From playing card maker to gaming giant

Creative turnaround strategy key to Nintendo’s success

By Chung Ah-young

Nintendo game machines are one of the most sought-after items for children and even adults. Nintendo is synonymous with gaming and iconic characters — from Donkey Kong, Super Mario to Pocket Monsters — and its innovative hardware is beloved by many consumers, regardless of age, gender and nationality.

The Kyoto-based game giant has achieved stunning feats by rewriting game industry history by launching revolutionary products for decades, vying with its rivals such as Sony and Microsoft.

However, the story behind the global firm is relatively unknown to many consumers, compared to its wide influence and business power.

“Playing to Wiin: Nintendo and The Video Game Industry’s Greatest Comeback” by Daniel Sloan delves into how the Japanese family company came to dominate the global gaming industry through thorough observation and anecdotes about its leadership and business strategies.

Few people might know that the firm started as a playing card maker founded in 1889 by Fusajiro Yamauchi, who saw a ready market with the end of the card-playing prohibition at that time for his “flower cards,” which caught the eye of players for their beauty.

Despite the success of the card business, the playing cards, which are known as “hwatu” in Korean, the company was incapable of surviving only on them.

Hiroshi Yamauchi, who became the president in 1949 when Japan was undergoing its post World War II recovery, realized that the card business was waning. He began pushing toward worldwide expansion and decided to transform the business’s focus from cards to toys and electronic entertainment in the 1970s, something that later saved the company’s destiny.

In its initial ventures, the company set up a taxi company and a love hotel chain, which all failed as it found it hard to make inroads into new businesses.

Yamauchi created a new research and development department for games and “Ultra Hand,” a scissor-like plastic gripper that extended children’s reach and other products such as “Love Tester” and “Beam Gun” — with more technological advances — allowed it to advance onto the global stage.

In terms of hardware, the revolutionary handheld and monitor-linked consoles, which included the “Game Boy,” allowed Nintendo Entertainment System and Super Nintendo Entertainment System reach worldwide markets.

Satoru Iwata, a software maven, neither family nor Kyoto-born, was selected to lead the company at the age of 42 by Yamauchi, defying Japanese corporate tradition and sparking some financial market disappointment. The relatively young leader faced questions over his early performance but the next generation handheld console and a two-screen dynamo that pushed up sales proved his potential that Yamauchi saw in the first place.

Iwata has altered the industry with his “Blue Ocean” strategy, which involved laying nets in consumer markets where others had yet to sail. Nintendo DS handheld thrived against a new portable console from Sony and Microsoft, while its self-training software widened the definition and demographics of gaming. The company redesigned DS with different sizes and added functions while still early in the console’s business cycle.

The new approach kept demand strong, as Nintendo looked to make the lifestyle product ubiquitous, resembling a smartphone in everything but the ability to make phone calls.

“Nintendo DS is the road map to the future of video games and most clearly demonstrates the type of innovation that players demand,” Iwata said.

But the “console wars” with its competitors such as Sony and Microsoft brought money-losing propositions and reestablished the handheld mantle.

Wii, which hints at the console’s group gaming utility, was launched to prove that Nintendo’s new generation gamer strategy could succeed beyond portable consoles in the now $30 billion video game industry.

The Wii and its cordless remote freed gaming from an individual and sedentary experience to a more engaging activity, and offered healthy and well-being entertainment that was enjoyable for groups.

The Wii Sports and Wii Fit franchises, which are now seriously gaining popularity in Korea, have become widespread as families look for activities they can do together.

The slim console went from late 2006 to trounce Sony’s PlayStation 3 and Microsoft’s Xbox 360. Nintendo not only found its way but also regained the mantle of industry leader.

The development of the DS and Wii mega-hit consoles and the creation of new gaming software and its revolutionary leaders contributed to expanding the gaming population and drive the company to the top of the industry.