Is Sony INNOVATING enough to create the next Walkman?

From being perceived a GHOST in 2012 to one of the most underappreciated TURNAROUNDS by 2017, SONY has come a long way! But, is it really INNOVATING? Will we ever see the next Walkman-like revolutionary product from SONY?

Sony, the company that invented the Walkman (1979), and revolutionized the way people listen to music[1], recorded its worst losses in 25 years in May 2012[2]. It reported $5.7 billion loss in FY2012, and a new CEO Kazuo Hirai was appointed to turn-around the company. For FY2017, Sony posted a record operating profit of $6.7 billion – a 20 year high[3]. Today, the world is still waiting for the next revolutionary product from Sony.

Since its inception in 1946, Sony grew into a giant conglomerate, and this slowed down progress in 2000s. The company completely missed key trends such as digitization, shift to software, and the importance of the internet[4]. Korean rivals like Samsung launched consumer electronic products at lower prices, and Apple innovated with products that Sony couldn’t compete with. Sony had been suffering through infighting and non-cooperation between divisions.

Sony was also diverting away from its core focus areas without fixing the key issues. For example, Sony invested in real-estate business when the core was not doing well without a clear strategy[5]. What was needed at this juncture was not only a focused approach, but also a forward-looking strategy for a long-term play in the technology industry.

For Sony to stay alive, Kazuo Hirai had to come up with something that really drives innovation at Sony.

To cut costs and increase accountability among various divisions within Sony, Hirai decided to focus on three pillars at Sony – the Gaming Business (PlayStation), Semiconductor Business (Image sensors), and Mobile devices[6]. The TV, Audio devices, and other divisions were spun-off as independent subsidiaries of Sony. This ensured competitiveness of each business and ensured responsibility. More responsibility encourages more innovation and does away with the long bureaucratic processes that typically hinder innovation in large companies.

Poor performing businesses such as VAIO (laptop business) and Energy Division were sold off. Sony focused on profitable and fewer SKUs for mobiles and TVs, resulting in improved profits while taking a temporary hit on the top-line.

To encourage open innovation, Sony launched the Seed Acceleration Program(SAP) in 2014. SAP is an approach used to quickly launch start-up projects and commercialize new ideas by tapping into the design and production know-how Sony already possesses[7]. Another initiative under SAP is First Flight – a crowdfunding and e-commerce website set up in 2015 to provide a platform where Sony’s start-up projects can connect with potential customers. This model creates an accelerated path to a product launch and feedback. SAP has produced 13 commercial small-scale products such as the WENA smart watch[8] and Aromastic – a personal aroma diffuser. SAP was expanded to Europe in 2016.

To encourage external inputs to Sony’s innovation funnel, the Sony Innovation Fund was created in 2016 to invest in upcoming start-ups. Sony also launched “Start-up Switch” – an annual business plan competition for start-up projects that originate outside of Sony. First Flight has also been extended to companies outside Sony Group.

While these initiatives to spur innovation at Sony have shown some success and the company seems to be on a growing trajectory, the world is still waiting for the next WOW product. To revive the old glory days, I believe that there are some fundamental issues that require the senior management’s attention.

Sony needs to work on creating a diverse and inclusive global culture. The Japan centers (Tokyo, Atsugi) have only a handful of international employees. Most of the culture and communication at Sony Japan is in Japanese, thereby creating additional barriers for an inclusive ecosystem. The global talent could be utilized to bring in different perspectives across projects to channel ideas for future projects.

For a huge company such as Sony, a seamless integration between products is critical to please the consumers. The employees should have the freedom and flexibility to cultivate cross-functional skills and work in different teams. As an example, Sony could learn from Google’s 20%-time policy for working on side projects[9].

SAP can be modified to incorporate the global talent at Sony, especially the emerging markets. Great scalable ideas come from emerging markets and can lead to Reverse Innovation[10]. Currently, SAP is heavily focused on Japan, with all the discussions and information in Japanese[11]. Added incentives for employees could be introduced for working on SAP-worthy projects.

As Sony thinks about creating the next revolutionary product, what are the fundamental mindset and cultural changes that it needs to incorporate? Does it make sense for Sony to break-free from the conventional Japanese perfectionist culture and open it to diverse opinions and perspectives? Will that lead to a chaos in the organized hierarchy that Japanese companies are known for? Will SAP be able to produce the next big thing, given its current scope?

(798 words)

[1] https://www.theguardian.com/technology/2014/dec/13/sony-successes-failures-inventions-walkman-music

[2] https://www.cnn.com/2012/05/10/business/japan-sony-record-loss/index.html

[3] https://www.japantimes.co.jp/news/2018/04/27/business/corporate-business/sony-posts-record-operating-profit-2017-robust-semiconductor-business/#.W-p0CZNKhPY

[4] https://www.nytimes.com/2012/04/15/technology/how-sony-fell-behind-in-the-tech-parade.html

[5] https://www.cnbc.com/2014/04/30/sperately-needs-to-innovate.html

[6] https://www.reuters.com/article/uk-sony-results-restructuring-idUKBREA1509B20140206

[7] https://www.sony.net/SonyInfo/csr_report/innovation/index3.html

[8] https://www.sony.co.jp/SonyInfo/News/Press/201707/17-066/

[9] https://www.forbes.com/sites/johnkotter/2013/08/21/googles-best-new-innovation-rules-around-20-time/#2b8ba50a2e7a

[10] https://en.wikipedia.org/wiki/Reverse_innovation

[11] https://first-flight.sony.com/pj/startupswitch/

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6 thoughts on “Is Sony INNOVATING enough to create the next Walkman?

  1. It seems like Sony is casting a much wider net than before, now aiming to capture the ideas of the startup market. How far are they willing to stray from their core competencies in order to pursue the next “big thing?” Fundamentally though, this means that Sony needs to pick winners from the beginning and fund them, since they can’t fund everyone. This seems to not be their strong suit – how do they overcome their own weakness at picking key trends? Maybe it ties into their much needed diversity, and encouraging a more diverse background in work experience and talent as well as the factors you already mentioned.

  2. The timing of this post could not be more appropriate given this evening’s LEAD case on Rakuten. If the company really wants to boost innovation, studies show that a diversity of perspectives increase the likelihood that innovation occurs. Thus, to the extent that on can manufacture innovation, management should bring in more global talent. For this reason, I also agree that they should pursue a similar strategy to Rakuten and drive “Englishnization” across the business. One question that arises for me out of this case is how important is the open innovation to driving innovation at Sony? Why not just grow through inorganic growth (albeit they should focus on companies within their scope of expertise ie not real-estate)?

  3. I think Sony does need to break free from its culture to a degree. You mentioned that SAP is Japan focused and I think that stifles their ability to source innovation. If the program can be broadened to be more inclusive of other nationalities, the added diversity can expand the scope of innovative ideas that come through the program. To win in the global economy, they will have to develop products that are applicable in societies far beyond just Japan, and for that reason, extending the program to source ideas globally gives them a far greater likelihood of finding that success. Furthermore, it would increase their chances of identifying that global opportunity when/if it comes through their program.

  4. I know this isn’t related to the TOM prompt but I love your breakdown of Sony’s problem – it really brings alive the Fin 1 discussion today about how businesses typically shouldn’t diversify away from their core competencies.

    I’m a bit confused as to how SAP works – do individuals and/or businesses with innovative ideas approach Sony? At that point, would Sony partner them with a team to continue growing the project?

  5. Hi Panda, thank you for the informative article. It was very interesting to read about how Sony is trying to go around the fact they have not had a groundbreaking innovative product in recent years.
    One question I am left with after reading your article is whether all these initiatives such as SAP and the Sony Innovation Fund divert the focus needed to develop a really cool product. Where do you draw the line between quantity and quality in product development? And how should Sony go about when it does launch a product that gains initial success? Should they drop the diverted focus and narrow down on this successful launch or should they keep ‘shooting everywhere’ in hopes of landing another random successful hit after it?

  6. Great article! I totally agree with your point that to harness more ideas and innovation, a company should have a global reach and a pool of global talent. I think this is a very interesting example where LEAD intersects with TOM. Having a diverse, global culture and workforce would generate a higher pool of ideas and facilitate brainstorming and “out of the box” ideas which would feed to the product development funnel and enhance open innovation. It is interesting that I got to read this article after today’s LEAD case on Rakuten. It seems that Sony is very similar to Rakuten given that most their offices are in Japan and don’t have a strong global presence. I wonder if what Rakuten did by enrolling their “Englishnization” scheme would work for Sony and allow them to improve their global presence and talent.

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