Both, but in different ways.
Right now the execution of the hardware itself is flawed. There isn't the first party software to demonstrate its uniqueness, it is over-priced, poorly advertised, and the basic bundle is an unnecessary use of shelf space and manufacturing resources.
Conceptually, Nintendo's vision of Wii U's place within the industry is flawed. Nintendo sought to partway position it more directly in competition with the PlayStation and Xbox business by pursuing the support of Western publishers, EA, Ubi and Acti in particular, ignoring that these Western companies have established and expanded their businesses overwhelmingly on PlayStation and Xbox branded devices. Nintendo would have been far better expanding their own studios, driving for indie support (as it is now) twelve months ago, buying studios such as Platinum, Atlus, Mistwalker, Next Level, and securing co-developing and publishing deals with more companies. Removing some financial risk while providing outright support, and even perhaps providing an IP, would result in more developer support and help to avoid the software droughts so damaging to Nintendo.
You can see that with the recent deal for Sonic games with Sega, and the indie drive happening behind the scenes, Nintendo are gradually heading in the right direction. It may be too little, too late for Wii U to become meaningfully successful, but Nintendo need to begin the work of expanding, acquiring and collaborating for the sake of their own long term future and viability.
Nintendo's single biggest problem is the lack of enough software to allow their systems to continually sell strongly. This would be solved not by seeking titles already available and more popular on rival platforms, but by providing more Nintendo software--whether it is the renewed presence of F Zero, Wave Race, 1080 once a generation, the utilisation of old IP like Star Tropics and Ice Climber to provide new gameplay experiences, or more partnerships like Lego City Stories, Bayonetta 2, Wonderful 101 and Sonic Lost World. Provide enough of those experiences consistently, and just having a Nintendo machine to play Nintendo games becomes a more broadly competitive prospect.
