Supplement | HBS Case Collection | August 2014

Opening the Valve: From Software to Hardware (B)

by Ethan Bernstein, Francesca Gino and Bradley Staats

Abstract

Valve, one of the world’s top video game software companies, has also become an iconic example of an organization with virtually no hierarchy. A 400-person organization, Valve’s unique organizational form (described in detail in the case and accompanying employee handbook) includes 100% self-allocated time, no managers (and therefore no managerial oversight), a structure so fluid that all desks have wheels to allow free movement between “cabals” (teams) on a regular basis (which happens frequently enough that Valve created a homegrown tracking app to allow peers to find each other), a unique hiring apparatus that supports recruitment of T-shaped individuals, and a purely peer-based performance review and stack ranking.

As customer demand and market forces draw Valve into hardware in 2013, Valve questions whether their organizational model will need to change as it expands from software into hardware—and, if so, whether they should prioritize strategy over structure or structure over strategy. The case therefore presents students with a strategic and organizational challenge which tests students’ understanding, and Valve’s resolve, with regard to the congruence between their organizational model and strategic direction.

Students should have read and discussed the (A) case, and Valve's options for entering hardware, prior to the (B) case being distributed. The (B) case provides significant detail on Valve's initial decisions but keeps the final outcome as a work-in-process.

Keywords: Valve; Self-Managed Organizations; organization design; strategy; Flat Organization; Video Games; organization alignment; Organizational Change and Adaptation; software; Hardwre; family business; Steam; Steam Machine; Design; Games, Gaming, and Gambling; Human Resources; Collaborative Innovation and Invention; Technological Innovation; Leadership Style; Management Practices and Processes; Organizational Design; Organizational Structure; Organizational Culture; Organizational Change and Adaptation; Groups and Teams; Alignment; Software; Hardware; Video Game Industry; Seattle;

Citation:

Bernstein, Ethan, Francesca Gino, and Bradley Staats. "Opening the Valve: From Software to Hardware (B)." Harvard Business School Supplement 415-016, August 2014.