Economy

Hiroshi Yamauchi dies at 85: Three lessons from the man who revolutionised Nintendo

Myriam Robin /

Hiroshi Yamauchi didn’t like to play videogames. But he took what had been a fading playing-card company and pivoted it towards the fastest-growing consumer entertainment industry of the era.

Over the years he led Nintendo, a name now synonymous with a golden age of gaming, he turned it from a small family business to Japan’s most profitable company.

Yamauchi died yesterday at 85, nearly 11 years after he stepped down from his role as chairman. His life is a reminder that the DNA of a business is never fixed.

Family businesses don’t have to grow stale

Nintendo was founded by Fusajiro Yamauchi, Yamauchi’s grandfather, in 1889.

It made Hanafuda, which were traditional Japanese playing cards.

And when Yamauchi abruptly became chairman in 1949, at just 22, he knew something had to change. In his early days as president, Yamauchi looked at everything he thought could help the company grow its revenue streams.

In his earliest years, he established a taxi company and a chain of ‘love hotels’. By the 1960s, he had moved the company into toy manufacturing, famously making the Love Tester, one of the company’s first electronic gizmos.

It wasn’t until the 1980s that Nintendo moved into gaming, first with arcade games and then consoles.

Nintendo, before it was floated, was a family business. But Yamauchi wasn’t so in awe of his heritage that he wasn’t willing to try new things.

Hire the visionaries, and give them free rein

Nintendo could have moved on from videogames as quickly as it moved on from other side-projects.

The reason for its success in videogaming is, undoubtedly, Shigeru Miyamoto, who Yamauchi hired in 1977.

Miyamoto became the world’s most influential videogame designer. It’s thanks to him we have games like Super Mario Bros, Donkey Kong and The Legend of Zelda, along with many of the other iconic games that laid the groundwork for today’s billion-dollar gaming industry.

Today, when people talk about Nintendo and that first golden age of gaming, they’re more likely to speak of Miyamoto than they are Yamauchi. But the fact that the chairman was willing to give his head creative room to shine, while providing the commercial and strategic backbone to monetise his genius, speaks highly of Yamauchi’s managerial skills.

Control, for a premium: creating a product users could trust

Nintendo’s success, though, wasn’t just because it made great games.

It made savvy business decisions, too.

By 1984, the videogame boom in America had turned into a crash. Videogame companies collapsed, retailers were left with unsold stock, and people began to write off the console. There were thousands of games on the market, and most of them were awful. Buyers mostly stopped buying.

Into this maelstrom came Nintendo, with its NES console, a rebranding of its Famicom console which had been popular in Japan.

Nintendo could have looked at the American market and decided to stay away. Instead, Yamauchi insisted on launching. But he decided to do things differently.

To make games for the NES, developers had to pay a licence fee, and be approved. As a result, Nintendo only had the best games, marked by their seal of approval on the box.

It was a massive hit. By 1989, Nintendo’s 100-year anniversary, its products accounted for 23% of all American toy sales, and it had overtaken Honda and Toyota to become Japan’s most profitable business. Nintendo saved the console, paving the way for companies like Sony and Microsoft to make billions selling them.

And as for Nintendo’s licence strategy? It has inspired things far wider than the videogame realm, for example, something similar is used by Apple, who carefully controls what appears in the iPhone App Store.

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Myriam Robin

Myriam Robin is a reporter for SmartCompany and its sister site LeadingCompany. She has degrees in economics, international studies and journalism. She likes writing about businesses taking risks and doing new things.

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