Console Hardware - The Video Game Industry: Formation, Present State, and Future - page 143

Yamauchi over the years (e.g. New York Times 1996, D1). Accordingly,
continuous innovations with discontinuous performance attributes were
regarded by Yamauchi as the only source of long-term company survival in
the game industry (Nikkei Weekly 1996, 8). The cognitive frame based on
this view had far-reaching consequences; it shaped the resource allocation
process as well as the organizational structure underlying the company's
innovation process.
In terms of resource allocation, Yamauchi's view acted as important
selection mechanism to give incentives to projects with discontinuous prod-
uct attributes and at the same time reject projects that merely were incre-
mental improvements of established product attributes in the industry. It
was a resource-allocation process in direct contrast with the well-estab-
lished notion of resource allocation based on improvement along estab-
lished product attributes from the company's most infl uential customers
(Christensen 1997; Christensen and Bower 1996; Christensen and Raynor
2003). Yamauchi was instead referring to how the nature and preferences
of consumers spending most of their time playing games was not well suited
for Nintendo's innovation strategy. 3 The resource allocation towards dis-
continuous product attributes continued to be an infl uential strategic fun-
dament of the view of the company after Yamauchi's resignation, with the
new president, Satoru Iwata, often referring to Nintendo's strategy of con-
stantly “surprising” and make “new proposals” to the customers. Accord-
ing to Satoru Iwata:
He [Hiroshi Yamauchi] has always been telling us and himself that
“Doing the same things as others will get you nowhere in the entertain-
ment business.” Whenever we developed something and brought it to
his attention, he would make it a point of asking us how is it dif erent
from the others already in the market? The worst answer which would
upset him was, “It is not dif erent but just a bit better.” He thoroughly
insisted that that kind of thinking was the most foolish in the enter-
tainment business. (Nintendo 2008)
The organizational structure of Nintendo also evolved to support this
cognitive frame. The company increasingly started to use outside manu-
facturers for its hardware technology, a response to the demand fl uctua-
tions in the game market and to avoid the risk of becoming locked in with
specifi c technological solutions. Within development, a close interaction
between the hardware and game software development was established.
The priority between the software and hardware development was clear;
it was the unique game experience from the software that should direct
hardware development. The view was that “hardware needs improvement
only when new, more entertaining software appears that can't run on exist-
ing machines” (Nikkei Weekly 1993, 11). Within this structure the com-
pany retained its large number of small, explorative projects to be able to