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Microsoft Xbox: Changing the Game?
In September 1999, the Microsoft Xbox team was wondering which strategic choices would give it the best chance against the upcoming Sony PlayStation 2. Initially called "Project Midway" within Microsoft, the console project was intended to counter the perceived threat to the Windows franchise posed by Sony expanding the original PlayStation into a broad entertainment platform with the PlayStation 2. Seamus Blackley--the chief instigator for the Xbox within Microsoft--and some of his colleagues were on a flight to Austin, Texas, where they had an appointment with Michael Dell, CEO of Dell Computer. The purpose of the visit was to convince Dell to manufacture Xbox videogame consoles running Microsoft software. Indeed, the team intended to produce a machine somewhere between a standalone videogame console and a PC tailored to play videogames. It remained unclear, however, where along the spectrum from dedicated console to PC Microsoft should position the Xbox. Would it be an open platform like the PC in the sense that independent developers could publish games on it with no restrictions and without having to pay royalties? Who would produce consoles and under what arrangements? What features should the console include, and how would it be priced to consumers? The home videogame industry had been born in the 1970s during the Atari "golden age", then collapsed suddenly in 1983. It was reborn at the end of the 1980s under Nintento's leadership, which was then challenged for a few years by Sega, only to be conquered by Sony's original PlayStation. And along the way, some companies such as 3DO had tried unsuccessfully to change the prevalent business models. This tumultuous 25-year history might provide Blackley and his colleagues with some useful tips on how best to enter the market. -
Production I.G: Challenging the Status Quo
In July 2006, Mitsuhisa Ishikawa wondered how he could further enhance the success and visibility of his animation production company headquartered in Tokyo, Production I.G. For the year ended May 2006, Production I.G. had sales of 5,439 million yen ($47.3 million), operating profit of 404 million yen ($3.5 million), and 184 employees. Its recent film Innocence: Ghost in the Shell 2 competed at Cannes Film Festival in 2004, and the company had gone public in December 2005. These were no small accomplishments for a Japanese animation production company. Indeed, despite the global success of Japanese animation, the industry was fragmented with about 430 animation production companies and dominated by distributors--TV stations, movie distributors, DVD distributors and advertising agencies, which held the lion's share of content copyrights. Distributors controlled the funding and contracted the production out to animation production companies. As a result, most of the latter were small companies laboring in obscurity. As such, no Japanese animation production company came even close to the size of Walt Disney Co.: in 2005 Disney had revenues of $32 billion, whereas Toei Animation, the largest animation production company in Japan, had revenue of only 21 billion yen ($175 million). To Ishikawa's mind, one of the key decisions concerned the mix of the "contents garden" that his company should aspire to. Should he increase the share of animation productions based on manga (comics and print cartoons) relative to original-productions (i.e. animation stories created entirely by Production I.G.)? -
SAP: Industry Transformation
SAP seeks growth in the small- and medium-sized enterprise market. To do so, it has created a platform strategy with SAP Netweaver. What are the advantages and challenges for an incumbent entering a new market? What are the benefits and challenges of implementing a platform strategy?