Im not sure how it happened but I put my whole big reply in a different thread!

You guys rely far too much on disruption like it's a perfect strategy that higher ups are just too old to understand. In terms of disruption, Kinect is completely disruptive in several areas, but it won't have the same effect the wii had.

Disruption is an imperfect art, and yes it is an art, not a science. Nobody has perfected disruption, and especially continued disruption.

Smash, I'm curious why you think the only solution is to either buy Nintendo or disrupt them. In just a few short months, the wii will be in red ocean, and with their announcements at e3 of classic titles and re-envisionings, they made it clear that they are re-entering red ocean, and Nintendo has not done well in red ocean when the competition is just as strong.

Nintendo is at the disadvantage here. Consider the stream of disruption. The competition is supposed to abandon markets and move upwards as the disrupter moves upwards. However, the competition is moving downstream to meet the wii. Additionally, consider the competition. Kinect is moving directly at the wii with the type of gaming and control style, and Move is aimed at gamers but with the expanded control style. So not only did the competition move downstream, but they ocupy several levels. Kinect is directly in the wii market, and Move is just above them in a smaller, nicher market composed of the traditional core.

Nintendo is looking at some obstacles. Look at their history with the wii. They used a crappy controller that didn't do what everyone thought it would do. Then they expanded with the board. Then, they moved upstream with the motion . Now the competition is expanding downstream. Nintendo has the vitality sensor for some more expansion, but they currently have no means of moving upstream.

They have the 3DS, but it has no additional functionality. Think about this: Apple is dominating the handheld market, and their product is even crappier than the 3DS. Crappy games, but expanded functionality. The fact of the matter is, Apple really does push more games than any other console out there all because the expanded consumer is satisfied with crappy games. Additionally, Apple has a network and social interaction, something Nintendo doesn't even acknowledge. How many people do you think are interested in 3D, but only on a 4 inch screen? As far as disruption goes, it makes sense. It's a much smaller screen, a small crappy screen for a crappy consumer. That's disruption. However, what expansion is it making? That's the whole point of disrupting. Why did wii succeed? It is because it expanded the market to people who were into gaming, but not the geek image of gaming. How does 3DS replicate this? The answer is that it does not. In fact, it is even geekier than before.

Now I'm not saying 3DS is going to fail. It is a DS. It will be impossible to fail. However, don't think for a minute that Nintendo is some agile, fresh, cutting edge-strategy kind of company and that Sony and MS are lumberingly slow Goliaths who are stuck in the old ways of doing things.

Nintendo is in for "interesting times".

Correct me if I'm wrong, but I thought that with disruption the goal is to move upsteam while your competiors are trying to move downsteam, basically while your competiors are trying to take your turf, you're already working on getting theirs.

...So far everything that Microsoft & Sony has done, from avators, to motion controls, has been reactive instead of proactive to the disruption that Nintendo caused. The repackaged systems by Sony & Microsoft has been the closest to offsetting the disruption that Nintendo has caused. If Nintendo repackaged (although I would do it) then they are following instead of leading at that point.

The goal is to eat away at the markets while the competition abandons them. The competitor continues moving upstream towards their most reliable customers, ie: the hardcore.

For example, the ps2 was a highly varied product. It had casual games, core games, and hardcore games. Then ps3 came out. It was too expensive for the casual, and had no games targeting them. They aimed too high. Nintendo moved in and took it all, and expanded the market into an even more casual player, the type who never plays games period (like wiifit adopters so to speak). It was too early to move upstream then, but look at nintendo's last e3 conference. Mostly core games. That is a complete change. It was a move upstream. However, Sony isn't abandoning the core, they are reinforcing and expanding as well.

http://www.self.org/news/Great_Disruption.pdf

Moving downstream leads to lower profit margins, and therefore, an initial shrink so a lot of companies at the top don't do it because the basis of capitalism and stock is to continue expanding and making more money year over year. However, in the long term, moving downstream is the best possible solution. You lose a lot of money early on because you have to develop new products and price your product a lot lower, but you prevent your market from shrinking upwards. Being at the top is a trap.

Also, read this

http://www.strategy-business.com/article/05203?pg=1

Thats a good read proff00, thanks you.

...Question, isn't that what happen with Microsoft & Sony (postal service & UPS), they both ignored the expand market, considering it more niche, then the ACTUAL small core market. Nintendo seeing this serviced that Market first, which is now allowing it to move into other areas of the industry, that article, from the way I read it, explains perfectly the logic behind the 3DS.

Sorry, I didn't see your reply before the link. Your reply explain some of what I just asked about. Thanks.

About your comparison of MS and Sony to UPS and postal service:

UPS and postal service ignored the higher tier market. The expensive overnight delivery. They ignored people who were willing to pay premium for a really great service.

Sony and MS are more like US steel compared to Japanese minimills. Minimills produced slag at a very low tier market for a very cheap price. US steel was made in large foundries and minimills used electric ovens to melt low quality scraps. They used these scraps in the concrete market as reinforcing agents. US steel made very little money on this market because the cost of their foundries was very expensive and creating this low quality steel wasn't profitable, so they just let minimills take over.

The difference begins here. Minimills quality, techniques, and economis of scale got better, driving the price down. Soon they were able to make beams and sheet metal using these very cheap ovens at a cheaper price than the foundries. The foundries, more suited to make super high quality and large applications moved up toward that market and kept letting these minimills take over more and more low margin.

Sony and MS are using different strategies to take on Nintendo.

MS is using a bottom-up "disruptive" product. It is very low end and is very limited. However, MS doesn't seem to understand that a disruptive product also requires a low price, so I don't understand their strategy right now. A bottom-up disruptive product is often identified by its low margin low quality that established brands are afraid of promoting. For example, Nintendo makes a lot of money on peripherals. Kinect is peripheral free. Nintendo wants to keep this kind of tech from becoming popular because it reduces their profit margin.

Similarly, Sony dominated the music market for a long time until the Ipod. iPod was capable of playing large amounts of downloaded music, which Sony is heavily invested in. Sony, of course, owns several labels, so promoting piracy reduces their margin. However, keep in mind that Apple's iPod was a top-down disruption. It sold at a premium price but offered new opportunities. Similarly, kinect sells at a premium and offers new opportunities. However, contrastingly, Apple marketed to the discerning customer, the one who is willing to pay more for a BETTER product. I don't think Kinect is a BETTER product, but MS pricing strategy seems to indicate that it is a top-down disruption. Perhaps they don't know what they are doing, or perhaps they believe that the less a customer has to hold, the BETTER it is.

Sony's Move is most certainly top-down disruption. It targets a more discerning customer, like someone who is interested in motion control but also wants a game that they think is cutting edge graphically, or has a lot of substance. For example, my one problem with wii and DS games is that I feel they are lacking in content. A lot of them seem short, or reuse art and other assets. I think DS is the greatest system of all time, but it infuriates me when I buy a game and it ends early, or has many variations of the same thing. For example, when I got Nintendogs, I thought it was a lot of fun, but it felt like it was missing so many things. The competitions never changed, and there were only 3. The walking of the dog took gameplay and had twists to keep me interested, but the actual things that happened were, "meet another dog" and "find a present". That's it.

Sony's Move seems to cater to the people who expect more, and in that, it is an ignored market. There are no wii games that can match ps3 in graphical ability and amount of content. There are many games that can compete on a gameplay level, and some wii games are untouchable in the gameplay aspect, like NSMBWii, wiifit, Smash Brothers Brawl, MKWii. What Nintendo ignored, was the high-end gamer. It was a smart decision though because bottom-up disruption requires a cheaper product that more successfully matches the mainstream expectation without doing much more.

Now, I'm not saying Kinect and Move are going to destroy Nintendo. They are simply taking over new markets and expanding. They are not succumbing to nintendo's disruption. Top-down disruption is very rarely fatal compared to bottom-up disruption. But like I said, MS and Sony are still here, surviving, and innovating using cunning strategy.

So you can see how earlier I said that it was an advantage that both are taking different strategies of response, because each way removes potential avenues for Nintendo to continue disruption. If both had gone with a Kinect style, Nintendo could have simply drowned out the competition with their core lineups shown at e3. Users would say "I just feel like Nintendo's motion games have more substance and higher quality." Sony Move is preventing that, and if both had gone with a wand, Nintendo could have just released kinect, (a technology of which they were definitely working on) and taken that market. Consumers would have said, "Nintendo just continues to innovate". It would have strengthened the brand and strengthened the consumer loyalty. MS canceled that out with Kinect.

The silver lining here for Nintendo is the vitality sensor. I think the vitality sensor has a major foothold in establishing a new market for the "self-helpers". However, it was shown more than a year ago. It would be silly to think that MS, Sony, or even Ubisoft, are not working on a version for a different platform.

Price always depends on the perspective. Arguably the Kinect console at $300 is the same price the Wii launched at considering the thing which sold the Wii early on was 2-4 player Wii Sports. They are using a 5 year old amortised console (Xbox 360) rebranding it and using it as the basis for their technology. Since they tore the Kinect accessory down in order to lower its overall cost I would have to argue that its coming in on the low end of the price spectrum. Their use of accessories to justify cost does indicate where they are coming from. The Xbox 360 Kinect is supposed to replicate one Wii console two Wiimotes balance board for $300.

I didn't want to talk about Kinect in this thread, but I felt I had to since you were making so many interesting points...

Top down disruption, bottom up disruption. So Nintendo's being disrupted from both sides? How can they survive?

Prof, you're seeing disruption where there is none. Do you still think Blu-Ray and Xbox Live are disruptive?