Ladies and Gentlemen,

Welcome to the Class of Revolution.

Our discussion, today, is about the Blue Ocean. Is there anyone in the audience who knows the three phases of the Blue Ocean Strategy?

A hand shot up from the back.

Yes! Go ahead, speak.

“Well… Professor Malstrom… I think… the three phases are marketing, colors, and… uh… innovation!”

Wrong!

Another hand was raised.

Yes, you. Speak loud so everyone can hear.

“Well, Professor Malstrom, the three phases of the Blue Ocean Strategy are to go after nonconsumers, then focus on marketing, and then compete against one’s competitors.”

What the heck? That was the dumbest answer ever. Blue Ocean Strategy is never about competing against one’s competitors.

Ladies and gentlemen, I will show you the three phases of the Blue Ocean Strategy by illustrating it with the three phases of the Nintendo DS. You will be amazed how they fit like a hand in glove.

PHASE ONE: SOON TO BE CUSTOMERS

This means customers who are about to leave your product, that are getting bored, or those who had recently left the product.

Ahh, the DS One. Behold its two screens. Behold its microphone. Behold its touch screen. To sum up, all these changes and additions, which confused the analysts (who called the DS Nintendo’s new Virtual Boy), were aimed at these ‘Soon To Be’ Customers. Sum up the changes, crowd.

“They are all additions to make gaming more innovative. To make gaming more fresh!”

Right. And who needs gaming to become more innovative? What type of customer? Or rather, what type of gamer?

“The former gamers! Or those who are about to become former gamers!”

You all are so correct! DS One launched very well and performed on par to the more hyped PSP at the time. But now we come to the next phase…

PHASE TWO: REFUSING CUSTOMERS

These are different than the phase one non-customers. The phase one non-customers were interested in gaming but not interested in the product. Therefore, Nintendo had to innovate to keep these customers and to gain back those who went away.

The Phase Two: Refusing Customer are those who refuse to play handheld video games. These are older people, and they are women.

Just look at it! Gorgeous! The changes in DS Two is that the model is more streamlined, prettier, much brighter screens, and the stylus is larger and has changed locations so older people can use it more easily.

DS Two brought in the peak of the DS sales. DS Two was what shot up DS sales in America especially. Women now regularly buy the DS Two and older people can be found getting a DS Two. DS Two was such a successful alteration that Nintendo phased out DS One entirely.

“But Professor Malstrom, what about DS Three?”

As you know, I thought it would make its appearance at E3 2008. The whispers among the investor circle was that the new DS was pushed back to enter the channels in the fall. After E3 2008, I posted how Nintendo execs talking about the DS being used for navigation purposes at airports and baseball games among other areas as well as the Cooking Navi pointed out how Nintendo was moving into Phase Three of the Blue Ocean Strategy. Nintendo was doing research for DS Three.

PHASE THREE: DISTANT CUSTOMERS

Distant customers is the third type of non-customer. They are not the lapsed or soon-to-be lapsed gamer. They are not someone who refuses to play video games. These are people who are in markets entirely distant. These are people who don’t even know what a DS is (unlike the Phase Two customer who knew what it was but refused to get it).

Phase three is all about the product becoming a tool for such a non-customer. This means the DS will be given non-gaming additions. This is not unlike the Wii having a Weather Channel and News Channel, for example.

Remember class, DS is not a disruptive product. That is what the Wii is. However, both the DS and Wii are Blue Ocean products. Sure enough, the rumored DS Three has all the requirements of the Phase Three: Distant Customer:

The rumored features are:

- (digital) Camera included
- music playback function
- Wireless connection function power up
- larger screen
- to be released this year in Japan
- under 20000 yen
- new types of games by using the camera
- get/exchange data from Wii and SD card (SD card slot included?)

All these fit the Phase Three of the Blue Ocean Strategy. Cameras are so cheap that most handhelds have them now. It is a wonder that PSP didn’t come out with one for they could have undercut Nintendo’s innovation by using the camera for games. Nintendo has used cameras for games before. And making games for DS Three won’t mean the DS One and DS Two can’t play it. There are GBA attachments. Hell, even the original Gameboy had a camera which Miyamoto, when asked about it a few years back, said he wanted to return to making games for a camera (which many thought the ‘Revolution’ console would have something to do with cameras).

Music playback and likely firmware that allows it to be used as a tool, such as a cookbook or a navigation guide in airports and other areas, fit the ‘distant user’ very well. People could buy the DS as a tool for those things and get into gaming in a more roundabout way.

It is very likely many of these details won’t be true or could change. That is the nature of rumors. But what will not change is that the DS Three will be used as a tool for these distant customers. This means non-gaming functions. This means hardcore having a cow. (Get out the popcorn. They will put up quite a crying fest!)

What I find most curious is the time now to release this. I thought the DS Three would be most likely released after the holidays where all the big sales are or at a huge tradeshow like E3. However, the DS Two was released right after a busy holiday season in Japan and that had horrible results. The DS One units were all sold out. But DS Two replaced the DS One model, DS Three won’t be replacing anything. But worse, just as console companies use the holidays to launch their new system to start off with huge momentum, I expect the DS Three could be released before the holidays to spur momentum. DS Three is a highly experimental product. And there are many Nintendo products that only stay in Japan. This could be one of those. DS sales are very healthy in America so Nintendo is in no rush to bring DS Three over here.

Now, for your questions.

A crowd of hands went up.

Quiet, people, quiet! You give me a headache with all you asking at once. Calm down. OK. You there.

“Is DS Three a move to compete against the PSP in Japan where PSP has gained momentum?”

Oh heavens, you are an idiot. Blue Ocean Strategy is not about going against competitors on their features. That is definitely not what the DS Three is about.

And you, the dork in the corner.

“Is DS Three a response to Apple’s gaming initiatives on the iPhone or iPod Touch?”

Is everyone drinking idiot juice today? I swear… For one last time, BLUE OCEAN STRATEGY IS NOT ABOUT RESPONDING OR COMPETING AGAINST COMPETITORS! You don’t even have to read the book to know that. Just by the title alone… sheesh! While business magazines will probably frame this in a sensationalistic way that Nintendo is ’scared’ of Apple and its gaming, that is not the case of what is going on here.

“Doesn’t this break the disruption strategy? This sounds like a sustaining innovation.”

DS is not a disruptive product. DS is entirely a Blue Ocean Product. Wii is a Blue Ocean Product as well, but it is also disruptive. Nintendo did not start talking about disruption until around 2005 from my estimates.

“Is the DS Three going to compete against cell phones?”

For crying out… Security, get rid of these people. PLEASE! While we get to watch stupid business journalism frame DS Three as to compete against something, that is not what the Blue Ocean Strategy is about. DS, in all three incarnations, is competing against disinterest. Not competitors.

“Don’t you think it is hypocritical for Nintendo to say they are a gaming company when they come up with these non-gaming features?”

Am I the only one who cites Blue Ocean Strategy anymore? You guys are hopeless.