Can Valve Compete with Nintendo? And Its New Imitators?
In addition to its normal approach of selling video game software, Valve moved into selling gaming hardware in 2020, with its release of the Steam Deck. In 2023, Valve released the next generation of the hardware, the Steam Deck OLED, phasing out the earlier LCD model in response to innovations by competitor devices. At time of writing, another upgraded version (usually called the Steam Deck 2.0) is expected to become available in the coming years. Valve’s commitment to product improvement based on market feedback make it an instructive innovation strategy example.
As Valve hardware designer Yazan Aldehayyat put it:
“We [Valve] do think that a Steam Deck 2.0 is necessary[.] […] Steam Deck OLED was necessary. We feel like there’s a roadmap ahead of us.”
Innovation Strategy Example Explained:
What is the Steam Deck?
The Steam Deck is a handheld device that allows you to play computer video games wherever you wish, without the need for a dedicated PC, keyboard, and monitor. Prior to the Steam Deck, there were no easily-available and reliable handheld devices one could play computer games with. Today, this is one of the fastest growing areas for innovation in the gaming industry. And, for relevant consumer groups, the Steam Deck is undeniably the most well-known handheld PC device.
Valve’s initial intention with the release of the Steam Deck was to better compete with Windows, which is the dominant operating system software for computer gaming. Normally, with Windows, you need to play computer video games with a laptop or dedicated gaming rig. But, with the Steam Deck, you can play PC games on the go. Therefore, the Steam deck is an innovation strategy example of how Valve has created a new way to meet the existing needs of their consumers. Yet, the Steam Deck isn’t for everyone, and this is by design.
By comparison to the Nintendo Switch, which is also a handheld gaming device, it becomes clear the Steam Deck is a niche product, not for the average gamer.
Innovation Strategy Example Success…
to a Point
Although Valve has not released sales data publicly, the Steam Deck 1.0 was projected to sell over three million units by end of 2023. Suggesting even greater sales, later in 2023 (around the time of the release of the Steam Deck OLED), some designers at Valve claimed Valve was “happy” with the sales and that the Steam Deck LCD had sold “multiple millions” of units. This is more than enough to conclude that the release of this product has been a success for Valve.
In contrast, released in 2017, the Switch’s lifetime sales to date are over 122 million units sold. Switches have sold more often and in greater quantity than Steam Decks. Assuming, with these numbers, that six or so million Steam Decks of any type have sold, that means for every Steam Deck Valve has sold, Nintendo has sold around 20 Switches. So, you’re far more likely to see someone playing a Switch in public than a Steam Deck.
This huge difference in sales quantity likely reflects, in part, a huge difference in price. The Switch’s different models range from:
- $199 (Nintendo Switch Lite)
- $249 (Nintendo Switch)
- $349 (Nintendo Switch -OLED Model)
Originally, the most basic model of the Steam Deck starts at $399, with two more expensive models for $529 and $649. In other words, for quite a while, even the cheapest Steam Deck LCD costs $50 more than the most expensive Nintendo Switch.
At time of writing, the pricing for different Steam Decks is somewhat different, ranging from:
- $349 (Steam Deck LCD 64GB) [Phased Out, Discounted Until Out of Stock]
- $399 (Steam Deck LCD 256GB)
- $449 (Steam Deck LCD 512GB) [Phased Out, Discounted Until Out of Stock]
- $549 (Steam Deck OLED 512GB)
- $649 (Steam Deck OLED 1TB)
Valve more or less retained the old pricing tiers, but has substantially upgraded the quality of what you get in terms of the existing hardware for the same price. Without charging much more, Valve is delivering a substantially more powerful handheld PC device.
That said, it’s clear that the Steam Deck is generally more expensive than the Switch. The cheapest Steam Deck one can buy at time of writing is the LCD model with 64 GB of storage, which comes at the same price point as the Nintendo Switch – OLED Model. So, at the exact same price, the Steam Deck has a lower quality screen than the most expensive Switch.
Generally, a Switch is the cheaper and more publicly-accessible gaming device compared to the Steam Deck, regardless of the exact model in question.
Therefore, one risk to this innovation strategy example’s ongoing success is that the Steam Deck is ultimately a niche and more expensive product.
Innovation Strategy Example
Customer Segments
The Steam Deck is not for every gamer, and the brand accepts its niche nature. Valve designer Greg Coomer has explicitly noted the company’s gaming device isn’t competing with the Switch, because it targets experienced gamers already using the Steam platform:
“We tried to make all the decisions really in Steam Deck that targeted that audience and that served the customers that were already having a good time interacting with the games that are on that platform, on our platform. That really was how we were making our decisions. We’ve ended up with a device that cosmetically shares some traits with a Switch, but that just was… it’s kind of an artifact of how we’ve proceeded down the design direction.”
While the Steam Deck has often been compared to the Switch, because they look like similar devices, they target very different consumers. Therefore, this innovation strategy example shows that a specialized product can be successful with the right strategy and expectations. The Nintendo Switch targets audiences of casual gamers, and these consumers may never have played a computer video game, or even heard of Valve or its Steam platform.
An Innovation Strategy Example that
Shows Competitors the Way
The greater risk to the Steam Deck’s success are all the competitors it has inspired. Valve has undeniably demonstrated that there is a demand for handhelds within experienced gamer audiences. In response to the release of the Steam Deck, new handheld devices for computer video gaming were announced for 2024, such as:
- ASUS Rog Ally
- AYN Odin Pro
- ONEXPlayer
- AYANEO, with 3 different models
These are direct competitors to the Steam Deck, and as a result, necessarily present risk to the Steam Deck’s future success as an innovation strategy example. Nintendo’s Switch may not be a significant competitive threat, but other devices will certainly make a go at it. And that is no doubt why Valve released all the Steam Deck OLED models, as multiple reviewers have noted.
Time will tell how well Valve competes in the market it has helped to create, and what impact the eventual release of the Steam Deck 2.0 makes on this growing area of the video game industry.
For more real-life examples, visit our Innovation Strategy Resource page. And sign up for our newsletter to receive monthly articles from Insight to Action experts.
