Nintendo Wii & Blue Ocean Strategy
About a year ago, I read an excellent book by Mauborgne & Kim: Blue Ocean Strategy.
To make a long story short, a blue ocean strategy is to be opposed to a red ocean strategy or ocean full of blood. The blood comes from battles between competitors fighting for marginal market share points.
In a blue ocean strategy, a given company will differentiate by positionning right from the beginning on unexplored segments to create new markets & capture new demand instead of joining the red ocean rat race.
In a market apparently utterly dominated by Sony & Microsoft (vs. Sega & Nintendo a decade ago; Atari, Amiga, Amstrad & Commodore two decades ago), Nintendo just released its new warhorse. A warhorse that’s not going to have to fight too soon. Indeed, with its new product Wii, Nintendo aims at a dormant market named “none core gamers”. The “none core gamers” market is more feminine, less addicted & suffers lower switching barriers between games that big fans market. Hugely successful Internet companies like Boonty (see Boonty’s founder, Mathieu Nouzareth , blog over here) have been targeting the same sort of “Sudoku” players for several years.
I don’t know much about video games, and haven’t played games seriously for more than a decade. Back then, I was Super Mario Kart and Super Soccer’s king on my 16-bits Super Nintendo. However, the more I read about videogame market forces, the more I think of Nintendo as the perfect Blue Ocean Strategy come back, executing in my views better than Microsoft which positioned the XBox 360 (an excellent multitask platform from which you can do a thousand things outside playing games) against Sony rather than next to Sony.
My bet? Apple will enter the gaming market (remember Steve Job is the founder of Pixar) in the 5 years to come.
Addendum December 6th 2006: I just came accross an excellent complementary post on the Nintendo Wii, by Ed Sim. Click here to see by yourself.
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Wii is indeed a clear example of aiming (!) at competing in a blue ocean. This is clear from their commercials. Whether this will pan out in reality will only really show when the product launches globally.
From what I’ve seen, following the xbox vs. PS1-2-3 debacle for over 5 years now, is that microsoft should not be underestimated at any cost. I could see them launching a portable gaming device next to the Zune, I could also envision that they drive Apple out of the portable market, and make it harder for them to enter the gaming-segment. Apple entering gaming is incidentally something that has been speculated about for several years now.
The thing about Apple, versus Microsoft, is that it tries to make money on hardware in all it’s product-lines. Conversely, gaming-hardware is notorious for losing money (xbox is still not in the black) and making it back on selling games. Also, Apple is renowned for it’s proprietary software, and whether they are strategically flexible enough to change on both spectrums is a big question.
Right now, there is maybe still some room for innovation gaming market, and I do have great hopes for the Wii, or that MS/Sony replicate it’s tactics, because the current gaming format is no longer so compatible with today’s world. What I mean is that the average gamer is now 29, has less time, prefers shorter games, and quick fun. Versus the immersive experience that Xbox/PS offered before and with its next-gen consoles.
Sorry for the longish reply. I actually realised that I wrote about this before for my weblog, but never found the time to publish it.
A last point to add, before I shut up. Blue Ocean Strategy, from the parts that I read, often uses Cirque du Soleil as an example of competing in a blue ocean against the traditional circus-model. The difference between that and Wii is, however, that it is competing against two fairly strong competitors.
I always felt that competing only with features against market-leaders makes it easy for them to drive you out of the market. I hope that this won’t happen with Nintendo, but considering Sony’s quick move to introduce motion-sensing in it’s controllers it is a good chance that they will at least try.
That, in my opinion, could be one of the weaknesses in competing only in blue oceans.
Hey Vince,
That’s what I like about blogging: great, value adding comments thanks to which I can learn a lot from my readers.
I’ll think over your thoughts today and answer properly when I get a chance.
Thanks!
I completely agree with you. This is a typical case of blue ocean strategy.
To answer to Vincent, Wii dose not seem to directly compete against Sony or Microsoft. I really think that Nintendo created a blue ocean (as described by the original paper from Harvard), ie they are coming from an existing market (video games) and developed a new products targeting a different customers compared to Sony or microsoft. You will buy a sony or microsoft hardware to have a multifunction product (games + DVD+ VOD+….) and you will buy wii only to play.
What I found exciting in the wii system (except the technology) is the possibility to play to old games originally developped on NES, SNES and N64. ‘Old’ players (our generation actually) will probably very excited to play to Mario kart, Super Mario series, Zelda, and even Sonic (from SEGA !!!) on their nintendo wii.
It seems that Nintendo remembers the failure of post-SNES video systems (N64, gamecube) which was frontelly competing with Xbox and Playstation. Wii will be free to develop in a ‘blue ocean’;-)
Salut Jeremy,
Tu vois je continue à te lire… avec beaucoup d’intérêt! J’ai eu l’occasion de participer à un séminaire de Renée Mauborgne il y a quelques semaines. Elle est incroyable et son livre vraiment super. Si tu te souviens encore un peu de l’histoire de ma boîte en Espagne, je crois que cela entre tout à fait dans la création d’un océan bleu. J’ai adoré le livre et le conseille moi aussi dès que je peux. Pour la console Wii, c’est tout simplement génial. A+, Xavier
Vincent> On your first post, I tried hard to find something not to agree on, but I failed. On your second post though, I’d say the Circle du Soleil example doesn’t totally fit what’s happening with the Wii. Once upon a time, the circus industry was sluggish, and in the doldrums – economically speaking. People preferred Holiday on Ice or going to the movies rather than spending time and money watching scary clowns and fat animals. But Cirque du Soleil came out, and basically re-invented the wheel, and the very concept of circus by the same token. Its main achievement is to have managed to be positioned in people’s minds as THE crème-de-la-crème circus show worldwide.
Wii doesn’t intend to be a best-of-breed videogame console. Nintendo is trying to bring non core gamers back to gaming (cf. what Laurent says about Sonic & Zelda) 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. In marketing, thinking of everything as a service and not product is a major trend on which Nintendo shows it can surf extremely well.
Hey Xavier! Great reading from you, I’m glad you’re keeping in touch. Funny you’re mentioning: I also thought of your company as a Blue Ocean Strategy epitome when looking for examples for myself, and also Eloy’s start-up if executed well (and I’m confident it will be so). Lucky you having listened to a workshop with Renée Mauborgne. I actually went to one of her classes at INSEAD Fontainebleau about two years ago: she was indeed amazingly interesting.
Hope to see you soon, give me a buzz when you come to Paris.
@Jeremy: that the Cirque du Soleil-case doesn’t fit the Wii’s, was my point also, in the sense that cirque was competing in a dying market, while the video-games market is definitely growing.
The question is that, while circusses did not have the capabilities to compete with the new entrant, are xbox and playstation facing the same problem?
In my opinion, no, because there is enough cash and flexibility to compete. Both xbox and PS could introduce add-ons that mimicked the motion-sensing and they could “encourage” the development of quick, fun games, which Xbox-live is already doing.
And that could mean that either there is a weakness in the blue ocean theory, aka competing on features only, or this is not a blue ocean strategy, because it only applies to dying markets. Or, I’m getting it entirely wrong, because I only read the first half of the book.
Vincent, I couldnt disagree more with your statement about Blue Ocean theory being competing on features only. Blue Ocean Strategy is all about ‘NOT competing’ and ‘NOT’ focusing on beating the compettion, but, rather about making competition irrelevant, which Nintendo Wii seems to have done. Wii’s strategy quite clearly opposes the conventional logic in the gaming industry. While the gaming giants have been quite used to targeting the specific gaming customer base, they would require a major strategic shift to enter/conquer the new marketspace that Wii has so successfully created (noncustomers of the traditional gaming industry).
Well, as I said 4 months ago (ouch :/) I didn’t read the whole book (and I really should).
Again, Im not sure if a major shift would be needed in this case. In the case of the circus-industry, yes, because they have deep capital investments in the direction they took and are a struggling industry.
In the case of Xbox/PS, there is a difference. One, they have deep pockets, which means they can afford shifts. Two, because what Nintendo offers is fairly easily replicable – create a Wii-Mote + some fun games – I think that PS/Xbox can easily compete in that space.. if they so desired.
But you’re right about that it is a case of Blue Oceans… I’m just arguing that it may not be such a sustainable strategy. This of course depends on what PS/Xbox want of course, and I think their targets are set on different things right now (PS Home, Apple TV, etc.).
Hopefully that was clearer than what I wrote four months ago.
[...] Wii没有打算成为大而全的视频游戏平台，而是要将游戏者带回到游戏中，……。Wii不完全是视频游戏但是包含了很多乐趣。Wii重视玩家的感觉，而不是他们产品的全面性。（阅读原文） [...]
[...] Wii没有打算成为大而全的视频游戏平台，而是要将游戏者带回到游戏中，……。Wii不完全是视频游戏但是包含了很多乐趣。Wii重视玩家的感觉，而不是他们产品的全面性。（阅读原文） [...]
[...] Wii. The epitome of Blue Ocean strategy, the Wii turned out to be a considerable success this year, with almost 5.8 million units sold. The [...]
[...] is an interesting channel in regards to Nintendo’s blue ocean strategy (discuess earlier here by Jeremy), but like many other aspects of Wii, it leaves me wanting more. The channel is basically an [...]
This blog article was published almost two years ago now. Yesterday was the 2nd anniversary of the Wii’s launch in the U.S. What’s happened since then?
* The Wii passed the XBox360 in sales last summer. To date they’ve sold about 16 million consoles in the U.S. There appears to be no end in sight of continuing to sell out. In October 900,000 Wiis sold in the U.S., more than the XBox360, PS3, and PSP. Combined. Nintendo hasn’t just hit the blue ocean successfully, they’ve pulled off a full-blown market disruption, as hardcore gamers are slowly coming to the Wii as well.
* Everyone who speculated that Sony (in particular) and Microsoft (by inference) would jump onto the motion control bandwagon was wrong. Sony’s Sixaxis controller was an abject failure, and Bill Gates came right out and ridiculed motion control at the Wii’s launch. Subsequent rumbling about motion control from Microsoft have so far been FUD (something they’re experts at…just ask any IT professional).
Opinions?
David V
familywii.org
[...] its two main competitors. Nintendo’s use of specificity with IT to create a new product through strategic use, has created an expanded market; thus providing a value proposition for the company. Consumers’ [...]