Nintendo's backstage performance

Managers employed by a company perform on two stages. First, they have to perform at the main stage where their act is judged on the basis of market response. Nintendo’s CEO Satoru Iwata, for example, decides over video game hardware design issues and which games get published (or not). The firm’s financial results then are a reflection of the market’s (the audience) perception of his stage performance.

Secondly, managers have a backstage function where they reflect on their stage acts and look forward to future performances in interviews, investor briefings, etc. The audiences of these backstage activities contain a wider stakeholder group: investors, suppliers, colleagues, and competitors. Saturo Iwata happens to be a manager that is very self-conscious of his role backstage and actively stages and conducts this backstage activity into a performance. 

What do I mean with this backstage performance precisely? Nintendo traditionally was a company that rarely let its personnel speak to the press about seemingly irrelevant issues. This closed culture is embedded in the Asian culture Nintendo takes part in and arose from the firm’s long history of being family owned and family managed.

However, after Hiroshi Yamauchi’s retirement and Iwata assuming presidency of the firm, Nintendo has increasingly shared self-reflective, often non-essential, information with its key stakeholders.

Financial reports have become more elaborate, investor meeting briefs are posted online and are translated into English, Iwata introduced the Iwata asks series in which he speaks with development teams about the process of game development, Nintendo Direct conferences have seen the light, and, an albeit Japanese reporter was granted access to some of the company’s key managers for the book Nintendo Magic: Winning the Videogame Wars. What is the rationale behind Iwata’s scripted (and increasingly public) backstage performance?

Self-reflection as above has two basic functions. Firstly, it creates legitimacy for Iwata and Nintendo. By reflecting on a situation that unfolded not as planned, Iwata acknowledges some of the miss-steps he made during his main stage performance act. By doing so, he shows that the people working for Nintendo are not completely ignorant or even irrational; they designed a stage script that was poorly received and on this basis they will most likely revise future stage scripts aiming for a better performance. On the basis of the firm's extant knowledge the managers strived for the highest possible performance, and they will continue to do so incorporating their newfound knowledge of audience preferences. Reflection like this should reassure investors, publishers and possibly even consumers about the capabilities of Nintendo’s managers which translates into firm legitimacy.

A second rationale for these backstage performances is signalling. With statements like these, Iwata is actively building an image of Nintendo’s desired state and its strategic intent. It is an image building performance that ought to improve the firm’s main stage performance. The big question here is, what is Iwata trying to signal, and to who? The most obvious response would be ‘Nintendo will announce greater Western publisher support for the 3DS platform at the time of the E3’. Since support from these publishers has been low so far and this could be a reason for lower than expected financial performance, this would surely satisfy investors.

Western consumers would be happy with this too, however, I doubt the number of consumers that actively monitor these backstage reflections, they focus more on the main stage performance Nintendo and Iwata are putting on: games and hardware released. Actually, I think there is more behind Iwata’s statements.

Was the, shortly after the disappointing financial results reveal, leaked Rayman Legends trailer showing unrevealed Wii U functionality truly unintended?

The amount of information from Iwata's backstage performances increased from two events; (1) Nintendo’s financial downturn, and (2) the timing of new hardware introductions. With the eye on the latter, I believe that Iwata is signalling strategic intent to its competitors, and suppliers of third party software. Iwata could actually be saying something like ‘listen Western publishers, 3DS sales have picked up significantly in the EU and USA markets in the last six months, our third-party policy has loosened up and we are ready to work with you to make these products a success. Please submit your games’.

Or, alternatively, ‘listen Sony, we are planning a plethora of games to be released over the next six months on the handheld market, you might consider postponing particular Vita games as their sales will be cannibalized by our products’. Clearly, events like financial downturns or new hardware releases increase the attention stakeholders are devoting to Nintendo, and Iwata is utilizing this attention carefully. It's up to analysts and stakeholders alike to be weary of the public function of managers' backstage performance and interpret what they are saying rather than blindly copying it.

This article was inspired by a research seminar by Professor Richard J Badham from Macquarie University, North Ryde Sydney at Cass Business School titled: “The Ironic Manager, The Para-Performance of Calling the Rationality Game”.