So Iwata recently said that he misunderstood the west, and he said he needs to better research the trends. Whether or not he will actually do this, that's a bigger question. However, if he does begin to make changes to improve the market, this is what I think he'll do.

-More 3rd Party Support

-Open up more western studios

-Advertise Bayonetta 2, X, Smash Bros (hardcore exclusives)

-Start development on more games that appeal to the western consumer. (Starfox, Metroid, F-Zero)

Maybe I have too much faith in Iwata, but I hope he does this. What do you think he will do?

 Those are all logical things to do, but we are talking  about Nintendo here. They do whatever they want even if it is pure nonsense.

He will take control all of Nintendo and spend billions in R&D to make the perfect wii music sequel

But heres hoping he will get out of NoA and let Reggie handle things here... Go to e3 this time around and announce something that people care about... They have to realize by now that the casuals aren't gonna help unless something magical happens

My triangle is ready.

More like "advertise the hell out of everything" But I agre with everything else.

A turnaround in the West doesn't start until Iwata starts hiring competent Western managers and gives them authority to do make decisions and even finance software, like Yamauchi did with Lincoln and Arakawa back in the day.

To be honest maybe Occulus Rift VR is the real deal and the next disruptor of the market. In which case maybe they should move forward for 2016 to fast track the first real VR home console.

It may require Nintendo having to let go of their family-console-only motif and selling initially to a more hardcore/tech enthusiast crowd ... but maybe this set up

2015 - Nintendo Tablet, Android OS (customized heavily), affordable ($199.99), can play at home on TV with a seperate home dock. This will be the new Nintendo "family" machine. 

2016 - Nintendo VR Console, significantly high powered to be able to drive high resolution VR displays far better than a PS4 or XB1. This is the new "revolution" with a controller specifically made for VR experiences. Designed primarily for Western markets (if Japan wants in, great, but no more tailoring consoles for them).

These could be the new "two pillars" for Nintendo.

So your're suggesting they just drop the 3DS and dedicated handhelds in general? That's basically all that's keeping Nintendo in business right now, so why get rid of it and replace it with something that their may not even be as large of a market for. This route would also require more regular reiterations of the product, which means that games would quickly become outdated, taking away the evergreen nature of many Nintendo games.

Those are great ideas, but they should also invest in 3rd party exclusives like they did in the past (No More Heros, Red Steel, etc).

They are going to have to adapt to how people's lifestyles have changed now, or they can become irrelevant. I think it's dawning on Iwata already. 

3DS has to be replaced at some point anyway, a tablet in 2015 can coexist with a 3DS for a couple of years with the 3DS being $99-$129 and severing the budget market for the last couple of years of its life cycle. 

Wii U's just been a disaster from the day 1 unveiling which was underwhelming. It's a giant miscalculation on Nintendo's part and no, Mario Kart isn't saving that trainwreck. 

Mario Kart? You're forgetting Super Smash Bros U, X, Bayonetta 2, Donkey Kong Country Tropical Freeze, Hyrule Warriors, and many unannounced games just in 2014. Also, they got Watch Dogs and Project CARS to fill some 3rd party gaps. For the 3DS, it will be $129 and the end of it's life style 3DS XL at $149 , and with the 2DS at $89-$99.