Joystiq’s interviewer gets Reggie to say:
“At its heart, what Nintendo’s trying to do is to bring more and more consumers into gaming. And to do it in a way that’s fundamentally different than anyone else,” Fils-Aime told me, explaining his company’s continued adherence to the “Blue Ocean” business strategy. “With the Nintendo 3DS — yes, it’s a handheld, but 3D in the palm of your hand without glasses. A full range not only of games but of other elements — photography, video. It’s not what people expected. Which is, at its heart, what the Blue Ocean strategy and Innovator’s Dilemma (which was the other book we used to demonstrate our strategy) are all about.”
Who is Reggie to say what people expected? The people will indicate their interest in the longterm sales numbers.
Is the 3DS a Blue Ocean product? Let us turn to the book itself and cut through opinions. The following is from pages 12-13 from the Blue Ocean Strategy book. Much of Blue Ocean Strategy depends on value innovation which is explained below:
Value innovation places equal emphasis on value and innovation. Value without innovation tends to focus on value creation on an incremental scale, something that improves value but is not sufficient to make you stand out in the marketplace. Innovation without value tends to be technology-driven, market pioneering, or futuristic, often shooting beyond what buyers are ready to accept and pay for. In this sense, is is important to distinguish between value innovation as opposed to technology innovation and market pioneering.
Let me interrupt this to say why business analysts keep getting the video games business all wrong. The product of video games is the software, never the hardware. The video game consumer buys the hardware in order to get to the software. Without interesting games, no game dedicated hardware can ever succeed.
So instead of putting the 3DS under the microscope, you must place the 3DS software under the microscope since no one plays “hardware”.
An example of Value Creation would be ‘HD graphics’ or ’16-bit graphics’ of the Xbox 360 or Genesis and SNES. An example of innovation without value would be the PS3 cramming in Blu-Ray, Cell processor, and all other sorts of things into the hardware creating a ridiculous price tag of $500-$600.
Let’s read on…
Our study shows that what separates winners from losers in creating blue oceans is neither bleeding-edge technology nor “timing for market entry.”
Stop the tape! Read that sentence again and again. Focus on the phrase ‘timing for market entry’.
This is from an Iwata Asks interview:
Then after development had advanced a bit, the 3D idea came up.
Konno:
Yes. I think the timing was good. Some of the staff members around me were saying things like, “Today’s 3D LCDs really look good!” I thought so, too. I had a connection with 3D games anyway. After the development of Luigi’s Mansion16 for Nintendo GameCube was over, I was involved in the experiment of making a 3D version of it.
This is direct contradiction of Value Innovation. He is directly saying ‘the timing was good for 3d’ which the Blue Ocean Strategy book directly says is not value innovation.
If you think I am putting this Iwata Asks out of context, consider what is said next:
Luigi’s Mansion 3D. Unfortunately, we never released it. 16. Luigi’s Mansion: An action-adventure game released simultaneously with the Nintendo GameCube™ system in September 2001.
Yeah. We tried fitting the Nintendo GameCube with a small, roughly four-inch, LCD that allowed you to enjoy Luigi’s Mansion in glasses-free 3D.
We showed that LCD as a reference exhibit at the 2002 E317, but kept the 3D aspect secret. I liked that, though. 17. E3 (Electronic Entertainment Expo): A video game-related trade show usually held in Los Angeles.
But we just couldn’t get past the problem of how to sell it.
Right. Liquid crystal was still expensive back then, and no matter how new an experience we could provide through the games, there would have been a need for players to buy the LCD as an accessory. There was even talk that it could turn out to be more expensive than the console itself!
Iwata:
In the end, we couldn’t overcome that hurdle and it never made it out into the light as a product.
What Nintendo is saying is that the 3DS is 3d only because technology has gotten to a point where it has become feasible. Absolutely no talk about customers and whether they are interested in this direction. Judging from the N64, Gamecube, and Virtual Boy, I would say not.And judging how the DS and Wii broke direction from just ‘more 3d’ and the continued lack of mass market interest in 3d Mario (and decline of interest from Nintendo’s core games not named Mario Kart), it is safe to say that the mass market prefers gaming innovation to be something other than ‘more 3d’.
Let us return to the Blue Ocean Strategy book.
Sometimes these exist; more often, however, they do not. Value innovation occurs only when companies align innovation with utility, price, and cost positions. If they fail to anchor innovation with value in this way, technology innovators and market pioneers often lay the eggs that other companies hatch.
Value innovation is not just ‘surprise!’, it is an alignment innovation with utility, price, and cost positions.
Value innovation is a new way of thinking about and executing strategy that results in the creation of a blue ocean and a break from the competition. Importantly, value innovation defies one of the most commonly accepted dogmas of competition-based strategy: the value-cost trade-off. It is conventionally believed that companies can either create greater value to customers at a higher cost or create reasonable value at a lower cost. Here strategy is seen as making a choice between differentiation and low cost. In contrast, those that seek to create blue oceans pursue differentiation and low cost simultaneously.
The bold is my emphasis.
3DS is definitely not low cost. It is the most expensive Nintendo handheld product ever made. It costs more than Nintendo’s home console! The games are 30% more expensive than its last incarnation.
It is also debatable whether the 3DS has even differentiated itself. The driving software of the DS and Wii were games that could not be done on any other system. Nintendogs and Brain Age could not be done on a Gameboy or any other handheld. Wii Sports could not be done on the Gamecube or any other home console. But 3DS software can be done on the DS and any other hardware that can make 3d. The 3d output does not change the gameplay as the touch screen or motion controller did.
I can go through the entire Blue Ocean book and just skewer the 3DS. This will be done if Reggie keeps running around calling the 3DS a ‘Blue Ocean product’ when it simply isn’t. Aside from increase in price, the 3DS is also much less accessible. You can sell a DS to Grandma, but you cannot sell a 3DS to Grandma.
Let me cut through all this PR crap and say what is really going on with Nintendo. If there is one word to describe the 3DS, it is selfish. This product was made to delight Nintendo developers, not Nintendo customers or the mass market. As the Iwata Asks interviews reveal, Nintendo developers have been dreaming of 3d output for quite some time.
This is not the first time Nintendo has been very selfish. There was the Virtual Boy. There was the 18 year absence of Super Mario Brothers (in favor for the less selling 3d Mario). There was Super Mario Galaxy 2 which had no business even being made. There is Super Mario 3DS which also has no business being made (as consumers show they have little interest in a 3d Mario on handhelds as early DS sales showed). There is the ridiculous direction Nintendo has taken the Zelda series (including having a field day with funky art styles that the audience did not appreciate). And what is Metroid: Other M but an example of selfishness?
There is still more we do not know about gaming than what we do know. But one thing that is becoming clearer as time goes on is that the longer a game developer has job security and riches, the more institutionalized he becomes. He tends to separate himself from the Mass Market and sees his tastes (which grow more eccentric the longer he remains institutionalized) as superior to that of the Mass Market.
The notion that the 3DS is a product for the masses is laughable with higher prices and eye strain. Nintendo needs to come clean to their investors that they are not interested in pursuing a ‘mass market strategy’ and prefer the glorified niche strategy of the N64 and Gamecube.
