if there’s one thing to learn from Satoru Iwata’s 12 years in charge, it’s that you can always count on Nintendo to surprise. At first glance, the company's much-hyped strategy announcement today was mostly devoid of revelations — yes, Nintendo will develop smartphone apps that may or may not include small games; no, the company won’t be swayed from its conviction that its future lies in creating software for its own hardware, even when that hardware performs as badly as the Wii U has done. But CEO and president Iwata threw a curveball toward the end of his presentation when he announced plans to "take on the challenge of expanding into a new business area." What followed was an explanation as equally inscrutable in English as it was in Japanese, but it might just be the first hint of Nintendo’s next big thing.
"I think now is the time we need to extend the definition of entertainment."
Iwata said that Nintendo's success with the DS and Wii extended the definition and demographics of video games, adding, "I think now is the time we need to extend the definition of entertainment." The new area will be "a platform business that improves people’s quality of life in enjoyable ways." And Nintendo is betting that its status as a video games giant makes it the best guide in a new era of technologically enabled self improvement.
The company says this "quality of life (QOL)" business could extend to areas such as lifestyle and education, but it’s starting with personal health. It's not a new area for Nintendo — Wii Fit was a hugely innovative and successful product that hooked tens of millions on the concept of tracking their fitness regimens via software and hardware, years before the Fitbit and FuelBand found a place on the wrists and belt-loops of the tech-savvy. Wii Fit and its Wii Fit Plus expansion have sold over 42 million copies to date, and a new version was just released for the Wii U.
But Iwata wants to take Nintendo’s focus on health to a whole new level. "When we use 'health' as the keyword, some may inevitably think about Wii Fit," he said. "However, we are considering themes that we have not incorporated to games for our existing platforms. Including the hardware that will enable such an idea, we will aim to establish a blue ocean." "Blue ocean" refers to a business strategy outlined in a 2005 book by W. Chan Kim and Renée Mauborgne; Nintendo often cites the key tenet of disrupting competition with innovative, inexpensive products as central to the approach it took with the DS and Wii.
Iwata’s explanation today, however, was less blue ocean than murky lake. The company plans to create an "integrated hardware-software platform" — the same language used to describe the company’s gaming systems — "that, instead of providing mobile or wearable features, will be characterized by a new area of what we like to call 'non-wearable' technology." What form this non-wearable technology will take is anyone’s guess. But from the overall goal outlined today, it sounds like Nintendo will apply the same video game skill set demonstrated by Wii Fit to more serious areas of health.
Nintendo believes it has the magic formula to keep users coming back
Iwata says that the new business will provide preventative measures rather than outright medical care, and will "enable people to monitor their health and offer them appropriate propositions." But Nintendo believes that, like Wii Fit, its unique combination of software, hardware, and a video game mentality will be the magic formula to keep users coming back. "What is generally good for health requires some kind of effort to be made by the individual," says Iwata. "It is not uncommon to give up after a few days. This is where our strength as an entertainment company to keep our consumers engaged and entertained comes into play, assisted by the non-wearable feature, which is the biggest differentiator of this new business field."
The program has shades of the Vitality Sensor
It’s clear that Nintendo is working on new hardware to push this health initiative, but the only thing we know is that it’s not worn on the body. The entire program has shades of the ill-fated Vitality Sensor, a Wii peripheral which was announced to great fanfare at E3 2009 but never saw the light of day. It was said to "sense the user’s pulse and a number of other signals being transmitted by their bodies, and will then provide information to the users about the body’s inner world." Iwata told investors last year that Nintendo "could not get it to work as we expected and it was of narrower application than we had originally thought," but qualified that statement by saying that the company "would like to launch it into the market if technology advancements enable 999 of 1,000 people to use it without any problems, not only 90 out of 100 people."
Although the company never showed off any software for the Vitality Sensor, the shelved project demonstrates the company’s interest in biometric hardware that could theoretically have health-tracking applications. Technology such as so-called electronic tattoos and medical tricorders are yet to hit the mainstream, but have the potential to go much further than the plethora of fitness-focused devices we’ve seen over the past couple of years. Other companies have also explored gaming controllers capable of picking up biometric data, like Valve's experiments in eye and sweat analysis and the Xbox One's pulse-detecting Kinect that tracks blood flow beneath the skin. Is Nintendo planning to apply its winning software formula to medical hardware more advanced than a Wii Fit Balance Board?
"Fighting with brute force is not our way of doing business."
Whatever the company is working on, its approach is sure to be different to others in the space, which has recently seen giants like Samsung and SoftBank attempt to muscle in. "Following others into the exceedingly crowded market of mobile applications or the market of wearable technology that is expected to become increasingly competitive and fighting with brute force is not our way of doing business," said Iwata. But Nintendo knows better than most that past success can mean little without the right execution in the present — just look at the reception of the Wii U next to its predecessor.
Nintendo will announce more details on its QOL business this year, including a "clearer vision" of what "non-wearable" actually means. The service is set to be launched in the financial year beginning April 2015, and Nintendo hopes it will make a positive impact on the balance sheet by the following year. One look at the company’s recent earnings tells you that it’s in need of additional revenue streams. Fortunately, Nintendo has enough cash on hand to weather a few quarterly losses while experimenting with new projects.