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.