Nintendo Rarely Uses the Best Technology—Why That Strategy Made Them Billions

Nintendo's success in the gaming industry can be attributed to its unique strategy of leveraging "good enough" technology and focusing on creative design and intellectual property. This approach has allowed the company to achieve high profitability and market share despite not always adopting the latest, most advanced technology.

1. **Leveraging "Good Enough" Technology**: Nintendo has a history of using mature, affordable components to create consoles that are "good enough" for the majority of gamers's needs. This strategy has proven lucrative, allowing the company to generate significant revenue and profit with aging models like the Switch 1. In fiscal year 2024, Nintendo reported ¥1.7 trillion in revenue and ¥529 billion in operating income, achieving an industry-leading margin of 30% or more.
2. **Creative Design and Intellectual Property**: While Nintendo's consoles may not offer the highest raw performance, the company compensates with innovative design and beloved franchises. For example, the DS doubled the number of screens instead of increasing pixel count, and the Wii Remote was a novel controller that turned the body into a sensor. These design innovations enhance the player experience and differentiate Nintendo's products in the market.
3. **Incubating Ideas for Long Periods**: Nintendo's approach to innovation is not limited to hardware. The company often incubates game ideas for years before releasing them, ensuring that each title is polished and well-integrated into the overall gaming ecosystem. This patient approach has led to the development of games that can be played for 15 years after they were first conceived.
4. **Market Expansion Through Marketing and Sales Strategies**: Nintendo's success is not solely based on hardware. The company has a strong marketing and sales strategy that expands its reach and redefines what it means to be a gamer. By focusing on the overall gaming experience and the joy of playing games, Nintendo has been able to unlock new markets and maintain a loyal customer base.
5. **Disruptive Innovation Culture**: Nintendo's culture of disruption is deeply ingrained in every aspect of the business. The company's former COO, Reggie Fils-Aimé, emphasized that disruption is a mindset, not an event. By looking at data from a different angle and pairing mature technologies with emerging ones, Nintendo has been able to create breakthrough products that disrupt the industry.

In conclusion, Nintendo's strategy of leveraging "good enough" technology, focusing on creative design, incubating ideas for long periods, and expanding its market through innovative marketing and sales strategies has been a key to its success. This approach has allowed the company to achieve high profitability and market share while maintaining a unique identity in the gaming industry.