Nintendo needs a complete strategy shift or they’ll die by 2015

Nintendo ushered in the era of modern console gaming with its first and second generation systems. Their history since then has been up and down as it fights with their primary competitors, the Sony PlayStation and Microsoft Xbox systems, to stay relevant. Things turned for the worse with the introduction of the Gamecube, clearly inferior to the competition at the time. They revived the family of systems (and arguably the company) with the innovative Wii. Now, they’ve taken a turn for the worse with the Wii U, the first entry into the 8th generation of gaming consoles that has disappointed fans and missed sales expectations.

Last week, they lowered forecasts dramatically for sales of the system from 5.5 million units through the first quarter of 2012 to around 4 million. Considering that they’re the first to have an 8th generation console, the first to have a touchscreen on the controller, and superior graphics to the current systems, they should be sailing through to a big lead on the Xbox 720 and Playstation 4 which will be released at the earliest a year after the Wii U. They aren’t sailing. They’re sinking.

The biggest problem they face isn’t necessarily from their console competition but from the rise of mobile gaming. Tablets and smartphones with less robust but easier to acquire games are filling the gaming needs of millions. Adding the touchscreen to the Wii U controller was a nice attempt to play on this trend, but it wasn’t enough. They need innovation. They need major changes. They need groundbreaking advances to keep up and stay alive.

It is unlikely that these necessary innovations will come from the console gaming world. The life cycle of console games is at best two per decade, which means Nintendo is stuck with their dud for a long time. Instead, they must come out with something that can either integrate their games with other technology (such as tablets) or focus on dominating the last remaining arena in which they do well: handheld gaming systems. The unfortunate thing for the company is that handheld gaming segment is the most vulnerable with the rise of mobile device gaming.

Their only answer, as obtuse as it may sound now, may be to completely shift away from the things that have carried the company in the past and bet high on something brand new. The strategy change cannot be a mere shift. It has to be a complete rebuild. They have to tear down what won’t be working in the near future and redirect their technologies, qualities, and skills into something that they can either dominate through innovation or something that they can dominate through creation.

By innovation, it is to say that they’ll need to produce something bold and take advantage of the trends. It could be the aforementioned integration with tablets and smartphones. They tried to go with the split-screen approach with the Wii U, but it simply has not resonated with gamers. Instead, they could create a true two-screen gaming experience by making games that can be played partially through the consoles and partially through tablets and smartphones. It would require them to rethink their game types, but such a shift made by smarter minds than me might be enough to prolong their existence while opening the door to further innovations in the field.

The other, much riskier approach would be to truly create something. Rather than integrate with other devices or try to fix the current platforms, they could create something that nobody has available at this time. This isn’t just about thinking outside of the box. It’s about taking the box, turning it inside out, ripping it into pieces and then reforming it into something that seems like it’s from another planet. Think holographic gaming. Think eyeball-level motion capture. Think “thought joysticks”.

Think about whatever we don’t have today that may or may not be possible in the near future. These are the realms in which Nintendo needs to break ground. They need to be the first to step on the gaming moon. They need to enter the 5th dimension, put a colony on Mars, or put a flux capacitor in a DeLorean.

Whatever their next move is, if it is an inch short of mind-blowing, the company may not be around in its current form by the end of 2015. They’ve made it through plenty of adversity through the century of their existence, but this is different. It’s not that they’ll be out of business. It’s worse than that. They’ll be irrelevant.

As companies like Sega and Atari have learned, irrelevance is special sort of death for a company with such a proud history.