The Press, August 2010

“Gamer” brings to mind a pimply youth, pale and unhealthy from too many hours inside drinking coke and twiddling in front of a TV. These days it could just as well be a fit young woman, or an older couple. Japanese company Nintendo has been the key contributor to this change with a clever marketing strategy.

It is a fascinating story, with some relevance for many Kiwi exporters contemplating taking on powerful opponents in off-shore markets.

Nintendo has a long history in gaming, formed in the late 1800s as a manufacturer of playing cards, the ‘Playstation’ of its time. After forays into various ventures, including ill-fated attempts at selling instant rice and running a chain of the infamous Japanese ‘love hotels’, Nintendo settled on the gaming console sector in the 1970s.

Classic game titles like Donkey Kong and Super Mario Brothers followed on various Nintendo platforms, from handheld devices to the TV-connected console.

Fast forward to the 21st century, and Nintendo were a long way behind Sony (with Playstation) and Microsoft (Xbox) in the gaming console market. The two heavy weights were battling it out in an ‘arms’ race of better graphics, controls and gaming titles. They served a very demanding market of competitive young males, with Nintendo becoming increasingly irrelevant.

Therefore recent news that Nintendo passed 73 million in worldwide sales for their ‘Wii’ gaming console should be surprising. Although only half total sales of the Playstation 2 (PS2), the biggest ever seller, the Wii has hit their current mark a lot quicker than their fellow Japanese competitor. On current growth trends the Wii is predicted to eclipse the PS2 and become the top selling console of all time.

How did this happen? How did the ‘Iran’ of the gaming arms race outflank it’s much more powerful opponents? The Wii had inferior graphics and a limited catalogue of games. Wasn’t it the equivalent of turning up to a gunfight with just a pocket-knife?

Nintendo, although a large company with a lot of experience in the gaming sector, did not try and take on Sony and Microsoft up front. They didn’t try to compete in the same market segment with a console and games that were cheaper, had better features or a different distribution model. That would have been a valid strategy, lower risk but less likely to deliver good returns.

Nintendo employed what has been called the “Blue Ocean” strategy. Coined by two European academics, it refers to the approach of targeting untapped markets, the undisturbed, ‘blue’ areas of ocean. As opposed to the ‘red’ zones, turned bloody by fierce competition.

Nintendo’s blue ocean was market segments previously not interested in the types of gaming offering by PS2s and Xboxes. The Wii was easier to use, more interactive with its heavy use of motion control technology, and focussed on areas like games for younger children and fitness. Families could play together, older people could bowl and even young women could enjoy fitness games like Wii Yoga.

Think of happy families playing Wii tennis instead of lank-haired youths killing and maiming in Grand Theft Auto or Halo. This completely new market drove fast adoption and strong sales.

So can anyone use a Blue Ocean strategy?

The mistake some companies make is thinking a Blue Ocean strategy is created by building a completely new product. That coming up something completely new is how you will tap into this fresh market opportunity.

It’s the wrong way to look at using the Blue Ocean strategy. It is about applying your existing knowledge, skills and technology to a customer problem that hasn’t yet been fulfilled.

Nintendo didn’t try and invent a completely new product concept to compete directly with Sony and Microsoft. There was no ‘holographic’ gaming or similar to draw gaming fanatics away from their PS2s and Xboxes (in fact the Wii has resulted in Nintendo losing some of its traditional gaming customer base).

Gaming consoles had been around for a long time, so Nintendo didn’t invent a new product category. What they did was tap into a new market need e.g. young woman wanting tools to do fitness at home, families wanting a shared inside activity that wasn’t board games.

People who would have never dreamed of buying a gaming console before were lining up in their millions to buy a Wii. Having the courage to focus on a new market gave Nintendo the opportunity to grow.

It’s a valuable insight for Kiwi exporters, particularly those in the technology sector. Inevitably up against big, powerful opponents, Kiwi companies tend to battle away with a better mousetrap at a lower price. The Wii story shows you can succeed with something that is not necessarily a better technical product, but a better way to satisfy a different set of customer’s needs.

With some smart thinking Kiwi companies could apply their knowledge, technology and skills to a different market problem, a Blue Ocean of opportunity.

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