Nintendo DS. Wii. Nintendo Switch. Each of these legendary systems revolutionized the gaming industry at the time of its release. Integral to their success was former Nintendo of America COO and president Reggie Fils-Aimé who recently ended his 15-year tenure with the iconic brand. In his recently published memoir, Disrupting the Game, Fils-Aimé shares stories, insights and lessons from his life and career that every executive should devour if they aspire to lead a global brand with a cherished role in the lives of its consumers.
In a conversation with Senior Executive Media, Fils-Aimé discussed disrupting industries, having the courage to make difficult business decisions and the importance of measuring organizational health. Read on for edited excerpts from our exclusive interview.
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Senior Executive Media:Your book, in part, focuses on disruption. While you were at Nintendo, what were the forces that changed the video game industry? What factors made disrupting a priority?
Reggie Fils-Aimé: So the video game industry in the early 2000s was very different than the video game industry of today. At that time, only about one out of every three people played video games here in the United States, and the number was even lower once you got out of Japan and the United States. Nintendo believed that the industry needed to do something completely different in order to grow, in order to attract people who did not traditionally play video games. Between 2000 and 2003, the industry was just doing the same remakes of the same old franchises.
We saw a need for new and innovative games, and we focused on unmet consumer needs. I’ll give you an example. We launched a product called the Wii U, which in fairness, was not successful in the marketplace because the messaging for it was complicated. But we heard from consumers that a key aspect of the system was highly desirable – the aspect where they could play their video games on a big screen and then take that with them elsewhere in the household and continue playing when someone else wanted to watch something on that beautiful big-screen TV.
The problem with the Wii U was that if you got more than 30 feet away from the console, the connection would be lost. But we identified that key insight and used that to develop our next system, what became the Nintendo Switch, which right now is the best-selling system in the industry, and is now Nintendo’s best-selling home console in its history.
“As a senior leader in an organization, you need to spend a significant amount of your time measuring the health of the organization and taking action based on what the data is telling you.”
Senior Executive Media: Disruption is hard. Tell us about a big challenge you’ve encountered – and how you responded.
Reggie Fils-Aimé: Well, you know, in my business past, I’ve had many failures out in the marketplace. And the fact is, sometimes they can’t be fully turned around, and the example I’ll use is outside of my Nintendo experience. It’s back when I was in the restaurant industry, working for Pizza Hut.
So this was in the early 1990s. Similar to what we’re going into [in 2022], there were recessionary pressures in the marketplace. The brand Little Caesars was doing exceptionally well because their proposition was a lot of food for a low price. Didn’t matter how tasty the food was, they were meeting a key consumer need at the time. Pizza Hut saw this as a key business threat, and we developed our own value pizza offering called Bigfoot Pizza. Its proposition was a rectangular two-foot by one-foot pizza sold at a similar price point to Little Caesars – plus, we offered delivery, which Little Caesars did not do.
This became a billion-dollar business, highly successful. I was in charge of testing and then rolling out this initiative. But the issue was that because we were using inferior ingredients—the cheese was not the same cheese that was used on the base pizza product, the dough was different—the consumer was noticing this difference [and began] associating it not just with Bigfoot Pizza, but with the entire brand.
In this case, there was no solution to the problem, meaning we couldn’t make the Bigfoot Pizza better because that would drive more cost that would make the entire proposition unprofitable and untenable. So I had to make the difficult decision to recommend that we shut down this business—that we shut down a billion-dollar business. When innovation is working in the marketplace, but there are other factors that make it untenable, as a leader, you need to make the hard decision, the hard recommendations, to shut a business down or pivot to other initiatives in order for the overall business to be successful for the long term.
Senior Executive Media: You deliver a lot of leadership lessons from Nintendo in your most recent book. Can you share one or two of the really big ones and how you learned them?
Reggie Fils-Aimé: One of the big leadership qualities that I would highlight is that leaders have to make those big, tough decisions because, in well-run organizations, easier decisions are made lower in the organization. So it’s those biggest, toughest decisions that come to the leaders. And so you need to have courage in your decision-making. You need to thoroughly think through the issues and the options, and then you need to make the tough call.
I mentioned how Nintendo was on this path: We needed to bring gaming to a mass market audience. We did that initially with a product called the Nintendo DS, but then we did it again with a product called the Wii. You might recall this product, it used a one-handed controller that had gyroscopic capabilities. So you can play a tennis game by swinging your hand as if you were swinging a racket. Or you could play a baseball game as if you were holding a bat and trying to hit that home run. And there was one key piece of software that really brought the system to life. It was a piece of software called Wii Sports.
During its development phase, when myself and all of the developers in Japan were working on this product, we knew its potential. My push was to include Wii Sports as part of the overall proposition for Wii hardware – meaning that when you bought the hardware, Wii Sports would be included in that box as a piece of playable software. This was a very controversial decision because the software could be sold for $50 per unit, generating significant profit. And so my recommendation would be foregoing significant revenue and profit. But in return, we would have a unifying experience for consumers who bought the hardware, having this wonderful collection of games to play.
In the end, the decision was made to include Wii Sports all through the Americas, which I was responsible for, as well as for Europe. In the Japan home market, it was sold as standalone software, which provided a wonderful A/B test. And in the Americas and in Europe, we saw consumers playing Wii Sports in retirement homes, we saw consumers playing Wii Sports on cruise ships, we saw consumers playing Wii Sports in bars – it was a shared communal experience. That really didn’t happen in the Japan market. And my market, in particular, had the best overall results for Wii during its lifetime. So that was the decision and again an example of the principle of courage and decision-making.
Reggie Fils-Aimé: I don’t know that executives don’t think to measure this but measuring it is hard. And that is measuring the health of your organization. [In order to measure it, you’ll need to] dissect all of the elements of your culture and then use the data to make decisions on how you want to shape your culture. I’ll give you an example.
When I joined Nintendo, we really didn’t measure our culture. We had standard HR metrics, you know – transitions, terminations, things of that nature. But we weren’t measuring the culture. As I became the president and chief operating officer… what we focused on were behaviors—behaviors around team building, behaviors around taking initiative, [behaviors around] communication, behaviors of developing the organization. And we ended up identifying about eight key behaviors that were important to our culture. As a senior leader in an organization, you need to spend a significant amount of your time measuring the health of the organization and taking action based on what the data is telling you.
Senior Executive Media: That can be a real challenge. What was your approach to measuring these behaviors?
Reggie Fils-Aimé: We did an annual survey, and we were fortunate – we literally had over 95% participation in our organization, which is a huge number. We not only measured against ourselves, our past performance, but we measured ourselves against other high-performing organizations. But the other thing that I personally did was I met with individuals and teams. That was probably 80% of my personal schedule, meaning I made it a priority to spend time with my staff, the key teams and the top leaders within my organization. I made it a personal priority, not only to check in on the projects but to check in on the people, to make sure that, individually and as a group, the culture and the health of the organization were high. So it’s a combination of hard data, as well as softer data and insights, to have a sense of how your organization is doing.