How Nintendo (Literally) Changed the Game

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1:33There's no safe like SimpliSafe. From Entrepreneur Media, this is Problem Solvers, a show in which entrepreneurs do what entrepreneurs do best, solve unexpected problems in their business. We were completely wrong. And I'm just like, it's not selling. It was like, we have to start from scratch. I'm Jason Pfeiffer, the editor-in-chief of Entrepreneur Magazine.

1:59In 2006, Nintendo released the Wii, and it was revolutionary. Maybe you remember it. Its controllers were motion-censored, which means that in addition to pressing buttons, you could also move it and something would happen correspondingly on the screen. And what could you do with it? Well, the Wii came with this game that was bundled in called Wii Sports, which gave you a great idea of exactly the power of this thing. So for example, you could play tennis and you could swing the controller and your character would swing their racket at that same time. Mind-blowing. Mind-blowing stuff. But here's the crazy thing.

2:36Even though Wii Sports was super popular, in fact, I mean, I will just read from the Wikipedia entry here about Wii Sports. Quote, a bundled game, Wii Sports was considered the killer app for the console. Within a year of launch, the Wii became the sales leader against the other seventh-generation consoles and by 2013 had surpassed over 100 million units sold, end quote. But as it turns out, not everyone in Nintendo was actually convinced that releasing the Wii with Wii Sports was a good idea. Well, it led to tremendous debates within the company. This is a guy who would know. My name is Reggie Fissime.

3:18I am best known as the former president and chief operating officer for Nintendo of America. And Reggie says the debate over whether or not to bundle in Wii Sports was not about whether or not the game was good. Everyone thought the game was great. That actually was the source of the conflict. Because the developers knew that this software was magical. They knew that consumers would love playing it and we could charge$50 for that software per piece. So it could drive a lot of revenue, drive a lot of profit versus the alternative that I pushed forward to packing it in. Yes. Reggie was on team packing it in.

3:58Team give it away for free. Team not make any money on Wii Sports. Why? Well, because he thought that Wii Sports was going to be the thing that convinced everybody to play the Wii, which meant buying the Wii, which meant buying more software for the Wii. So how do you go about convincing your company to forego profits in the name of the longer game? It's a story we're going to dig in today on Problem Solvers, and it's one that comes from Reggie's new book called Disrupting the Game from the Bronx to the Top of Nintendo. It's a business memoir laced with a number of really insightful principles and stories.

4:41The book came out in 2022, which is also when I originally recorded this conversation. It came out on the show three years ago. And I'm replaying it for you now for two reasons. Number one is because ever since Reggie told me this story, it has just lodged in my brain. I've repeated it to so many entrepreneurs who are struggling to figure out how to take something to market. And I think you'll find it extremely useful. Also, number two, if you've noticed all this month, I've been playing old episodes of Problem Solvers. That's because this month is an insane travel month for me. I'm just away a lot.

5:11And so this has just been the best way to keep delivering value to you. All right. So how do you convince your team, your company to do something that maybe isn't profitable in the short term, but is better for the long term? How do you get people to see the long vision? That's what we're going to talk with Reggie about right after the break. All right, we're back. So we're going to get into how Reggie navigated that internal debate over whether to bundle Wii Sports with Wii. But when I asked Reggie to set that moment up for me, he said, actually, we have to start a few years earlier to understand where Nintendo was coming from at the time.

5:51So it's important to think about that moment in time. So this was, you know, one out of every three people played video games. You know, compare that today, that's almost seven out of 10 people today play video games. So video games were still somewhat small, not yet a true mass medium. And Nintendo's philosophy was how could we make gaming a mass market phenomenon? That's what we were trying to do. Two years before, we had launched a new handheld called a Nintendo DS, which was intuitive. It was the first mass market consumer electronics product to use a touchscreen. And so that's the moment in time that this product is being introduced.

6:46We want to make it mainstream. We want to touch as many consumers as possible. And as an executive, I had seen this experience called Wii Sports. So a collection of five sports game, baseball, tennis, boxing, golf. And we were trying to figure out what would be the most effective way to launch the system, the most effective way to utilize the software. That's a situation we were in. So these are being produced in parallel, Wii and Wii Sports, which is to say that it wasn't initially conceived of as something that would be sold together as a bundle. And when did you say, wait a second, we have to include this when people buy the core technology, the core player?

7:34So the key innovation of the Wii console was the Wii remote. So this was a controller for the system that looked like your TV remote, flat oblong fit in your hand. You could use it in either hand. And it really was a disruptive approach that the company was taking at the time. Before then, Nintendo's own system, the GameCube, had something like 11 different input buttons. The Wii Remote had less than five. So it was a very simple design that way so that any player could jump into the system and engage. And at the time, we really had two key pieces of software that we were looking to use to drive adoption of the system.

8:26One was a more traditional game called The Legend of Zelda Twilight Princess. And then the other was Wii Sports. and Wii Sports internally within Nintendo, we had a number of deep conversations about how to best use this software as a way to drive adoption of the system. And myself, as well as one of my key executives on my team, we had this thought of, well, what if we packed in Wii Sports with every Wii console. And the thought was, because the system was so disruptive, because this controller was so disruptive, we wanted to have a proof of concept. We wanted to have an easy way for every consumer to get engaged with the system.

9:16So packing it in, we thought was going to be the most straightforward way to do that. Well, But it led to tremendous debates within the company because the developers knew that this software was magical. They knew that consumers would love playing it and we could charge$50 for that software per piece. So it could drive a lot of revenue, drive a lot of profit versus the alternative that I pushed forward to packing it in. So it was a raging debate within the company. because people thought, well, you're just sacrificing revenue here. This is something we could sell. It's going to be really popular.

9:55Why on earth would you give this thing away for free?

10:01If you could put yourself into the mindset of the people who are arguing against you, they also obviously understand that there has to be some means by which to introduce the we to people. They know that people have to learn how to use it. They have to understand the value of it. So they're not blind to that. What was their rationale for why Wii Sports was not the way to do that? Well, I think their primary motivation at the time was knowing that we could sell this software, knowing that maybe one out of every two people who bought the Wii, maybe more than that would buy this software, I think they were looking at this through the prism of arguably the best financial outcome for the company versus I was looking at it through the prism of if we wanted to be truly disruptive, if we wanted to foundationally change the way consumers thought about the system, then we needed to enable the player to have a great experience right when they opened up the system, right when they started to engage with it.

11:21And Wii Sports was the best way to do that. As we went through the debate, the developers at Nintendo came up with a range of other pieces of software that they thought maybe could play the same role. Because I do think there was a tipping point in this conversation where the senior executives at Nintendo in Japan saw my point of view and bought into my point of view, but they still were hoping to keep Wii Sports as a piece of software or something that could be sold. So we started to ideate on other potential solutions. But I remained steadfast and I thought Wii Sports as a piece of software fully formed would be the best solution.

12:08And you were saying one of those other options was the Zelda game? No, one of the other options was a piece of software that later became known in the marketplace called Wii Play. So to compare these two pieces of software. So Wii Sports, you know, it was a fully enclosed piece of software, had these five different sports, had a series of ways that you could play together with other people that you could progress on your own. It really was a complete piece of software. Wii Play was a collection of different mini games that weren't related to each other in any way, shape or form. There was billiards.

12:51There was a little tank shooting game. There was, it was, it was just different little games that were, I don't want to say cobbled together, but they were put together in a way that in my view, wasn't complete. So I didn't think that that software by itself was going to be a best way to achieve the same solution. Got it. And just for context, am I right in remembering back to NES that when you bought an NES system, did it come with the original Mario and maybe even a couple other things? This is a part of the philosophy of Nintendo and presumably other companies as well, that when you sell a piece of hardware, that it comes with some software that you've decided is the best entry point into the system.

13:40Is that correct? Well, what's interesting is if you look at Nintendo's history, yes, they have taken that approach. So the original Nintendo Entertainment System, at least here in the Americas, came with a number of different elements. It had something called Rob the Robot. So this little robot that you could control had a couple other small experiences. when I bought the Super Nintendo Entertainment System, so the second generation from Nintendo, that came with a piece of software, Super Mario World, a delightful piece of software. But after that, Nintendo tried to not include software when they sold a piece of hardware.

14:26Again, their mentality was, our developers are working so hard to create this software, we want to monetize it. We don't want to give it away for free. Oh, I see. So that's interesting. So that means that this conversation about Wii Sports was not just a matter of, hey, we always include a piece of software, which software are we including? But rather, hey, we moved away from that because we can sell this software and make a lot of money. So now you are pushing to go back to an idea that had been discarded in the company a long time before and also sacrificing the profits that would have come from this great product.

15:02That's right. And that's why when the idea was being initially proposed, that's why the pushback from the senior executives, especially the developers, really was so fierce. They believed that they had made the transition, that they really were focusing on monetizing every piece of content that they could develop. And here was this brash American who was pushing forth a different idea, arguably an old idea, but an idea that I felt was critical because I felt that if we could create shared experiences for the purchaser of the Wii console, that truly we could create something that was magical. We could have a way of sharing these experiences, using it as a way to invite new players to jump in on the platform.

16:02I saw it as a way that we could grow the audience exponentially by including WeSports in the product. What happens next? Well, we're going to take a short break and then come back with the rest of the story.

16:21Thank you.

16:51Thank you.

17:43All right, we're back. So now let's pick it up with the rest of my conversation with Reggie. So I like the way that you're thinking there. And it reminds me of something that I have seen a lot in the way that businesses introduce new ideas. And also I've seen it throughout history. And I've come to think of it as this thing I call the bridge of familiarity. I came up with this way of thinking, which I'm going to tell you for the purposes of having you react to. I'm curious if you feel like I'm onto something here and if it describes maybe what you were experiencing. So I think, my own personal philosophy, I think that people don't like new things.

18:22What they like are new versions of old things. You know, they don't want you to come along and say like, everything that you know is now in the garbage and here's something totally brand new and for it. What instead they like is, hey, we know the things that you like, and here's a better way to do it. And this is the reason why, for example, when the car was first introduced in the late 1800s, people were like, I don't know what to do with this. And they were actually quite angry about it. It was called the devil wagon. Cars were being advertised as a replacement for horses. And eventually, the auto industry realized, you know, people like their horses.

18:57Coming along and telling people to get rid of their horse is not a welcome idea. So we need to stop talking about it as a replacement for the horse and start talking about it as a better horse. And so the language starts to change. You start to hear cars being described as horses. They take on the names of horses. They emphasize words like horsepower. And this gives me this belief that oftentimes a thing that innovators forget is that people don't know how valuable your thing is yet because they haven't experienced it. It's not in their world. You spent years making it, so you understand the value of it, but they don't.

19:31And so you need to come to them not by saying, hey, here's this new thing. Get rid of your old thing. But instead, rather say, hey, here's this new thing, it enables you to do the thing you already love better. And as I hear you talk about Wii Sports and the way that you were thinking about shared experiences, I was thinking, you know, the real power of Wii Sports is that everything in Wii Sports is really familiar. It's these games that we already know how to play and that we share with each other. And if you can create a way to do those that we like to do, but inside, I don't have to go to a tennis court anymore.

20:04I can just hold this thing. That's pretty amazing. And it creates that bridge of familiarity to me in that it is not saying, hey, we've created Wii. It's radically new. It's unlike anything you've ever seen before. Forget everything you know about video games and try this. And instead, it's saying, hey, we created this amazing technology. It enables you to do the best of what you already love about play, but in this much more convenient and inventive way. What do you make of that? So, love the idea, love the way you describe it. I want to twist it because here's how I think about innovation. And innovation, whether it's in a physical product, a service, even innovative ideas, creative ideas, commercials, what have you.

20:55I talk about it in terms of they need to be relevant but unexpected. So the relevance really ties into your point around familiarity, right? It needs to be something the consumer can relate to that the player can see immediately. But I believe fundamentally it needs to be unexpected. You need to do something in a completely new and different way. So with Wii Sports, there had been tennis games. There had been baseball games. But those were played by pushing a button. Never had they been done where you would swing your arm like you had a racket in your hand hitting the virtual tennis ball. Never were you in a batter's box swinging the bat with your hand versus pushing a button.

21:48so highly relevant, but highly unexpected. And I believe that that's how to judge a breakthrough idea. Is it relevant, but also is it fundamentally unexpected in bringing the consumer something that they hadn't even thought they wanted? That's a beautiful way of thinking about innovation. So Reggie, how did you win this battle? So imagine we are in a conference room with the president of Nintendo, the most acclaimed game developer who had marshaled the resources to make this great content called Wii Sports. And, you know, what I did is I just laid out the proposition that, in my view, by having this great piece of software available for every consumer to have a shared experience, that it would give us a touchstone for the product.

22:50It would enable us to demonstrate what was just so unique and different about the Wii platform. The developer was there trying to sell me that instead of using Wii Sports for this, that we should use Wii Play. And so, you know, my reaction to his proposition was that while Wii Play also made great use of the Wii Remote, it wasn't as complete a piece of software. And so I threw another idea at the developer. I said that, well, we should take Wii Play and bundle it with a Wii Remote and sell it at a price of traditional software, at which he exploded. He was not happy with me at all. But, Jason, what I would say is that what I did is I kept pushing forward the clear and logical point of view, the clear and logical business case.

23:51I was relentless in pushing it forward. And what was interesting in terms of the outcome of all this is, in the end, Wii Sports was included with the Wii platform, but only in the Western countries. So the Americas that I was responsible for, Europe, about three quarters of the world. But in the Japanese market, they sold it by itself. They did not include Wii Sports in the Wii proposition. So it ended up being a test market. And it was clear based on the results that by packing in Wii Sports, we drove adoption at a much faster pace. And my territories ended up leading the world in the business performance.

24:36for Wii overall. We also did end up packing in that remote with Wii Play. Ended up being, I think, the fourth best-selling piece of software that the Wii platform ever had. So I sold hard. I pushed hard for my point of view. And fortunately, both ideas worked out in the marketplace. That is a very satisfying A-B test. Reggie, as a final question, for someone who is at a moment like that, in their own company, large or small, which is to say that they see something that they believe is critical to driving adoption, critical to the future success of something that they're going to launch. But internally, people feel like, no, no, what you are proposing here either sacrifices too much in terms of profit or just is not the right way to reach people or is not needed.

25:35What advice do you have to them about how they can make sure that they're right and bring people over to their side? So a few things. First, I do believe that when having this type of business argument, it's critically important that you truly hear the other person's point of view. And this is not just listening and trying to butt in and refute at the earliest opportunity. it really is deeply understanding that other person's point of view and understanding the merits of the point of view. You know, I understood the business case of revenue and profitability when it came to eSports. The second piece is you need to ground your own argument in some core principles that are relevant to the issue that you're trying to address.

26:33And in my case, I brought it back to the core proposition that we had been developed to bring gaming to the masses, to make it adoptable, broad scope, and by as many people as possible. And I kept bringing the argument back to that fundamental point. We share the goal of getting this system in as many hands as possible, and here's why my idea makes sense. And then the third thing I would highlight, in the end, the greater you rise within an organization, the tougher and thornier the decisions are that you're being forced to make. And that's because easy decisions are made lower in the organization.

27:20When you're at the senior most level of any organization, that's when you're making the tough decision. And I fundamentally believe you take all of the input, all of the information, and then you decide and you go. And you don't second guess at that point. You rally your team behind that decision and execute it to the very best of your ability. because, you know, in the end, you know, even an 80 % idea, but 100 % executed is going to win out in the marketplace versus, you know, a hundred percent idea that's executed only at 40%, you know, chances are may not work nearly as well. So in the end, you got to get people on board and execute the hell out of that idea.

28:08Well, Reggie, it's a great story with great lessons. I really appreciate you sharing it. Absolutely. Thank you, Jason. And that's our episode. I would love to hear what you think and maybe even about a problem that you solved. You can find me at my website, jasonfeiffer.com. J-A-S-O-N-F-E-I-F-E-R.com. Also, I have some more useful stuff for you. I write a newsletter about how to future-proof yourself and become more adaptable and optimistic. I would love for you to sign up. It is at jasonpfeiffer.bulletin.com. Also, check out my other podcast. It's called Build for Tomorrow. In each episode, I take on some belief that we have that holds us back from progress and show you why it is not as bad as you think.

28:51Problem Solvers is a production of Entrepreneur Media and comes out every Monday morning, so make sure you're subscribed so you don't miss an episode. Thanks to Deepa Shah for production. My name is Jason Pfeiffer. See you next week.