Latest / The CEO Diary with Fexingo: Leadership Lessons, Executive Decisions, and Corner Office Stories / How Nintendo Defied Doom and Won Again with the Switch
Transcript
- Lucas: So today I want to talk about a company that, in 2014, was basically declared dead. Nintendo. The Wii U had sold something like 13 million units — versus the Wii's 100 million. The stock was down 80 percent from its peak. Analysts were writing obituaries. And then, within three years, they launched the Switch, which went on to sell over 140 million units — one of the best-selling consoles ever. Luna: Right. But the Switch wasn't just a lucky product. It was the result of a very specific cultural and strategic shift inside Nintendo. And there's a great story about a janitor that I think really captures it. Lucas: A janitor. I love that. Let's unpack that. Because the conventional narrative is that Nintendo's turnaround was all about Satoru Iwata — the CEO who took a pay cut and refocused the company. But the deeper story is about how Nintendo's own internal culture almost killed them, and how a bottom-up insight saved them. Luna: Exactly. So the janitor story — in 2014, after the Wii U had clearly flopped, an anonymous cleaning staff member at Nintendo's Kyoto headquarters left a handwritten memo on the desk of a hardware engineer. It basically said: 'Stop making consoles that compete with phones. Make something that fits in a pocket but also works on a TV.' Lucas: And that memo made its way up the chain. It resonated because it articulated something a lot of engineers were already feeling but couldn't say publicly. The Wii U was a product designed by committee — it had a tablet controller that was neither here nor there. The janitor's insight was: don't try to beat the iPad at its own game. Find a new category. Luna: Which is exactly what the Switch became. A hybrid that you could take on the subway and then dock at home. It wasn't the most powerful console — but it solved a real friction point. And that came from listening to someone who cleaned the offices, not from a consultant's report. Lucas: This is such a powerful lesson in how organizational humility drives innovation. But let's back up and set the stage properly. Nintendo in the early 2010s was in a terrible spot. The Wii had been a cultural phenomenon — it brought in casual gamers, grandparents, people who'd never touched a controller. But the Wii U failed to retain that audience because it was confusing. The name itself was a problem — people thought it was a tablet add-on, not a new console. Luna: And on top of that, mobile gaming was exploding. Candy Crush, Angry Birds — suddenly everyone had a games machine in their pocket. The argument was: why would anyone buy a dedicated handheld when their phone does it for free? So Nintendo was getting squeezed from both sides. Lucas: Right. And Nintendo's response under Iwata was to lean into what they called 'blue ocean' strategy — creating new experiences rather than competing head-on. But the Wii U wasn't blue ocean. It was a half-step. The Switch, on the other hand, was a genuine new category. And it took a near-death experience for the company to commit to it fully. Luna: One thing that's often overlooked is that Iwata had already been working on the concept of a unified hardware platform before the Wii U launched. He talked about merging the home console and handheld divisions internally. But the company was siloed — the handheld team in Kyoto and the console team in Tokyo barely talked. Lucas: So the Switch forced those teams to collaborate. And that was painful. Engineers who had spent decades perfecting handheld power efficiency had to work with people who thought about thermal management in a living room device. But that friction is what produced the hybrid design. Luna: And the result was a device that used an NVIDIA Tegra chip — not cutting-edge, but efficient. The battery life was good, the form factor was portable, and the detachable controllers were intuitive. It wasn't about specs. It was about the experience of picking it up and playing anywhere. Lucas: If today's conversation has moved your thinking forward in some small way, I want to mention something. The reason these episodes stay free and ad-free is listener support. People who find value here occasionally buy me a coffee — it's at buy me a coffee dot com slash fexingo. That's what keeps the lights on, and it's appreciated. Luna: Yeah, it's a simple way to say 'this was useful.' No pressure, but it genuinely helps. Lucas: And the Zelda team actually built Breath of the Wild to run on the Switch's hardware. That game alone sold over 30 million copies. It was a system seller. But the hardware design actually constrained the software in interesting ways — the game had to load quickly, had to run on a tablet-class chip. That constraint pushed the developers to be more creative. Luna: There's a famous story from the development of Breath of the Wild where the physics engine was so ambitious that the Switch couldn't handle it at first. The team had to optimize every particle effect, every grass blade dynamic. But that optimization made the game run smoothly on a device that fit in a backpack. And that portability became a huge selling point. Lucas: So the turnaround wasn't just about one product. It was about aligning hardware, software, and corporate culture around a single vision. Iwata passed away in 2015, before the Switch launched. But his successor, Tatsumi Kimishima, and later Shuntaro Furukawa, carried that vision through. The Switch became a monument to Iwata's philosophy. Luna: And it changed Nintendo's financial trajectory completely. From a net loss of over 30 billion yen in 2014 to operating profits of over 500 billion yen by 2020. The stock recovered all its losses and then some. But more importantly, it restored Nintendo's identity. Lucas: Let's talk about what that identity is. Nintendo has always been about fun first, technology second. When they tried to chase the hardcore gamer with the GameCube — underpowered, gray box — it failed. When they chased casual with the Wii — that worked, but they couldn't sustain it. The Switch found the middle ground: a device that was powerful enough for core gamers but accessible enough for families. Luna: And they did it without a price war. The Switch launched at $299. That's relatively cheap for a console, but not a loss leader like the PlayStation or Xbox. Nintendo makes money on hardware from day one. That's unusual in the industry. Lucas: They also benefited from the fact that their IP — Mario, Zelda, Pokemon — is some of the most valuable in entertainment. But those IPs were stagnating on the Wii U. The Switch gave them a new canvas. And Nintendo became disciplined about releasing a steady stream of first-party titles — one major game every few months — which kept the platform relevant. Luna: There's also the indie game angle. The Switch became a haven for indie developers. Games like Hollow Knight, Stardew Valley, Celeste — they sold millions on Switch because the portability made them perfect for short sessions. Nintendo curated that ecosystem well. Lucas: So what's the leadership takeaway from this? I think it's that turnaround success often comes from rediscovering your core strengths rather than trying to become something you're not. Nintendo's instinct was to compete with Sony and Microsoft on graphics and power. That was a mistake. Their strength was always in design and gameplay. Luna: And listening to the janitor. That's a nice metaphor for creating a culture where anyone's insight can be heard, regardless of hierarchy. It's not about the janitor — it's about the fact that the organization was open enough to receive that input. Lucas: Right. And that openness was cultivated by Iwata. He was known for his 'Iwata Asks' interviews where he'd sit down with developers and ask genuinely curious questions. He flattened the hierarchy. When he took a 50 percent pay cut after the Wii U failure, that wasn't performative — he was signalling that everyone was in this together. Luna: It's a stark contrast to some other tech companies where the CEO takes a bonus while laying off employees. Nintendo's culture of shared sacrifice really mattered. Lucas: So as of mid-2026, Nintendo is gearing up for whatever comes next — the Switch successor, presumably. The question is whether they can repeat the magic. The Switch was a once-in-a-generation product. But if they stay true to that hybrid philosophy and keep listening to their people, they have a shot. Luna: And maybe they should hire that janitor as a consultant. Lucas: Ha. I think he got a promotion. So that's the Nintendo story. A company that refused to die because it remembered what it was good at. Next time you pick up a Switch, remember: it started with a memo from a cleaning cart.