Lessons from Nintendo

Samsung and LG are household Korean electronics brand names. They are in fierce competition as archrivals. The top-seeded contest at home and abroad has kept the two on their toes and sustained their competitiveness on the playing field.

But one of the two engines has recently lost significant steam. The industry cannot run on one engine and the waning performance in the traditional duo system is in danger of jeopardizing the industry.

LG Electronics began to stumble after venturing into the smartphone business in 2009 when Apple Inc.’s iPhone became a sensation. Samsung Electronics moved fast to catch up. LG was not so agile. By the time it joined the race, the front-runners were way ahead and the mobile phone market was entirely changed. Finnish phone giant Nokia was pushed out of the league and LG slipped to the second-tier group.

LG hoped to restore its reputation with the ambitious GS series, but the mobile business only gathered deficits. Its smartphone division has been in the red for five consecutive quarters. If the player is deemed no longer competitive, the manager has only two options.

It must pull it out of the race to prevent further loss, or continue investing until it performs better. LG cannot continue to lose smartphone business, as the mobile phone device has become imperative to run the Internet of Things that will define the fourth industrial revolution.
LG has only one option left. It must strive to devise a forward-looking, stunning product. That is easier said than done. Nintendo, the game console giant that has been struggling since the smartphone became the primary gaming device and interest in first-party games waned, made a dramatic comeback through Pokemon Go, a location-based mobile game that allows players to catch the titular monsters in the “real” world with their smartphones. Nintendo has kept up Japanese pride by dominating the game console market even as other local companies crumbled. Consoles like the DS and Wii were unrivalled best-sellers in game hardware and software.

In 2009, the king of the hill recorded sales of more than 1.83 trillion yen ($18.5 billion) and more than 555 billion yen in operating profit by selling 26 million Wii consoles and 31 million DS systems around the world. Then-Korean president Lee Myung-bak envied Japan for having a company like Nintendo.

Nintendo, which makes games exclusively for its consoles, has not fared well in the mobile platform with the audience now more used to zero-barrier multiplatform gaming titles on smartphones. For five years, the company has been posting losses and is stigmatized as a loser in the mobile age.

That’s what has made its turnaround through Pokemon GO more stunning. Nintendo invested in the augmented reality game developed by Niantic, a former Google subsidiary, based on the all-time popular Pokemon characters. Although the game has been released in restricted markets, it has become an instant phenomenon.

Nintendo’s revival and Nokia’s fall from grace indicate the path a technology company must take in a fast-changing world. It must not stop innovating. Nintendo, which started off as a maker of handmade playing cards, has managed to stay in the lead through innovative game consoles and 3D character games. Its wealth in intangible intellectual assets has proven that it has the corporate strength and potential to ride the wave of the fourth intelligence revolution.

LG Electronics must learn from Nintendo’s evolution. If it cannot give up its smartphone business, it must consider adding original value. Samsung Electronics also cannot afford complacency, with Chinese rivals turning ever stronger on top of its archrival Apple in the smartphone business.

Korean hardware makers have a hard time fighting off Chinese latecomers and cannot beat Apple in software because of its exclusive ecosystem. Korea’s smartphone powerhouse is built on sand. But there is still a chance for the Korean makers to come up with a winning strategy and inventions to stay competitive.

JoongAng Ilbo, July 18, Page 28