And people still wonder why I study Nintendo. Here is the link.
What are some traits of the World’s Best Companies? A commitment to innovation, diversified portfolios, aggressive expansion, strong leadership, and a clear vision for the future. “In an environment of continuous disruptive change, companies that have rigorous strategic planning initiatives that allow them to see over the horizon…are far more likely to win than those that make it up as they go along,” says Paul Laudicina, chairman of A.T. Kearney.
It does look like he is referring to the Great Disruption. And he does look like he is referring to disruption as defined by Clayton Christensen.
The top 40 come from 18 countries and industries ranging from chemicals and contracting to software and shipbuilding. But three groups stand out. There are six technology and telecommunications enterprises that have tapped into continuing demand for mobile-phone service and new digital hardware and services. The eight heavy-industry and engineering outfits performed well as infrastructure spending started to bounce back. Finally, companies in sectors tied to the commodities boom of recent years have in many cases continued to prosper, though their ranks have been thinned considerably.
Japanese electronics maker Nintendo (7974.T) claims the No. 1 spot this year. Its sales have risen 36% annually over the past five years, while its value growth averaged 38%. Despite the hard times of the past year, Nintendo’s continued emphasis on innovation has helped the company develop must-haves such as the DS handheld game machine and the Wii console, which outsold rival offerings from Sony (SNE) and Microsoft (MSFT).
Nintendo’s strategy is emblematic of the tech companies on the list. Like Nintendo, American technology giants Google (GOOG) (No. 2), Apple (AAPL) (No. 3), and Amazon.com (AMZN) (No. 17) have continued to invest heavily in innovation, commanding large market share with new products even as consumer spending and confidence have declined sharply.
If you say you are studying Apple’s business or Amazon’s business, people will give you a thumbs up. But if you say you are studying Nintendo’s business, they think you just said you were studying Fisher Price’s business.
The lack of business writing and even adequate analysis on Nintendo is shocking. I know the main reason why though: it is because business writers and analysts do not understand gaming and are dismissive of it as an entertainment medium. They are cut from the cloth that gaming is ‘toys’.
Most importantly, there has been failure to look at gaming from the standards of gaming. Gaming is only analyzed by the benchmarks of movies, television, or some other entertainment. Gaming is not seen as the benchmark of gaming itself.
Why is this? Gaming is not well understood. Video games are considered an incredibly tricky market. Yet, there is one company that consistently thrives which is not done in the video game market: Nintendo.
Much of the recent business writing about video games is actually observers of Microsoft and Sony chatting about gaming. But they do not do so from the benchmark of gaming. They do so mostly in the benchmark of the computer industry. They are all cheering the ‘top box’ and ‘taking over the living room’. This is why any video game product that came out before the Sony PlayStation does not exist to them.
It was pretty easy to see the Wii phenomenon coming since it matched what the Atari 2600 and NES were doing. However, these observers treat the Atari and NES Eras as the “Land Before Time” and nothing more than mere toys or relics. Understanding the video game market means knowing its entire past which includes gaming before the PlayStation. They couldn’t explain why the Wii did what it did because they couldn’t explain why the Atari 2600 or the NES sold to non-gamers.
Even with the Wii troubles in 2009, it should show how fast and how difficult the video game market is. Even if an idea seems sound, it may not be so at all in the market. Prior success ends up toxic to the future since it makes the decision makers become complacent and ‘arrogant’. Sony and the PlayStation 3 are going to be example number one in history of that.