When Satoru Iwata became president of Nintendo, it was both an honor and a curse. But the result was a blessing for fans of video games.
When Iwata (1959-2015) took the helm of the storied video game giant in 2002, he made history. He was the first person to run Nintendo who was not a member of the founding family since it began in 1889. And given Nintendo's stature in the video gaming culture, not to mention in Japan, it's one of the top jobs any executive could hope for.
But as much of an honor as this was, Iwata inherited existential challenges, too. Sony's PlayStation and Microsoft's Xbox consoles were outselling Nintendo's recently launched GameCube at the time. And the two massive tech giants were racing even further ahead of Nintendo in the fast-growing field of online gaming.
Iwata, though, not only caught up with these deep-pocketed rivals. He surpassed them in the following console generation.
Listen To Your Employees Like Satoru Iwata
Nintendo is known for its passionate employees. Working at the company for many is more than just a job.
Iwata quickly tapped into this spirit. Soon after taking over, Iwata met with the company's 40 department heads and 150 other employees. He wanted to get their feedback directly. He learned the power of listening to employees when he had helped his prior company, HAL Laboratory, survive its own troubled times.
"The variety of perspectives was astounding and the discoveries were endless," he said of that experience, according to "Ask Iwata: Words of Wisdom from Satoru Iwata, Nintendo's Legendary CEO."
Some CEOs only like to listen to employees who are positive or flattering. Not Iwata. He'd seek out even crestfallen employees. Their insights were often the most telling.
"Everybody wants to have a say and whenever a company makes a bunch of decisions, most of the people working there won't understand where those decisions come from," Iwata said. "The more frustrated someone is, the more important it becomes to listen to them."
Know Your Business From The Bottom Up
Iwata faced challenges from the start. But he usually found ways to turn them into advantages that would serve him later.
Born in 1959, in Sapporo, Japan, Iwata suffered from asthma and was bullied at school. Taking blows on the schoolyard, though, gave him lifelong empathy for underdogs. An underdog drive drove his professional life, too, including at Nintendo. He was curious about everything. He even read an encyclopedia from cover to cover.
Personal computers were still science fiction in his youth. But he worked with the tools that were available. In high school he made games that would run on a calculator. He sold them to a classmate.
"I had found my first customer and awakened to the joy of making something," Iwata recalled. "I would have never made video games if it weren't for that experience."
Iwata: Get A Jump Start On The Future
During his first year in college in 1978, he used his savings to buy a Commodore PET, an early personal computer. He soon completely dismantled it.
Why did he take the computer apart? He wanted to find out how it worked. And it proved a great learning experience. The computer's design coincidentally had similarities to Nintendo's Family Computer (Famicom) home console. He joined a user group at the computer store, where he even showed a well-known programmer how to solve a problem.
In 1980, a breakaway group of the store's staff asked him to join a company they were starting, HAL (named after the computer in the film "2001: A Space Odyssey"). Iwata began as a part-time programmer and then full-time after graduation in 1982. He lobbied Nintendo (which had entered the electromechanical arcade game market in the 1970s) to allow HAL to help develop the software for Famicom. Soon he developed his first game, Pinball.
Iwata then got his first shot to save a company. He took over as president of HAL in 1993 as its debt mounted and bankruptcy looked likely. Nintendo's president, Hiroshi Yamauchi, urged HAL to put Iwata in control of the turnaround. Nintendo saw HAL's viability as important to its own. HAL built many popular games for Nintendo systems.
Iwata got to work. He negotiated new business terms with partners like Nintendo and other companies to help pay off the debt over six years. Always a big reader, he devoured books on business management. He supercharged HAL's creativity, resulting in Nintendo's "Kirby" games series that sold 30 million units. The company also helped bring the "Pokemon" games to Western markets — which continue to be a global phenomenon.
Prioritize Innovation To Drive A Turnaround
Nintendo noticed what this programmer-turned-executive could do.
Iwata joined Nintendo in 2000 as its head of corporate planning. At the time, sales and profits were falling. He focused on reducing the cost and time for game development. But he knew gamers are demanding, too. Maintaining quality was critical. Employees responded to him because of his credibility as a hands-on programmer. Profits soon increased.
In 2002, Yamauchi, who ran Nintendo for 52 years, tapped Iwata to succeed him.
Forge Your Own Path Like Iwata Did
Iwata decided for Nintendo to thrive, it needed to be unabashedly unique.
Sony and Microsoft pushed top-of-the-line hardware and graphics that appealed to hard-core players. Iwata thought that strategy limited gaming. He decided to rethink the console, software, and games to make it easier for anyone to play and attract a much broader audience.
"Unless you can shock people in a good way, you'll never gain new customers," he explained. "Nothing is more hazardous than staying the course."
Iwata took the company on a bold path many thought was crazy. Nintendo introduced the Nintendo DS in 2004, a curious handheld that featured two screens. One was a touch screen, long before Apple's introduction of the iPhone.
"When we launched the Nintendo DS console with two screens and a touch panel, most people must have thought we had gone off the deep end," Iwata said. "But engineering is not quite as important as imagination."
The DS flew off shelves globally. It sold 150 million units, thriving on games that were more educational and entertaining for a family audience. But the DS was a handheld. Iwata wanted to reclaim the living room, too.
So in 2007, Nintendo launched the Wii gaming console. It again defied industry skeptics about its motion-sensing remote controller and games that enabled groups to play together. It was also technically underpowered next to rivals' consoles. And yet, the Wii sold more than PlayStation 3 or Xbox combined that year. Gamers loved playing virtual tennis simply by waving an arm.
Nintendo thrived like never before. The company's revenue in 2009 hit 1.8 trillion yen, up more than 230% from when he started as president in 2002. Nintendo's revenues had been growing steadily through fiscal 2009 (ending March 31), when they reached roughly $18 billion and the company had 68% of the worldwide handheld gaming market. And profit soared more than 160% in that same time. By 2013, Iwata took on the additional role of Nintendo's CEO.
Remember The Customer Is Always Right
But Iwata knew gaming is a hits-driven business that can sour overnight.
Largely following the touch success of the DS, the iPhone came on fast as an alternative to Nintendo's handheld consoles. And that put pressure on Nintendo's runaway success in the early 2010s.
During this period, Iwata cut his salary 50% and encouraged other executives to reduce theirs. He refused to lay off staff because morale would be destroyed, with long-term consequences, he believed. Iwata recognized the mobile lifestyle was only going to continue to grow exponentially. In 2014, he implemented expanded plans for mobile apps.
"If we can trigger laughter, fear, joy, affection, surprise, and — most of all — accomplishment, from our players, that is the true judgment of our work," he said.
But time ran out on his latest move. Iwata died of a bile duct tumor at 55 in July 2015. But his legacy in the industry endures.
"Satoru Iwata was a rare talent," Ram Charan, bestselling author of "Talent: The Market Cap Multiplier," told IBD.
"Only a few leaders have been able to reshape an industry and even create a new one: Bill Gates, Steve Jobs, and then Satoru Iwata. Now everyone knows that gaming is more than just an industry."
Satoru Iwata's Keys
- President of Nintendo, the Japanese video game and console developer, from 2002 to 2015.
- Overcame: Declining sales and profitability and intense competition from Sony and Microsoft.
- Lesson: Prioritize innovation and quality products over all other considerations for a turnaround. "I firmly believe in the importance of setting goals, even when they are without precedent."
