The failure of the new Nintendo 3DS and upgraded Wii have caused the Japanese company troubles similar to those faced by Motorola, Research In Motion (NASDAQ: RIMM), and Nokia (NYSE: NOK) in the past. None could follow up a remarkable successful product with a new one. In each case, it cost the company dearly.
Nintendo predicted its first annual loss in 30 years as it reported its most recent quarter. It blamed its troubles on weak sales of its latest products. Only two years ago Nintendo was the second most valuable company in Japan after Toyota (NYSE: TM). Experts considered the rise of what had been a small game console company a near miracle.
The early versions of the Wii game console outsold the Microsoft (NYSE: MSFT) Xbox 360 and Sony (NYSE: SNE) PS3 when the three were introduced. The Wii was a machine so simple to operate that it had a wider consumer appeal than the Xbox and PS3. It took the two larger companies several years to add new features. Eventually Microsoft and Sony were able to flank the Wii with new products.
The aged Wii was modified several times. Its stablemate DS product added 3D capabilities. Neither set of changes worked. Nintendo has not created sufficiently new products. And it only made modest changes to its old ones.
Nintendo’s problem mirrors other recent consumer electronics company failures. The most famous is Motorola’s trouble as it tried to replace its RAZR handset, one of the most successful wireless phones in history. The wild demand for the RAZR made Motorola the second largest handset company in the world, with 22% of the global market. As the RAZR aged, Motorola management got the blame for the losses the firm suffered for several quarters. Motorola never recovered and will soon be taken over by Google (NASDAQ: GOOG).
More recently, RIM was unable or unwilling to change its BlackBerry smartphone enough to compete with the Apple (NASDAQ: AAPL) iPhone. RIM had been in the smartphone business for more than five years when the iPhone was introduced. RIM held the pole position, but the BlackBerry was not adapted to be a consumer device quickly enough. For too long it remained a smartphone exclusively for businesses. RIM is now considered a failure, and it continues to suffer from failed product introductions of devices like its Playbook tablet.
Another legendary failure of a consumer technology firm that did not adapt to new markets is Nokia. It had 39% of the global handset business three years ago. Nokia’s leverage with wireless carriers around the world was unprecedented. It decided to concentrate on low-end handsets. Its efforts in the smartphone space were half-hearted, and the surge in smartphone sales came quickly. Nokia had few products for consumers who wanted the wireless PC-like devices. It also tethered itself to the aged Symbian operating system, which did not have the advanced features of the Apple iOS or Android.
It is impossible to say whether the managements of Nintendo, RIM and Nokia could have foreseen the changes in their industries. One of the jobs of senior executives is to see the future, even if it is around a blind corner. Certainly the signals were there as competitors introduced new and successful products. Nintendo does face one fact that should depress management. Once rivals with popular products seize markets, the incumbent rarely gets them back.
Douglas A. McIntyre
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