We’re advocates of Blue Ocean Strategy* or Value Innovation. So we feel driven to commend one of the most successful recent innovations that demonstrates this approach.

The Nintendo Wii of course. A phenomenal seller – 10.1 million units globally versus Xbox 360’s 10.32 million. However, Xbox has been on sale a year longer! PlayStation 3 has achieved just 4.11 million units.

When competing in mature markets, companies can sometimes focus innovation efforts on a few key features. In the case of computer games this has typically been around improving the quality of the graphics. For Playstation 3, Sony refined them to a whole new standard of performance and aesthetics.

I’m sure some users are appreciating these advances, but I suspect as in many technology markets – the features offered are running way ahead of what the end-user wants to pay for - or needs. Under these circumstances – there is usually a relatively poor return on the innovation dollar.

Mature markets can be described as Red Oceans - everyone is fighting over the same territory. After a hard fought battle you gain a bit of ground - then competitors play a few tactics and you lose that ground again.

By contrast Nintendo identified a Blue Ocean – uncontested market space. They realised that the bigger prize was to understand non-users/occasional gamers and why they didn’t play. What might bring them into the market?

Resolving this required being aware of how non-users in technology markets can be left behind as products become increasingly more sophisticated and complex. Non-users remain potential customers, but they may feel increasingly ignorant and fearful of being made to look stupid if they were to try and engage with the market - with little prior knowledge.

Nintendo realised that these people need something very different to bring them into the market – hence the simple and intuitive ‘wiimote’. (The motion sensitive remote control.)

As is often the case when innovation successfully opens up a new sector – the innovation can have influence even beyond what was originally imagined. The Wii has achieved its goal of attracting a host of new casual gamers. Maybe more importantly though, is the way the Wii has revealed the potential for gaming to be a more sociable activity. Families can and do play Wii together – which to some parents can feel more healthy than children gaming alone.

Now, as the Brixton Bar And Grill in London has put up a screen and started to host Wii nights, we see that it is not just the Playstation and Xbox that Wii is competing against – it is also against pub quizzes and salsa dancing!

Action:  Are you and your competitors fighting in a Red Ocean?

Where is the established focus for innovation in your market?

Where might the Blue Ocean for you be?

Clues: Alternatives. What are people using if they aren’t using your product or service (think broad)?

*Blue Ocean Strategy by Chan Kim and Mauborgne