they could point people back to all this thanks that they had received and all these badges which were instances of that thanks, they felt it added to their reputation. That’s a simple example of gamification at work.

Paharia: My company provides a technology platform that any business owner can take and integrate into their content or their experience in order to drive whatever particular behavior drives business value for them. That can be used in B to C type arenas. We have many major media companies using our platform to drive content consumption and sharing around their television properties, like “Psych” and “Burn Notice,” etc. They want people to consume more content because it’s an ad revenue driven business. And so therefore they generate more money.

We also have companies using us internally now, so this is, I don’t know what you’d call it, B to E? Business to employee? For sales incentive programs today, the way that most of them work is you sell something and you go put in a PO number in a little system and it says, “Here’s 10,000 points, go buy some golf clubs.” That’s the entire experience. When really salespeople are inherently competitive, so shouldn’t you be having high score tables and real time news feeds and people leveling up and giving them missions, both long-term and short-term, to accomplish? To say, “Here’s the long-term quarter-long goal. And here’s this week, sell 10 more Cisco routers and you’re going to get a spiff.” That kind of thing. Use game mechanics to drive that. All the way down to where you see companies like Kias and Shape Up the Nation using it to get employees to exercise and [improve their] health to drive down health care costs.

Knowledge@Wharton: So how durable is this concept? You have mentioned some obvious and perhaps less serious things like getting badges, leader boards, being the mayor of a location in Four Square, in addition to more sophisticated uses. But isn’t burnout an inevitable side effect when there is widespread adoption?

Werbach: I would say we’re very early, so there’s a lot of hype about gamification and a great deal of excitement. But it’s just at the beginning of the curve. It’s the way social media was and even electronic commerce before that. A great deal of excitement, some early examples, and then what happened was people burnt out on the kind of early simple uses. But then when you step back from a perspective of five years or 10 years, you realize that the impact has been even greater than we anticipated. So whether the term gamification sticks, the kinds of practices that are going on that these companies are doing, and others are doing, I think are enduring because they come back to real enduring problems. How do you motivate people inside your company, outside your company and how do you make things engaging? And that’s something that’s just simply not going to go away.

Paharia: I think social is actually a really good analogy. So Myspace explodes. Friendster explodes. Everybody on the Internet says, “I need social on my website.” And then it even moves into corporate, right? At some point, the same legitimate question gets asked: Aren’t people going to get tired of interacting with all of these different social systems? I think the answer is, yes, people will interact with the ones that they want to interact with and they’ll ignore the rest. So just because The New York Times has commentary on it doesn’t mean I interact with it, doesn’t mean I even read it. I go there for a very specific purpose…. I’ll interact with it where I want to, where it’s compelling for me. And in other places I won’t.

Debow: I’d add two comments. One is that people are experimenting. I think it’s even inherent in what we’re trying to do, which is to try different things and see what works. It’s almost part of the design. But two things I think will stand out — those games that are designed at work around intrinsic motivators, so it’s very quick. You can spike any type of behavior for a short period of time and then you get the burn out. But the examples that are enduring are the ones that appeal to things people really genuinely like to do or want to do — you gave the example of wanting to run — or are based on behaviors that people already engage in before the game came along. Four Square was really based on the observation that people would send text messages to their friends and say, “I’m here.” And so they said, “Let’s build a game around that to amplify that.” I think that’s the one side that you’ll see.

I think the second side is to remember just because [something] has a game element doesn’t make it a good game. There’s lots of video games that fail all the time, and they have lots of leader boards and badges. And similarly you’ll see that in the workspace. The ones that will last are the ones that go back to the initial proposition, the ones that are really well designed and that really get at something core that people really, genuinely want to do.

Werbach: If I could jump back in, that’s one reason that I’ve started a project here at Wharton called “For The Win” with Dan Hunter at New York Law School to try to get at what’s deep and what’s enduring here. We’re engaged in a number of activities to try to kick start serious research and analysis. We believe that this is a major, important, enduring phenomenon, but it is important to look deeply and separate out the wheat from the chaff.

Knowledge@Wharton: Do you see a way where gamification could fail, where it’s used in the wrong way or it’s overemphasized in the wrong direction? Is there any down side to this phenomenon?

Paharia: Yes, absolutely. Like any other tool, methodology, it can be used poorly, and it can have unintended consequences or results.

There have been several stories on the Internet of people doing high score tables and competition around things that they probably shouldn’t be, and driving the wrong kind of behavior. Or rewarding people for making forum posts. Well, if you’re going to reward that, then people are going to be typing garbage in the forum post just to get the reward. Right? You’re not rewarding the right behavior, which should be quality discourse. And so you really want to be rewarding people for getting a good thumbs up on their comments and things like that. To Dan’s point earlier, design is a really important part of this and thinking really clearly about what you are trying to motivate and how you should motivate it. 

Werbach: Any system can be abused because any system can be gamed. And it turns out the people who understand that the best because they think about it every moment are the game designers. I agree with Rajat completely. There’s a real risk but it also, if you follow through this technique thoughtfully, it also has the kinds of mechanisms to counteract that.

Debow: I think that’s the right point. Our lead designer has been very successful building other sorts of social games. He’s actually quite cautious about us experimenting and implementing these things because of exactly that, because you can create incentives that have very perverse results — not any different from any other incentive design system…. And so we’re very careful when we do things at work.

I’ll give you a simple example. Most people think money would incent people to behave and encourage them in one direction. And in fact, even in the consumer web space, a company called Drop Box has exploded in growth because of a very clever two-sided incentive that basically gives you free stuff if you share the product. We experimented with something like that at work, gave people $25 if they shared it. What we found is that people actually were far less likely to share Rypple at work when we offered them a monetary incentive, and much more likely when we removed it and made it much more intrinsic.

But I don’t think these are failures…. You simply have to try things. The good news about gamification is that you tend to not have massive collapses in the financial system when you implement one wrong. You learn pretty quickly.

I think one other point we probably haven’t mentioned but should: Gamification is very data driven. You are absolutely looking in real time at how people react and what are they clicking through and how are they behaving. Because they’re often implemented in a video game context, you can do experiments, little ones. If we change the wording, how do people behave now? If we change the position of the leader board, does that change how people do it? And I think that’s part of the ethos of design about how you build these systems. So you tend to figure these things out as you’re implementing a process to try to change any sort of behavior.

Knowledge@Wharton: So let’s assume that gamification becomes a central part of a company’s strategy, more and more in the next five years. How would a company actually go about implementing this? Would it be the responsibility of the chief marketing officer or the chief technology officer or the chief information officer? What would be the most strategic approach to getting this rolling?

Paharia: It all depends on the application. So if it’s a business to consumer, if I’m trying to get consumers to do more behavior, then it’s typically head of product or head of digital product. If it is a marketing campaign — we’ve worked with Rite Guard, Victoria’s Secret and others — then it is the head of marketing. If it’s the person responsible for the health and wellness of the organization, then it’s typically HR. And if it’s the sales incentive manager, then it’s the head of sales. It’s a very flexible kind of fluid system that can be used anywhere where there are people to be motivated. And because of that, there are different buyers depending on the actual application. 

Debow: Absolutely. We find that we’ll get very senior managers, VP of sales, VP of product who will want to implement something like what we’re doing because we see this as a management problem. But often we’ll talk to tons of HR people. Facebook is one of our biggest customers, and there it’s the HR department that’s initially brought us in but then was embraced by their engineers. So you’ll find different pockets depending on the problem.

I think one thing that’s important about strategically implementing this is understanding that it’s not as simple as asking your 14-year-old kid, “Show me the video game you’re playing,” and then trying to implement that at work. I mean it’s funny, but I think sometimes that’s where a lot of these failures occur. It is a well advised thing to engage with people who have deep experience in human psychology, motivation and game design. As you mentioned, it’s a $50 billion business. This is not a bunch of kids in their basement. This is a large industry that has a large body of knowledge about how to design things that work. And you know, Bunchball’s a great firm, a great example of, “Hey, how can we bring an expertise to bear?” 

Knowledge@Wharton: We have about one minute left. Would anyone like to make a final point?

Werbach: I think we’ve covered the right kind of ground. I think it behooves businesses and people in all contexts to try to understand what’s going on with this phenomenon and not dismiss it out of hand, but also not to get caught up in the hype. But I’m tremendously excited by what I’m seeing, especially its breadth — ranging from academics to start ups to large companies in lots of different fields, [including] social impact. Even the U.S. government is looking at applying these techniques. Five or 10 years from now, everyone in business is going to have some understanding of gamification.

Knowledge@Wharton: This has been fascinating. Thank you all for coming by.

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