Following the puck can give you a black eye

Wayne Gretzky is one of the greatest hockey players of all time.  I remember reading somewhere that while watching hockey games on TV, his dad made him draw on paper where the puck was going in order to teach him to “Skate to where the puck is going, not to where it is”.  That quote is often good advice on how to compete.  But it does beg the question, “What if someone’s stick is winding up to take a shot right at your face?”  Well, at times like that maybe the right competitive strategy is to play a different game.  And that is exactly what Nintendo did with the Wii.

I’ll admit it.  I got a Wii for Christmas and it’s fun.   I will also admit that when I first heard about the Wii I thought Nintendo had totally lost the video game market to Microsoft and Sony.  As background, through the 1980′s and early 1990′s, Nintendo was the market leader with the Nintendo Entertainment System and the Super Entertainment System. But once Sony stepped in with the Playstation in 1994 and then Microsoft stepped in with the Xbox in 2001, Nintendo was relegated to a distant third place.

The market dynamics  in 2001 were basically as follows (think of this as where the traditional video game market “puck” was going):
- video game players were primarily males ages 12-40
- first person “shoot em ups”, such as Halo, were all the rage.
- all the industry talk was about the need for faster and more realistic graphics.

So what to do?
The common and most often used strategy is to do what everyone else is doing but doing it better and faster. This is exactly what Microsoft has done with Xbox -- and actually for almost every market they enter -- operating systems (Mac), Applications (WordPerfect and Lotus 123), Databases (Oracle and sybase), etc. Let’s call this “Keep up or get ahead of the joneses”.  And Microsoft has shown that it can be a good strategy. However, it would dictate that Nintendo make a box that has faster graphics with more shoot em up games, and do it better and faster than Microsoft and Sony.

Instead Nintendo charted a whole new course. They said let’s do something completely different. Let’s zig while everyone else zags. They questioned the status quo and instead of trying to get a piece of an existing market, they challenged the basic market dynamics and literally and figuratively changed the game.

They said let’s build games for a (much larger!) segment of the population not currently even a target for an Xbox or Playstation -- which will make both somewhat irrelvant as competitors. By coming up with a whole new way to play games based on a new controller or, more to the point, a “wand” you hold in your hand and move, they were able to go after a new market such as younger children and their parents and even grandparents.  As an example, people play Wii Sports for hours. Many of the games are very simple electronic versions of tennis, bowling, golf, and boxing. The graphics are not at all realistic, but it is tons of fun.  Hand someone the controller and they are playing tennis in no time at all -- no matter what the age, from 7 years old to to 70, or the gender.  And they actually make money on each unit as opposed to Sony and Microsoft that lose $100-200 per game box and make their money on the royalties from the games.  

In hindsight, it seems obvious. Why do you need a controller with a gazillion different buttons so when you press X and O followed by a double tap move to the left does a Karate Kid “crane kick”? How about simpler games such as tennis, and you use a controller you simply swing just like a racket?   If you’ve never played a Wii, then watch the video.

And now Nintendo is the video game console market leader.  Worldwide sales from Wikipedia shows the results for this generation of games as follows:

1. Wii 45.8 million
2. Xbox 360 28 million
3. PlayStation 3 15.6 million

There are other examples of companies that have done the same thing taken the road less traveled such as Southwest Airlines -- air travel like a bus, FedEx -- overnight mail delivery, or even Cirque du Soleil, a modern day circus for adults (and $100 tickets!). 

So next time you are coming up with a startup or competing against a more established player, ask yourself if you can go after a whole new market to capture new demand which makes the competition irrelevant (for the time being at least), and do it with lower costs.  That combination of new markets and better economics will make the competition wonder where the puck went for a long time.   Let me know what you think…

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