Wii: the Blue Ocean Knockout

No blog about Blue Ocean Strategy and technology would be complete without at least one post about the BOS superstar, Nintendo's Wii. Those in techville seldom seem to understand the BOS aspect of what happened.

First, a well-known recap. Nintendo was founded in 1889: that's not a typo. They've always made games, and were an early adopter of video games. At different points through history their game consoles have been at the top and on the bottom among the various competitors.

Their prior system was the Game Cube. My son, who is eleven, loved it. His male friends loved it. Unfortunately for Nintendo, nobody but my son, his friends, and a small number of college students who either had drunk too much or needed to grow up, showed much enthusiasm. The competitors were Sony, with the awesome PS2, and Microsoft, with the XBox. The latter played Halo and had a great online community, the former played everything else and DVD's too. Most people purchased one or the other.

Gearing up for their next generation systems Sony and Microsoft announced they were building supercomputers. They'd have breathtaking graphics, physics chips that mimicked real-life, they'd play high resolution DVD's and do biomolecular engineering in its spare time. They'd be controlled the same way the former systems were because consumers already knew how to use the existing game controllers. When you're the market leaders, why change anything, right?

Nintendo must've thought about following this strategy but decided instead to bet the farm on Blue Ocean Strategy. They made gutsy, insightful decisions clearly derived from the six-path framework. Nintendo's never published their Eliminate-Reduce-Raise-Create (ERRC) or the Strategy Canvas that followed but we can probably reverse engineer it:

Eliminate. Movie playing. Want high-def movies, or even DVD's? Go buy a player for them. Pop one of these disks into Nintendo's Wii and it'll pop right back out.

Reduce well below the others. High resolution graphics and the physics chips. The graphics aren't awful: they're good enough for games. When playing a Wii you know you're not watching a movie being rendered in real-time, and Nintendo realized that'd be just fine with people. Same with the physics: balls bounce in a realistic and predictible manner, but the wind rustling through the leaves on the tree is probably pre-rendered. Or maybe the leaves don't move. Nintendo realized buyers don't care what the leaves are doing if the game is...

Raise well above the others. FUN. Everything about the Wii is about fun. Nintendo clearly popped the functional requirements from their competitors and spun them around into the emotional key element that, ultimately, drives buying decisions. In BOS speak they flipped the functional and emotional appeal of a key element as per the six-path framework. Playing a Wii is fun. Making a Mii is fun. Having your friend's Mii's in the audience as you compete with your friends is fun. It's less expensive to program fun than it is ultra high-definition graphics and perfect physics, making Wii games more appealing to game programmers than PS3 or XBox 360 games. Despite being easier and less expensive to program, playing the games -- having fun -- is a lot more satisfying for end-users.

Create. The Wiimote. The magic wand that I've written an entirely separate post on below. This one speaks for itself.

One more thing: the name. The well-known codename of the console was the Nintendo Revolution. My son thinks that's a great name. He and his friends still say Nintendo should change the name. The traditional gaming community -- especially those writing the magazines -- agree. But looking at the three tiers of non-customers there's one group the cutesy-sounding name appeals to: girls. Girls seem to love the Wii as much as boys. Geriatrics love the Wii: it's a hit in nursing homes. Parents love the Wii: it makes their kids move and more than a few parents admit to hitting the On button after the kids are in bed.

The end result is that everybody loves the Wii: traditional demographic customers of gaming systems and non-customers alike. They love the Wii so much there are piles of PS3's and XBox 360's as tall as I am sitting on the floor of electronic showrooms. But the Wii hasn't been in stock since it shipped, well over a year ago. At the same time Nintendo sells the Wii for $250 and makes money on every single machine; Sony and Microsoft have significantly higher price points but lose money on every unit sold (the hope is to make it up selling games).

The well-known end of the story: Nintendo came from a distant third to a solid first thanks to BOS. Nintendo's strategy didn't just win; it made the competition irrelevant.