I think about 9-10 years ago, when Nintendo realized the GameCube was just a complete and total dud and seeing the rising development costs of the successive generation, Nintendo had a massive internal shift in their approach to game development.
Yamauchi said graphics were no long important and the concept of the DS, which would later inspire the Wii, was born.
So they shifted their philosophy and went away from Western 2nd party development that they had relied on a lot in the 1990s/early 2000s.
And Yamauchi actually was right in a way ... the DS/Wii were monstrous successes on the back of things like Brain Training and Wii Sports, the problem was that audience got gobbled up by the even bigger smartphone revolution or just lost interest (in the Wii specifically). Nintendo didn't quite know what to do with the success of the Wii, and it was evident in its final years.
But in the 90s, Nintendo used to push graphics hard, and companies like Rare and Factor 5 were the "it" companies for looking at what could be done with hardware, much like Naughty Dog is today.
Right now, I'm not sure what Nintendo's philosphy is, they seemed to acknowledge they can't be a purely casual gaming company and are trying to hedge back by making the Wii U a bit more traditional of a console, but they're finding that market is pretty saturated too.
