Monday, June 17, 2013

Gaming in Blue Oceans

Markets and industries are hard to break into, especially now that there are well-defined incumbents and leaders in most of the primary spaces. There are several different ways to sneak in and try to gain market share, but once incumbents are entrenched enough this becomes a very challenging task. It could require either large amounts of initial capital, an innovative change on the way things are done, or an extraordinary amount of luck.
The safest way to succeed though is to create a brand new category to compete in. Then you would be the only competitor and you could dictate the rules to give yourself the best chance of succeeding. This is referred to as a “blue ocean” strategy, a metaphor for piloting a ship towards empty waters. The alternative is called “red ocean”, charting a ship towards a raging naval engagement.
Avoiding the bloodshed of a contentious fight with other established companies is obviously preferable in the right circumstances. Typically, you would want to pursue this type of strategy if there is a large enough market that is not satisfied by the options currently available. These might tend to be more niche customers who would not necessarily be worth the attention of larger companies. By focusing purely on them and creating a new market around them, you are able to not only create a product that is tailored specifically to their needs, but you are able to sell it to them unopposed. This also allows you to play to your team's strengths in creating a product rather than need to bend to existing standards.
One recent example of a company playing to its core strength is Nintendo in the last generation of video game consoles. Microsoft and Sony were releasing their new consoles, the Xbox 360 and Playstation 3 respectively, and were clearly gearing themselves towards cutting edge technology, realistic graphics, and exciting mature games. Nintendo however had built its empire upon family-friendly games with more colorful, childish graphics. There was no way it was going to be able to survive in a head-on fight against Microsoft or Sony on these terms.
Instead, Nintendo unveiled the Wii, a cheaper console with innovative motion-based controls. They paired this with a line of games from their established franchises which instantly appealed to the people who grew up with Nintendo and did not want to play online shooters. Nintendo was derided by many video gamers and journalists for this turn away from the trend. However, the results speak for themselves. Because of its cheaper price and focus on its chief demographic, it was a huge success, selling 99.84 million consoles worldwide and eclipsing its rivals [1]. Microsoft sold around 75 million Xbox 360s and Sony sold 70 million Playstations.
Knowing your strengths and focusing your efforts on uncharted markets can pay off hugely in a competitive field. This enables you to focus more intently on your primary market while leaving many of your competitors to fight elsewhere.

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