For 10 years, City Interactive based its business around budget video games. While its Polish neighbour CD Projekt, developer of The Witcher, chose to compete with the triple-A blockbuster RPGs of America and Japan, this family-run developer and publisher was content with bargain bucket clones.

Then, in 2010, the company quietly released Sniper: Ghost Warrior, a first-person shooter that draws heavy influence from the sniping missions in Infinity Ward's Modern Warfare titles. Sniper expanded these memorable sneaking sections out into a full game, discarding the run-and-gun set-pieces that define Activision's blockbuster in order to exclusively focus on the art of the long-range headshot.

As expectations for the product were low, City Interactive opted to publish the game itself around the world, a decision that would drastically change the company's fortunes. "To be frank we never expected Sniper to be half the success it was," explains City Interactive's Lukasz Mach. "We knew that sniping is an attractive niche to many players and so we figured that there was possibly the opportunity to gain some market share in a genre that is highly competitive and overcrowded. When we demoed the game we found that it appealed to players who are not particularly skilled in run-and-gun close-combat games. Here was an experience in which players could take their time, line up shots, hold their breath and make the kill. That seems to appeal to a broader range of people than anyone here could have expected."

Indeed, contrary to City Interactive's low expectations for the game, it became a sleeper hit, selling 2.5m copies in the 12 months following its release. For a small Polish publisher who had dared to distribute the game around the world single-handedly, the rewards were unprecedented, generating profits in excess of $25m and instigating work on the sequel, which is today nearing completion.

"The earnings from Sniper were huge," says Mach. "The success of Sniper changed not only our mindset in creating the sequel but also the entire business model around which the company is based. In the past we had this problem with being perceived as a cheap game company. And in fairness, we were making cheap games. But after the success of the first Sniper we have shifted direction to triple-A titles. It's been a dramatic change."

The company began the transformation by doubling in size in just a few short months, opening new studios in both Romania and Britain. The latter is headed up by the ebullient Scotsman Stuart Black, best known for his work on EA's well-respected Xbox first-person shooter Black, who left Codemasters in a storm of controversy midway through the development of Bodycount.

"That was the big thing for me," explains Black, who is currently working on a second world war shooter for City Interactive called Enemy Front. "After I was through with Codemasters and hunting around for a new project I spoke to various people around the world and had a number of potential options. Then the call came in from City Interactive. I decided to take the meeting because: why not? I was very taken by their attitude. It was just after Sniper came out and the game was doing very well. But they were extremely self-critical. They were very honest about what the problems were with the game, highlighting what they should and shouldn't have done with the development of the game."

For Black, this sense of self-awareness, and desire to improve was beguiling. "I've worked in most of the big game companies in the UK and it's amazing how delusional and complacent many of the major developers can be when it comes to their work," he explains.

"I'm not like that. I am always very self-critical. I always want to do better. And I found that attitude very syncopated with their attitudes. Their ambitions for the future were very beguiling and the fact that they want to make a second world war shooter was exactly what I was after."

For Mach, the acquisition of Black was a key part of the new strategy for the publisher. "We were very excited because we knew of his games, of course," he says. "Having him on the team was a big step towards quality improvement." Nevertheless, the success of Sniper has had an impact beyond attracting talent from within the games industry. "The sheer size of profits involved from Sniper caught the attention of stock investors in Poland," explains Mach.

"Combine this with the success seen by CD Projekt's Witcher titles and the games industry has become the big area for investors in Poland right now. City Interactive has a huge amount of interest in this area."

At the publisher's showcase in Warsaw, where we have the opportunity to play Sniper 2 and Stuart Black's game, the audience is equal parts journalist and investor. But even though the company is still on the lookout for investors to continue to expand, now the focus is on delivering more games to match the success of Sniper.

"2011 was a year of expanding our company internally," says Mach. "We didn't have too many titles last year and it was all about reinvesting the profits, opening new studios, hiring new executive producers. The huge challenge in that time has been managing process, implementing the kind of processes required for developing many more titles concurrently."

With seven development studios, City Interactive is generating a lot of content behind closed doors, including downloadable Unreal 3-based shooter Alien Fear; Combat Wings, a second world war dogfighting game; an un-named RPG project involving staff who worked on The Witcher and, of course, Sniper 2. It's this last title that City Interactive is banking on becoming its greatest success. Built on CryEngine 2, the game features real-world ballistics, requiring players to gauge wind speed and direction before taking a shot. It features limb dismemberment from large calibre guns, while, if you manage to target a grenade on a distant enemy's belt you can cause an explosion to impact the surrounding area. It's undeniably a tightly scripted corridor shooter, but the upgrade in visuals and atmosphere from the first game is obvious from first touch.

The next 18 months will be crucial in revealing whether City Interactive can turn a flash in the pan success story into a successful new business model.

Mach is aware of the dangers. "Right now we are trying to be realistic," he says. "We have many projects on the go which is hugely exciting but also very risky. The key for us now is to ensure is game is released in the best possible shape it can be. It's the only way that this gamble will pay off."