As many of you know, the video gaming market is a multi-billion dollar business. Video consoles, which is a big chunk of that market, are currently dominated by two giants: Sony with its Playstation (PS1&2 and soon PS3) and Microsoft with its Xbox (Xbox and Xbox360). Nintendo, however, a distant third actor is raising eyebrows with its recent introduction of the Wii. This is particularly interesting from a strategy point of view because it's a wonderful example of a so-called blue ocean strategy (a concept introduced by Kim & Mauborgne which I mentioned here and here). The graphic below (done with the following Blue Ocean Excel template) illustrates Nintendo's Wii strategy and is almost self-explanatory...
The graphic illustrates the attributes of Sony's, Microsoft's and Nintendo's latest consoles. What does it show? Jeremy Fain from the Tech IT Easy blog puts it nicely:
Wii doesn’t intend to be a best-of-breed videogame console. Nintendo is trying to bring non core gamers back to gaming [..] with the Wii. Wii won’t equal video game but Wii aims at meaning fun. Nintendo focuses on the consumer’s feeling rather than its product. (-> read post...)The attributes in the graphic show that Nintendo is competing on completely different terms than Sony and Microsoft. The Wii is cheap, has no Hard Disk, no DVD, no Dolby 5.1, weak connectivity, comparatively low processor speed, but blows minds away with its innovative motion control stick (check out the demo video below). The stick integrates the movements of a player directly into the video game (think tennis, golf, sword fights, ...). With this feature Nintendo opens up the console world to a completely new public of untapped non-gamers...
All of the above describes nothing else than the characteristics of a blue ocean strategy:
- A strong value innovation for (many new) customers (i.e. motion stick)
- Cost reduction by eliminating features (i.e. no HD, no DVD, no Dolby 5.1, low processor speed)
Finally, if your unfamiliar with Nintendo Wii's (amazing) motion control, check out this video:
Disclosure: I haven't thoroughly assessed the detailed product specs of the three consoles. Gamers might want to correct my graphic ;-)
10 comments:
I had a meeting with some Nintendo exec last month and they textually referred to the blue ocean strategy, that's basically intentional.
alex: your blog is really getting better - this post on the Wii is packed with useful info and the You Tube video is great.
Nicolas: thanks for the info, I was actually wondering how intentional the link to blue ocean was...
Greetings!
Firstly, I agree with the graph you presented in all points except connectivity. Wii comes with WiFi support and there are a number of services that you can get online now, and more are expected to come. XBox has, by far, the best online service of all (XBox Live).
Nintendo was really cleaver in making such a simple but extremely innovative console. The hardware is not the bleeding edge technology, but it's enough. While a Wii costs about $150 to make, PS3 costs about $800. Usually, the business strategy in the console market is sell the console cheaper and take a better income from selling games. Nintendo managed to go against this approach by making a cheap console.
The harcore-western-player will not abide the overpowered computer graphics, but everyone else will. And this "everyone else" is the growing market of children, young adults, adults and seniors (as seen in the movie). There are games for the PS3 with stunning graphics that are not fun to play. I am a proud owner of a Wii, and i can say... well.... Wiiiiiiiiiiiiiiii!
This kind innovation really deserves a smooth sailing over a blue ocean...
Tiago A.
PS: Sorry about the long comment. I really got carried on...
Hi Tiago, great to hear from you! Thanks for the insights by an industry specialist ;-)
Cheers, A
Alex: It is also interesting to compare the Wii and the PS3 from a business model design perspective. Target customer(age structure), customer relationship (online services)and revenue stream (console vs games)are different. It gets even more interesting if you add the Nitendo DS and PSP to the comparison.
Alex,
Just one quick comment on this very interesting post: the motion control is not that radical an innovation. In fact, for a couple of years now, there has been a thing around for PS and X-box called "body pad" , which does basically the same as the Wii motion control (http://www.bodypad.com/eng/Index.php). Of course, the body pad is not as elegant as the wii motion control, but the functions are basically the same. I never quite understood however, why there was no massive marketing campaing for the "body pad". I actually learned about it by chance, but never saw any adverts or the like.
Maybe the wii success story is hence more about good marketing, rather than radical innovation??
This book, Blue Ocean Strategy, is kinda like the authors' Blue Ocean, isn't it? I guess they are under a lot of pressure to come up with some new and clever way to look at the market.
The problem with the book is that it is over-hyped and actually deceptive. The primary examples given in the book were people who never set out to create a Blue Ocean.
They were all people just doing what they loved and had a passion for and they wound up in a Blue Ocean. They did not sit down and plan a Blue Ocean Strategy to get rich or dominate the market or whatever.
I wrote to Steve Wozniak about this and he confirmed it. They were doing what they loved.
So that is the key to success.
By 'large public' are you referring to NCL's Expanded Audience or something different?
~a
On Dave's comment about people intentionally setting out to adopt a 'Blue Ocean Strategy',or create a BO.
Being a model it will only ever be the authors' interpretation of what happened in the past (even >100 yrs ago) and a drawing together of many threads into something easy to understand and follow.
That goes into the academic papers.
For 'real' people in the real world, it has to be presented differently, hence the nice name and the lovely imagery of BO vs RO.
What I really like is the idea that entrepreneurial activity can change the mkt/world. Chan Kim was my prof during my MBA and he was always on about changing the way of doing things ... cutting across existing structures, mindsets.
He was difficult to understand at times - due to accent - but then so were many of the students. Most important, he was full of energy. Hopefully, so are all the entrepreneurs out there.
One final bit in this long post. They have a statue of Gen Doriot at Insead, with a quote from him: 'Without action, the world would still be an idea.' I loved it and would go to read it from time to time.
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