Winning with yesterday’s technology

Nintendo is older than the car. It was founded in Kyoto in 1889 by Fusajiro Yamauchi to make hanafuda, traditional Japanese playing cards decorated with flowers. More than a century later, Nintendo makes some of the most successful games machines ever sold, using a philosophy that sounds almost backwards.

A card company looking for a future

For decades, Nintendo was a successful card maker. When Hiroshi Yamauchi, from the founding family, took over in 1949, he began searching for new businesses. Nintendo tried a taxi company, instant rice and even a love hotel, with little success. Toys were more promising, and they led the company towards electronics.

The engineer who fixed the machines

The philosophy that shaped modern Nintendo came from Gunpei Yokoi, who joined in 1965 to maintain the machines on its card production line. In his spare time he built an extending grabber arm for fun. Yamauchi saw it and turned it into a toy, the Ultra Hand, in 1966. It sold well, and Yokoi was moved into product design.

Years later, on a train, Yokoi watched a bored businessman playing with an LCD calculator. Calculator screens had become cheap because so many companies were making them. That gave him the idea for Game & Watch, a pocket-sized game using the same inexpensive technology, launched in 1980. For it, his team created the cross-shaped directional pad, which is still on almost every games controller today.

Withered technology

Yokoi summed up his approach as "lateral thinking with withered technology". Withered technology means components that are mature, cheap and reliable, not the newest and most exciting. Lateral thinking means using them in a way nobody else has thought of. In his words, the Nintendo way is not to look for the state of the art, but to use mature technology that can be mass-produced cheaply.

The Game Boy, released in 1989, is the classic example. Rivals soon launched handhelds with colour screens. The Game Boy kept a simpler black-and-white screen, which made it cheaper and let it run far longer on batteries. It beat them comfortably, helped by a little puzzle game called Tetris.

Nintendo does not compete on power. It competes on fun.

The blue ocean

In the early 2000s, Nintendo was losing the race for powerful home consoles to Sony and Microsoft. Its president, Satoru Iwata, a former game programmer, decided not to fight that battle. Instead, Nintendo went after people who did not play games at all. Business strategists call it a "blue ocean" strategy: leave the crowded, bloody red ocean of competition and create a new market of your own.

The Nintendo DS, launched in 2004, had two screens and a touch screen, and sold brain-training games to adults. The Wii, launched in 2006, was far less powerful than its rivals, but its motion controls let grandparents and children play together by swinging a remote like a tennis racket. The DS sold over 150 million units and the Wii over 100 million.

Falling, and getting up again

The approach is not foolproof. The Wii U, launched in 2012, confused customers and sold poorly. Nintendo's answer, the Switch in 2017, was another lateral idea: a single machine that works as both a home console and a handheld. It sold more than 146 million units. Its successor, the Switch 2, launched in June 2025 and sold 3.5 million units in its first four days, the fastest start in Nintendo's history, passing 23 million in roughly its first year.

The strategy: own the fun

Nintendo's advantage rests on two things. First, using proven, cheaper technology keeps its hardware affordable and usually profitable from the start, instead of losing money on every machine sold. Second, it owns some of the most loved characters in entertainment, including Mario, Zelda and Donkey Kong, and makes most of its biggest games itself. That means the reason to buy a Nintendo machine is something no competitor can copy.

By refusing to fight a specifications war, Nintendo creates its own category, where its main competitor is its own previous success.

What could stop it

The strategy depends on finding the next big idea every generation. When the twist does not land, as with the Wii U, weaker hardware has nothing to hide behind. Nintendo must also persuade other game makers to build for a machine that is less powerful than the rest. And its heavy reliance on beloved characters means it must keep them fresh for new generations.

Why it matters

Nintendo is a reminder that innovation is not the same as the newest technology. The question is not "what is the most advanced thing we can build?" but "what is the most delightful thing we can do with what already exists?"

Is the newest technology really what makes something great?