Contents
Markets have frontal attacks, just as war does: more performance, bigger budgets, lower prices. If you fight that way, you usually win only if you are the stronger party. Around 2005, Nintendo was not the stronger party. The story of the Wii shows how a company sidesteps a trial of strength and seeks out a position in which its rivals cannot or will not follow – an example of Maneuver.
The arms race of the giants
Situation
Microsoft launches the Xbox 360 at the end of 2005, and Sony launches the PlayStation 3 in November 2006. Both bet on high-definition graphics, expensive chips and controllers with many buttons and two sticks. Both initially sell their consoles below production cost. According to a much-cited estimate by the market research firm iSuppli, Sony lost about $300 on every early 20-gigabyte PS3. With its previous console, the GameCube, Nintendo had lagged well behind Sony.
Link to the principle
This is a frontal battle. The winner is decided by performance and financial staying power. In this fight, Nintendo would have been in the weaker position. A maneuver begins with knowing which field you should not compete on.
Sidestepping instead of keeping up
Situation
With the Wii, Nintendo deliberately does without high-definition output, expensive chips and the complicated two-stick controller. Instead, the company bets on a remote that detects motion. You swing it like a tennis racket or a bowling ball. The Wii is released in the United States on November 19, 2006, for $249.99, considerably cheaper than the competition. According to analysts’ estimates, Nintendo makes money on every console sold from the start.
Link to the principle
Nintendo does not stand in its rivals’ way; it goes around them. The strength of Sony and Microsoft, computing power, becomes irrelevant for the new target group. This is the same logic as in a military maneuver: the opponent’s fixed position loses its value because you are standing somewhere else.
New terrain: people who don’t play
Situation
The Wii is aimed at people who had never bought a console: families, parents, older people. It can be used without any prior knowledge. Wii Sports, which comes with every console outside Japan and South Korea, invites people to play together in the living room. Players who mainly want graphics performance are not satisfied, but they are not the target group. The strategy researchers W. Chan Kim and Renée Mauborgne later describe the Wii in a case study as an example of a blue ocean, that is, a newly opened market without direct competition.
Link to the principle
A maneuver takes you into a position in which you are superior. For Nintendo, that was a market Sony and Microsoft had not even considered. There, the opponent has no position you have to overcome.
The yield
Situation
In the first half of 2007, according to data from the market research firm NPD, the Wii outsells the Xbox 360 and PlayStation 3 combined in the United States. In September 2007, the Financial Times reports that the Wii leads the home console market worldwide. By March 2016, Nintendo says it has sold 101.63 million units. For April to December 2006, the company reports net profit up 43% to 132 billion yen.
Link to the principle
The success comes not from winning the arms race but from going around it. Nintendo did not have to defeat its rivals. It was enough to be in a place where they were not.
The limit of the maneuver
Situation
The lead does not last. In September 2010, Sony brings out its own motion control with PlayStation Move, and in November 2010 Microsoft follows with Kinect. Wii sales fall by 21% in 2010. Over their entire lifetimes, the PS3 and Xbox 360 together sell more units than the Wii. Only with the Switch, released in March 2017, does Nintendo achieve a hit of similar size again.
Link to the principle
A maneuver creates a position, not a permanent state. As soon as the opponent moves up, the game starts over. If you have won through movement, you have to keep moving.
Key takeaways
Key lessons
- First ask on which field you should not compete.
- Make the other side’s strength irrelevant instead of surpassing it.
- Look for people or markets that nobody has in view.
- Accept that some will think you weak.
- Keep moving when the others catch up.
Summary
Instead of wrestling with Sony and Microsoft over the most powerful technology, Nintendo used the Wii to sidestep onto a different field: simple motion control, a low price and a target group that had not played before. As a result, its rivals’ strength counted for less. The success was great but not lasting, because the competition caught up. Here the principle of Maneuver appears in both its aspects: in the power of going around and in how quickly that power fades.
Sources
- W. Chan Kim, Renée Mauborgne: Blue Ocean Strategy. Boston: Harvard Business School Press 2005.
