Nintendo Wii Blue Ocean Strategy -- Strategy Canvas

In April I'll try to show some Strategy Canvases built with the Blue Ocean Strategy (BOS) practitioner's tool I developed, BOS Createware. I'll start with the Nintendo Wii. Nintendo has never released the strategy canvas they used, but the canvas above is a good guess of what it probably looks like.

Let's look at the Key Factors, and examine how Nintendo likely arrived at them:

Eliminated Movie Playing. The PS3 plays Blu-Ray disks. The XBox 360 plays HD-DVD. Both play DVD's. The Wii plays ... nothing. Only games. Nintendo realized that high-resolution movies on a game machine are Technological Innovation: innovation solely for the sake of innovating. High-resolution movie-playing adds cost that doesn't align with the added consumer value.

Reduced Graphics & Physics. The Wii has good-enough graphics: they're fine. Using the six-path category of Strategic Groups shows people trade-up on entertainment to TV and movies or down to board-games. Nintendo obviously realized the cost of trying to invent a widget that traded up to the higher strategic group, movies, didn't outweigh the cost. Physics is similar: balls bounce just fine but if you're looking for real-time rendering of wind rustling through leaves look outside your window: this isn't something important enough to justify the added cost.

Raised Fun. This one almost seems obvious but, in retrospect it's probably the biggest six-path key factor responsible for the Wii's success. Microsoft and Sony concentrated entirely on functional elements: great graphics processors, physics engines, specialized chips, etc... Nintendo used the six-path element of Functional/Emotional to turn that around. Everything about the Wii is Fun: Fun -- an emotion element -- was placed over chips, a functional element. Mii's are fun; the fact the PS3 does a petaflop of calculations is cool, but not especially fun. Besides raising the Fun element Nintendo created the Virtual Console to take advantage of that giant game library they had lying around.

Created the Wiimote: Nintendo's Magic Wand. I've written an entire post just about the Wiimote: here's a link -- http://www.valueinnovation.net/2008/02/create-tech-innovation.html.

Repeating the well-known end-result, the Wii blew out of stock the day it was released and has remained unavailable ever since. PS3's and XBox 360's are stacked up as tall as a person on showroom floors, but you still have to show up at store opening times for the chance of landing a Wii. At last count the Wii was outselling the PS3 4:1 in Japan and is projected to overtake the XBox 360 in total volume of consoles by year-end despite that the 360 had a year head-start. Nintendo didn't compete in the Red Ocean: they created a Blue Ocean that rendered the competition irrelevant.

Blue Ocean Strategy In Real Life

IRL = In Real Life. Answering a question I've been asked a few times: Yes, I've used Blue Ocean Strategy to create products. Some went on to do great; others not so great. Whatever the eventual outcome, I believe in the process and wouldn't spawn a new business without going through it.

Here are the steps, in order, I personally recommend to create a BOS business. Remember, everybody seems to have a different answer to this question. Like everything else here, this is solely my personal opinion.

1. Create a Pioneer-Migrator-Settler Chart. Be honest: many companies are big red blobs that may not shrink in total revenue, but will shrink dramatically in gross profit, over time.


2. Do a comprehensive six-path study in this order:
   1) time/trends, 2) chain of buyers, 3) strategic groups, 4) alternative industries, 5) complementary products & services, then 6) functional/emotional appeal. Why that order? I'll explain in a later post. Officially, the order doesn't matter, but I came up with this after a lot of thought and having been through the process a few times. It's important to study these for both current buyers and, more importantly, non-customers.


3. In parallel, send some engineers to figure out possible things that can be used in the "Create" portion of the Four Actions Framework, coming up later. I've developed these rules for a successful Create element: 1) there's an overwhelming chance the element will involve technology, 2) the technology will be catalytic: the end-user won't notice it directly, 3) the technology must exist and is usually mature, 4) you're looking for a new use of the technology, and 5) the technology is usually, though not always, from a different industry. They should be spending more time at Disneyworld and CES, and less in the lab. You might need to attach a marketer to them to keep them focused. If you do, find a creative geek (shameless plug: or just hire me to work with your engineers).


4. Abstract key elements from the above and plot your As-Is Value Curve: allow no more than 10 key elements; the fewer the better. Don't allow participants to guess in advance which should be eliminated, reduced, raised, and created (ERRC'd).


5. Complete your Strategy Canvas by plotting substitute offerings.


6. Figure out which key elements to eliminate and reduce. Eliminate and reduce substantive key elements: if there aren't a few people who swear you'll ruin the company by eliminating and reducing these -- and who show how important the elements are by pointing out how much competitors are working on these -- the elements aren't important enough.


7. Given what's left, raise it -- high. This is fun: it's the easiest part of the process. Make sure you don't slip into technical innovation, innovation for the sake of innovation, when doing this work.


8. Make the engineers/marketers from the Create study come back and show their nifty things: see which complement the key elements you've raised and add real consumer value.


9. Map a TO-BE curve out of all this.


10. Now ... iteratively go back and forth over the prior steps until you find a set of key elements that allow you to draw a TO-BE curve that matters. When you think you're there, use the Buyer Utility Map to see if it adds adequate value. If not, back to the Strategy Canvas.

All this should take a substantive amount of time and cause mental anguish. If everybody is giddy, happy, and/or relaxed you've missed something.

Finally, take your new curve and transform it into a business model that makes billions of dollars.

PS: About those flops... I attribute those more to managerial failure than to any issues with Blue Ocean Strategy. Using BOS honestly and accurately will churn out great businesses, but talented teams and managers are still needed to execute the models. For help with this, read the last third of the book.