Nintendo Power

Greg Thaera
Japanese Civilization
Monday, December 3, 2001

     In 1983 a Japanese company called Nintendo Corporation Limited attempted to seize the video game market while Atari Corporation, American company and creator of the renowned game “Pong,” was rapidly failing (Sheff 150).  Under the direction of President Hiroshi Yamauchi, Nintendo first released its Famicom in 1983.  The Famicom, a family computer for home use on the television screen, was a system designed to play video games.  From the heart of Nintendo spawned “Super Mario Brothers,” the beginning of a series of games that would sell sixty million copies worldwide within the next ten years (Katayama 172).  During that time, sales would also include over fifty-nine million units of the Famicom hardware, called the Nintendo Entertainment System in America (Katayama 161).  How was Nintendo successful in the video game market?  What led to its ability to propel forward in the industry?  The story of Nintendo clearly narrates that its people and their ingenuity have led Nintendo to unprecedented success.  Specifically, the leadership of Hiroshi Yamauchi has allowed Nintendo to thrive.

     Hiroshi Yamauchi led Nintendo to prosperity long before the invention of video games.  He became the third president of the company when his grandfather passed away in 1949 (Katayama 163).  A longtime manufacturer of playing cards, Nintendo first profited heavily in 1959 by making playing cards pictured with popular Disney characters.  A record six hundred thousand packs of cards were sold that year (Sheff 19).  Yamauchi began the expansion Nintendo after this success.  His business enterprises during the 1960s included instant rice in small portions, a love hotel rented hourly, as well as a taxi company named Daiya.  These three concept were soon defeated in the competitive market, yet as failures they displayed the brilliance inherent in Yamauchi as well as his potential for innovations in business.  He learned that his expertise lay not in taxis or hotels, but in entertainment.  His aptitude as an executive would come into play as Nintendo charged forth, using its experience with playing cards to journey anew into the entertainment industry (Sheff 20).

     The brilliance of Yamauchi was reflected by his newest employees.  Yamauchi hired Gumpei Yokoi as the first product engineer in 1970.  Working for Nintendo, Yokoi first invented a claw that opened and closed, named the Ultra Hand.  The Ultra Hand sold an outstanding 1.2 million units when released in 1970.  According to Yokoi, Yamauchi had accurate intuition about a product, that “Yamauchi knew if a new idea would sell” (Sheff 22).  During the early 1970s other success by Yokoi included the Ultra Machine and the Love Tester.  The Ultra Machine pitched a light variety baseballs for indoor use, while the Love Tester allowed a young couple the rare privilege of holding hands with each other as the device determined their compatability.  Yokoi reminisces that his early days with Nintendo were “a time of great fun,” as he was “a cartoonist” working for Hiroshi Yamauchi (Sheff 22).  Nevertheless, business was always evolving, and Nintendo could not afford to fall behind, as Yamauchi called for electronic toys beyond the capacity of the Love Tester.  Yamauchi wanted to surpass past efforts to climb to new heights of success.  When Yokoi informed Yamauchi of the growing popularity of shooting ranges, Yamauchi was adept enough to utilize the commercial potential.  He envisioned the success of bowling alleys as they were transformed into new shooting ranges (Sheff 25).  The technology was also now at the disposal of Nintendo.  Masayuki Uemura, hired directly from Sharp Electronics, brought with him knowledge of the solar cell technology that would be critical in the new shooting range.  The Laser Clay Ranges of Nintendo debuted in 1973 in Kyoto and soon became a popular entertainment center (Sheff 26).  The stream of winning ideas directed by Hiroshi Yamauchi met with positive results.  Clearly his leadership proved valuable to his engineers, such as Yokoi and Uemura.

     However, prosperity was not eternal as oil shortages damaged Japan heavily.  The Laser Clay Ranges fizzled, so Nintendo began to dabble in consumer video games in 1975.  Teaming up with Magnavox, Yamauchi distributed in Japan the popular American game “Pong,” in which a ball was reflected between two linearly scrolling paddles.  In 1977 Nintendo followed up with its “Color TV Game” systems, which sold over a million units (Sheff 27).  These actions in the middle 1970s were only the beginning of the adventure into consumer electronics for the giant to be.  Yamauchi saw the progress in Nintendo, yet he was unsatisfied.  “We must look in different directions.  Throw away all your old ideas and come up with something new” (Sheff 28).  Yamauchi witnessed the current boom in the electronic calculators, which were being produced cheaply and profitably.  Under Yamauchi, “the Nintendo way” was “to utilize mature technology that can be mass-produced cheaply,” says Gumpei Yokoi (Sheff 28).  Video games the size of calculators were the result of combining the available technology with the ideas of Yamauchi.  These new “Game & Watch” units sold in the hundreds of thousands.  However, potential benefits remained unattainable by Nintendo as copycat products snatched away its market.  The competition eventually left the market empty by 1982 (Katayama 165).  Nevertheless, Yamauchi had learned much from the temporary accomplishments with Game & Watch.

     The previous success of Atari in America had not gone unnoticed.  The concept of a single system playing interchangeable cartridges allowed for expansion as long as “new and interesting” games were available, according to Yamauchi (Sheff 29).  Famicom, the Nintendo video game system designed to win the market, was a critical project for Nintendo.  Here, as always, Hiroshi Yamauchi proved himself a strong authority worthy of such an endeavor.  Economic growth had finally returned to Japan, and most businesses assumed prosperity as the norm.  Unlike others in business, Yamauchi was willing to take risks, to “go for broke” and stake everything on this project, his new Famicom (Katayama 166).  He saw within the Famicom more than just video games played by children.  “[Yamauchi] had his first glimpse of the incredible potential of a home-computer system disguised as a toy,” remarks Uemura (Sheff 29).  As an entrepreneur, his genius was unmatched.  Yamauchi had a final vision of the Famicom that surpassed fantasies.

     However, Nintendo had to deal with the overwhelming number of competitors releasing video game systems.  These opponents included Casio, Sharp, and Bandai.  Yamauchi realized that Nintendo needed to “develop something that other companies cannot copy,” a video game system that “must be so much better that there will be no question which system the customers will want” (Sheff 29).  For Yamauchi, entering the market was not enough.  He wanted to own the video game business.  First of all, the Famicom had to be affordable to sell well.  Yamauchi slashed the price on the system, removing unnecessary components such as a keyboard or mouse.  After all, Yamauchi saw the Famicom hardware as “just a tool to sell software” (Sheff 34).  The Famicom was released for a hundred dollars less than competing systems in 1983.  Yet, cheap hardware was nothing without desirable software.  To claim that Yamauchi understood the connection between the two would be an understatement.  He emphasized “software values,” the inherent quality of the intangible entertainment hidden underneath the surface of the “hardware,” the physical system used to play video games (Katayama 163).  Yamauchi fully comprehended that video games required entertainment and fun.  “The appeal of video games is not in the hardware, but in the software,” says Yamauchi (Katayama 171).  Thinking within the framework of software values, he did not demand a machine for “the great things it can do.”  Rather, he emphasizes that the benefits of a system is determined entirely by its games (Katayama 174).  Most Japanese business was focused on long-term goals.  However, as a lone risk-taker Yamauchi refused to take the tried approach with the Famicom.  “What game software requires is quality, not quantity,” he claims to this day (Katayama 180).  Yamauchi proved to be correct in his thinking.  The results were extraordinary, as Nintendo obliterated the competition with the Famicom in 1983 (Sheff 36).  Yamauchi and his emphasis on software values had allowed Nintendo to emerge at the top.

     While Hiroshi Yamauchi realized that software was the key to victory in video games, he could not stop with the initial success of the Famicom.  Nintendo had to produce games of highest quality to insure continued prosperity.  To this end he promoted Shigeru Miyamoto, a designer who knew little about video games.  Yamauchi possessed the insight to perceive in Miyamoto unbridled excitement and a creative penchant that would prove invaluable to producing games (Sheff 108).  Already Miyamoto had proven himself in 1981 with the wildly successful game “Donkey Kong,” in which a carpenter climbed up an unfinished building foundation to rescue his girlfriend from a giant gorilla.  This carpenter was ultimately named “Mario,” and his new adventure with his brother Luigi would be called “Super Mario Brothers.”  Miyamoto did not just make a game; he told a story that gripped the player.  “I am not creating a game.  I am in the game,” says Miyamoto (Sheff 50).  Yamauchi understood the genius of Miyamoto when others underestimated his capacity.  “You can sell all of the software you want as long as it is interesting,” claims Yamauchi (Katayama 172).  For the last twenty years, the in-house titles produced by Nintendo have remained the top sellers, despite the number of third party titles by popular software companies such as Capcom, Konami, and Square.  There is a three to five proportion of first-party games made by Nintendo themselves to Nintendo systems, the hardware.  Yamauchi understands why Nintendo copies have sold well.  With Miyamoto by his side, he only allows high caliber games such as “Super Mario Brothers” and the equally popular “Legend of Zelda” series to be produced  (Katayama 171).  The fostered genius of Shigeru Miyamoto exemplifies the insurmountable leadership of Hiroshi Yamauchi at Nintendo.
 The success of the Famicom was a solid start in the video game industry for Nintendo.  Therefore, in order to maintain its reign of the video game industry, Nintendo needed continuously produce premium software.  Since the early 1980s, Hiroshi Yamauchi has drastically changed the corporate structure of Nintendo to promote software development.  Yamauchi imposes no strict deadlines on game developers.  Instead, he allows freedom that leads to creativity, which of course transforms into profitable games (Katayama 182).  “Game software is art,” says Yamauchi, and he does not tolerate inferior products.  Along with avoiding due dates, Yamauchi ignores official documentation within Nintendo as much as possible.  Approval forms and planning documents are considered a waste of time at Nintendo, as they only complicate matters of software development (Katayama 183).  Most Japanese companies would be appalled by this practice, as they would also be shocked by the lack of official quality control teams, documents, and meetings.  Meetings about the value of creativity would certainly prove worthless, and Yamauchi realizes that quality control activities are performed by the work itself (Katayama 184).  Strict controls have an adverse effect, muting creativity and producing unimpressive products (Katayama 185).  An inferior video game will never hit the shelves of retailers because Nintendo prevents such atrocities from being produced.  The elimination of timely bureaucracy from Nintendo has been a long-lasting asset of Hiroshi Yamauchi.

     For all the actions Yamauchi has taken as chief executive of Nintendo, his personal demeanor deserves some attention.  His personality certainly provides an insight into his effective leadership of Nintendo.  Yamauchi has been described as “rigorously rational” and possessing an “aura of charisma.”  Nintendo is confident under Yamauchi, who fails to direct encouragement toward his staff.  Motivational speeches do little for Yamauchi.  Rather, he depends on results to gain his loyalty (Katayama 184).  “Company sayings and all that stuff...  I see no reason to have things we do not need,” quips Yamauchi (Katayama 183).  Yamauchi and his strong individuality have transferred to his managerial abilities.  Herein lies the source of the innovation that is Nintendo (Katayama 184).  The natural leadership skills of Yamauchi are reflected in his corporate mentality, a departure from the norms of Japanese business.

Since his acquisition of the company, Hiroshi Yamauchi has transformed a modest playing card company into a software giant in the video game industry.  Throughout his time as president, Yamauchi has demonstrated his capacity to climb above the competition.  His creative, albeit risky, schemes showcase his talent as an executive.  His flair to envision the potential of others truly distinguishes him; the brilliant inventions of Gumpei Yokoi and Shigeru Miyamoto highlight his talent.  Finally, his rational philosophy allows Nintendo to focus on its software values to produce exceptional games to compete in the market.  Hiroshi Yamauchi is definitely the strongest driving force behind the powerhouse known as Nintendo.

Sheff, David.  Game Over.  Published by Cyberactive Publishing.  Wilton, CT, 1999.

Katayama, Osamu.  Japanese Business into the 21st Century.  Translated by Richard Walker.  Published by University Press.  Cambridge, Great Britain, 1996.
 
 

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