Surprise Hits: Nintendo Wii wows gamers -- and the video-game industry

For the better part of two decades, Microsoft (MSFT), Sony (SNE), and Nintendo have been in a relentless battle to develop video games with more realistic graphics, more sophisticated game play, and increased processing power. But in 2006, Kyoto-based Nintendo (NTDOY), which had fallen to third place in market share, started to change its Wii strategy. It stunned the gaming industry announcing that it would do away with joysticks and with complicated buttons, and that its graphics on future game players would not be exceptional – but just good enough. Instead of catering to what consumers said they wanted, Nintendo would provide them with something different -- a new, simpler, more intuitive way to play games.

Gamers and analysts snickered at the strategy. But when the Nintendo Wii hit store shelves in November 2006, it was an instant hit. Part of the reason: embedded within the controller of the Wii was a chip, made by Massachusetts-based Analog Devices (ADI), called a "three-axis accelerometer." That chip allowed gamers to use natural motions -- swinging, jabbing, whapping the air with imaginary tennis rackets, golf clubs, and bowling balls. The sensor would pick up the motion and replicate the move on the video game in real time.