In April 2008, Nintendo was ranked seventh in the annual BusinessWeek–Boston Consulting Group ranking of the world's most innovative companies. The award recognised the company as an innovative design powerhouse that had challenged the prevailing business model of the video game industry with its new video game console, the Wii. The video game console industry traditionally went into a new cycle every five to six years. In 2006, when the newest generation of video game consoles was introduced, Microsoft and Sony had continued with their previous strategies of increasing the computing power of their latest products, the Xbox 360 and the PlayStation 3. This time, however, Nintendo had planned something different. The company believed that the video game industry had been focusing far too much on existing gamers and completely neglecting non-gamers who could well be the source for future growth. Armed with this insight, Nintendo had developed a radically different strategy by producing the Wii, whose processing power was dwarfed by that of the PlayStation 3 and Xbox 360. Nevertheless, it soon became evident that Nintendo's Wii was a runaway success.
How has Nintendo achieved this success? Has the company really disrupted the video game industry? What course of action is available to Nintendo's competitors?
This case provides students with an understanding of the principles of disruptive innovation. Through this case, students will be exposed to the disruption the video game industry went through on account of Nintendo's Wii. It will sharpen their understanding of how competition should manage creative innovations. The case can also be used to demonstrate how important it is for highly successful companies to remain nimble and, despite their size and value networks, to identify and successfully develop potentially disruptive technologies before having their traditional sustaining technologies overtaken.