Case Analysis

Satoru Iwata, the president of Nintendo, stated that Wii is “a disruptive innovation product”. He set up goals “to expand the game population and make people who never played games play.” In other words, Nintendo was trying to get into the potential domain to expand its target customers, and to determine their needs and interests in potential domains so that these potential customers would use its products.

In the following subsections, we discuss its competence set analysis and charge structure, and explore how it fits in with the framework of innovation dynamics.

6.4.2.1. Competence set analysis

The expansion and transformation of CSs played a vital role in Wii’s success.

Personnel’s brainstorming, information and communication technology, and even bravery and enthusiasm were all important elements in its CS.

The idea of designing Wii Remote began with Satoru Iwata’s interest in TV remote controllers. “People are willing to take TV remote controller for interaction, but not every family member would like to touch the remote controller of a video game console.” Satoru Iwata gave the problem to his R&D colleagues and requested that they make a video game console which would be as popular as a TV remote controller. Thus, in order to achieve such a conceptual idea, Miyamoto Shigeru, Senior Managing Director and General Manager of Entertainment Analysis and Development of Nintendo, gathered designers and engineers together to discuss various opinions and ideas, and created a video game console that can easily attract senior family members with the willingness to buy it. Moreover, the result of personnel’s brainstorming gradually formed the basic goals and concepts for Wii, including being simple, fast starting, power saving, quiet, etc., and many important suggestions occurred that influenced the design of Wii in the process of brainstorming, such as “new video game console should not have too many lines, otherwise it may be easily messed up and made mom to be mad”. Finally, Wii was successfully targeted to female and senior groups who had never played video games before.

In terms of IT and communication technology, Wii successfully integrated wireless communications technology, sensor bars, infrared pointer, etc., into its CSs.

Wii’s console embedded the standard wireless networking function, which allows users to access the internet and subscribe to Nintendo DS built-in services, including

“Nintendo WiFi Connection” and “WiiConnect24”.

In addition, there are some intangible but extremely important elements to

support the enterprise’s innovative activities, such as bravery and enthusiasm. Based on the idea of “amusement is more important than visual attraction”, Wii does not support higher definition; thus its visual effects have been greatly exceeded by its competitors, PS3 and Xbox 360. Great courage and enthusiasm were required to do something that departed from the traditional track.

6.4.2.2. Charge structure in potential domains

The video game industry has been around for decades. In the past, producers believed that players’ requirements for playing game lay in sensuous gratification of the eyes and ears; therefore, the game’s images/sound effects had to be exquisite and vivid.

However, with the development of the “physical experience design”, Wii made players physically move their bodies while playing games. In addition to enjoying the fun and excitement of playing games, in a player’s potential domain, he/she would like to “win” (for the strong circuit patterns of “social comparison”, please refer to Appendix 2). For example, the moment when the physical-experience designed remote controller hits the ball on the screen image, there are vibrations and sound effects of hitting a tennis ball which makes players believe that they have hit a beautiful shot. Moreover, when a player hits an ace and scores, the reachable domains triggered by the actual physical movements may possibly accelerate the player’s heartbeat and make the player have feelings of glory and excitement as if he/she was really on a tennis court playing and winning.

In our busy and tense modern societies, the real reason that many people exercise and engage in leisure activities is to relieve physical and mental charges, suffering, and problems. However, not everyone has the time or opportunity to go to a stadium or leisure spots. These are the charge and suffering in people’s potential domains. The emergence of Wii turned one's living room into a virtual stadium, or speedway, or fishing pond. Players can obtain mentally pleasant feelings and excitement through virtual reality, As a consequence, the charge in their potential domains can be relieved.

6.4.2.3. Nintendo’s innovation dynamics

In Section 6.4.1, we describe the charge structure of Nintendo, which can be regarded as the motivation for Nintendo to innovate. With hard work and persistence in effectively integrating the creative thinking of human resources, the IT environment, and communication technology, in 2006, Nintendo officially announced

the latest generation of its home video game console, Wii. Nintendo successfully expanded and transformed the CSs (as shown in (i) of Figure 6).

As mentioned in Section 6.4.2.2, Wii’s physical experience design allowed players to enjoy the movement of their bodies while playing, departing from the traditional “sit and play” way of using a game console. Players get excited and tell their friends. Thus more and more people are attracted to the product. Therefore, the target customers have greatly expanded to include women and seniors. As Wii released the charge, pain, and frustration in the potential domains for a large targeted group of people, many people bought and used Wii and its services. As a consequence, it earned great profits for Nintendo. Please refer to (ii) to (iii) of Figure 6.

To continually upgrade its products and services, Nintendo reinvested its earned value (resources) to develop new products and services. In December 2007, Nintendo further promoted the new-generation software, Wii Fit, which is an exercise game consisting of activities using the Wii Balance Board peripheral. The balance board measures a player’s weight and center of gravity. The software can then calculate the players’ body mass index when told his or her height. As most people are concerned about their health condition, Wii Fit was very popular and became the fifth best selling videogame in history (among games not packaged with a console) with 18.22 million copies sold as of March 31, 2009. As a result, Nintendo has become far more than a game console provider in the industry; it has also connected communication-related, network-related, and health-related industries. The reinvestment, continuous transformation of the ever growing CS to relieve more customers more pains to create even more value and resource keep on going, which is consistent with innovation dynamics (see Fig. 6 (vi)Æ(i)Æ(iii)Æ(v)Æ(vi)). Being limited by space, we encourage readers to explore the counter-clockwise cycling of Figure 6.

6.4.3. Summary

Wii was Nintendo’s innovative breakthrough. Its innovation was not only in

“subverting the traditional design”, but more importantly, it satisfied the desires of people “wanting to experience realistic gaming” in potential domains. In the past, the game console industry was always committed to pursuing exquisite graphics and sound and light effects, attempting to satisfy the desires of players. However, luxurious graphics and sound and light effects are needs in the actual domains of gamers (desires for audio and visual aspects). Allowing body movements and feeling the speed, direction, and even the power in a game are strong needs hidden in players’

potential domains. By satisfying the needs of potential domains, Wii recreated the interaction between gamers and games; this not only created value for Nintendo, but also allowed the company to regain its competitive advantage.