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Dr. Malta Behrmann (malte.behrmann@egdf.eu), Jari-Pekka Kaleva (jari-pekka.kaleva@egdf.eu) European Games Developer Federation (EGDF), www.egdf.eu.

ABSTRACT A viral innovation process challenging public support for innovation During the last decade, games became an important part of daily life for the majority of Europeans. Recent studies show that in many European countries not only younger generations play games but also almost half of the elders1. Thus video games have a bigger and bigger impact on the everyday life2. This impact is not limited to consumer behavior; they have a significant impact also on the business and innovation models of the Digital Era. In many ways, they are the forerunners of the innovative content, services and business models of a rising immaterial economy3. Consequently they are preparing the way for the other sectors where the digital revolution has not started yet. The viral innovation process, a special form of user innovation, of SMEs successfully operating in immaterial markets is highly different from the innovation models of the past. The traditional innovation model was a closed linear process, the viral innovation model, used by many online game developers, is an open perpetual process. Based on the constant feedback (on the Internet and, in general, not in test beds) from the consumers the services are optimized concerning content, business models and technology4. So the product shape, its technology and design, are adapted to the immediate taste and preference of the gamers the empowered end-user. Viral innovation is therefore an innovation process, which relies on patterns developed in viral marketing and applies these patterns in product and service development itself. The development is constantly adapting the requirements of and re-communicating with the end-users themselves. As the result of user-driven approach, in the Digital Era, it is the technology that follows the business models and content. Consequently, it can be said that in the Digital Era the innovation ecosystem is content driven, not technology centered. Therefore it is necessary to open the definition of innovation to innovations related to content, services and business models. This approach should be largely adapted by extending the formal definition of innovation and the focus of innovation funding5. Furthermore, the old fallacy stating that only large companies can implement innovations worldwide does not apply at all for the digital age. Previously, in physical markets, large corporations were needed to force the innovations into markets. Now all European compete from the outset directly in the European and global markets; game developers from the polar circle are successfully competing against the ones from London or Tokyo with their gamers. Most of the innovative business models, services and content are developed by small entities. The ground braking viral innovations happen in SMEs often lead by university dropouts or people without formal higher education. Some of these companies become quickly highly successful6. Thus it is no longer enough to see innovations just as simple prolongations of research. The example of the video games industry demonstrates that in the Digital Era big structures like academic institutions, including public research institutions, and multinational corporations, are rarely required to create innovations. In fact they are probably losing their central role in the innovation ecosystem, because they are lacking behind the constantly changing and developing market realities that change once in every six months. Consequently, a strong SME approach to innovation is crucial for the public support for innovation. In addition, innovation support should not be linked to any formal requirements on university or research level. It should really be open for new ideas from the whole community. Furthermore, in order to be able to reach the most innovative actors research and innovation support has to become more risk-taking, risk tolerant and competent to identify the most innovative initiatives behind the formal quality of applications.

37% of males and 42% of females over 50 years old in Germany, 33% of males and 44% in France and 41% of males and 43% of females in the UK and 45% of males and 59% of females in Neatherlands play video games. (Newzoo: Todays gamers 2009) 2 A term used to describe this phenomena is gamification. This process has led to a boom of applied games a.k.a. serious games. Other market areas, especially USA, Canada, South Korea and Japan are already focusing public funding on these games revolutionizing geriatrics as well as education and training. 3 Games have always been constantly engendering new business models, creating path breaking content and germinating a new service culture. Furthermore, they have been over spilling into other technological trends (e.g. more powerful visual computing, bigger and smaller hard wares and drivers and faster networks). 4 Minecraft, developed by Mojang, is a good example of how this innovation model works in practice. Althoug the the game is still a prototype, already more than 13 million people have tested the free versions and over 3 million people have bought it. (http://www.minecraft.net/) 5 The broad-based view on innovation has already been introduced by TEKES, the Finnish Funding Agency for Technology and Innovation. As the rapid growth of Finnish online and mobile games companies shows, this approach has been highly successful. 6 Facebook and Twitter in the USA or European game developers running already driving services with hundreds of millions of users, e.g. Sulake, Gameforge and Bigpoint, started their business only a few years ago.