The surprising backstory of an industry pioneer

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The Japanese company had been in the business of making playing cards for over 75 years, but its core market had become stagnant as customer preferences changed. It had produced few significant innovations in recent decades, aside from the successful introduction of plastic cards, plus a licensing deal back in the 1950s that brought Disney characters to its children’s products.

Its leader clearly saw that without drastic change the future of his enterprise would be one of irrelevance or decline. To forestall this, his team experimented with scattershot forays into new markets as varied as taxi service and noodle soup. These and similarly implausible attempts went nowhere.

By the 1970s it was clear that analog objects like playing cards were being supplanted by new technology-driven devices, particularly those that took advantage of emerging digital capabilities to draw in younger users. The company’s connections in the toy and game industry were fortuitous, as it was well positioned to observe these new products and their distribution patterns.

After some unexpectedly successful early bets on electronic toys, management trained its focus on the nascent video game sector, which matched controllers to computer processors and used screens for interaction. They signed a deal to distribute the first home console in the Japanese market and soon the business was creating arcade games of its own.

Finally, in 1983 the company launched its own homegrown gaming system. It would be known as the Famicom in Japan but became far more famous under its global branding, the Nintendo Entertainment System. It would go on to revolutionize the video game industry, selling millions of units and launching franchises that put Nintendo at the top of a new category, where it remains a leader to this day.

I can see clearly now

Nintendo serves as one of the most striking examples in history of an organization finding massive success in what appeared to be an unrelated market. But on closer inspection video games and playing cards serve overlapping functions. Both provide a chance for players to test their skills in a form of recreation. Both have clearly-defined rules and require responses to unpredictable events. Most significantly, they both create a venue for social bonding. Although their attributes are very different their core purposes are similar.

Nintendo originally provided diversion and amusement by way of playing cards.1 When the ways people sought these out changed it adapted along with them, starting with iconic figures like Donkey Kong and Mario, who now represent entertainment brands in their own right.

In his classic 1960 article the late Harvard professor Theodore Levitt used the term “marketing myopia” to describe organizations focused on the products or services they happen to provide at the time, instead of on the needs of their customers.2 Such companies can be characterized by an emphasis on minute features of their offerings, at the expense of understanding what is truly wanted.

The idea is captured in the standard example from home improvement: when shopping at the hardware store, no one actually wants a quarter-inch drill bit—what they really want is a quarter-inch hole. A drill is merely the best way to meet that requirement, but technology that did away with drilling altogether would be quickly embraced. Tool companies would do well to keep that in mind.

Organizations should be careful not to confuse the specific ways they happen to serve their markets with the actual needs they meet. Sometimes this leads them to cling to the wrong thing until it’s too late.

The company that manufactured Smith Corona typewriters was founded in 1887, just two years before Nintendo was established. It went on to dominate the market with its core product. It managed to navigate the transition from mechanical to electrical devices, and even added a rudimentary screen to one of its later models.

Unfortunately, it fundamentally remained a typewriter. It was eventually eclipsed by the rise of the personal computer, with its superior function and far greater versatility. Instead of deciding when an edit justified laboriously reworking a page, or fumbling with ink ribbons and correcting fluid, writers could save hours by editing in real-time and printing only when complete.

Those who purchased typewriters did so not because they preferred the clacking soundtrack of keystrokes or because they appreciated their functional elegance.3 What they needed was a way to organize and present their thoughts, or share information, or manage a business, or communicate across distances. As technology advanced, the traditional ways of doing so were quickly discarded in favor of more efficient options.

After much corporate maneuvering and a long decline, including two stops in bankruptcy court, Smith Corona ultimately shuttered its typewriter manufacturing operations and has since faded into obscurity.4

True calling

A key job of a leader is to understand the core need that an organization addresses, and to make sure that all activities are ultimately rooted in it. The responsibility is complicated by the fact that sometimes end users themselves don’t fully understand their need.

Prior to 2004, few people believed they needed a virtual wall on which to post photographs from their evening at a taqueria for the viewing pleasure of former high school classmates, and now Facebook has north of two billion users. Steve Jobs was known for eschewing market research in favor of his instincts as to what customers wanted.5 The core need that you meet can be latent or deeper than imagined.

As an exercise to help get find it, chase down your activities to their essence. For instance:

• No one wants a lawyer per se; what people want is justice, and fairness, for contracts to be upheld, to know that right will prevail. How might these goals be accomplished more directly?
• A radio station doesn’t exist to optimize its use of air time, or to effectively manage the technical elements of broadcasting, or even to provide a mechanism for advertising. It serves to entertain or inform or enlighten.6 When does radio best provide these services to listeners? What are other ways listeners can find them?
• An airline does not operate planes as an end goal. Instead it allows passengers to connect with loved ones, to engage in commerce more effectively, or to experience unseen parts of the world. Are there better ways than flying to achieve this?

When opportunities appear to be withering away or your market is no longer growing, consider the question framed by Professor Levitt: what business are you really in? Find that core need you serve and figure out how you can re-establish a connection to it.

As with Nintendo, that can lead you down some interesting paths, perhaps back to a new expression of your original purpose.7

References

Marketing Myopia by Theodore Levitt was published in the July-August 1960 issue of Harvard Business Review.

Gizmodo has a rundown on Nintendo’s evolution.

Corporate histories of Smith Corona and Nintendo available on their websites.