The notion that innovation is tied to creative destruction is embedded in the psyche of innovators and entrepreneurs, which is why individuals and companies instinctively focus on disruption in pursuit of innovation and growth. But is disruption the only way to innovate and create new markets? And is it the best way?

Nintendo languished in last place during the console wars of the early 2000s, with game industry analysts suggesting that the Kyoto-based firm exit the gaming console market altogether. Instead, Nintendo used Blue Ocean Strategy to redefine market boundaries, creating the best-selling video-game console ever, the Nintendo Wii.

Organizational design can be complex, involving many different levers. But at its roots are a few fundamental formal structures or forms: functional, matrix, and divisional. This case tracks the early history of a (fictitious) start-up company in the software/mobile entertainment industry that rapidly expands and needs to consider the pros and cons of these various archetypes of formal structure.

The home video-game market in Japan was relatively small and the market in the US was on the verge of collapse. In Japan, Nintendo could expect stiff competition from a number of companies in, or actively considering an entry in this market. This did not look a good time for Nintendo to make an entry. Conventional strategic thinking would suggest that it is a suicidal action to enter the market.