Nintendo’s Blue Ocean Strategy: Wii

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by: Alexander Osterwalder

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 on my business model blog). 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.

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)

These two characteristics defy the conventional wisdom that you should either go for cost leadership or differentiation but not for both (remember Michael Porter…). In Kim & Mauborgne’s terms this means that while Microsoft’s Xbox and Sony’s PS3 are fighting each other fiercly in a red ocean (i.e. the existing market), Nintendo’s Wii is calmly sailing in the blue ocean it created for itself (i.e. a new market)… By the way, Switzerland is not innocent as to the creation of this blue ocean: An Italy-based division of STMicroelectronics, which is headquartered in Geneva, Switzerland, has put forward to Nintendo the integration of motion sensors into their consoles.

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 our graphic 😉

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