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Seventy years on, the once-mighty Sony Corp. struggling for hits

JIJI

What has happened to the company whose name used to be a byword for innovation?

The story of Sony Corp.’s rise and fall shows that past glory is no indicator of future success.

Soon after the end of World War II, Sony’s predecessor, Tokyo Tsushin Kogyo K.K., was established in 1946 in Tokyo’s Nihonbashi district.

During Japan’s postwar reconstruction and high economic growth periods, Sony launched a series of groundbreaking products, establishing a global presence.

Nearly 70 years after its foundation, however, Sony is struggling for hits. The firm could not capitalize on the wave of Internet growth and accelerated digitalization from around the turn of the century.

Sony has lost its status as an innovation leader to U.S. technology giant Apple Inc.

Located in a quiet residential area in the Gotenyama district of Tokyo’s Shinagawa Ward, Sony Archives showcases the company’s products chronologically, including the Trinitron color television set, which entranced the world with its bright images, and its signature Walkman portable music player.

But the section for products released in the 2000s looks boring, lacking super hits as seen elsewhere, notably in an area for products launched in Sony’s pioneer days.

In 1947, Tokyo Tsushin Kogyo relocated its headquarters to Gotenyama and changed its name to Sony Corp. in 1958. Sony became an icon of Japanese manufacturing with its cutting-edge technologies in the decades that followed.

The “Sony spirit” — which meant trying things that others would not — was the company’s strength.

Sony co-founder Masaru Ibuka spoke of the secret to coming up with innovative products in a U.S. magazine interview, stressing the importance of originality to satisfy his strong sense of purpose.

“The Sony spirit was the product of Ibuka’s impossible demands,” Kozo Osone, 81, who helped develop the Walkman, says, explaining that Sony’s history was a series of attempts by its engineers to meet the goals laid down by its leaders.

“At least, the size of this product should be this small,” Ibuka once whispered when showing up at a development center.

Sony engineers strove to rise to the challenges Ibuka set as they wanted to see him smile.

Thanks to efforts to reduce size and weight, the firm’s transistor radio, which was launched in 1955, became a big hit in the United States.

Proudly flying the Japanese national flag at its entrance, the Sony showroom that opened on Fifth Avenue in New York’s Manhattan was a symbol of Japan’s postwar reconstruction.

The Trinitron TV supported Sony’s growth for over 30 years after its launch in 1968.

Sony’s Walkman portable music player ushered in the company’s golden age, creating a new lifestyle of listening to music outside.

Cumulative Walkman sales since its birth in 1979 topped 420 million units by the end of March 2014.

In the 1990s to the 2000s, the global electronics industry experienced a structural change.

On the back of the popularity of personal computers and the Internet, electronics-makers rushed to digitalize products and services, standardizing parts and outsourcing production and assembly work to companies in low-cost emerging economies.

As product prices tumbled due to this shift, electronics-makers found it difficult to differentiate themselves from rivals with hardware devices alone.

Apple took advantage of this trend.

“Apple has created a new value by combining hardware, software and services,” says Yoshiaki Sakito, 57, a former Sony employee who served as vice president of Apple from 2004 to 2006 and headed the tech giant’s Japanese unit.

In 2001, Apple released the iPod portable music player, turning music fans into loyal customers by offering services combining music management software and music distribution.

Then came the iPhone smartphone. With it, Apple achieved a breakthrough innovation in handsets, allowing users to expand the functionality of their phones through applications developed by engineers and even individuals worldwide.

Sony did not spend these years doing nothing.

Noticing the change in the times, Nobuyuki Idei, 77, who was Sony president from 1995 to 2005, tried to combine Sony’s audio and video technology with information technology. Idei even considered acquiring Apple.

But “I couldn’t do it,” he says. “Sony was too big.” Sony had some 140,000 workers when Idei became president. Although he was aware of the need for a shift in Sony’s business strategy, he could not change the mindset of employees and managers.

“The top leader is not a person with supernatural powers,” he says. Within the company, there was a divide between those focusing on audio and video business and those engaged in IT business.

Sony earns most of its profits from financial services and movie and music operations instead of from manufacturing operations.

The company has split from itself such mainstay operations as TV and audio equipment divisions, aiming to recover its vitality by streamlining its operations. The headquarters concentrate on new business creation.

But one incumbent Sony executive is deeply concerned about the current situation facing the company.

“Now that many excellent workers have left Sony as a result of structural reforms, the company’s power of innovation has declined sharply,” the executive says.

An analyst who hopes for Sony’s revival says the company’s successful experience in manufacturing may hamper its power of innovation.

“Sony needs to break from its past by completely transferring its existing businesses to overseas or separate companies in a bid to create innovation,” the analyst says.

On the prospects of Sony’s revival, Idei says the company needs to transform itself. “There are no answers in its past. Sony should get ahead of Apple, rather than copying its products,” he says.

  • Firas Kraïem

    There are other things in life than smartphones and music players. Quite recently, Sony’s RX100 quite literally wrote the book on what a high-end compact digital camera should offer, and was unanimously hailed as a major breakthrough. Admittedly, digital cameras are becoming a bit of a niche market, with all the Joe Averages of the world using their smartphones to take their random snapshots, but it’s one in which Sony is doing well. There may be others.

    • Steve Jackman

      Anyone can develop niche high-end products if price is no consideration. The important thing in product development is to create products at the right price-point which offer consumers a good value proposition. There is no point in developing high-end niche products, if a company cannot recoup its costs associated with developing and selling the product. It doesn’t take a genius to sell things at a loss to a micro-niche segment of consumers, which is something Sony and other Japanese companies seem to excel at.

      • Clickonthewhatnow

        As far as I recall, Steve, you’re in Japan, right? Why? How can you have such a hate on for a country and deign yourself to live there? That alone confuses the heck out of me.

      • Steve Jackman

        I’m not sure I get the connection between my being in Japan and Sony’s downfall, which is the point of this news article, as reported by Jiji, a Japanese news outlet.

      • Clickonthewhatnow

        Just curious why someone who, given a chance, will always post how Japan is backwards, the Japanese are racist and xenophobic, etc. would deign themselves unworthy to live in a country they dislike so much.

      • R Collier

        Japan is about 100 years behind the rest of the developed world cultural speaking. But there are many positives to living in Japan. It’s safe has low taxes and by and large the Japanese are a nice people when you get down to it.

      • Clickonthewhatnow

        There are parts of Japanese society that are maybe 30 years behind, I give you that, but I’ll take 30 year old smoking areas(ugh) with the safety and kindness from 30 years ago. 100 years is a bit much.

      • That Scottish Guy

        I don’t always agree with Steve’s posts, but I fail to see how his (accurate) observations qualify as “hate”.
        Nowadays, most consumer electronics have a 3 year replacement cycle. Samsung et al have worked this out, and produce products which are good for their price-point. Sony is stuck in a rut of always trying to produce the best – thus pricing themselves out of consideration by the mainstream consumer.

      • Clickonthewhatnow

        It’s more about the consistency than him being right or wrong in this particular situation. This is a continual running theme with him, no matter the topic.

      • Steve Jackman

        Clickonthewhatnow, you have stated in the past that you used to work as a customer service operator at a call center in Canada. As it so happens, I used to manage people working at call centers in the U.S. So, we just have a different perspective on things and are coming from different places. I don’t expect you to get my comments and I understand that.

      • Clickonthewhatnow

        Okay, and that’s fine. But for someone who – seriously, you are – is anti-Japan on every topic I have ever seen you comment on (not like some who are anti-Japan in some situations, but totally okay with it in others), why would you live here? If you think the country is racist, xenophobic, and backwards, why would you bother to live here? If I thought everything a single country did was horrible, it would be the last place on earth I would ever live.

      • Steve Jackman

        My comments are not anti-Japan. They are a call to action for Japan to get its act together. The fact that you can’t tell the difference is more a reflection on you and your insecurities than of me.

      • Clickonthewhatnow

        If you’re gearing for change, more positive terms could be used instead of recycling xenophobic and racist like they’re going out of style.

      • Steve Jackman

        Japanese media and society are full of people extolling the virtues of Japan/Nihonjinron, Japanese superiority and uniqueness, navel gazing and patting themselves on the back.

        I’m just trying to balance these by presenting a counter argument based on my experiences and observations as an American expat who’s been living and working professionally in management jobs in Japan for over a decade. There’s really no need for you to get all worked up over my comments and opinions here.

      • Clickonthewhatnow

        Again, I didn’t say don’t call for change, by all means, Japan needs it. Just don’t be surprised if your message falls short because you’re using negative words all the time.

      • Steve Jackman

        Frankly, I don’t see how the way I approach problems in Japan is any of your business. This is my way of providing a reality check and I will continue to do so. Besides, the thousands of up votes my comments have received on Disqus prove that many others agree with me.

      • Clickonthewhatnow

        It becomes everyone’s business when you post it on a public forum. Thought you would have figured that out prior to posting. And if you take the “thousands of up votes” as proof that people agree with you, so be it, then take replies that don’t agree with you in the same vein.

      • Steve Jackman

        Of course, others have a right to comment on my posts, but I prefer not to be stalked online by trolls whose sole objective seems to be to make personal attacks on me. None of your comments here pertain to the story on Sony reported here by Jiji and The Japan Times. I think that’s the problem with your comments, Mr. Clickonthewhatnow.

      • Clickonthewhatnow

        I’ve already indicated the problem with yours, and I doubt either of us will be satisfied. Tough luck.

  • Anukul

    Ipod is dead. sony is leader in camera sensor tech. their a7 mirrorless cameras are shaking the pro photography market. playstation is selling like hot cakes. sony is doing pretty well actually. yes their tv and mobile segment is not doing very well but overall sony no more has the fear to go bankrupt or so unlike it was in such a situation 3-4 years ago.

    • Steve Jackman

      So, just because Sony does not have a “fear to go bankrupt”, things are OK? Talk about setting the bar low, but I guess that’s quite common in Japan these days.

      At the same time, Apple has idle cash reserves of USD 180 Billion just sitting on its balance sheet, with which it could buy six Sony corporations, given that Sony’s market capitalization is a mere USD 30 Billion.

      • Anukul

        sony was once 120b , once it was 8b , its a funny company.

      • https://twitter.com/streetwise_IT streetwise_IT

        It is hard for Apple to access its cash because of tax concerns whenever foreign currency balances are repatriated. It is even borrowing in the US to pay its dividends rather than draw on overseas cash and pay tax.

  • R Collier

    Too many old people making important decisions. Not enough young people in upper management willing to say no to the old school boys. it’s a yes senpai culture.

  • Steve Jackman

    Interesting article, however Sony’s problems go much beyond competition from Apple. Sony’s rise and fall closely mirrors the rise and fall of Japan. Due to the insular, closed and homogenous nature of Japan, Japanese corporations are merely a microcosm of Japan at large. All of Sony’s problems are also problems faced by almost all other Japanese corporations and by Japan as a society and country.

    As Japanese society has become more insular, closed, racist, paranoid and xenophobic, so have its companies lost their sense of creativity and innovation. It’s only logical that a insular, racist, arrogant, conceited and xenophobic society like Japan would see its corporations lose competitiveness in a world which is becoming increasingly global and interconnected.

    Sony is actually in worse condition than many think. It makes most of its profits from financial services within Japan and movies globally. It’s financial srvices, including insurance, have high margins because it’s a protected industry in Japan, where it is effectively closed to real foreign competition. So, Sony is basically living off of Japanese government handouts for this. The second money maker for Sony is its movie and entertainment business, which is all due to it’s acquisitions in Hollywood. In other words, Sony did not create and does not even run the entertainment and movie business on a day to day basis. The only area where Sony competes in globally which it actually runs on a day-to-day basis is electronics and there Sony is a loser. That is the reality of Sony and of Japan.

    • Clickonthewhatnow

      Was wondering when I’d see the next “Japan sucks” post from Steve Jackman.

      • Steve Jackman

        Let’s not make this personal about me. In case you didn’t notice, the news story is about Sony, not Steve Jackman.

  • Alfonso

    I remember my first trips to japan about 12 years ago they used to have very high end Mobiles at the time . Motorola , Nokia or Samsung Phone couldn’t match those phones features but they suffer the galapagos Syndrome not in the way that they were unsellable abroad but in they way they were too ahead of their time and not affordable for all markets , features like HD resolution screens but pricey as 700 USD and The japanese executives never took the risk to going abroad just because the product it was too “japanese”

    But Japanese companies still have the edge in many industrial and consumer products Sony itself with the camera sensors , all the high end smartphones have the sony camera sensors , just to mention other examples we have the Office Scanners the best are Fujitsu , Canon and Brother same goes for the Inkjet and toners mostly are made in Japan.

    The problems here is that they have the edge in products that will have (or experience ) short demand (cameras) or are the decrease phase or elimination … (The Fax Machine).