Latest / The Pivot Podcast with Fexingo: How Businesses Change Direction and Survive Disruption / How Nintendo Pivoted From Toys to Video Games to Blue Ocean Disruption
Transcript
- Lucas: It is July 2026, and Nintendo is worth more than it has ever been in its history. The Switch — now on its second generation — has sold over 150 million units. And it’s easy to forget that this is a company that started as a playing card manufacturer in 1889. Luna: That's a 137-year-old company that has reinvented itself multiple times. And it wasn't always smooth. In the early 2000s, Nintendo was getting crushed. Lucas: Right. So let's talk about one of the most famous strategic pivots in business history — Nintendo's move from fighting Sony and Microsoft head-on to creating their own uncontested market space. The Blue Ocean Strategy. Lucas: If today's conversation gives you a new way to think about your own business decisions, that's exactly why we do this show. The way we keep it ad-free and focused is through listeners who find it valuable enough to support — you can do that at buy me a coffee dot com slash fexingo. It's the simplest way to keep these conversations going. Luna: Yeah, it really helps. And we notice every single contribution. So, back to Nintendo — what was their situation in the early 2000s? Lucas: So, fast forward to 2001. Nintendo releases the GameCube. It's a competent machine. But it sells about 22 million units, while Sony's PlayStation 2 sells 155 million. And Microsoft enters the market with the original Xbox. Nintendo is in third place. Luna: And their stock was down. The market was basically writing them off as a also-ran in a two-horse race between Sony and Microsoft, right? Lucas: Exactly. The conventional wisdom was that to win in gaming, you needed more power — better graphics, faster processors. Sony and Microsoft were in an arms race. Nintendo didn't have the resources to compete on that front. So they stopped competing. Luna: That's when the Blue Ocean Strategy book came out, and Nintendo essentially became its poster child. Lucas: Published in 2005 by W. Chan Kim and Renée Mauborgne, the book argues that instead of fighting in a crowded 'red ocean' of bloody competition, you create a 'blue ocean' of new demand. Nintendo did exactly that with the DS handheld in 2004 and then the Wii in 2006. Luna: So what made those products different? The DS had two screens, one of them touch-sensitive. That was unheard of. Lucas: And the Wii had motion controls. The idea was not to make a more powerful console, but to make gaming accessible to people who didn't play games. Grandmothers, parents, people who never touched a controller. Nintendo targeted non-consumers. Luna: And it worked spectacularly. The Wii sold over 100 million units. The DS sold 154 million. Nintendo basically doubled the size of the gaming market. Lucas: But here's the part that doesn't get enough attention: it was a huge internal risk. Nintendo's own developers were skeptical. They thought dumbing down controls would alienate core gamers. And for a while, it did. Luna: Yeah, I remember that. Third-party developers like Electronic Arts and Activision complained that Wii games were harder to develop for because the motion controls required completely new design paradigms. Lucas: Right. And Nintendo's response was basically: we'll build our own first-party titles that show what the hardware can do. Wii Sports, Wii Fit, Mario Kart Wii — these became system sellers. Luna: And that strategy of focusing on first-party exclusives is still central to Nintendo today. The Switch's biggest games are Zelda, Mario, Animal Crossing — all Nintendo-made. Lucas: But let's talk about the downside. After the Wii's success, Nintendo tried to repeat the formula with the Wii U in 2012. It flopped. Only 13 million units sold. The lesson there is that a blue ocean doesn't stay blue forever — competitors catch up, and novelty wears off. Luna: So what did they do? They essentially tried to combine the handheld and home console markets with the Switch. That was another pivot. Lucas: Yes. The Switch, released in 2017, is a hybrid. You can play it as a handheld or dock it to a TV. It's not the most powerful console, but it's the most versatile. And it completely redefined what a console is. Luna: And it's been a massive success. The Switch outsold the Wii. Combined with the Switch Lite and the OLED model, it's Nintendo's best-selling home console ever. Lucas: So the throughline here is that Nintendo doesn't compete on specs. They compete on experience. And they're willing to cannibalize their own products to create new markets. Luna: What are the key takeaways for a business leader listening? I think one is: don't compete where you can't win. Find a different battlefield. Lucas: Exactly. Second: align your entire organization around the new value proposition. Nintendo's hardware, software, marketing — all aimed at 'expanding the gaming population.' Third: be prepared for failure. The Wii U was a misfire, but they learned from it. Luna: And fourth: protect your unique strengths. Nintendo's IP — Mario, Zelda, Pokémon — is irreplaceable. They never outsourced that. Lucas: Right. So, as of mid-2026, Nintendo is in a strong position. The Switch 2 is selling well, and they've got a movie franchise now with the Super Mario Movie making over a billion dollars. The question is: can they continue to find blue oceans? Luna: With the rise of cloud gaming and mobile, the competition is changing again. Microsoft is pushing Game Pass, Sony is investing in live-service games. Nintendo might need another pivot soon. Lucas: And that's the thing about pivots — they're not a one-time event. It's a muscle you have to keep exercising. Nintendo has done it four or five times in 137 years. That's remarkable. Luna: It really is. And it's a great case study for any business facing disruption — which is most businesses these days. Lucas: Alright, that's our show. If you want more deep dives into how companies navigate change, make sure to check out our other episodes. And if you found this useful, you know where to find us.