From this project, I learned that there are various ways to evaluate technology enabled innovative products. While they all may not be the most beneficial to every project, they should still be considered valid. It would probably be wise for companies to use a combination of some type of cost-benefit analysis, as well as one about the product and market. While analyzing existing technologies is easy, analyzing new and not-currently-available innovations is decidedly more difficult.
I also learned that it is not enough for a company to simply have a great reputation or idea. Nintendo, Sony, and Microsoft are great examples of this. Sony and Microsoft had bigger names, as well as more money, yet Nintendo stuck to its values and the Wii became a breakout success. Microsoft and Sony are currently playing catch up with the smaller firm. Past success is no guarantee for future success. In the technology world, you must constantly evolve and improve your products, or risk fading away.
- I chose to use this evaluation method because it looks at the technology itself, as opposed to the company. The technology is just as important as the company creating it, if not more so. Below are six different categories used to evaluate a particular technology, as well as a link to website it is from.
- Relative Advantage (Is it better?)
“The relative advantage of a new technology is defined as the degree to which the new equipment is perceived as being better than that which precedes it.” The Wii has improved the overall video game experience, which is why it’s so popular. Prior to the Wii, video games were limited to button mashing. Not very interactive. As a result of the Wii’s popularity, Microsoft and Sony released their own motion technology systems. Microsoft’s Kinect may have a relative advantage over the Wii, Move, and the traditional gaming method. The Sony PlayStation Move, however, is just a continuation of the Wii.
Compatibility (Does it fit?)
“Compatibility is defined as the degree to which an innovation is consistent with existing values, past experience, and current needs.” Nintendo has stated that the design and creation of the Wii was influenced by their Nintendo DS handheld device. As such, the Wii was in line with their values and past experience. Microsoft’s Kinect is a new venture for the company. The Kinect is surprising, in a way, because Microsoft is not the most creative company around. The Kinect’s successful release may be what Microsoft needs to make itself an innovator instead of a follower. Sony is known for its hardware prowess, so the Move isn’t too much of a deviation for it. However, the implementation of this hardware is. If Sony is to be successful in the future, it needs to focus on its core customer group (hardcore gamers) and leave the family/group oriented games to Nintendo and Microsoft.
Complexity (Can it be understood?)
“Complexity is defined as the degree to which a new technology is perceived as relatively difficult to understand and to use.” This is something that all three technologies have in common. The Wii, PS Move, and Xbox Kinect all make gaming less complicated. Instead of pressing buttons on a controller, you use your body and familiar motions to control the on screen action. This is what made the Nintendo Wii a breakout success, and enticed Sony and Microsoft to follow suit.
Trialability (Can it be tried?)
“Trialability is the degree to which a new technology may be experimented with on a trial basis.” Trialability is easy for all three companies to do. All tech companies must test their products before releasing them to the market, so this is no surprise.
Observability (Can the operations and results be seen?)
“Observability is the degree to which the operations and results of a new technology are observable to others.” This criteria is also similar for all three companies. The best way for them to observe results is to look at product reviews and sales. As the Wii and Kinect have shown, if customers like a product, they will buy it. Since these are hardware consoles, they have to invest money in a product, release it, and wait to see what happens.
Re-invention (Can it be modified?)
“Re-invention is defined as the degree to which an innovation is changeable or modifiable by users.” Under this definition of re-invention, none of the new motion technology systems allow for re-invention. Customization by hacking is not intended by the companies, so it does not qualify. But the technology can be modified in a sense by the companies themselves. The Kinect has already evolved the Wii. It remains to be seen what else can be done to continuously improve the experience for gamers.
Strengths: history with creative gaming, low upfront costs, past success with family gaming model, extensive experience in the video game industry
Weaknesses: console power, smaller game selection
Opportunities: the first to introduce motion technology in video games – gives it experience to expand the technology
Threats: Sony and Microsoft have released their own motion technology gaming systems
Strengths: software development, plenty of capital
Weaknesses: limited experience in the gaming sector, lack of creativity
Opportunities: Microsoft has released the Kinect, which has become wildly popular
Threats: Sony and Nintendo
Strengths: lots of capital, hardware development, large game selection
Weaknesses: lack of software development experience, high upfront production costs
Opportunities: expand on the Wii’s success by implementing the Move system with more “hardcore” games to appeal to traditional gamers
Threats: Microsoft and Nintendo – both are having more success with their new systems
After looking at Nintendo’s balance sheet, it is still in a much better position than Microsoft and Sony to innovate. It has total assets of about $1,760,000, while only having about $430,000 in total liabilities. The large difference between assets and liabilities gives Nintendo the opportunity to experiment, whereas its larger counterparts may have to forgo such opportunities. Low production costs combined with a favorable assets-to-liabilities spread gives Nintendo the most ability to innovate. It also allows Nintendo to release products at lower costs, which is a major factor for consumers.
Looking at Microsoft’s balance sheet, it has total assets of $86,000,000 and total liabilities of $40,000,000. Microsoft has a little more than twice as many assets as debt, which still gives it some room to innovate. However, Microsoft is not just a video game company. Some of its investment decisions may be limited by its main business activity, which is computer software. They are most likely not willing to risk sacrificing valuable capital for those projects by over investing in the Xbox Kinect and future motion technology products. Like Nintendo, its lower liabilities allows Microsoft to offer its consoles at lower price points. Microsoft’s entrance into the motion technology video game market show that they, as well as Sony, feel that there is still money to be made. If not, they wouldn’t spend the money and time.
Sony is the largest of the three companies by only looking at total assets and liabilities. It also has the most debt, with a staggering $106,000,000. Its total assets are $138,000,000. Although its spread is only a little less than Microsoft’s, the shear size of it means that Sony has to take extra precaution to not harm its cash flows. If it does not, it risks not being able to pay back its creditors. Although this is an unlikely scenario due to Sony’s success in various industries, it still must be considered. Sony also had high production costs for the PlayStation 3. This was the main reason for its $400 price tag. Only recently did Sony begin to profit from it. If Sony wishes to compete against Nintendo, and now Microsoft, with innovation, it needs to get its production costs under control. High upfront costs will limit its ability to innovate in the future as it has done in the past.
Uses the monetary value of initial and ongoing expenses vs. expected return. Costs and future returns are estimated using present value discounting. This is done to put relevant costs and benefits on equal “monetary footing.” The company chooses a discount rate, which is then used to compute all relevant future costs and benefits in present-value terms.
Evaluates the Strengths, Weaknesses, Opportunities, and Threats a company faces in the marketplace.
- Strengths: characteristics of the business or team that give it an advantage over others in the industry.
- Weaknesses: are characteristics that place the firm at a disadvantage relative to others.
- Opportunities: external chances to make greater sales or profits in the environment.
- Threats: external elements in the environment that could cause trouble for the business.
Analyzes the characteristics of new technologies in order to determine the likelihood of their being adopted. Research has illustrated that the higher the innovation’s score on each of these characteristics, the more successful the implementation was likely to be. According to research, “relative advantage, compatibility, and complexity have the most significant relationships with the adoption and implementation of technological innovations.
- Relative Advantage (Is it better?)
- Compatibility (Does it fit?)
- Complexity (Can it be understood?)
- Trialability (Can it be tried?)
- Observability (Can the operations and results be seen?)
- Re-invention (Can it be modified?)
The goal of this blog is to identify and analyze three different methods to evaluate motion technology in video games. In addition, I will also discuss the pros and cons of each method, as well as the application of each method to video game motion technology. Finally, I will assess my work and discuss what I’ve learned about analyzing innovative technologies.
The three evaluation methods I have chosen are Cost-Benefit Analysis, SWOT Analysis, and an analysis based on several factors. The last method will be discussed in greater detail in a later posting. This analysis will focus on the technology, as well as the major companies behind it: Nintendo, Microsoft, and Sony.
Nintendo has positioned itself to employ an emergent strategy process. The business has been built to learn and adapt to markets as opposed to resisting change. The designer of the Wii stated that the Nintendo DS influenced the design of the Wii, stating they wanted to focus on player interaction. Nintendo simply took the player interaction found on a smaller scale with the DS and applied to the larger Wii console. The Nintendo Wii is also the most profitable home based game console on the market, giving Nintendo more flexibility in the short run than Microsoft and Sony. According to Forbes Magazine, Nintendo reportedly makes a $6 operating profit per Wii unit sold. This financial cushion gives Nintendo the flexibility to seek out new markets, while Microsoft and Sony have to worry about fixed costs.
Microsoft and Sony have taken a different road than Nintendo. The choices made in getting the Kinect and PlayStation Move to market are not as difficult to point out. Both Sony and Microsoft waited four years to release their take on motion technology, probably waiting to see how the Nintendo Wii performed. The only problem with this strategy is that they gave up market share in the process. Had they been forward thinking like Nintendo, they could have capitalized on this new-market innovation. Microsoft and Sony have released their own add ons so late because they figured they couldn’t compete with Nintendo, so they might as well as capture the remaining market share before the other does. They may have also had delayed entrance into the motion technology market because of financial reasons. Due to the higher fixed costs of the PlayStation 3 and Xbox 360, Sony and Microsoft have to rely on software sales to make up for the costs. These high fixed costs will limit the investments that the companies will be able to invest in. They will not be able to take the chances on emerging technologies that Nintendo can.
The use of motion technology in video games isn’t going anywhere. It provides an enhanced user experience, and has created an entirely new market of consumers and games. Nintendo has already stated that it plans to keep developing the Wii and has plans to unveil new features in the near future. Microsoft and Sony will be releasing their motion sensing add ons this year, showing their commitment to the technology. Both companies have a decent amount of game titles to release with their new products as well. Motion technology is here to stay in the video game industry. And it appears that there is nowhere for this new-market disruptive innovation to go but up.
Who Is It Made For?
The Microsoft Kinect was made for undershot consumers. Undershot consumers are consumers “for whom existing products are not good enough.” They will “consume a product but are frustrated with its limitations.” like the PlayStation 3, customers who purchased an Xbox 360 wanted powerful hardware and superb graphics. The Nintendo Wii, released in 2006, provided a new experience but not enough power and capability. The Xbox 360 and PlayStation 3 also failed to provide the motion technology utilized by the Wii, limiting the user experience to traditional button controllers.
These undershot customers may have wanted the motion capability provided by the Wii, but not enough to sacrifice hardware performance. These consumers had no options under these circumstances. Now that the Kinect is awaiting release this winter, these undershot customers can have the motion sensing technology of the Wii, PlayStation Eye, and the hardware performance of the Xbox 360. These customers don’t mind paying the $149.99 on top of what they paid for the console for the added features. However, the Kinect’s controllerless nature is so hands off that it remains to be seen whether even undershot customers will want to purchase it.
Signals of Change
As discussed before with Sony, the signals of change listed by Christensen for sustaining up-market innovations are: 1) New, improved products and services introduced to existing customers; 2) Integrated companies thrive; specialist companies struggle. The Kinect easily fits the first signal of change listed by Christensen. The Xbox Kinect is a new and improved product introduced to existing Xbox 360 customers. It is not a standalone console like the Nintendo Wii, but an add on. Therefore, only existing Xbox 360 users can utilize the Kinect’s added features.
The second signal of change focuses more on the company as opposed to the product. Microsoft and Sony were essentially on opposite sides of the fence in regards to issues related to their gaming consoles. While Sony struggled with the software aspect, Microsoft thrived. It had more big name titles for immediate release and a well designed online community. Not surprising since Microsoft is a software company and Sony is a hardware company. Where Microsoft dropped the ball was with the hardware. Many users encountered what was named the “red ring of death.” The red ring of death resulted when the console would overheat for seemingly no reason, creating a red color around the power button. Although Microsoft has made improvements to the durability of the Xbox 360, users are still reporting overheating as an issue despite a product refresh this year. Like Sony, Microsoft is on the path to greater integration, actively working on its shortcomings to become a more complete company in the video game industry.