Let us take a look the 'bible' for Nintendo's business strategy:
Blue Ocean Strategy said:
What consistently separated winners from losers in creating blue oceans was their approach to strategy. The companies caught in the red ocean followed a conventional approach, racing to beat the competition by building a defensible position wihin the existing industry order. The creators of blue oceans, surprisingly, didn't use the competition as their benchmark. Instead, they followed a different strategic logic that we call value innovation. Value innovation is the conerstone of blue ocean strategy. We call it value innovation because instead of focusing on beating the competition, you focus on making the competition irrelevant by creating a leap in value for buyers and your company, thereby opening up new and uncontested market space.
Improving existing genres would not grow the industry. But focusing on eliminating disinterest and creating new value in games, Nintendo was able to grow the market. A good example are the Brain Age games which are valued entirely different than other games (just as non-fiction books are valued differently than fiction books).
Value innovation places equal emphasis on value and innovation. Value without innovation tends to focus on value creation on an incremental scale, something that improves value but is not sufficient to make you stand out in the marketplace. Innovation without value tends to be technology-driven, market pioneering, or futuristic, often shooting beyond what buyers are ready to accept and pay for. In this sense, it is important to distinguish between value innovation as opposed to technology innovation and market pioneering. Our study shows that what separates winners from losers in creating blue oceans is neither bleeding-edge technology nor "timing for market entry." Sometimes these exist; more often, however, they do not. Value innovation occurs only when companies align innovation with utility, price, and cost positions. If they fail to anchor innovation with value in this way, technology innovators and market pioneers often lay the eggs that other companies hatch.
The last line signals why someone else just cannot tack on the touch screen (or Wii-mote) onto another system. Brain Age and Wii Sports are more value innovations than technology demonstrations.
Interesting, the PS3 and PSP could easily fit the above definition of being 'technology-driven' and overshooting what buyers are ready to accept and pay. The Xbox 360 definately fits someone focusing on 'market entry timing' to create an industry foothold.
We can easily classify the companies' strategies as:
Playstation = Industry standard
Xbox 360 = Red Ocean
DS, Wii = Blue Ocean
One more quote:
Value innovation is a new way of thinking about and executing strategy that results in the creation of a blue ocean and a break from the competition. Importantly, value innovation defies on of the most commonly accepted dogmas of competition-based strategy: the value-cost trade-off. It is conventionally believed that companies can either create greater value to customers at a higher cost or create reasonable value at a lower cost. Here strategy is seen as making a choice between differentiation and low cost. In contrast, those that seek to create blue oceans pursue differentiation and low cost simultaneously.
Many observers (and some analysts) point that cost is the primary difference between the consoles. They believe that once the Xbox 360 and PS3 come down in price, its sales will go up. In their analysis, they are forgetting about value. People don't buy a 360 or PS3 today not just because of the price but because of low value (due to the limited game library). Once the game library increases, the value of the system goes up (this is true for all systems).
Nintendo has been trying to break the cost-value relationship. If PSP had a price drop, would it suddenly begin outselling the DS? Most likely not because the DS is generating new value that is pulling in non-customers.
Blue Ocean Strategy continues with an interesting example of the wine industry. The demand for wine had been flat but competition and supply resulted in price wars, overemphasising prestige on the bottles, and becoming intimidating to non-wine drinkers. Wine drinkers would debate over the subtle differences of taste that noncustomers couldn't grasp. If a noncustomer complained, the wine drinkes would stick out their pointy finger while sipping their elaborate drinks and
declare the non-customers as unsophisticated.
A new wine designed to combat the problems of the industry called Yellow Tail was introduced. The wine was non-intimidating, cheaper, tried to be 'fun', and drew in non-customers. Many regular wine drinkers "went down" to Yellow Tail's level. But many wine drinkers did not and snorted dissatisfaction at it. They considered Yellow Tail as a 'non-wine'. As Yellow Tail exploded in popularity where the company couldn't keep up with the demand, these wine drinkers believed Yellow Tail would destroy the wine industry.
The same parallels can be made with the gaming industry. When hardcore gamers debate textures, game designers, their home theater set ups, 1080p and framerates, I am reminded of wine enthusiasts debating over subtle tastes of wines which are invisible (and intimidating) to the mass market. Wine drinkers believed their industry was
mass market when it was actually niche (just like gamers), and that they, the wine drinkers, were
more sophisticated than regular people.
Those who complain about 'non-games' are really complaining at the lack of 'sophistication' those games have. Brain Age has no graphics. Animal Crossing has no 'ending'. When a hardcore gamer complains that Wii Sports isn't a game because "it is not sophisticated", this is exactly the point. Wine drinkers lost sight that wine was supposed to be fun to consume, not some symbol of sophistication. Imagine a hardcore gamer trying to upset a Wii Sports (or even Wii Play) party by saying, "Stop! That game is unsophisticated! It is not a true game!" Everyone would laugh at him.
The traditional gamer value games based on their sophistication. But the non-customer will value games differently. To non-customers, Wii Sports and Brain Age are the most sophisticated video games ever made.
