Blue Ocean Strategy: How did Wii prove a game changer for Nintendo?
- BLUE OCEAN STRATEGY
Innovation is always a great strategy and businesses rather than competing in limited spaces should search for new areas or bring innovative products and services that address new needs. Being caught in traditional areas, trying hard to beat the competition can often lead to stagnancy in business. The Blue Ocean strategy enables companies to search for new areas of business or emerge out of the Red Oceans. The industry is replete with examples showing that companies used the blue ocean strategy to change the game in their favor but none ever did it better than Nintendo. Companies fight for the customer share where their customers are. What did Nintendo do? It found a market where there was none. It found or rather built a market for the non-gamers. We hear the Japanese captain in the movie Battleship, “there is a popular Japanese saying, fight the war away from the war”.
That is what Nintendo’s strategy was – to take the market away from the market and before competitors realized Nintendo had taken over the market by storm. Nintendo is a Kyoto (Japan) based software company and now a very popular and well known name in the world of gaming. Today, Nintendo is the world’s largest gaming company by revenue but the situation was not so in 2006. Nintendo was haunted by a falling market share, left sulking at the third place behind Microsoft and Sony. With the release of Wii, in November 2006, the game changed sharply in Nintendo’s favor. Wii was an instant hit and not just the hardcore gamers loved it, among the non-gamers too, Wii’s popularity was sharply high.
Nintendo included a controller which was the most important part of the gaming kit. This controller made it easy for even the non gamers to control and play the game. Those who did not find games interesting because so many buttons left them puzzled, started playing games with interest. Wii was all set to get people interested in video games, even those who never thought they could be good players. Now, the movements of arms, wrist and hand were sufficient to control the game and there was no need to push so many buttons which usually left the non-gamers feeling disgruntled. The release of Wii simply extended the thrill of gaming. Well, in gaming business companies fight hardcore to retain their market share with newer versions being released every day and week. The strategy Nintendo pursued is known as Blue Ocean Strategy.
As the name suggests, you look for new islands in the vast blue ocean. The easy way out for any business is to look for customers where they can be found in clusters. However, one rarely thinks of finding them where they are not. Blue Ocean strategy is the strategy of venturing into unexplored spaces. Nintendo’s marker started expanding into US after Wii was already a hit in Japan. Competition is a very important factor in the business market. However, new players enter and the market gets crowded. The pie cannot be expanded so everyone has to manage with a smaller share. This is bound to happen sooner or later These pies that do not expand are Red Oceans. In these Red Oceans the competition keeps growing and market share of the players keeps shrinking. Nintendo decided to expand the pie. It decided to emerge out of the Red Ocean which it did leading gaming to a new era. The new style of Nintendo was simple but intuitive. Businesses need to employ their intuition to create Blue Oceans Like Nintendo did. Being caught in a Red Ocean means you will continue to lose opportunities.
A Blue Ocean Strategy uses a strategy canvas to draw the current strategy landscape as well as the future prospects for a company. (Here is an excellent article on how to build one) It should be used to build a compelling Blue Ocean Strategy. In the form of a graph the strategy canvas shows the current picture of a business relative to its competitors and helps decide new directions. Blue Ocean strategy further uses the Eliminate-Reduce-Raise-Create framework to bring new market offerings. You eliminate attributes that are taken for granted, reduce those which are below standard, raise those not meeting market desires and at last create attributes which have never been offered. The attributes Nintendo’s Wii featured had never been offered. So, just as the Japanese saying goes fight the war away from the war, but then you need a strategy – a blue ocean strategy.