Nintendo gives sony a bloody nose by refusing to play power games

It’s that time of year when children start making their lists for Father Christmas promising that they have been very good all year long. But even the best-behaved kids may be disappointed if they want a Nintendo Wii. The console has been continuously sold out in shops around the UK for months; you can’t even bribe Santa with a dram of whisky and a premium mince pie.

But why has the Wii been so popular? Just over a year ago, everyone assumed that Sony’s Playstation 3 would be the dominant console around the world. Nintendo was a giant of the computer industry in the 1990s, but was unable to compete on the same terms as Sony or its other main rival in consoles, Microsoft.

Now the Wii has sold more than 13.2 million units and is on track to sell at least 17.5 million units in the year to March 2008, against predictions of 14.5 million. By the end of September 2007, Sony had shipped just 5.6 million PS3 consoles. So where did it all go right for Nintendo and why is Sony suddenly playing catch-up?This question brought to my mind comments about marketing made recently by an analyst called David Evans at Continental Research. He said: “Companies get in trouble when innovation comes from the brand development perspective rather than from the consumer.”

He’s absolutely right. Sony has struggled with its PS3 console because it put its corporate agenda above the consumer one. In an age where consumers are used to shaping brands’ strategies, they will no longer accept having their needs dictated to them.

While the brand was obviously keen to create an advanced console product, it also wanted to do something else – win the larger corporate battle over future storage disc formats. It decided to use its proprietary Blu-Ray system in the PS3 in an attempt to give it the edge over the Toshiba-backed HD DVD disc.

But this strategy meant that the console had to be delayed in its European launch time, missing the 2006 Christmas season. The Blu-Ray inclusion also pushed the PS3 price beyond that of its competitors. Sony still loses money on each console sold due to component costs, according to reports from games industry analysts IDG.

In choosing to align the product development of the PS3 with the business’ corporate aims, Sony chose to innovate from the brand development perspective, not the consumer one. It was all about making Sony a dominant brand, not pleasing an audience of game-playing consumers.

Now let’s look at Nintendo’s thinking. Rather than come up with another copycat machine along the lines of the PS3 or Xbox 360, it decided to look at what consumers weren’t getting from a console experience. By doing so, it managed to identify a new style of gaming that could appeal to those people who did not traditionally play consoles at all.

As Nintendo game designer Shigeru Miyamoto told Business Week: “The consensus was that power isn’t everything for a console. Too many powerful consoles can’t coexist. It’s like having only ferocious dinosaurs. They might fight and hasten their own extinction.”

In choosing to think outside the “dinosaur” mentality, Nintendo worked out that something that allowed people to get really involved with the experience of playing was missing from the console-playing experience. By employing a wireless controller that worked with motion, people could use the Wii almost as an extension of their own body. This immersion appeals to both 12-year-old boys and 40-year-old women.

At this point, I should clarify and say that I do not own a Wii myself; I’m not arguing that it is perfect. Critics have blasted its online connectivity, sound quality and some developers have warned that it doesn’t have enough power to run the best new games. Nintendo also grossly underestimated levels of demand.

But overall, I think that Nintendo has proved David Evans’ point. Businesses must not get complacent and forget consumers when they’re developing their products. If what the buyer wants is not at the centre of your strategy, you are likely to fail.

It has happened before. Kodak, the biggest name in photography, failed to notice that both consumers and professionals were enjoying the ease of digital technology until too late. By the time it started innovating with its customers’ preferences in mind, other companies had made their mark in the digital photography area.

It’s likely that Sony will make up some ground on the Wii before Christmas this year; PS3 could still be a great success. But I imagine that this holiday season, Santa might not be so kind to the brand as its executives pray. After all, he is probably stuck in Lapland playing Rampage: Total Destruction on his Wii.

Ruth Mortimer is editor of Brand Strategy