The Wii was a huge success but was evident that it strongly lacked 3rd party support so Nintendo should have focused the Wii's successor to appeal more towards 3rd party devs. The easiest way to do that is by making their consoles equal in power with their competitors.

The "Wii successor" didn't really need to happen. They should've just let the Wii brand be its own thing, a family/casual brand and removed the more core/enthusiast gamer franchises off the brand. Just let it be a side brand. 

This crowd:

Was never going to "graduate" up to anything else, unless it was the typical young boy who becomes 10/11/12 and wants to play nothing but Call of Duty and Destiny.

Games like Bayonetta, 3D Mario, Zelda, Metroid, Madden, Sin & Punishment, etc. don't need to be on the Wii brand. The above audience isn't going to play anything but the more casual fare 95% of the time anyway. 

The problem for Nintendo in the long run was always going to be the above, transforming into this today:

Again, I'm aware that it's not selling as well as it could/should but I don't necessarily think that's the only mark of success because unit sales =/= profit. Also unit sales =/= a good product. Also I think there's a reasonable chance that the shrinking games industry is going to see everyone except Microsoft see their worst-selling console to date. PS4 might manage to outsell PS3 but at the moment I wouldn't bet money on it. Where do you get five years from, though? I thought it was four years ago that Nintendo first recorded losses.

Anyway, I don't really want to quibble over sales figures. Point is, on the terms for which I define success, the Wii U has been successful. I've been happier with it than I can recall being with just about any other console I've owned. Except, ironically, for the GameCube.

Here is an old breakdown from almost two years ago.

http://www.destructoid.com/cnn-estimates-the-cost-of-wii-u-s-parts-to-be-228-249435.phtml

 The GamePad alone is valued at $79.25, 

Replacing this with a classic controller that costs around $15

http://bgr.com/2013/11/26/xbox-one-teardown-bom/

That makes for a reduction in price of less than $65 (almost a much as a bundled game)

they should have nintendo sports club in the launch bundled with white wii U.
They should let EA manager the online services with origin, and earn all the third party support from them.
And also offer discount for who upgrade its wii for a wii U, a decent online service to pass content from wii to wii u should help a lot.
they should have brought either lugis mansion or kid icarus to wii U intead of 3DS, for filling the droughts.
They should have a deal with rockstar for launching GTAV first on wii U, with the first person view as exclusive feature(until ps4 and xone).
If that happened, wii U should be in a way better position nowadays.

Yea and then u have the licensing fees since Nintendo partnered with Broadcom (I believe) to create the zero latency streaming, R&D and a whole lot of other stuff which could have been far less if they didn't go the way they did with the gamepad. But yea, they goofed a lot this generation which is a shame cause the games are great

I'm of the mind that the third party problem for Nintendo is more or less un-solvable, pending Sony or Microsoft's outright exit from the market. Early head start and easy porting or no, they weren't going to get the right games from third parties.

In cpu terms the wii u is ridiculously under-powered for its release date. Most wii u games that are also available for ps3 and 360 perform weaker on wii u with the only exceptions being 2D games and light cpu games like racing games. Also the gamepad is a terrible controller, bulky and missing analogue triggers. Not only that but the launch price was ridiculously high for such a weak console.

Instead of a gpu with 176-352 gflops performance they needed something like 700 gflops and instead of 3 incredibly weak 32bit 1.25ghz powerpc cpu's it needed perhaps 4 jaguar cores (or the early version I forget the name of) which would easily have been up to the job of emulating the original wii powerpc chip at full speed.

The controller should have been a conventional joypad design that also doubled as a motion controller.

Personally I think it should have been a top loader design for the disc so it could run gamecube and wii discs.

There are lots of other things I would have done differently but the meat of it is a console that sits in the middle between ps3/360 and ps4/xbone not stuck with the 360/PS3 in performance terms.

What Nintendo should have done, is try to genuinely (not half ass) recapture the core market, by offering a true next system in terms of power. Nintendo at the time thought "we have the casuals on lock" so they should have emulated what MS did in stealing the PS fanbase, by taking advantage of a 1 yr head start. This would have shown devs and the gaming community "ok, Nintendo is serious again!".

But by making the faux tablet MANDATORY, it added unnecessary cost to the system. The faux tab - pro controller cost differential should have been added to the budget toward getting the best gpu/cpu and ram possible. It is more than evident now, that Nintendo never had any real breakthrough ideas/innovation in game play when it comes to the Faux tab. But when Nintendo was in meetings coming up with ideas for their system after Wii, they likely said "oh people mainly use wifi for their tablets, which means mostly home use" so they included this gimmicky Faux tablet with terrible signal power, to entice the casual Wii market. Nintendo wrongfully assumed parents/kids would prefer a Wii U (gamepad) over actual ipad/android tablets.

I personally like the gamepad for its off tv play, but the thing should have been optional and not sacrificed HW power for it.

I have struggled to come up with an answer to what Nintendo should have done three years ago to avoid this disaster, but has not managed to come up with any good answer.

Some time ago we had a thread on this forum asking if what our recollections was of the time before the launch of the eight generation. Most, of course, stated that they knew Playstation would win. I am not so sure the managers at Sony was so sure. The managers at MS was not sure, cause they betted on the Wii route to be the future: TV, TV, TV - casual-Kinect games - Family Entertainment - Xbox Fitness - Spielberg's Halo exclusive to Xbox Live. 

Three years ago when it was to be decided how the new consoles should look like gamers was mass emigrating to mobile gaming. Ipads was everywhere, Call of Duty seemed to be the only remnant left of the dedicated gaming industry, game sales had been declining for a couple of years, Xbox 360 was eight years old tech and people was starting to doubt if MS and Sony even were interested in producing new hardware. I could not have given any advice to those that had to come up with new hardware.I had no idea that the right answer was "MORE of the SAME".