Surface Studio, Nintendo Switch, and Niche Strategies


First, the Nintendo Switch:

Then, yesterday, the Microsoft Surface Studio:


The Wii U Mistake


Back in 2006 the Wii came out of nowhere to win the seventh-generation of consoles, outselling the Xbox 360 and PlayStation 3 despite the fact Nintendo’s hardware was significantly underpowered relative to its competition. The key was the Wii’s motion control, best manifested by the seemingly simplistic Wii Sports; it turned out that simplicity was a virtue, attracting casual gamers who had long since abandoned consoles or never considered one in the first place, and Wii Sports went on to become the best-selling video game of all time.1



The Surface Mistake


The past several years have seen great change in the industry and great innovations coming from Microsoft. We’ve helped usher in a new era of cloud computing, we’ve embraced mobility, we’re redefining communications, and attempting to transform entertainment. In all that we have done Windows is the heart and soul of Microsoft: from Windows PCs to Windows servers to Windows Phones and Windows Azure, Windows has proven to be the most flexible general purpose software ever created…



Microsoft’s Transformation

In the intervening years the advice for Nintendo and Microsoft has been strikingly similar: stop making hardware (I haven’t said that about Nintendo, but I certainly did about the Surface). The world has changed, it’s time to move on and adapt.

Microsoft in particular has done exactly that, to a degree I frankly didn’t think was possible as long as Windows was around. There are two divisions of the company — Productivity and Business Processes and Intelligent Cloud — that are building for a future where Windows is one of many computing platforms, and an increasingly unimportant one at that.3 Meanwhile, the company’s third division (More Personal Computing) is basically a collection of businesses, most prominently Windows, that are cash cows but don’t figure into Microsoft’s long-term future as a services company.

I have applauded Microsoft CEO Satya Nadella for pulling this split off, not just organizationally but culturally; Ballmer’s (correct) contention that Windows was the center of Microsoft was holding the entire company back, and it was why he needed to be replaced for Microsoft to survive in a world centered on iOS and Android. What I didn’t expect, though, was that the demotion of Windows would be just as good for Windows — specifically Surface — as it was for Microsoft.

The Surface Studio

Perhaps the most important feature of the Surface Studio is its price: $3,000 for the lowest-end model, and that doesn’t include the innovative “Dial”. This price point immediately attracted a lot of consternation on Twitter amongst Windows fans in particular, while some industry observers argued that most consumers weren’t artists anyways. Both true!

But what is also true is that all PCs are niche devices: for most people, particularly outside the U.S., a smartphone is all they need or care to buy. The world today is the exact opposite of the world a mere decade ago, where we bought dedicated devices to plug into our digital hub PCs; the smartphone (and cloud) is the hub, and everything else is optional.

Selling a niche device is a fundamentally different proposition than selling a general purpose one: the question of why a consumer would buy a general purpose device (like a PC ten years ago, or a smartphone today) is a solved one; the only question is which. Niche devices, on the other hand, face two hurdles to adoption: before a consumer chooses which device to buy they need to be convinced as to why they need a niche device in the first place. And, because answering “why” is even more difficult than winning “which”, niche device makers ought to focus on being a clearly superior solution to an identified market need; being cheap is not only not a priority, it’s a distraction.



The Nintendo Switch

As for Nintendo, the beloved gaming company has certainly taken steps in the right direction: the company lent its intellectual property (and investment dollars) to Niantic, driving the phenomenal success of Pokémon Go. Perhaps more significantly for the bottom line, the company has leveraged its partnership with mobile game developer DeNA to develop the upcoming Super Mario Run; encouragingly, like Pokémon Go, Nintendo is taking an established concept (a “runner”, in this case) and applying its intellectual property on top. It’s a great way to leverage Nintendo’s most valuable assets.


  • It looks like (but is not confirmed) that Nintendo is abandoning touch as an input, which is exactly right. Touch on Nintendo products debuted in 2004 on the Nintendo DS, when the iPhone was but a gleam in Steve Jobs’ eye; today touch-focused games are going to be developed for the far larger smartphone market, and keeping the technology will only make Nintendo’s product significantly more expensive and/or far worse with regards to screen quality (the current 3DS and Wii U touch screens are embarrassing).
  • What Nintendo is doubling down on is controllers, another smart move. I argued in 2014 that controllers are so important to the user experience of consoles that they will hold off general purpose devices like Apple TVs when it comes to living room gaming; Nintendo’s bet is that they can attract gamers who want mobility by offering high fidelity control that smartphones can not4.

However, there remain two big questions: first, while Microsoft is a highly diversified business that can afford to sell Surface Studio to a very narrow niche, Nintendo’s entire business, outside of its nascent smartphone efforts, is its consoles. There is definitely a console niche, but Sony and Microsoft are filling it admirably. Is a portable niche big enough to support Nintendo?



What might be created if you start with the assumption that the smartphone exists? Perhaps you would make sunglasses with a camera, or a watch, or an activity tracker, or a drone. I noted in Snapchat Spectacles and the Future of Wearables that the establishment of the PC led to an explosion of dedicated devices like PDAs, digital cameras, GPS devices, and digital music players. Now that those have been subsumed into the smartphone there are new opportunities, and in a twist of fate it is smartphone also-rans like Microsoft and Nintendo — along with smartphone native companies like Snapchat — that have more freedom to experiment given they have nothing to protect. It’s never been better to be a geek!

  1. Including bundled versions, breaking the record held for 20 years by Super Mario Bros. []
  2. I am painfully aware of this point, as I was on the Windows 8 team charged with bringing 3rd-party applications on board []
  4. Yes, there are add-on controllers for the iPhone, but games can’t require them which dramatically reduces their utility) []