Game boy

(Fortune Magazine) -- When Bobby Kotick took over Activision in 1991, the once-thriving videogame company was nearly bankrupt. Kotick, a college dropout and serial entrepreneur, threw himself into resuscitating the business. He shored up the company's balance sheet, selling furniture to pay down debt.

To kick-start growth he found new ways to sell old titles, and he began a series of acquisitions, buying the licensing rights and later the game-development companies behind hit titles like Tony Hawk's Pro Skater. Today Activision (Charts)'s annual revenue tops $1.5 billion, making the Santa Monica company the No. 2 independent videogame maker in the world, after Electronic Arts (Charts). Fortune's Oliver Ryan talked to Kotick, now 44, about the importance of sharing his long-term outlook with employees, what makes a good gadget, and why making videogames is not so different from manufacturing diapers.

FOCUS ON PROCESS. I've been accused of taking all the fun out of making videogames. To build a great business, you have to incorporate process -- like brand planning. We recruit from the packaged-goods industry, like P&G (Charts, Fortune 500). It's not obvious that diapers and videogames would have similarities, but they do. For example, we now use focus groups to gauge customer interest before spending millions on development.

DECENTRALIZE CREATIVE TALENT. Early on we thought we needed to put everyone under one roof, but that didn't really work. Now we have 13 [game development] studios around the world, and they each have their own name, P&L, and culture. The mothership [corporate office] supplies things like human resources and market research. We let the studios figure out what's best for their culture, instead of dictating it.

BUY THE RIGHT TOOLS. I love gadgets and carry everything in a big bag. It's embarrassing. I carry two laptops, and a cellphone for each carrier. My T-Mobile BlackBerry is the most important, but in New York you need Verizon [for coverage]. Since I travel overseas a lot, I have a Nokia phone that runs there. I look for a simple interface and elegant design. I'm not a car guy, but if you live in L.A., overinvest in yours. I have an Audi W12. I'm a distracted driver, so I wanted the most airbags. And definitely get navigation -- GPS is essential.

SHARE YOUR VISION. I visit our studios, but not just to show we're thinking of them. It's to add value. I'm on the Yahoo board and have a dialogue with partners like Microsoft, so I come to talk about where we see the business in the next three years. Providing those perspectives is a lot more helpful than saying, "Great job on that game." They know.

MOTIVATE YOURSELF. My office is sparse, but on my wall I have a letter from Warren Buffett. He's an inspiration to me. If you want to be a great custodian of shareholder value, read the Berkshire Hathaway "Owner's Manual" [a guide to the company's business principles]. I also have a video sculpture by artist Nam June Paik called "Dr. Paik Failed Drawing in Kindergarten." It was inspired by Korean aptitude tests, which are supposed to give students some idea of what direction to take their studies. Paik took the test, and it said he shouldn't do anything creative.