Wednesday, November 29, 2006

Why third place might not be the worst place

The Nintendo Wii gaming console sold something like 600,000 units in 8 days at an extremely low price as compared to competing offerings from Sony and Microsoft.  Certainly the Wii has a reduced feature set as compared to the all-in-one home media offerings from Sony and Microsoft, but those that I’ve talked to that have one strictly as a gaming console are very happy with their purchase.  In addition, Nintendo is selling their consoles at a profit while Sony and Microsoft are both losing money on each console sold.

The New Yorker has a great article about the Nintendo Wii being in 3rd place and why that’s not such a bad place to be:

The point is that business is not a sporting event. Victory for one company doesn’t mean defeat for everyone else. Markets today are so big—the global video-game market is now close to thirty billion dollars—that companies can profit even when they’re not on top, as long as they aren’t desperately trying to get there. The key is to play to your strengths while recognizing your limitations. Nintendo knew that it could not compete with Microsoft and Sony in the quest to build the ultimate home-entertainment device. So it decided, with the Wii, to play a different game entirely. Some pundits are now speculating, ironically, that the simplicity of the Wii may make it a huge hit. Nintendo wouldn’t complain if that happened.

In doing some Technorati searching, I found that Ed Sims from BeyondVC had picked up on the same New Yorker story and has some interesting comments about how this can relates to startups:

First, as a startup you have to get away from a feature/function battle because you will always lose against a big boy.  If a customer has already bought a product from an incumbent, they are more often than not willing to stay with that incumbent if they can deliver the extra feature/function soon enough in a good enough way. What I like startups to do is win with the product roadmap and vision.  Show the prospect how you solve their needs today better than the incumbent but more importantly why you are different and how your approach will solve their future needs.  If you can differentiate on this level, it gives you a much better chance to win. 

The moral of the story for every person in business is: Third place is not necessarily a place to avoid especially when competing in a large market and focusing on not being first or second can actually help you focus on core competencies.

Link — New Yorker

Link — BeyondVC

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