That isn't really a good question, as it assumes no middle-ground between what Nintendo has been doing and what Microsoft and Sony have been doing. It also creates a simplified view of the world where products like Eye Toy, Kinect, and Playstation VR never existed. "Nintendo innovates and no one else does anything but release a box," is a false dichotomy.
The truth is, innovation for the sake of innovation rarely improves upon the standard model. Standard models are standard models because they work. If you have something that improves upon that, or is better than that, then marketing that product is good for everyone. However, when your innovation is something that really doesn't improve anything, then all you're really doing is creating a gimmick to sell your product.
Should Nintendo continue to innovate? Yes, if they can, though true innovation is rare. Should Nintendo depend on gimmicks when they're unable to create something truly innovative? Well, that's up to them, though that business model will be full of strike-outs between the home-runs. It will also mean your consumer base erodes during the down periods.
The lesson Nintendo should have learned from the Wii U is not that gimmicks are necessarily bad, it's that EXPENSIVE gimmicks are bad and expensive gimmicks that you cannot divorce yourself from are killer.
I guess, really, rather than stop with innovations, they just need to do a better job of not depending on bad gimmicks. Easier said than done, of course.