Consistent choices


Photo by laffy4k

I was just reading this fascinating post about: “How Nintendo Delights Its Customers“. In it, the writer, Peter Merholz discusses the success of Nintendo’s Wii. Here is a short quote that caught my eye:

As it turns out, Nintendo’s Wii has been the runaway success. Since coming to market in November 2006, over 50,000,000 units have been sold, far surpassing the 30 million XBox 360s, and 23 million Playstation 3s. Instead of playing the faster-better-greater race, the technology in the Wii was essentially on par to the prior generation of consoles, apart from some common and inexpensive sensors in their “Wii-mote” controllers. Nintendo opted to differentiate on experience, providing innovative gameplay through these controllers that afforded immersive interaction. What’s widely known is how this move drove top-line growth, attracting new audiences to game playing, and thus moving more units. But an even more interesting financial story appears when you dig a little deeper. At launch, the XBox 360 Premium Edition was priced at $400, though cost $525 to produce. The Playstation 3 was priced at $600, costing $800 to produce. Wii cost closer to $158 to produce, and was priced at $250.

My thoughts:

1. I think Merholz makes a very valid claim. Costumer experience mind set is so important especially in today’s competitive environment. Doing more with less is a great way to create a competitive advantage. As Merholz says: “Too often, services firms try to solve problems by acquiring additional technologies”. Making more with what we have is the challenge. This is something you, as a manager, can do to tomorrow morning – ask yourself what do I have that I am not using? How can I enrich costumer experience with things I have but am not currently using?

2. And that brings me to my second thought. If there is one thing I feel I learned in the last few weeks of taking a strategy course is that strategy is about making consistent choices and tradeoffs and understanding that you cannot do everything at a remarkable level.  Nintendo’s decision to go with an inferior technology might seem risky, but coupled with its consistent approach to make more out of the inferior technology and to price the console at a lower price it all makes sense. It is interesting to look at one of the comments for the post:

While I agree that Nintendo has opened an untouched market (namely women and older gamers), I think that it has lost a lot of what used to make it great. While the controller was truly innovative, its games have been incredibly disappointing for traditional gamers. In this first round of interactive controlers I think that many traditional gamers bought the system because of its controller and the company’s catalogue of Nintendo only games. I do not believe gamers will make that mistake again, and while the Wii has sold a number of units, I would be interested in seeing how many games people actually bought. For myself, after initially purchasing a few games in the first few months of getting the console, I realized that the Wii seemed to be targeted at very young children or people who didn’t like video games in the traditional sense of the word. As a result after the first few months I have never bought another Wii game nor even used the system

This is exactly the point. Competing with Sony and Microsoft for the traditional gamer would have been much harder. Nintendo made a tradeoff, understanding that it can’t be everything for everybody. This is strategy at its best –consistent, tradeoff, not trying to do everything for everybody.

3. The third point I think this story illustrated is about how companies can redefine the market.  I think it is amazing that Nintendo succeeded in changing the customers for the console industry by creating a product that speaks to non traditional customers of the console industry.   Our non-customers are just, or maybe as important as our existing customers.


2 Responses to “Consistent choices”

  1. Re-thinking tradeoffs « The Comparative Advantage Says:

    […] Not because being good at everything is bad. It is because it is so hard to achieve all at once. Because success is so many times the result of tradeoffs. Of actively deciding not to be good at something, because we put all our resources on something […]

  2. Lessons learned through a discussion of the Amazon-Zappos deal « The Comparative Advantage Says:

    […] excel at what we do. We forget to exploit our comparative advantage. Instead of focusing on them, we should focus on us. And I know what you are thinking. Isn’t that a contradiction? You just said that we should stop […]

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