Video Games and the Shaping of Industrial Transformation

Center on Japanese Economy and Business, Columbia Business School
Tuesday, February 21, 2012
Uris 301, Columbia Business School


In this diagram you can see that from hardware to software, from software to user experience, value has been shifting. This is the shift from something physical to something intangible. Namely, value has shifted to the user experience itself, from the easily repeatable to something that can’t be repeated at all.

So the answer to our question of value is simple; we must ask ourselves, how do we offer a unique user experience?

To illustrate further, let’s consider the word processor. When word processor separated itself to PC and word processing application, the value shifted to the application. This is what I call the movement from hardware to software. From there, we saw software become further specialized. We moved from code toward data. Consider spreadsheet software. While the logic of spreadsheet software is really important, what's more important is what the customer is trying to calculate, in other words, the data itself. This is the shift of code toward data.

Moving even further, what becomes critical is how customers create experiences with this data. We should simply focus on the customer's "user experience" and here is where we have to make our business model.

We have some good estimates of how the ecosystem will look, and we've decided what kind of value we want to offer within that ecosystem. There are lots of business model ideas. But there are many answers. Although we cannot decide on the details, we aim to take an initiative in our position. To do this, we need innovation. And here is where innovation management becomes important.

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