Latest / The Pivot Podcast with Fexingo: How Businesses Change Direction and Survive Disruption / How Nintendo Switched From Playing Cards to Video Games
Transcript
- Lucas: So Nintendo. 2026, they're one of the most valuable entertainment companies on the planet. The Switch has sold over 140 million units. But if you go back to 1960, Nintendo was a small playing-card company in Kyoto, and it was almost dead. Luna: Playing cards. That's where it started, right? Hanafuda cards? Lucas: Exactly. Hanafuda — those beautiful, hand-painted Japanese cards. Founded in 1889 by Fusajiro Yamauchi. And for 70 years, that was the entire business. But by the 1960s, the card market was shrinking. The younger generation didn't want to play traditional games. Nintendo was losing money. Luna: So what did they do? Just switch to toys? Lucas: Not overnight. They tried a few things. A taxi company. A love hotel chain. A food company selling instant rice. All failed. By 1964, Nintendo was in serious trouble. Then Hiroshi Yamauchi — the great-grandson of the founder — made a bet. Luna: What was the bet? Lucas: He hired a young engineer named Gunpei Yokoi. Yokoi had been maintaining the card-printing machines, but Yamauchi saw something in him. He asked Yokoi to come up with a new product — anything that could use Nintendo's manufacturing capabilities in a new way. Luna: And Yokoi came up with the Ultra Hand, right? That extendable toy arm. Lucas: That's the one. A simple plastic toy that could grab things. It sold millions. That was the first pivot — from cards to toys. And it bought Nintendo time. But the real pivot happened a few years later, when Yamauchi saw something at a trade show. Luna: The Magnavox Odyssey? Lucas: Yes. 1972. Magnavox had just released the Odyssey, the first home video game console. It was primitive — black and white, no sound, simple dots on the screen. But Yamauchi saw the potential. He licensed the light gun technology from Magnavox and told Yokoi to build a product around it. Luna: That became the Beam Gun series, right? The light gun that you shot at targets on the screen? Lucas: Exactly. Nintendo released the Beam Gun in 1973. It was a huge hit in Japan. That one product saved the company. And it set the direction for everything that followed — from arcade games like Donkey Kong to the home console market. Luna: But it wasn't a straight line, was it? I mean, Nintendo had failures. The Virtual Boy. The Wii U. They've had missteps. Lucas: Oh, absolutely. But the pattern is consistent: when the current business starts to decline, Nintendo has this ability to step sideways into a new category. From cards to toys. From toys to arcade games. From arcade games to home consoles. From home consoles to handhelds. And then again with the Switch, which blended both. Luna: What makes them able to do that? Is it just luck? Or is there something in their culture? Lucas: I think it's a specific mindset. Yamauchi, and later Satoru Iwata, both encouraged what you might call lateral thinking. Don't try to compete head-on with Sony or Microsoft on graphics. Find a different angle. The Switch is underpowered compared to a PlayStation 5, but it's portable, it's versatile, and it has amazing games. Luna: That's the same thinking that let them put a cross-shaped D-pad on the Game Boy instead of a joystick — because it was cheaper and more durable. Lucas: Exactly. Gunpei Yokoi called it 'lateral thinking with withered technology.' Use mature, cheap components in clever ways. That's how the Game Boy, the DS, the Switch all came together. It's a philosophy of constraint-driven innovation. Lucas: And let's put a number on this. In 1962, Nintendo's revenue from playing cards was about 60 million yen. By 1985, after the Famicom — the NES — launched, revenue was over 100 billion yen. That's a compound annual growth rate of roughly 25 percent over 23 years. That's not just luck. Luna: That's staggering. But it also shows how long the pivot took. It wasn't a single moment. It was decades of incremental moves. Lucas: Right. The card business didn't disappear overnight. It coexisted with toys, then with arcade, then with consoles. Each new business line supplemented the old one until the old one became irrelevant. That's the smart way to pivot — you don't burn the bridges until you've built the new ones. Luna: I think a lot of companies try to pivot too fast. They abandon the core business before the new one is viable, and then they crash. Lucas: That's exactly the lesson. Kodak invented the digital camera but was afraid to cannibalize film. Nokia had a smartphone but was afraid to betray the feature-phone business. Nintendo did the opposite — they were willing to cannibalize themselves, but slowly. Luna: And they had one other thing. They had a product that people loved. The games. Mario, Zelda, Pokémon — those characters have real emotional weight. That gave them a buffer. Lucas: Absolutely. The intellectual property is a moat. When the Switch was struggling in 2017, it was 'Breath of the Wild' that sold the hardware. When the NES launched in 1985, it was 'Super Mario Bros.' that made it a must-have. The pivot works because the underlying creative engine is strong. Lucas: So here's the concrete takeaway for any business leader listening. Nintendo's story suggests three conditions for a successful pivot. One: have a culture that rewards lateral thinking. Two: don't kill the old business until the new one is generating real revenue. Three: invest in something — a brand, a character, a technology — that people care about beyond the current product. Luna: That's a good framework. And it's worth noting that Nintendo almost broke that rule a few times. The Wii U was a flop precisely because it didn't offer a compelling new experience. The pivot failed there. Lucas: Right, and they recovered by pivoting again — to the Switch. Which shows that even a failed pivot isn't the end. You can try again, as long as you have the financial resilience and the creative talent. Luna: That resilience comes from not over-leveraging, I guess. Nintendo has always been conservative with debt. Lucas: Exactly. They have billions in cash reserves. That gives them the runway to experiment. Most companies don't have that luxury. They have to pivot faster because the cash is running out. Luna: So for a startup listening, what's the one takeaway? They can't copy Nintendo's 25-year timeline. Lucas: No, but they can copy the principle: build a culture that rewards small experiments. The Ultra Hand was a cheap, quick project. The Beam Gun was a licensing deal. None of those were massive bets. They were low-cost experiments that happened to pay off. Lucas: In fact, one of my favorite stories from that era: Yokoi was commuting on a train and saw a businessman fiddling with a pocket calculator. Yokoi thought: 'What if we made a game that you could play on a device that size?' That thought eventually led to the Game Boy. Luna: Just watching someone on a train. That's the lateral thinking. Lucas: Yeah. And that's a mindset, not a budget line item. Luna: Hey, before we go further — a quick note. If this episode was useful to you and you want to keep the show ad-free and accessible, you can support us at buy me a coffee dot com slash fexingo. It literally helps us keep producing these deep dives. Lucas: Yeah, it's a small ask, but it makes a real difference. And we're grateful to everyone who chips in. Luna: Alright, back to Nintendo. One thing I've always wondered: do you think Nintendo could survive another pivot? If the console market collapses or shifts to cloud gaming, what's their move? Lucas: That's the billion-dollar question. I think they're already preparing. They're investing in theme parks — Super Nintendo World. They're making movies — the Super Mario Movie was huge. They're expanding into mobile games. They're building a media company around their characters, not just a hardware company around their consoles. Luna: So the next pivot might be from a gaming company to an entertainment company. Lucas: Exactly. And that's the same pattern. They're not abandoning consoles overnight. But they're building a new revenue stream — movies, parks, merchandise — that could sustain them if hardware sales decline. Luna: It's smart. They're applying the same lesson from 1960. Don't wait until you're desperate. Start experimenting early. Lucas: Right. And that's the real lesson of Nintendo. Pivots aren't always dramatic, single moments. They're a series of small, curious decisions made by people who are willing to ask: 'What if we tried something different?' Luna: And then having the patience to see it through. Lucas: Yeah. That patience is rarer than the ideas.