Early design choices such as only releasing the purple color for the system for the first few months, the controller style (harbringer to the simplicity control style that Nintendo would later try to master on the Wii controller) and disk space (mini discs with 1.5 GB storage compared to 4.7 of its competitors).
These along with the emergence of the Xbox, pretty much doomed the system with most third parties who most didn't feel the GC was worth altering their designs just to properly match the GC. Which perpelled the idea that games on Nintendo ssystems would only sell for kids and families and that drove down 3rd party interest, especially bad as the last generation was the one were western developers started to come into their own.
Some could blame the first party software and there is case to made for that as well, but compared to what was done on the N64 before it, Nintendo actual had a diverse lineup of software just not as many sure fire classics, exclusive to the system. In part, due Nintendo's desire to experiment/make them different more then graphically from the previous systems in the franchises and also their attempts to lure companies to develop for them by going the MS route and paying them, which lead to stuff like FF: Crystal Chronicles and third party developed games like Star Fox Assault.
With the DS they learned their lesson a little, and took some of that (but not really all of it) with them to the Wii. Currently they are still in the lead for this generation, despite not having nearly as much support of the major third parties but time will tell, if they can maintain it and make the Wii a symbol of evolution and not just a fad for consoles.
