Incompetent: No, and the reaction to the Ultra games situation is just fucking embarrassing.
Stubbornly conservative to the point that it's going to have to change for the good of the series: Yes, absolutely.
This has nothing to do with the Ultra games. Next to the fact that we know nothing about them, I'm pretty hopeful they'll be meaningful expansions a la BW2. People are pissing themselves over it not being on Switch (even though it probably will be in the form of Eclipse), but that's really not even remotely close to a problem.
The problem is that they refuse to put the resources behind this series that it deserves. These games should be getting MUCH more content and features than they are, and that means Pokémon, areas, side modes, story (main and postgame and side quests), in-depth pokedex entries (more than one or two sentences), and other things.
They're comfortable spending the same small budget because it's returned to them in excess, but if they want the series to really flourish, and if they want Pokémon to remain as much of a cultural presence as it is, they're going to need to spend a bit of money. I'm frankly really baffled as to why Nintendo hasn't ponied up a wad of cash to fund a truly expansive Pokémon game yet, because such a thing could expand the audience way more than their current strategy.
Not to mention, it would just be nice to do for fans of the series who are tired of less than 25 hour Pokémon campaigns with a largely empty word to hang around in afterward (me). I just want a Pokémon game that's fun to play offline after I've beaten the main story. I'm hoping they've future proofed the models so that they can spend more time actually developing the rest of the game adequately in Gen VIII on Switch.