VODC MiniCase –

Nintendo: The Wii Success

Introduction

Nintendo is one the pioneers in the history of console gaming. Their first console
appeared in 1983 and was a huge commercial success, selling 61.91 million pieces in
total [1]. Their follow-ups also proved to be of good success, until the GameCube arrived,
which was of moderate success. At the beginning of this century, Nintendo had outlived
its early console competitors (e.g. Sega) but it was facing heavy competition from the
newcomers Sony (PlayStation) and Microsoft (Xbox).
The focus of this paper will be on how Nintendo identified the problems of the
GameCube and how they saw the market opportunities which made the follow-up of the
GameCube, the Wii, a huge commercial success.

1. Steps of the Adaptive Cycle

1.1. Crisis

The Nintendo GameCube was not very successful compared to its competitors, selling
22 million units while the competitor Sony PlayStation 2 sold over 130 million units.
The main criticism point for the GameCube was the lack of hardware power and the
missing of extra’s like DVD support. [2] This made Nintendo realize that things had to
change for the next generation.
In the field of gaming consoles, there is a five-year hardware cycle. After the launch,
games will be brought out for this console for an estimated period of 5 years, after which
the new generation will be launched. [2] So after 3 or 4 years, the manufacturers of these
consoles would automatically fall in the crisis part of the adaptive cycle, to keep up with
the other competitors. The focus on the current console should then be moved on toward
the new console.

1.2. New Combinations

In 2002, Nintendo switched their CEO. Their old CEO had been this from 1950 till 2002
and left the organization with a culture with which it could compete in a fast-moving,
uncertain and competitive environment. Still, the new CEO brought some improvements
to the Nintendo organizational culture. Main changes were the focus on why something
had become a success or a failure, better communication across departments and a
change from top-down way of decision making to a discussion-centred way of decision
making [2].
Looking at the adaptive cycle, this culture can have advantages for being in the right
part of the circle. The culture was open to innovative behaviour, by giving people a voice
and by letting them speak about their ideas, which are crucial for proper functioning in
this part of the adaptive cycle.
Due to this organizational culture, they created a strategy of so-called Blue Ocean:
focusing on winning a new target group. This instead of Red Ocean, which is fighting
for the existing group of customers [3]. Although the Blue Ocean strategy had failed with
the GameCube, the difference with the Wii was that it was more innovatory. It had a new
type of controller which focused on motion sensor control instead of the button-only
control that had dominated the console market at that time, even though this would be a
big risk for the company [6]. It also had a gateway to playing old Nintendo console games
which went back to the NES [3]. Nintendo believed that this innovations could lead them
to regaining their old market success. The Wii was released in 2006.

1.3. Entrepreneurship

The announcement of the Wii brought a lot of excitement in the gaming world.
Customers and developers were very excited about the possibilities that the Wii brought.
The sales numbers confirmed that: there were more Wii’s sold in the first part of 2007
than the Xbox and the PS3 combined and in the beginning of 2008 it had already
outnumbered the total GameCube sales [3]. These numbers show a perfect example of
the exploitation part of the adaptive cycle. The Wii was standardized and scaled up for
mass production and the consequence was a rapid growth and gaining of market share.
An example of a deal that was made during the exploitation was the colour of the
Wii. The Wii was first presented in white, but the idea was to present it a couple of
months later in five different colours, as the marketing experts stated that this would be
good for the sales. But Nintendo was having such a hard time meeting up with the
customer demands, they decided to keep it in white for a couple of years after the launch.
Inside the company, a compromise was made to first focus purely on fulfilling the current
demand and to focus on the colours afterwards. Furthermore, the colour seemed to barely
have an effect on the high sales numbers [6].

1.4. Equilibrium

The next challenge for Nintendo was to conserve the position of market leader, at least
until the next generation of consoles. Due to the high sales numbers, they were able to
build up their size and capital. A consequence of a successful console is that the number
of software sold next to it will also increase, improving the power of the company. Due
to this software sales, Nintendo could maintain its power. Furthermore, the first 16 best-
selling games for the Wii were produced by Nintendo itself, which also improved the
size and capital of Nintendo.

2. Future prospects

The video-game lifecycle came kicking in for the Wii and near the end of 2012 its
successor was released, the Wii U. Unfortunately for Nintendo, the Wii-U has not proved
to be very successful, selling just over 5 million consoles at the beginning of 2014 [1]
and as a consequence Nintendo is currently losing money annually [8]. An interesting
topic for a mini-case next year might be how Nintendo handled the crisis with the end of
the Wii, how the Wii U was developed during the new combinations phase and why it
failed to be successful in the entrepreneurship phase.

References

[1] Moriarty, C.. (2014). These Are Nintendo's Lifetime Hardware And Software Numbers. Available:
http://www.ign.com/articles/2014/01/29/these-are-nintendos-lifetime-hardware-and-software-numbers.
Last accessed 13th Nov 2014.
[2] Kim S., Lamont, I., Ogasawara, H., Park, M., & Takaoka, H.. (2011). Nintendo’s “Revolution”. MITSloan
Management. 11 (124), 1-23.
[3] Rosmarin, R.. (2006). Nintendo's New Look. Available: http://www.forbes.com/2006/02/07/xbox-ps3-
revolution-cx_rr_0207nintendo.html. Last accessed 13th Nov 2014.
[4] Huse, T.. (2010). What Can We Learn from Nintendo?. Available: https://hbr.org/2010/08/what-can-we-
learn-from-ninten/. Last accessed 13th Nov 2014.
[5] Gunderson, L. H. (2001). Panarchy: understanding transformations in human and natural systems. Island
press.
[6] Crossley, R.. (2012). Revolution: The Story Of Wii. Available:
http://www.computerandvideogames.com/378029/features/revolution-the-story-of-wii/. Last accessed
13th Nov 2014.
[7] List of best-selling Wii video games. Available: http://en.wikipedia.org/wiki/List_of_best-
selling_Wii_video_games. Last accessed 13th Nov 2014.
[8] Luke Karmali. (2014). Nintendo Announces Another Annual Loss, 6.17 Million Wii U Consoles Sold.
Available: http://www.ign.com/articles/2014/05/07/nintendo-announces-another-annual-loss-617-
million-wii-u-consoles-sold. Last accessed 13th Nov 2014.