Can work be fun? Is it possible for customers to have the same deep engagement with an organization’s products or services that they might experience when playing a game? Can things game designers have learned about what makes games effective from the 40-year-old video game industry, which generates $70 billion annually, be applied to meet business objectives? Wharton legal studies and business ethics professor Kevin Werbach and New York Law School professor Dan Hunter say yes.

Lawyers and World of Warcraft players who created the first course on gamification at the Wharton School, Werbach and Hunter recently authored For the Win: How Game Thinking Can Revolutionize Your Business, which helps business leaders to think like game designers in addressing business challenges and provides a roadmap for integrating gamification into business efforts. Knowledge at Wharton recently spoke with Werbach and Hunter about what gamification really is, how companies like Microsoft and Deloitte are using it, where game thinking works best and pitfalls to avoid when gamifying.

Below is an edited transcript of the conversation.

Knowledge at Wharton: I would like to talk to you about your book, which is titled, For the Win. Where does the title come from?

Kevin Werbach: “For the win” is a gamer term that is usually abbreviated FTW. In games, people will say some great thing for the win. It was originally something you had to do to get over the top to win an epic battle. It’s become a commonplace expression for anything you want to do that gives you a real achievement. We thought it echoed some of these expressions in games, but also was very indicative of what we’re talking about, this concept of gamification or game thinking as something that can actually, for businesses, provide epic wins as well.

Knowledge at Wharton: It’s very interesting because though the book is about gamification, the starting point to your book is actually the fact that so many employees and customers are so utterly disengaged today. Business just isn’t as much fun as it could be. What do you think are some of the reasons for that?

Dan Hunter: We assumed that the way to motivate people is through rewards or punishments. We do that in businesses; we do that within the consumer side. There are lots of ways of motivating people, and we need to find new ways of [accomplishing this]. At the core of it, this book is about finding ways to do that by relying upon some pretty well-tested approaches to game design and what makes things fun. What we’re really trying to do is put fun back into all of these kinds of areas.

Werbach: We’ve gotten really good in business at squeezing out operational efficiencies, and we have all this technology. We’re in a globalized world. The baseline has been raised to the point where just doing those things — just being efficient — isn’t a differentiator. What’s a differentiator? It’s human beings; it’s engagement and enthusiasm. Games, we found, are the key to understanding some of the techniques, as Dan said, to motivating people in powerful and differentiating ways.

Knowledge at Wharton: So before we go too far, what exactly is a game and what is gamification?

Werbach: Both of those are deeper concepts than you might think. In fact there are large, dense works of philosophy that have been written on what is a game. A game is something that has some rules, some objective and involves an attitude by players that [suggest they] care about the outcome of the game. It includes everything you might think of as a game, including board games, card games, sports, video games, but also other kinds of experiences that feel game-like where there’s a set of constraints and you care about somehow overcoming those constraints. Work can be a game, and school can be a game. Lots of things can be game-like.

Gamification is taking what we understand about games. Turns out games have been around for tens of thousands of years. Video games now are a 40-year industry that generates roughly $70 billion a year worldwide. Game designers have gotten really good at understanding what makes those games work. [Gamification involves] learning from those things, taking those insights from what makes games effective, what makes people care about the outcomes and then translating them into a business context.

Knowledge at Wharton: How can applying these lessons to revolutionize a business, which is a point that you make early on in your book?

Hunter: Starting off from Kevin’s point, we can’t squeeze out any more operational efficiency gains from this. So basically, it means looking at the business in a completely different way and asking, “What are the objectives that we have in relation to this business and in relation to these business processes? And then how can we take these time-honored and now very well understood approaches to game design and apply them to these particular arenas?”

Pick any given kind of business objective. Do you want to increase engagement of your customers in relation to, say, your website or something like that? Okay, so rather than saying, “Okay, we’re going to pay for them to come” or “we’re going to have prizes or those sorts of things,” we’re actually going to approach this as a design problem and say, “Alright, what’s going to motivate them? What sort of playful features do people like?” Understanding your users and saying, “Okay, this particular sort of person would like this. This particular sort of person would like that.” Then introducing those game elements into the overall design of the process.

Knowledge at Wharton: One of the things that I really loved about your book is that you say, at its core, gamification is about finding the fun in the things that you have to do. Could you give some examples of how companies like Microsoft and Deloitte have been using this approach?

Werbach: Sure. Those are two examples we give in the book. The Microsoft example is a project that came out of the test group. They are the people who do the testing of things like Windows and Microsoft Office. One of the problems we talked about was that when they were releasing Windows 7, Microsoft released it in dozens and dozens of different countries and languages, and they had to make sure the dialogue boxes worked well in every one of those languages. Even Microsoft would have a challenge hiring companies that have native speakers in all of those languages to go and sit and look at those dialogue boxes, but it’s really important. You don’t want something to be offensive or incorrect that would hurt the usability of the applications.

What they realized was that they could make a game-like experience. They created a competition for teams of their employees, their sales offices in these different countries, to go and find errors in the localized dialogue boxes. There was no reward. There was just the thrill of finding the most problems, being good corporate citizens and being the most successful office on the leaderboard they set up.

Just doing that, they got their employees to review a half a million dialogue boxes and found hundreds and hundreds of bugs, errors in the localization, that hadn’t been caught in the original translation. That’s an example of taking something that’s very mundane, very boring. No one would say that reading dialogue boxes is inherently fun or great. But it’s something that they had to do for a real, legitimate business purpose. And that was what we call an internal gamification example, using it inside the enterprise as opposed to outside for customers.

The Deloitte example you mentioned was about knowledge management, about getting their consultants to describe what they are working on and what they know about, which is an incredibly important task for lots of organizations, especially professional services organizations. By creating a little bit of competition and a little bit of fun through an internal application, they got much greater participation in that information sharing. In the book, we go through examples in all sorts of areas. Gamification is not just something for teeny little startups or for youth-oriented, sexy kinds of companies. It’s something that applies across the board.

Knowledge at Wharton: You distinguish in the book between internal and external gamification. How is external gamification different?

Hunter: It still uses the same principles, but you’re focused on issues outside of the company. The internal examples are the things like HR or the examples that Kevin gave in relation to Microsoft and Deloitte. External examples are typically in marketing arenas. Thinking about things like sales forces, at the really high end, and examples like Club Psych, which was a website that was gamified for USA networks, at the lower end. Those examples are really about trying to improve the user and customer experience, trying to drive revenue and those sorts of things outside of the enterprise. It’s really just a useful distinction between the different elements or approaches that you face inside the enterprise and outside the enterprise.

Knowledge at Wharton: What does it mean to think like a game designer? And how can companies use that kind of thinking to do some of the things that you describe?

Werbach: This ties into a point that Dan made earlier, which is really critical. We look at gamification as a design challenge. It’s part of design more broadly. There have been other authors and scholars and practitioners who have written about design thinking. This, in some ways, is a special case of that broad approach. But it’s a special case that’s important. Game design is its own discipline. Major video games cost tens of millions of dollars and bring in, in some cases, billions of dollars of revenue. It’s a fairly sophisticated and well developed discipline.

Thinking like a game designer means attacking problems through the lens of creating an experience for players. The primary challenges of a game designer are: one, get people playing, and two, keep them playing. If you start to think about your business challenges that way, you think about your participants as players. They are voluntarily participating in something because they want to, because they get value and enjoyment and fulfillment out of it. Find ways to get them in. Then, once they’re in, find ways to keep them interested, to create a player journey, if you will, that remains valuable as they get to higher levels of the experience. You start to create an environment that is inherently engaging. In the book, we go through lots of specific frameworks and concepts, and there is a lot more detail than that. But that’s the basic approach, to think about what you’re doing [to create] an experience for a group of players that they find valuable.

Hunter: The reason that we sat down to write this book was that we looked at the other sorts of approaches that were out there. Everyone was saying, “Oh, look, gamification is this huge, interesting, fascinating, incredibly important thing that you should do. And the way you do it is just to slap badges on this or put points on anything.” And those approaches fail, right? We had seen them fail and we were looking at it and saying, well, why do they fail? We sat back and said, okay, so if you approach this in the way of a game designer and try to understand what it is that the players want and actually go through this entire process that we outline in the book, then you can actually build an experience that’s engaging and that people will keep coming back to because it’s fun — and, at the same time, drive revenue or do all of the sorts of things that you need for your business process.

We found that there was really just nothing out there that was a guideline along those lines. That was really the motivation for the book, to think as a game designer without being a game designer. We absolutely don’t want people to be a game designer at the end of this. We’re simply saying, look, if you approach it this way, you’ll actually generate these really useful, compelling experiences for your users.

Knowledge at Wharton: Let’s say there’s an executive who’s facing a business problem. How does she or he know whether gamification is the right solution for that problem?

Hunter: … What they need to do is try to work out what is the actual process that they’re looking to gamify. What’s the objective out of all of this? What do they need to do? Then they go through the steps in the book and they’ll actually have, within a very short space of time, an idea about what gamification can give them at the end of this experience. Not every business objective can be gamified. There are lots that are just not going to work because your customers or your players are not going to be engaged; they’re not going to be interested in it. Or that there’s a mismatch — the nature of the activity is so serious that introducing game elements is going to make the player or the user think, “Hang on, what’s this? This doesn’t make any sense.” You have to think carefully about that, and that’s really what the book’s about.

Werbach: There’s a matrix in the book, which is a little too detailed to get into here. But the starting point is motivation. If you’re a business manager, you say, “Let’s say I could wave a magic wand and get this population — whether they’re my customers, potential customers, employees — to be more motivated. Would that really drive a business benefit in some metric I care about in my business?” And there are some times where it wouldn’t, either, because it’s something that shouldn’t be made fun or it’s something where motivation would get people to be more excited but wouldn’t drive purchases or efficiency or anything you care about.

That’s the starting point: Is this something where if I can successfully build something that motivates, and that would be a real and lasting benefit to my business? Once you answer that question, then you think about how to design using some of the steps that Dan talked about to ensure that the system you’re building would, in fact, produce those motivational benefits.

Knowledge at Wharton: The section on motivation is one that I found really fascinating in your book. One of the things that you distinguished there is what you call intrinsic motivation and extrinsic motivation. Could you explain for our audience how the two are different, and how they can motivate people differently to alter their behavior?

Werbach: I can go first, although Dan did some of his PhD work in psychology and artificial intelligence. Part of the reason that we felt that we were well situated to put this book together was that we had an understanding of the different pieces. The game design is one piece. The psychology is another piece. The business aspects are another piece. Intrinsic and extrinsic motivations are well established terms in the literature on the psychology of motivation, primarily from a set of theories called Self-Determination Theory, which was developed by Edward Deci and Richard Ryan at the University of Rochester. It’s a very well established theory about what motivates people, backed by dozens and dozens of empirical studies.

The basic idea is that you can be motivated by something external to you, something outside of yourself. It’s not something that you inherently want to do, but you do it because you get paid; you do it because you care about what other people think; you want status from other people; you do it because you need to finish this unit in order to get to something else you care about, to get a promotion at your job, whatever else. That is extrinsic motivation. With intrinsic motivation, if none of that were there, you would still do it. You want to do it for its own sake.

The lesson from Self-Determination Theory — and there are many lessons, but one of the key ones — is that extrinsic motivation works, but it’s dangerous. If you take topics and areas that are inherently interesting to people and substitute external rewards, they can actually crowd out, as it’s called, the intrinsic motivation. And that’s a danger in any context. It’s a real danger in gamification because, as Dan said, people tend to think about gamification as just these shiny rewards. We’ll just give people these points and badges and so forth. And that can work. That’s why frequent flier programs work. It’s why compensation systems work in business. And that’s part of gamification. But you need to understand the limits of it and not create a system where those things make it so that people feel sort of subconsciously [like] this isn’t something fun. This isn’t something I’d want to do. I’ll just do it as long as you give me stuff and pay me.

What you want is a system that gets to the point where people feel, like in a great game, this is fun. I want to do this. I feel validated in this experience. And it’s something that potentially gives me that sense of a win.

Hunter: If you think about intrinsic motivation within business and all of the recent management theories about how to get people to do things, how to make a better workplace, how to ensure better profits, better ROI, whatever it happens to be, the recent trends have been toward intrinsic motivation. Rather than assuming that the way we’re going to do this is to try to squeeze more out of the individuals, it’s really about trying to understand them, what they’re doing — say, within an HR context, for example. The chapter on intrinsic and extrinsic motivation is really trying to get the manager to think about what it is that people want. And then asking, how can we build systems — in this case, game-like systems — that actually will be compelling and interesting and be the sort of environment where people will look up and say, “Wow, I just wasted an hour and I was working?” And that’s really where we were trying to get to by the end of the book.

Knowledge at Wharton: You also offer companies a toolkit that managers can use if they are interested in gamification. Could you tell us about some of those tools that companies can use?

Hunter: We put that in the middle of the book rather than at the beginning of the book because we wanted to make it clear that the toolkit doesn’t make any sense unless you understand the overall process. By about halfway through, you’re at the stage at which you can say, okay, here are the sorts of elements that we might be able to use in this particular environment.

Those elements are pretty obvious if you think about it in game terms. Think of any game or sport that you’ve played. There are elements like teamwork and cooperation. There are elements like scoring. There are elements like success states. There are these big challenges that might be this final push, like a full court press in basketball terms, which in video game terms would be a boss fight or something like that. There are all of these aspects that can get built into any gamified process. What we provide is this definition and these steps to understand how these things fit together in a framework and a hierarchy so that the manager can go about building systems that actually use those features.

Knowledge at Wharton: You also recommend six steps that companies can take to build effective gamification programs. Could you take us through some of them?

Werbach: We call them the Six Ds. They are six elements of gamification design. Now design is not a linear process. We talk about this in the context of design thinking and game thinking. It’s iterative. You go through and go back. You have to play test and so forth. But these are steps that are essential to think about, to make sure that you don’t ignore. It starts with defining objectives, which is what Dan talked about earlier. What is my goal here? Your goal is probably not to get people to earn points or to get people to show up at your website. That might be an intermediate goal, but your goal is maybe to get more conversions for people to be customers or to get your customers to be engaged more. Whatever it is, you as a manager know what your business goal is.

Then you break that down into specific behaviors. What are the activities you want people to do in the gamified system? And then they drill down on your players. Who are these people? What do you know about them? How do you model them? Think about their methods of engagement and so forth. So that gets you down to the specifics. And then from there you can go on to the further steps and model the specific activities, what we call activity cycles within your gamified system — the specific tools that you employ, the game elements that Dan talked about. And the critical one is the next to last one, which is: Don’t forget the fun.

Dan and I taught the first gamification course ever offered, as far as we know, at Wharton last year, and we’re teaching it again this year. What we found was that it’s so easy to lose the forest for the trees. You start to go through this design process, and you have to constantly pull yourself back and say, “Would someone want to do that?” Because that’s a critical question, that’s the essential question. You can’t just do that. You can’t just say, “Gee, this looks like fun. And we’re done.” You need to be systematic and thoughtful, and model and do analytics and so forth. But you need to keep bouncing back between those things and a sense of the experience, a sense that this is something people would want to do.

So the Six Ds are basically a structured framework to ensure that you look at all of those aspects. And the things that people generally start with in gamification, again going back to the point Dan made earlier — just spilling out the blocks, as it were, and sticking them together — that’s all near the end [of the book]. If you do that without a really good sense of your objectives and who your players are, you’re going to fail. Or you’re going to succeed for a little while and then fail, which in some ways may be even worse.

Hunter: And you won’t know why you failed. Right?

Werbach: Exactly.

Hunter: It looked like it was great. But then it really wasn’t.

Knowledge at Wharton: What are some of the big risks and dangers of gamification? And how do you think companies should avoid them?

Hunter: There are a [number] of them. There are some legal risks. There are some ethical risks. And there are some risks which are really mostly in the nature of just bad gamification design. The legal risks are not that serious. But there are those that you have to look out for, things like sweepstakes rules or competition rules that you might have in your particular state or jurisdiction. There are some ethical risks that can occur that we outline in the book. Those examples are where people are compelled to play your game, and it can end up being something which is really bad business practice, really unethical behavior or behavior that’s going to end up subjecting you to some problems, whether it’s PR or issues with the workforce. An example of that is using leader boards to try to speed up peoples’ workflow, right? And showing that Dan is really great at this but Kevin is really bad. That will not only demotivate Kevin, but it raises some real ethical concerns….

And then the final category of risks is in relation to bad gamification design, where you end up more than anything else just wasting money. It’s just going to fail as a process. So why would you start it? Those are the risks that we outline at the end of the book.

Knowledge at Wharton: Do you have any final words of advice for companies that are eager to use gamification to motivate their employees and engage their customers?

Werbach: One of the interesting things that we found as we started to research the book was [a number of] examples that were already out there [showing that] companies weren’t necessarily thinking about gamification. Or, there were things that people [considered gamification] — like, for example, frequent flier and loyalty programs — that turned out to not really be gamification, or to be just bad gamification, because they don’t have that focus on game design and fun and engagement.

It turns out that if you go into a room of business executives or professionals and ask, “Who’s a gamer,” about one in 10 or one in 20 people will raise their hand. And then you ask, “Alright, well how many of you play Angry Birds or Farmville” — or one of these games that have literally billions of players around the world — and more hands go up. How many of you play golf? Chess? Checkers? Bridge? Poker? We’re all gamers. Businesses need to realize that this is not just about how to placate the kids that want to be shooting and killing dragons all the time instead of doing their job. This is about taking some very old, very established insights — psychology and design — and apply them in new ways given the new capabilities of technology.

We now have a concept. We have a word for it. We have these extraordinary capabilities of digital platforms and analytic systems to manage and implement gamification. So I would urge companies to have that kind of broad view, because it turns out that most of them, the ones we talked to, when they start to look around they realize they’re already doing this, they’re just not doing it thoughtfully and systematically.

Hunter: The advice that I would have is that … games are the future of many businesses, [so] every manager needs to understand gamified thinking.