Console Hardware - The Video Game Industry: Formation, Present State, and Future - page 146

the market (Nikkei Report 2004a). The industry's ef orts to continue
exploiting existing product attributes based on the perceived preferences
of the most dedicated consumers (i.e. “hardcore players”) were interpreted
by him as a strategy subject to declining innovative rents (Nihon Keizai
Shimbun 2002; Associated Press 2002).
To satisfy the needs of hard-core fans, game makers have until recently
been making their products more and more complicated, which has
alienated some game fans and pushed up software development cost.
A mutually destructive battle among game producers has caused the
overall market to shrink. (Nikkei Report 2004b)
An ef ort to expand the market again by introducing discontinuous
product innovation that could attract lapsed and new game consumers to
the market became Nintendo's primary product development strategy. The
product design solution for this was not defi ned at this stage, but emerged
from an open-ended conversation among expert management with guiding
directions from the president. Nintendo went through an organizational
restructuring at the time to support this conversation.
ORGANIZATIONAL RESTRUCTURING AND THE
OPPORTUNITY RECOGNITION OF THE WII
An open-ended conversation that supports a lengthy interpretative process
has been found to be important in the early stages of discontinuous product
innovation (Lester and Piore 2004). In order to improve its higher-order
interpretative capacity following Iwata's appointment as president, Nin-
tendo changed its organizational structure by introducing an expert-based
management board, and it changed its divisional organizational structure
of R&D.
With the new management structure, important operational decisions
were taken in an interpretative process by an expert board of six mangers.
Game design experts were given considerably more infl uence in the expert
board, as evidenced by the important role given to Shigeru Miyamoto. The
new interpretative expert board was markedly dif erent from the hierarchi-
cal system that had characterized Nintendo during Mr Yamauchi's time
as president . 4 The expert-team decision structure seems to have provided
several advantages in the company's ef ort to explore new directions to
expand the market. In several accounts from the Wii development process,
it appears that the expert management team was able to (1) provide a con-
versational space for an interpretative process of innovative opportunities
based on discussion of the nature of entertainment, and (2) provide more
diversifi ed ideas and understanding of the more heterogeneous market that
the company aimed at expanding into.