Nintendo & Blue Ocean Strategy: Record Profits ... Again
The blue ocean strategy Switch blew away the competition by ignoring it, just like the Wii did way back when.
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Results are in and the Nintendo Switch is the second bestselling videogame console in history, in both volume and revenue. Only 2008 Nintendo Wii sales were higher:
I briefly worked with Nintendo way back when while they were developing the Wii, explaining the core of blue ocean strategy in the days before the book.
I knew what they were working on and found it wildly exciting. When the Wii was released, I went with my then young son and waited in the parking lot of Target at 2 AM to stand in line and buy the console.
The excitement in the air was palpable. Enthusiasts stood around talking to one another and playing on their DS handheld consoles. My son quickly gave up and went to bed in the car. I asked people why they were excited and got some really interesting information.
We waited and waited. Eventually, chipper Target employees, amused to see us there, arrived and handed out numbers. Soon after, the door finally opened and we bought a Switch. It was the coolest console I’d ever imagined, even having worked on the strategic framework (I never got the details).
Not long after, others from the blue ocean strategy team asked if I could get them consoles to check out. I called Nintendo and they asked how many we wanted. Sure, that was a little anti-climatic after the all-nighter but showed how the firm believed in and embraced blue ocean strategy.
My long-time friend and colleague, Jason Hunter, wrote a case study about the original Wii. It’s distributed, like all blue ocean strategy case studies, by Harvard Business School Publishing:
I eventually went on to write about the Nintendo Switch and how the firm went back and forth from the Wii (blue ocean) to the Wii U (red ocean, and a total flop) back to the blue ocean Switch. My piece is here:
Like all genuine blue ocean strategy cases, both were written under the direction of Blue Ocean Strategy co-authors and INSEAD professors Chan Kim and Renée Mauborgne.
During consulting projects, I’m often challenged to provide cases where companies actually used blue ocean strategy and Nintendo is one of the best. I strongly recommend buying and reading the cases above to see why. They’re not expensive and provide a great overview of blue ocean strategy in the real-world.
Back to the Switch, Nintendo became an inadvertent lab experiment demonstrating that the same company, operating in the same market, during a similar timeframe, and even with the same competitors, can use blue ocean strategy to fly (the Wii and Switch) or pivot to competitive strategy and sink (the Wii U).
To contextualize, when the Wii was released there were three console game competitors, Sony, Microsoft, and Nintendo. Sony was releasing the PS3 that featured a graphics chip that cost over a billion to develop and could fly cruise missiles. Microsoft was selling Xbox 360 consoles, losing almost as much per system as the sale price. Before the Wii, Nintendo was a distant third who couldn’t afford to lose any money at all on each console sale.
Many analysts believed Nintendo should have exited the home console market, focused on handheld systems, and simply created games for Sony and Microsoft. Instead, Nintendo released the Wii and outsold Sony and Microsoft combined.
A couple of years ago, I was talking to a Microsoft product manager who was on the Xbox team when the Wii was released.
“They sure surprised us as brutal competitors,” he said.
Actually, they aren’t. Even after all those years, he still didn’t get it, which I’ll take to mean that Microsoft didn’t understand. Nintendo wasn’t competing with Sony and Microsoft. Nintendo produced a game console that appealed to gamers and non-gamers: noncustomers in blue ocean strategy terminology.
While Sony and Microsoft were beating one another up to buy a Playstation or an Xbox, Nintendo focused on selling gamers a Wii (and, later, a Switch) and a Playstation or Xbox, the latter two being optional for those who wanted a traditional high-powered game system.
Today, the young son I waited in line with is all grown up; his Wii put away on a dusty shelf. But his fifteen-year-old sister is inseparable from her Switch and the high-quality games on it. Young, old, male, female, gamer, non-gamer … Nintendo’s use of blue ocean strategy has, again, put them solidly on top by not stressing about the competition.