While we focus heavily on how Nintendo’s strategy to disrupt the market has achieved great success of impacting Sony and Microsoft, I think we often forget to consider that they have impacted the entire gaming market and not just the console manufacturers. It’s very true that Sony and Microsoft were heavily invested in the conventional strategy of advancing games by advancing the underlying technology through more advanced hardware; but it is also very true that most third party publishers have tied themselves to that strategy for more than a decade.
In a way, many of these publishers have not been able to come to terms with the concept that the values that the Wii is based on are as important (or possibly more important) to most gamers so they justify its success by assuming that it is successful because its userbase is made up of entirely new gamers and of very passive/casual gamers from previous systems. They can’t believe that someone who owns an XBox 360 and Wii would choose to have a game like Resident Evil made for the Wii, so they pretend that we don’t exist; and they ignore all evidence to the contrary.
To me, it seems similar to how the big 3 car manufacturers reacted to the success of small cars from the 1960s until the 1990s. Because of the initial success that small cars like the Beetle and the early mustangs had with students and as a second car for most families of modest income, up until fairly recently the big 3 car manufacturers considered small cars as a cheap product to introduce people to your brand so that when they were able to afford a "Real" car they would upgrade to one of your larger nicer vehicles. The thought that someone would choose to drive a compact car even though they could afford a full sized sedan never really occurred to the executives at these companies.
This meant that these companies continued to churn out inexpensive, low quality cars with almost no investment in R&D to make nicer small cars for decades while the Japanese manufacturers (Toyota, Honda, Datsun/Nissan) focused heavily on producing higher quality small cars. In many cases these small cars shared many of the same values as the cars American manufacturers were pushing (like luxury, performance or style) but American companies continued to assume that people were choosing these vehicles for other reasons; like their lower cost, better fuel economy, and what not.
I don’t think these companies realized that people actually wanted smaller cars until Honda, Toyota and Nissan really started to eat away at their market-share in the late 1990s; and by that point in time these companies were 10 years behind their competition.
