Nintendo doesn't understand the Japanese market, either.
The problem is there are really two Nintendos. In the first half of the Wii's life, we saw a Nintendo that focused like a laser on what consumers wanted and needed. This is the Nintendo that also produced hit products like the Game Boy and DS.
The other Nintendo is what emerges as they get comfortable and start leading the market. It's the Nintendo of Shigeru Miyamoto and Eiji Aonuma--the Nintendo that exists solely to bring their "brilliant" ideas to market. If these ideas fail in the marketplace, it's because the consumer needs to be educated about how brilliant the product truly is. This is the Nintendo of failed products like Wii Music and Metroid: Other M.
The problem is we really only see the first Nintendo when their backs are against the wall, after the second Nintendo has almost driven them into the ground. And once the first Nintendo succeeds, Miyamoto says, "That's fine; I'll take over from here." And then he proceeds to destroy the company again.
Look at the difference between the Wii and the Wii U. When Nintendo explained the Wii, they were constantly talking about their research into why many people never played video games. The Wii remote happened because market research led them to the controller as the chief barrier. It really wasn't about some "amazing gameplay" idea Miyamoto had. With the Wii U, we are hearing once again about all these supposedly wonderful ideas Miyamoto has. Not once have we heard, "And our research has led us to conclude that the reason people didn't buy the Gamecube is because the controller didn't have a big ass screen in the middle." And that's because the Wii U doesn't exist to satisfy some glaring consumer need or solve some key consumer problem. It exists to delight Shigeru Miyamoto and give him a new gadget to play with.