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HBS Professor Stefan Thomke, Professor Atsushi Osanai (Waseda University), and Senior Researcher Akiko Kanno (Japan Research Center) prepared this case with the assistance of Executive Director Nobuo Sato (Japan Research Center). It was reviewed and approved before publication by a company designate. Funding for the development of this case was provided by Harvard Business School and not by the company. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2018 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School.

S T E F A N T H O M K E

A T S U S H I O S A N A I

A K I K O K A N N O

Sony

What matters at the end of the day is whoever has contact with our company, through products, services or anything in between; that they can say “This is really cool.” Whether they watch, play, or whatever it is that they do, that they can say: “Wow, this is cool.” That’s what we are here to do.

— Kazuo Hirai, president and CEO, Sony Corporation

On June 15, 2017, Kazuo Hirai, president and CEO of Sony Corporation, stood in front of 1998 shareholders at the company’s 100th general shareholders meeting. For the year ending March 2017, the Japanese company had reported 288.7 billion yen (¥)1 in operating income and a 3.0% return on equity (ROE) (see Exhibit 1). In the following year, Sony expected to achieve 10% or higher in ROE and ¥500 billion or more in operating income, results that the company had not seen in 20 years.

Hirai stressed that thanks to his management team’s actions—including the turnaround of Sony’s television business, which had recorded losses for a decade—the company had regained confidence and vigor. “A few years ago, there was skepticism, but we rallied around the goal of ‘emphasizing differentiation, not volume,’ which has been entrenched in Sony’s DNA since the founding of the company,” he explained.2 “Sony should never forget the philosophy of our founding, which makes this company Sony,” he added. Going forward, Hirai emphasized that one of the key drivers to achieving sustainable growth was “to focus on the ‘last one inch’ and deliver kando (a sense of ‘wow’) to our customers.”3

During the shareholder meeting Hirai fielded some 13 questions, ranging from dividend policy, to product quality, to technology strategy. In a lighthearted moment, one shareholder was concerned about the inconsistent pronunciation of “S-o-n-y” around the world. Hirai patiently explained the global strength of the company’s brand name. Then, another shareholder asked about Sony’s entry into Virtual Reality (VR), a new medium for experiencing media and entertainment content.

The emergence of VR had been on Hirai’s mind for some time now. In the fall of 2016, Sony had successfully launched PlayStation VR, a headset that could be operated through its PlayStation 4 computer entertainment system (see Exhibit 2). At $399 for the headset and the cost of a new game, any of the 60.4 million PlayStation 4 users could now experience VR through more than 100 titles. 4 But VR also raised strategic, managerial, and organizational questions for Sony. “The next challenge

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is whether Sony can develop the VR value chain from creation, distribution, and the actual user delivery side,” noted Kenichiro Yoshida, Sony’s chief financial officer.

Sony’s Businesses Sony had three major businesses: electronics, entertainment, and financial services. The electronics

business focused on television and video products, mobile communications, cameras, semiconductors, games and network services (see Exhibit 3). Around 30% of Sony’s sales were domestic, and 70% came from overseas (see Exhibit 4). The company also invested in new technologies, such as robotics and artificial intelligence (AI). In 2016, it teamed up with Cogitai, a California start-up that focused on next generation AI technology for empowering machines to learn from interactions with the real world.5

Electronics

The fast-growing global consumer electronics market, which included products and services related to television, mobile communications, digital imaging, video games and network services, was expected to reach $2.9 trillion by 2020.6 The Japanese market was expected to grow at only 6.4%, far lower than the expected 15.4% growth rate of global electronics during the next five years.7

Television The global TV market was expected to show steady growth throughout the coming decade. Some predicted that the market would grow at an 8% compound annual growth rate (CAGR) between 2017 and 2021.8 Japanese brands collectively had more than 15% of the global TV market, but only Sony was among the top five manufacturers.9 While Sony’s global liquid crystal display (LCD) TV market share had fallen from 13.7% in 2008 to 5.6% in 2016, the company still remained one of the key players in the market, following Samsung (21.6%), LG Electronics (11.9%), TCL (9.0%), and Hisense (6.1%).10 TV shipments in Japan were expected to increase by 6% in 2017, as organic light-emitting diode (OLED) TVs were becoming exceedingly popular.11

Mobile Communications The mobile business started in 2001 as a joint venture with Ericsson. Sony’s Xperia smartphones and tablets were successful during their release in 2008; however, Sony’s mobile business had become a very small slice of the global smartphone market. In 2016, the market leaders were Samsung (27.8%), Apple (14.4%), Huawei (9.3%), and Lenovo (5.8%).12

While management acknowledged that competition in this sector was fierce, and that Sony’s smartphones would never be market leaders, Hirai believed that the company’s phones could “showcase Sony’s differentiation by utilizing the latest technology.” He emphasized that smart-phones were “last one inch” products—that is, products with touchpoints very close to customers.

Digital Imaging With the emergence of smartphones, the digital camera market had shrunk over the past ten years. Sony, however, had remained a key player, closely following its biggest competitors, Canon, Olympus and Nikon.13 Sony considered sports events as huge opportunities for this business. At the annual shareholders meeting, Sony’s Executive Vice President, Shigeki Ishizuka, explained: “Sony recently developed Alpha9, a new mirrorless camera for consumers that has also attracted interest from professional photographers. We hope that our advanced technologies, including 4K and 8K (Ultra HD) cameras, will continue to be drivers of the broadcasting industry.”

Game & Network Services The Game and Network Services group was Sony’s largest business segment, constituting over 21% of the company’s total profit. 14 The global video game market was expected to grow at a steady rate of 6.6%, to reach a total of $118.6 billion by 2019 and Sony had a 29% market share.15 In 2016, the PlayStation dominated the console market, with a share of 51% (excluding software), ahead of Microsoft’s Xbox (25%) and Nintendo’s 3DS (8%). 16 There were


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around 70 million monthly active users on the PlayStation Network, and management was determined to create software content to attract and retain even more customers.17

Entertainment

The entertainment business made up around 20% of Sony’s total profits and consisted of two segments: music and pictures.18 Sony Music Entertainment (SME) and Sony Music Entertainment Japan (SMEJ) produced and distributed recorded music in various commercial formats.19 Sony Music (22.4% market share) was the world’s second-largest record label, behind Universal Music Group (28.9%).20 Moreover, Sony/ATV Music Publishing was a market leader with a catalogue of over 3 million copyrights, which included songs by stars such as The Beatles, Michael Jackson, and contemporary stars like Taylor Swift.21 Sony Pictures Entertainment (SPE) produced and distributed motion pictures and television programs across the world. In 2016, SPE had around 8% global market share, following Universal Studios, Warner Bros. Entertainment, 20th Century Fox, and other companies.22 Hirai believed that motion pictures, TV production and media networks were key drivers of revenue because the number of content platforms had increased significantly.

Financial Services

Sony had been involved in the life insurance business since 1979. The company’s financial services covered many sectors, including life, automobile, medical, and banking and operated through three major companies: Sony Life, Sony Assurance, and Sony Bank.23 Sony had an established brand name and its business performed well over the years.

Pioneering Products On May 7, 1946, Masaru Ibuka and Akio Morita officially founded Tokyo Tsushin Kogyo (Tokyo

Telecommunications Engineering Corporation) in the war-damaged capital of Japan; the name was changed to Sony in 1958 because it was easier to pronounce.a (See Exhibit 5 for Sony’s founding principles.) The new company for research, development and manufacturing of telecommunications and measuring equipment started with just ¥190,000, some scientific equipment, and no machinery.

In 1950, the company developed Japan’s first magnetic tape recorder and recording tape, which was in line with Ibuka’s wish to develop products for the general public. Though few people fully understood the innovative product, many were impressed; however, there was little interest in purchasing a machine that cost ¥160,000 (about ¥1,300,000 in today’s money 24) and weighed 35 kilograms. “That is when I realized the critical importance of creating a market,” Ibuka later commented.25 The following year the company developed a much lighter recorder, designed for home use. “The point of our company is to operate as a business. No matter how wonderful the product is, if we create a product and if no one buys it, there is little point in continuing the company,” Morita commented. 26 Over the following decades, Sony became one of the world’s leading product pioneers (see Exhibit 6).

Transistor radio In 1955, Sony developed Japan’s first transistor radio, the TR-55. At the time, 74% of Japanese households had radios, but they were bulky vacuum tube devices, which were placed in a room where the family gathered to listen.27 The TR-55 was Japan’s first portable radio and was sold with the advertising pitch “The days of radios with cords are over. Your transistor radio can accompany you wherever you go.”28 In 1958, the company developed the world’s smallest “pocket-size” transistor radio, the TR-63, which became its first export model. In December 1958, Sony was

a “Sony” combines the words “sonus” (Latin for sound) and “sonny”, a 1950s American slang word for young and smart boys.


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listed on the Tokyo Stock Exchange (TSE). Then, in 1960, Sony launched Sony Corporation of America, and marketed its pioneering radios in the United States.

Trinitron television The success of Sony’s transistor radios was followed by the development of the world’s first transistor TV, the TV8-301, in 1960. However, it was black-and-white and other industry players were already pursuing color technology. Then, in 1968, Sony launched its first Trinitron color TV, the KV-1310, which offered about twice the brightness of conventional TVs.29 In 1973, the National Academy of Television Arts and Sciences awarded Trinitron an Emmy for groundbreaking technology in broadcast hardware systems.30 Four years later, Sony launched its personal TV, which incorporated technology that greatly increased the luminous sensitivity of Cathode Ray Tubes (CRTs). The picture clarity established Sony’s superiority in color television.

Walkman In 1979, Sony launched the Walkman, a small, lightweight portable tape player with headphones. The product was based on Ibuka’s idea for a small device that would allow him to listen to music when riding on airplanes. He told his engineers that the device did not need a recording function or even speakers. By simply removing functionality from the compact voice recorder, which had been developed a year earlier, Sony engineers created the Walkman. The first month’s sales were disastrous because consumers could not understand what the device was used for. Then, after employees walked around Tokyo with Walkman players, the second month’s sales surged. The Sony Walkman revolutionized the way people listened to music, making it a personal rather than a shared experience, and paved the way for portable music players, such as the Apple iPod.

With Sony’s series of product hits, its name became synonymous with “innovation” and “cool products” and the company became one of the most admired brands in the world.

The Competition Intensifies In 1995, Sony’s business performance began to falter as competition intensified and an estimated

$8 billion investment in Sony Pictures and other ventures resulted in a net loss of ¥300 billion and a ballooning long-term debt of ¥1.5 trillion. 31,32 In April 1995, Nobuyuki Idei was appointed president of Sony. Idei was trained as an economist and known as one of Sony’s more internationally minded leaders. He reorganized the Japanese business by creating 10 semi-autonomous companies, a structure that would enable Sony to react swiftly to market changes. Reorganizing businesses became a familiar feature of Idei’s leadership.33

Idei felt that Sony had to compete in the faster-paced PC industry to remain viable in the digital age.34 In 1996, the company launched the VAIO series of personal computers, which realized Idei’s vision to develop computers that were as easy to use as consumer electronics. VAIO became popular for its innovative product design, which combined Sony’s audiovisual (AV) expertise with the latest technology. The same year, Sony developed the first flat-screen television, utilizing its super-flat Trinitron tube technology.35 In 1997, the company launched the high-end 32-inch WEGA models, followed by 36-inch models the next year, and increased market share. “Everybody knew Sony TVs and the Trinitron brand. We sold them at a premium price, so the product was very successful from a business point of view,” explained Kazuo Kii, director and deputy president of Sony Visual Products. In 2000, Sony launched the PlayStation 2 game console, which included a DVD drive. The PlayStation became an immediate hit, taking away market share from the early entrants Nintendo and Sega. That year Sony’s share price reached ¥13,000, triple of the price at Idei’s appointment in 1995.

As Sony expanded into mid- and low-price segments, other television makers moved quickly to develop flat-panel plasma and LCD models. With more product supply, price competition intensified and Sony’s strategy gradually included lower price segments to pursue sales volume.36 To please investors, Sony focused on short-term profits and institutionalized modern management


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methodologies such as economic value-added (EVA) and Six Sigma. In April 2003, the company reported its FY March 2003 results: consolidated operating profits had fallen short of company estimates by ¥100 billion. The next day, Sony’s stock price plunged, which also triggered a drop in share prices of other Japanese companies. The Nikkei stock index dropped to a new record low after the burst of the Internet bubble in the early 1990s.

In 1999, Sony introduced its first network capable, portable music player, the Network Walkman, but it faced fierce competition after Apple launched the iPod in 2001. Howard Stringer, head of U.S. operations at the time, explained that Sony executives were so concerned about music piracy that it took a long time to respond to the iPod.37 “We didn’t get there, and by that time, Steve Jobs was there,” said Stringer.38 Moreover, management mistakenly believed that customers wanted products with as many features as possible, which became a guiding principle for its engineering organization. Intense price wars in flat-screen televisions and low sales of other consumer electronics gadgets caused Sony to report weak financial results yet again in March 2005. Idei felt that it was time for another round of organizational changes. Yoshida explained the challenges:

Sony had great success in the so-called “packaged era,” which was based on broadcast media that packaged content, like videotapes, CDs, and DVDs. We dominated the visual and entertainment content industry by defining the standard for packaged media. When Sony acquired CBS Records in 1988, packaged media was the most important business, which made Sony a great company. However, from around 1995, the Internet emerged and networks gradually became the mainstream of content delivery, which put us into a difficult situation. In the network era, we need to be closer to end-users because billing and user authentication is very important. Sony has been a consumer-brand company, but when we say B2C, it actually means B2B2C, because there are retailers such as Best Buy in between. Thus, the transformation to B-to-direct-consumer was a huge challenge for Sony. Idei declared that the network era was coming and that we should prepare. However, the actual implementation was delayed.

Shiro Kambe, Sony’s head of legal, compliance, and corporate communications, added:

Idei anticipated how things will change. But even with good predictions, a vision needs to be translated into words that people can follow and act on, which is difficult in a large company like Sony. During Idei’s years, Sony launched a lot of new businesses and products but did not shut down some of the legacy businesses. The founders themselves were not against new things, but it was a challenge for Idei to fight the people from the founders’ generation. They had experienced great success in analog and stand-alone products and were reluctant to accept his vision and direction.

In June 2005, Howard Stringer, who had been running Sony’s U.S. operations for seven years, became CEO of Sony. The promotion of the Welsh-born American executive, a former journalist who didn’t speak Japanese, sent shockwaves through the company. Stringer immediately sold off business units that had resulted from increased diversification. In the first phase of his plan, called “Sony United,” Sony announced $2 billion in global cost reductions, which included the closure of 11 plants and the elimination of 10,000 jobs.39 “He was recognized as a change agent and tried to break down the silo cultures to make Sony’s electronics culture closer to the entertainment business,” explained Kambe. Sony decided to eliminate 600 out of 3,000 or so products to focus on growth markets.40 This included killing its beloved artificial intelligence robotic pets (AIBO) and the premium Qualia product brand, both of which had been launched in Idei’s years.41

Although Sony’s gaming businesses turned profitable after Hirai returned to Japan as the chief executive of PlayStation, the TV business had still suffered losses while its sales grew by 44%.42 The


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company was expected to report a net profit of ¥70 billion in March 2011, when a severe earthquake hit eastern Japan, costing the company ¥17 billion that year and ¥150 billion the following year.43 In March 2012, Sony had experienced four consecutive years of losses, and the share price fell to around ¥1,700, which was far below the ¥4,000 price when Stringer assumed office (see Exhibit 7).

Enter Hirai In April 2012, Kazuo (Kaz) Hirai replaced Stringer and became president and CEO of Sony, just

one year after he had been promoted to executive deputy president. Hirai had joined CBS Sony (now Sony Music Entertainment (Japan) Inc.) in 1984 and moved to Sony’s computer and video game section, Sony Computer Entertainment America (SCEA), in 1995 (see Exhibit 8). Hirai reflected on his promotion to CEO:

The PlayStation business was based on two pieces of hardware, the home based console and the PlayStation Portable, which was fueled by software. It was a platform business, the employee base was much smaller, and people came from different parts of Sony, as well as different parts of the video game industry. The decision-making process was very fast. In contrast, the Sony organization was just huge in terms of the employee base, organizational layers, and administrative red tape. It was like I drive a Ferrari the whole time, and then suddenly someone gives me an 18-wheeler to drive in the middle of Tokyo. That’s the kind of cultural difference that I felt when I moved to Sony’s corporate headquarters. I knew that before I did anything top-down, I needed to make sure employees understood that I was there to help. So I started calling the rank-and-file employees one by one, to hear them out. After a while, the employees understood that I was there to help and people started to listen.

Transforming Sony

Soon after Hirai took office, Sony announced its midrange plan, “Transforming Sony” (FY April 2012–2014). The plan included the sale of the company’s office buildings in New York, Shinagawa, and Osaki (Tokyo), the sell-off of chemical-related businesses, and the reduction of 10,000 employees throughout the group. Hirai stressed that the company did not sell assets to move into the black, but rather “actively eliminated assets that were not necessary for our core business, which led to restoring profitability.”44

In FY March 2014, the company reported a net loss of ¥128 billion, and sales of its products had declined to half of its value six years earlier. Hirai recalled, “I think at some point, whether it is the Trinitron TV or some other business, we reached a point where we were famous for Sony design, although we didn’t necessarily have the number one market share. Then, sometime later, things kind of switched and Sony decided to, in a Japanese saying, ‘wrestle sumo in their arena,’ and started to go for market share and compete solely on price, commoditized features and functionality. Unfortunately, all the good attributes that made Sony famous were left behind.” (See Exhibit 9 for Sony’s historical operating income.) Hirai recalled the public pressure:

Transformation takes time and you get a barrage of criticism from different types of media, investors, and analysts, which you cannot really control. What really hurt me was the fact that every time a bad article came out about Sony, like “Sony is going to be finished in six months with Hirai running it,” some employees or their family members were seriously concerned. That is what really motivated me to turn the business around quickly.

He decided to appoint Kenichiro Yoshida, CEO of Sony’s Internet service provider subsidiary So-net, as chief financial officer (CFO). Yoshida joined Sony in 1983; he worked in finance and was the


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president’s office head when Nobuyuki Idei was CEO. Hirai also appointed Hiroki Totoki, who had worked closely with Yoshida at So-net, to join the restructuring team.45 “The issue was quite clear,” reflected Yoshida. “I knew that a turnaround of electronics was the only way to restructure Sony. It was evident in the financial figures. The electronics business had about ¥1 trillion of accumulated losses over seven years, and television alone had accumulated losses of nearly ¥800 billion.” 46 Yoshida continued: “In the first few months after I rejoined Sony, I had intensive discussions with Hirai about the restructuring plan. The first step was a cost reduction by restructuring the head office and sales company, second was the exit from the PC business, and third was to turn the television business into an independent company. Hirai decided to pursue all three steps.” Hirai added:

I am sure that our analysis had been done before with similar conclusions. What was different this time is that the team could act on the analysis and do what needs to be done. In the past, one would manage the losses without rocking the boat, and then a few years later, as is the tradition with Japanese companies, one would be moved over to a different department.

“The key was the cost side,” Yoshida explained. “Top line is very important, but it takes a long time to show results. Totoki and I proposed reductions of 30% in head office cost and 20% in sales company cost. The 30% figure was based on gut feel that it would be the maximum level at which we can maintain basic functions.” Hirai commented: “It was extremely important that we forced the restructuring of Sony’s head office. It is never good to instruct business units to restructure and leave the head office functions untouched.”47

At a corporate strategy meeting held in May 2014, Hirai announced that Sony would reform its electronics business and create a foundation for future growth. Hirai looked back:

We worked with HR and various groups to sell the idea, which took time because we had already done some restructuring before but needed to cut another 30% of head office cost. Then we embarked on a very tough headcount reduction, which included overseas sales companies. We did not do much reduction in R&D and things related to innovation and new business creation, because I hoped, even back then, that things would turn around. I did not want sales and everything else to get better and suddenly find out that we had nothing to sell because we had cut R&D five years ago.

The same year, Sony decided to sell its PC business to Japan Industrial Partners and exit a major product line for the first time in its corporate history. The company remained in the mobile phone business, which had expanded global market share with its hit product Xperia and was on track to achieve the number-three position (behind Apple and Samsung). 48 However, sales of high-end models suddenly stagnated as Chinese competitors offered high-quality, lower-priced products. Sony had to revise its business plan, which included personnel reduction in overseas operations, downsizing operations in the U.S. and China, focusing on the premium segment, and reducing the number of models in its midrange lineup. The company recorded a ¥176 billion impairment charge in the Mobile Communications segment for the second quarter ending September 2014.49

Making Sony Better for the Next Generation

In September 2014, the board of directors decided not to pay a dividend for the first time since Sony became a listed company. The announcement triggered severe criticisms from shareholders, former Sony employees, and the founding family.50 Meanwhile, Yoshida proposed a slogan for the company’s transformation: “Let’s make Sony better for the next generation.” The slogan had two audiences. The first was current management, which was the generation that benefited from the company’s past success and had the responsibility to pass a stronger company on to the next generation. The second audience was the employees, and the slogan emphasized patience: one


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should not rush, as it might take years before a new business shows results.51 Kambe recalled, “In addition to the strategic change—not to pursue volume any longer—we communicated the new governance structure and the need for employee responsibility.”

At an executive meeting in February 2015, Hirai announced that Sony would split up business units to transform the company into a highly profitable enterprise. Business units that were already operating as subsidiaries would get increased autonomy. Some administrative functions and production technology development were moved to subsidiaries, while treasury, basic R&D, and public relations remained part of the corporate office. Each business unit had its R&D group that focused on the near term, while corporate R&D focused on long-term projects, which were not necessarily linked to immediate business unit needs. Corporate R&D received about 15% of Sony’s entire R&D budget.

Hirai also announced several management changes. Yoshida and Tomoyuki Suzuki (in charge of the device solutions business and R&D) were promoted to support the CEO and to drive Sony’s transformation. Executives now headed eight business groups and were expected to act autonomously. Hirai summarized the announcement: “To create truly attractive products that inspire customers, we must first secure sustainability and regain our financial strength to make investments in growth fields. We will also develop unique products and services to increase corporate value. This is what Sony is supposed to be about. The main theme of the first midrange plan was ‘transformation,’ and that of the second midrange plan will be ‘profit generation and investment for growth.’”52 The announcement was not without criticism from current and former employees, who felt that increased autonomy would result in a divided Sony and a sell-off of longstanding businesses.

To grow Sony, the company also needed to create new businesses. Kambe explained:

First, even if we were able to turn around the traditional electronics business, we still need new businesses for future growth. Second, since we needed to work on substantial restructuring, the mind-set of our employees was not healthy, and we had to tell employees that Sony is a company where people have a chance to work on something new. Third, by creating new businesses, people can learn how to incubate, operate and grow a business even if the initial size of the business is small.

The TS Business Planning Office

Soon after becoming CEO, Hirai started to visit engineering and product development departments to learn about the state of the company. He found that there were many technologies and product ideas that were never given a chance to be tested on the market. In 2013, he decided to create the TS Business Planning Office and appointed Hiroshi Saito as general manager. b Saito explained his mission:

The mission of TS is to develop any product that does not belong in a current Sony product category. That is the only constraint. For the first few months, we struggled to decide what we should do. After meeting with many people, we realized that Sony had interesting technologies related to the home environment. We thought that the home was special because it was the only place where one could control everything. At one time we were looking at an interior design magazine and noticed that electronic devices never appeared on nice pictures of interiors. We feared that traditional electronics

b The meaning of the initials TS is a company secret, known only to Hirai and another senior executive. When pushed for an explanation, Saito refers to his office as “top secret”, or “TS”.


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manufacturers were becoming irrelevant. Perhaps the product itself did not need to take the center stage any longer, and people just wanted the sound, the picture, or the light.

This insight gave birth to a new concept, “Life Space UX,” which was about the creation of different audio/visual experiences through the power of living spaces. By merging walls, floors, tables, and other core room components with products, homes could be filled with new experiences.53 Saito added, “The key was to go outside the boundaries of audio and visual products, and propose a comfortable living space itself.” The TS team started with five members and did not have its own engineering team. They scouted groups in and outside Sony to find an idea or technology that matched the living space concept. When a product concept was found, Saito then searched for engineers within Sony who had expertise. “That is actually quite tough,” Saito explained, “but I made connections with HR in various business units where I can find engineers, who, for example, suddenly have time because some big project was cancelled.” For business and marketing functions, TS sometimes hired people from outside Sony on a short-term contract basis, but never for engineering.”

The TS team reported directly to Hirai. Saito explained, “It takes time to find consensus within our company, but in the case of Life Space UX, all we had to do was to speak directly to Hirai, and then the decision to go was made instantly. Hirai did not set price targets, although the price could not be under the breakeven point, and he did not set any short-term KPIs. He never asked me about sales volume or profit, just about how fast I was progressing.”

The first product was commercialized after one year. In 2014, the 4K Ultra Short Throw Projector, a piece of furniture that projected high-resolution, large-screen images onto walls, was launched in the U.S. In addition, TS launched three more products in four years: the Portable Ultra Short Throw Projector, the Glass Sound Speaker, and a speaker housed in a light bulb (see Exhibit 10). The Glass Sound Speaker idea came from an engineer in the sound group, who had found ways to generate high-quality sound from vibrating glass. His group had rejected the unconventional idea but someone connected him with the TS Office. Similarly, the Portable Ultra Short Throw Projector came from a persistent engineer in corporate R&D. Saito explained:

I rejected him many times, because at first, I couldn’t think of a product that uses the projection module. But after we came up with the “Life Space UX” concept, I thought that the module might be a good fit. An important goal was to increase the speed for launching new products. And by doing so, we could show Sony’s pioneering attitude again. Sony used to be a company that took risks and launched “wow” products. Another goal was to have a hit product that could change people’s lifestyles through something new, fun, and entertaining.

The Seed Acceleration Program

In April 2014, Sony’s New Business Creation department established the Seed Acceleration Program (SAP). Authorized directly by Hirai, the initiative promoted entrepreneurship within the company. Shinji Odashima, its general manager, explained the mission and structure:

When I was a member of the corporate strategy team, I was supporting various business units and noticed that we were losing our ability to innovate and to start new ventures. Our people were experienced and knowledgeable, but had no exposure to businesses and technologies outside of their field. So I proposed a new business generation program to Hirai. Proposals must fall outside the scope of Sony’s existing businesses. We have five objectives: to create new businesses for the future, to enhance


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open innovation and networking, to develop intrapreneurs who can build an end-to-end business, to create a professional team with deep expertise, and to generate profits.

Odashima ran a new business audition every three months to gather ideas from employees. The event was for scouting in-house talent, which needed an outlet for entrepreneurial ideas. After he announced an information session, more than 1200 employees wanted to attend. The winner of the first audition was a smart remote control and a second-year employee became its project manager.54 Over three years, SAP attracted 600 business ideas, out of which a few dozen were incubated. Selection criteria consisted of five elements: whether the applicant would be a good entrepreneur, the uniqueness of the idea (does it have the “wow” effect?), the business model, competitiveness, and whether the idea was feasible. When an idea was selected for incubation, the candidate was given the option to work full-time on the project, or work at least one day a week, to prepare for the next stage. Out of the ideas that went into incubation, 11 had passed the final milestone by June 2017. Selected projects were given financial support from three months up to one year, depending on the project’s complexity. Odashima explained:

There is no financial incentive for people to win the audition. They continue to be paid their usual salary, but if they produce good results, they are rewarded with an accelerated promotion. This may appear unusual for a start-up, but it is the Japanese mentality. People become Sony employees because they are looking for a place to excel in innovation, and it is not their top priority to become millionaires. The 11 final projects are unique products that do not fit into Sony’s existing businesses. Most projects’ sales grew three to five times in their first year, which is not bad for a start-up, even if the absolute sales figures are small for Sony.

After businesses were launched, its project leaders had two choices. They could ask to transfer projects to Sony’s business units or run them as a stand-alone business. In 2017, 8 of the 11 final projects were fully owned by Sony, 1 had become an independent company, and 2 were joint ventures. Odashima added:

The mission of each business is to make a profit. If the business is making a small profit, they can operate it as a business office. We divide the business development processes into stages from 0 to 100. Stage 0 to 10 includes everything from operationalizing the idea to getting the product out into the hands of early adopters. Stages 10 to 100 involve penetrating the mass market. For a new business to be transferred to a Sony business unit, it must be between 10 and 100 unless, of course, the BU wants to absorb the project at an earlier stage. Three years have passed since the SAP was set up, and we are comfortable with going from stage 0 to 10, but scaling to 100 is difficult. Marketing is difficult because customers often do not know or understand a new product. You might have the technology but addressing consumer needs and communicating the benefits in a mass market takes time. The needs of a mass market are different than the ones of early adopters.

Being too conservative or complacent in a changing market posed yet another set of challenges, as Sony’s television business had discovered. Hirai and his executive team decided to face these challenges head-on.


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Turning Around the Television Business By 2014, Sony’s TV business had accumulated ¥790 billion of losses over 10 consecutive years (see

Exhibit 11). Yoshida found that in prior years, it had averaged an annual profit of ¥40 billion. However, the business became unprofitable when the number of TVs sold increased rapidly and Trinitron TVs, the company’s most differentiated product, fell below 50% of total sales. Hirai and his leadership team felt that Sony’s strategy of competing against Samsung’s product lineup led to a decline in R&D efficiency and product appeal. At the same time, Sony was losing the price war with its South Korean rival.55 The company also failed to transition from its analog Trinitron TV to digital liquid crystal display (LCD) TVs. With Trinitron’s better pictures, the company had a unique and exclusive technology differentiation. Its engineers were working on flat-screen technologies, but when LCD became dominant, Sony no longer had in-house technology to differentiate its pictures. As a result, management focused on volume to keep cost down. Kii explained:

When Sony started in flat TVs, we had to source LCD panels. People mistakenly believed that we needed more buying power, which meant that we had to sell more TVs. We also believed that we had to invest in Samsung and Sharp to secure manufacturing capacity for the panel. Of course, a big business volume gives you buying power but I think that we should have taken a different path.

After the emergence of flat-screen TVs, Sony had four major product categories: traditional CRTs (its core product), rear-projection TVs, LCD, and plasma. Each category had independent business owners and different product engineering platforms. Kii continued:

Every TV had its own platform, so we had at least nine or even more platforms with many models for each platform. At the time, it was really confusing and I think that we caused the problem, not our competition. Another aspect was region. The requirements and specifications for TVs differ from region to region, because the broadcasting systems are different. That is why we had separate businesses in the U.S., Europe, Asia, and Japan. The organization was like a matrix structure with regional and platform directors, each with different opinions and strategic directions.

Even though management was aware of the complex structure, the company found it difficult to make big changes fast. “From around 2008, we started to standardize our platforms and cut down the number to five, which supported maybe 80 to 90 models,” Kii explained. In the meantime, Sony developed new 3D televisions and launched its 3D Bravia line in 2010. Competitors also entered the segment but demand for 3D television was weak and the new product line was ultimately a failure. “Sometimes this happens but I think that the attempt is okay as long as we do something challenging,” Kii reflected.

A New Business Model In April 2011, a year before becoming CEO, Hirai assumed responsibility for all of Sony’s

consumer electronics, including its TV business. Hirai recalled, “I sat down with executives and said, ‘First of all, no business should be allowed to lose money for eight consecutive years and nobody does anything about it.’ We went through everything and found that our business infrastructure and headquarters had to be fed with 40 million TV sets to be viable. But we had sold only about 15 million sets the year before.” In November, Sony announced a plan to fix its TV business. Kii explained:

To bring costs down, we had to cut the number of people in the TV business. Japanese labor law makes layoffs extremely difficult, so we had to do it mildly, like shifting resources to other business units. We reduced the number of platforms so that we could decrease engineering resources. We outsourced software engineering to places like India.


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In November, Sony announced that it would reduce the number of LCD TVs sold in developed countries by 40–45%. The number of models sold in the U.S. was cut from 40 in 2011 to 22 in 2012. Kambe explained, “Hirai, together with the new head of the TV business, stopped our joint venture with Samsung and Sharp. They decided to focus on our core strength, image processing technologies, to really differentiate us.” Kii added:

Our strength is picture quality. Picture quality is about the perfect balance between contrast, resolution, and color. I think that our engineers are the best in the business. We reduced project managers and product leaders, but we did not cut any picture engineers whose know-how came from Trinitron products. Technology moved from analog to digital, but the fundamental know-how of turning a broadcasting signal into a picture is the same. Even though we buy the panels from the same suppliers as everyone else, we can have excellent signal processing and chip technology—that is what makes a better picture. We make the TV backlighting, so we can show better colors and contrast.

Hirai elaborated:

The biggest misconception is that we cannot differentiate our products because we purchase display panels from the outside. But it’s the chipset that makes the difference. What makes Sony TVs the best are the chips that drive commodity panels and our commitment to product design.

Downsizing the TV businesses had to include Sony’s sales company. “The sales organization is a global distribution network which Morita started in 1960s. It had been a valuable asset up until the packaged media era, but it became a liability after the shift to a network business,” Yoshida explained. Sony’s sales company historically operated independently from business units and had its own key performance indicators (KPIs). Not surprisingly, the U.S. sales company sometimes objected to the TV business’ decisions. On other hand, business units blamed the sales company’s high cost structure for low profitability.56 Kii explained:

Until around 2012, sales people didn’t believe that anything could happen to the TV group. Sudden pressure came when the TV and PC groups were in trouble and looked like they were dying. The sales company’s TV revenue was 40–60% of total, so it would be very difficult to sustain their business if the TV business was gone. They started saying, “What can we do to support TV?”

The Recovery Begins

In July 2014, Hirai established the Sony Visual Products business unit. It accelerated the shift to high-end models, especially in the area of 4K (Ultra HD),57 where the company had a share of over 75% in Japan, and 2K (Full HD) models—with a wider color range and image-enhancing technologies. It also announced an expansion in emerging markets by launching models tailored to specific local needs.58 Hirai and Yoshida emphasized that Sony had to get back to its founding spirit and concentrate on differentiation instead of going after scale. To strengthen product appeal, the leadership decided to reengineer its product development process and appoint a general manager for each product line. The general manager would oversee the entire process of production, sales, and revenue management to optimize the allocation of scarce resources.59 Hirai reflected:

When we first set out to turn around the TV business, I attended design meetings and looked at TV mock-ups. I told the team, “I am not a designer, but this looks like a me-too product and you must fix this.” I always see things from the perspective of a customer and there was a fundamental disconnect in Sony’s design. For example, the TV’s design concept has a very thin stand that seems to float in the air and looks


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beautiful, but I told them, “If I buy that TV and take it home and hook it up, it is going to look crappy in my living room because I cannot conceal the cables.” So that was the start of what we call the cable management issue. Every single time we had design discussions, I would say: “Where is my cable management? I’m still seeing cables and I don’t want to see the cables.” At the beginning, people were like “What is he saying?” but after two or three years, people finally got the message. The victory finally came at international consumer electronics trade shows where we had Samsung and LG people come to our booth and take photos of our TVs, and there were comments on websites that said, “Sony TVs are beautiful because they manage cables properly.”

The company also set out to reform its TV business in the U.S., where competitors such as Samsung and LG Electronics sold large TVs at low prices. Sony decided to exit the price war and focus on high-value-added products. “Before, we worked with large discount retailers in the U.S. but discontinued our relationships in 2014. Instead we focused on the consumer electronics retailer Best Buy,” Kii said. Sony set up small-scale showrooms called “shop-in-shop” at Best Buy stores to display its TVs. In the showrooms, customers could experience the high-quality image and sound. “We put promoters in the stores, who are still Best Buy people, but we teach them to explain our products,” Kii explained. The new strategy led to a market share gain of more than 20% for high-end TVs priced $1,500 and above. In the first half of FY 2014, U.S. sales increased by 22% in spite of restructuring one-third of the company’s sales force.60

In March 2015, Sony’s TV business reported an operating profit of ¥8.3 billion yen, which was its first profit in 11 years. Ichiro Takagi, president of Sony Visual Products, who oversaw all sales and cost management of the TV business summed up his approach, “The key to gaining stable revenue from the TV business is stronger product appeal and integrated management of the sales company.”61 The KPIs in the sales organization were now aligned with the TV business. Kii added:

When Takagi came to TV, he pushed the sales organization on our behalf. They no longer disagreed with our TV group’s direction or our requests. The new KPIs for sales were not pushing for more unit sales but for better inventory management, higher price, and so on. It may sound easy but it was very difficult in the past because the sales organization was independent. We launch products every spring, but it takes at least one year to develop new products. No matter how the product turns out, we need to sell it. In the past, the sales group did not understand this and if the product wasn’t very competitive, they would say, “No, no, it is your fault, we cannot sell anymore,” or “We need to reduce prices.”

Because the TV business’ large size, the turnaround took time. Hirai noted:

It took us five years to break out of a situation where we were playing on a field where we shouldn’t be in the first place. We are not a company that should declare that we are going to sell 40 million TVs. We should be a company that can be profitable at 10 to 20 million units because we compete in the high end. We do not need many SKUs like Samsung and our other competitors. We will compete on picture quality, design, and deliver emotional value to our customers. That’s where we shine, and that is where we are different from our competitors.

By 2017, Sony had nine corporate executives and 12 board members, who came mostly from the outside. Kambe observed, “Sony’s governance structure is now simple and clean, and the roles of the board and management are quite clear. The board represents shareholders and checks Hirai’s activities, whereas corporate executives focus on operating their businesses. In the earlier days of the company, there was no need to precisely write down responsibilities and authorities because the founders were charismatic and everyone liked them. It was like a family business. I do not know


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whether this [new clarity] is the reason why we are turning the business around, but at least it is a transition to a more professional governance structure.”

Back to “Wow”

During its May 2017 corporate strategy meeting, Hirai stressed the significance of owning the “last one inch” and deliver kando to customers. He explained his vision for Sony:

“Wow” is the manifestation of the kando, which is Japanese for “an experience that moves people emotionally”. For example, “Wow, that is beautiful,” or “Wow, I love that movie,” or “Wow, that OLED TV is unbelievable.” Everything we do at Sony needs to have that “Wow, this is pretty cool” element. You cannot really quantify it but a “Wow” in television is showing amazing pictures. We push the envelope for better picture quality, so that consumers think: “This [picture] is pretty cool.” We do not just compete on some functional specifications but on the emotional experience of people.

Virtual Reality Gets Real Back in 2010, Sony Interactive Entertainment (SIE) started to experiment with head-mounted

displays and motion controllers to respond to the emerging field of virtual reality (VR)—a potential “wow” experience. (See Exhibit 12.) In 2012, a formal project for developing a VR headset was launched.62 Hirai described how Sony got started:

Initially, development of a VR headset was a skunkworks project. Kazuo Miura, deputy president and director of SIE, and his team were looking at new ways of expanding the PlayStation business from a technology standpoint. They showed some executives and me the prototype of a PlayStation VR. At the time, it was a novelty and our initial reaction was like “Really?” However, Miura and his engineers kept working on it, then Facebook acquired Oculus [for $2.3 billion], and suddenly VR got traction and became a mainstream proposition. Once we were exposed to VR, everyone’s light bulb went off because it was not just about the PlayStation gaming platform, but also about content creation and distribution.

A Sony executive added, “The PlayStation VR initiative is a very good example where the CEO was at first completely skeptical, but still let the engineering teams run forward and kept the investment going until the concept could be proven. I think that is an indication of how we manage innovation.”

In October 2016, PlayStation VR was launched in Japan, North America, Europe, and Asia. “VR brought a big change to the gaming experience. Before VR, users played games by looking at the monitor, but VR created a new experience in which players participate,” explained the Sony executive.63 The VR headset was released at a manufacturer’s suggested retail price of $399 (¥44,980). Users had to connect the device to a PlayStation 4 console, which was priced between ¥29,980 and ¥44,980 depending on specifications.64 “Based on our experiences with the PlayStation business, we estimated that the $399 price would be the threshold where non-portable game consoles become a big seller,” explained Masayasu Ito, executive vice president of SIE.65

The VR market, combined with augmented reality (AR),66 was expected to grow to around $80 billion by 2025.67 VR had the potential for many non-game services and opportunities, including hazard training, elderly health care, and medical applications for doctors. By June 2017, Sony had sold more than one million PlayStation VR headsets. A SIE executive noted:

Of the VR headset suppliers, we are the only ones making money at this point, because we designed it well. We approached PlayStation VR with the same philosophy


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that we applied to PlayStation 4, which is not going for high margin but still making money on the hardware. The headset is also profitable for retailers, so it is a healthy and sustainable model. We also have a platform where VR creators can build and distribute their content. Unlike conventional games, where you need a 200-person development team, the barrier to enter VR is very low and there are many independent creators with small teams that can differentiate themselves through VR. You can have very simple game concepts that are quite magical. Our own studios do not have a large number of titles, but we tend to build the higher-end, more fulfilling flagship experiences.

At the same time, there remained concerns about potential side effects associated with this new experience, including motion sickness and health issues for young children. The company released the headset only after working with outside professionals to identify potential risks and decided to set the recommended age at 12 years and above. Hirai continued, “The primary driver of the hardware and business model is now coming out of SIE, but they do not have everything. For example, our TV business has the best picture engineers. So it is incumbent on SIE, and on other parts of Sony, to share information and make sure we understand what each other is trying to accomplish.”

Hirai continued, “I think that the IoT [Internet of Things], or digital disruption, is impacting all our businesses, everything from PlayStation to financial services, and everything in between. How we use this digital disruption to change our business models and change our product services, or make better decisions is a huge challenge. We need to have the courage to throw away, or in some instances destroy, the current business model that has been successful for us.” Kii noted, “I don’t think that VR is a threat to the TV business. I hope that VR will augment TVs rather than become a substitute, because it is a new category and a different way of experiencing pictures.”

Everybody was aware of VR’s potential: it could be a new medium for consuming a wide variety of content offered by Sony, which affected the company’s entire supply chain, from content production, to camera equipment, to gaming and TVs. But many questions and uncertainties remained. Other than motion sickness, customers noticed too many cables coming out of a PlayStation VR headset. And aside from being profitable, what exactly was Sony’s VR kando and how was it different than its current (e.g., Samsung) and new competitors’ products (e.g., Facebook)? (See Exhibit 13.) Some were also unsure if emphasizing differentiation over volume—the strategy that drove the TV business transformation—would work in the network-driven gaming business.

There were also organizational and managerial issues. Should Hirai allow the VR initiative to continue organically, led by the PlayStation team, or should he take charge and run it from corporate? Or will the VR technology mature enough to justify an entirely new business unit in the future? For sure, Hirai could not hide his excitement:

If you were a travel agent, and you want to let folks know what the beach in Hawaii looks like, wear a VR headset, smell a little sunscreen, and it’s like you’re there. If you are a maintenance crew at United Airlines, before you actually hoist new employees up to the top of the fuselage for the first time, part of the training may involve a VR experience of what it feels like to be up there. Driving simulators are, game or non-game, somewhere in the middle. This is a fascinating piece of technology. The list of applications goes on and on.


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Exhibit 1 Sony’s Financial Statements

Sony Corporation and consolidated subsidiaries, selected financial data

Source: Compiled from Sony Corporation security reports (FY March 2011–March 2016).


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Exhibit 2 Images of PlayStation VR

Source: Company information.


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Exhibit 3 Sony Organization Chart (as of June 2017)

Source: Company information

Exhibit 4 Sony’s Business Results by Segment FY 2016 (as of March 31, 2017)

Sales revenue by segment


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Exhibit 4 (continued)

Breakdown of electronics business (sales revenue, billions of yen)

Operating income by segment (billions of yen)

Sales revenue by geographical segment

Source: Compiled from company information.


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Exhibit 5 Sony’s Founding Principles

1. To establish an ideal factory that stresses a spirit of freedom and open-mindedness, and where engineers with sincere motivation can exercise their technological skills to the highest level;

2. To reconstruct Japan and to elevate the nation’s culture through dynamic technological and manufacturing activities;

3. To promptly apply highly advanced technologies which were developed in various sectors during the war to common households;

4. To rapidly commercialize superior technological findings in universities and research institutions that are worthy of application in common households;

5. To bring radio communications and similar devices into common households and to promote the use of home electric appliances;

6. To actively participate in the reconstruction of war-damaged communications network by providing needed technology;

7. To produce high-quality radios and to provide radio services that are appropriate for the coming new era;

8. To promote the education of science among the general public.

Source: “Corporate Information, History, The Founding Prospectus,” Sony Company website, https://www.sony.net/SonyInfo/CorporateInfo/History/prospectus.html, accessed July 13, 2017.


https://www.sony.net/SonyInfo/CorporateInfo/History/prospectus.html

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Exhibit 6 Sony’s Pioneering Products

First tape recorder for home (G-Type, 1950) First transistor radio (TR-55, 1955)

First Trinitron color TV (KV-1310, 1968) First Walkman (TPS-L2, 1979)



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Exhibit 7 Sony’ Financial Results by CEO


Exhibit 8 Biography of Kazuo Hirai

1984 Joined CBS/Sony Inc. (currently Sony Music Entertainment (Japan) Inc.)

1995 Joined Sony Computer Entertainment America

1999 President and Chief Operating Officer, Sony Computer Entertainment America (SCEA)

2003 Corporate Executive, Chief Operating Office, Sony Computer Entertainment Inc. (SCEI)

2006 President and Group Chief Operating Officer, SCEI (Chairman, SCEA) Group Executive, Sony Corporation

2009 Corporate Executive Officer, EVP President of Networked Products & Services Group, Sony Corporation

2011 Assumed responsibility for all of consumer electronics including TV business Representative Corporate Executive Officer, Executive Deputy President, President of Consumer Products & Services Group

2012 President and CEO, Representative Corporate Executive Officer, Sony Corporation



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Exhibit 9 Operating Income of Sony’s Consumer Electronics Business (FY 96–FY 2017)


Exhibit 10 Images of TS Products

4K Ultra Short Throw Projector Portable Ultra Short Glass Sound Speaker Throw Projector



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Exhibit 11 Operating Results of Sony’s TV Business (FY2004–FY2016)



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Exhibit 12 Estimated Virtual Reality/Augmented Reality Software Use in 2025

Source: Adapted from “Virtual & Augmented Reality,” The Goldman Sachs Group, Equity Research, January 13, 2016, p. 7.

Exhibit 13 List of Major Virtual Reality Companies

Sony Oculus HTC Google Samsung

Product name PlayStation VR Oculus Rift HTC Vive Google Cardboard Gear VR

Launch date October, 2016 March, 2016 April, 2016 June, 2014 December, 2015

Price U$ 399 U$ 599 U$ 799 U$ 15~30 U$ 99

Device PlayStation 4 PC PC Smartphone Smartphone

Sites that offer compliant software

PlayStation Store Oculus Store/ Steam

Steam Google Play Exclusive software

Source: Adapted from “VR Money,” Weekly Toyo Keizai, April 16, 2016, pp. 34–39.


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Endnotes

1 Dollar-yen exchange rate as of end of June 2017 was 112.35 yen to the dollar.

2 “Corporate Strategy Meeting,” Sony Corporation, May 23, 2017.

3 “Corporate Strategy Meeting,” Sony Corporation, May 23, 2017.

4 Users needed to have PlayStation 4 and PlayStation Camera (maker suggested retail price U$59, as of June 2017) to use PlayStation VR.

5 “Sony Joins Forces with Cogitai to Conduct Research and Development for the Next Wave of Artificial Intelligence,” Sony Corporation press release May 18th, 2016, https://www.sony.net/SonyInfo/News/Press/201605/16-052E/index.html, accessed April 2018.

6 “Global Market Study on Consumer Electronics: Consumer Electronic Device Segment to Retain Its Dominance Throughout the Forecasted Period,” Persistence Market Research, December 2016, http://www.persistencemarketresearch.com/market-research/consumer-electronics-market.asp, accessed July 2017.

7 “Consumer Electronics,” Statistics Portal, https://www.statista.com/outlook/251/121/consumer-electronics/japan#takeaway, accessed July 2017.

8 “Global TV Market 2017–2021,” Technavio, March 2017, https://www.technavio.com/report/global-consumer-electronics-global-tv-market-2017-2021, accessed July 2017.

9 Rasmus Larsen, “Samsung Dominates Global TV Market for 10th Straight Year,” FlatpanelsHD, March 15, 2016, http://www.flatpanelshd.com/news.php?subaction=showfull&id=1458017308, accessed July 2017.

10 “Global LCD TV Manufacturer Market Share from 2008 to 2016,” Statistics Portal, https://www.statista.com/statistics/267095/global-market-share-of-lcd-tv-manufacturers/, accessed July 2017.

11 Rei Nakafuji and Ryosuke Hanada, “As Panasonic Enters Game, Japan’s TV Industry Banks on OLED,” Nikkei Asian Review, June 17, 2017, http://asia.nikkei.com/Business/Trends/As-Panasonic-enters-game-Japan-s-TV-industry-banks-on-OLED?page=2, accessed July 2017.

12 Todd Weiss, “Sony May Consolidates Its Smartphone Lines, Reports Say,” eWeek, May 16, 2016, http://www.eweek.com/mobile/sony-may-consolidate-its-smartphone-lines-reports-say, accessed July 2017.

13 “Japan 2016 Camera Report: Sony Lost 8% Market Share,” Sony Digital Camera News, January 16, 2017, http://www.sonyalpharumors.com/japan-2016-camera-report-sony-lost-8-sales-market-share/, accessed July 2017.

14 Sony Corporation, Consolidated Financial Statement 2016, pp. 82-83.

15 “2016 Global Games Market Report,” Newzoo Games, June 2016, https://cdn2.hubspot.net/hubfs/700740/Reports/Newzoo_Free_2016_Global_Games_Market_Report.pdf, accessed July 2017.

16 Dean Takahashi, “Sony Dominates Console Market with 57% Share Worldwide,” VB, March 16, 2017, https://venturebeat.com/2017/03/16/sony-dominates-console-market-with-57-share-worldwide/, accessed July 2017.

17 Sony Corporation, Corporate Strategy Meeting Presentation 2017, p. 17.

18 Sony Corporation, Corporate Strategy Meeting Presentation 2017, p. 22.

19 Sony Corporation, Form 20-F, 2017, p. 29.

20 “Global Market Shares 2016: Sony and Warner Gain on Universal, as Indies Rule,” Music Business Worldwide, February 26, 2017, https://www.musicbusinessworldwide.com/global-market-shares-2016-sony-and-warner-gain-on-universal-as-indies-rule/, accessed July 2017.

21 Sony ATV website, https://www.sonyatv.com/en, accessed April 2018.

22 “Studio Market Share,” Box Office Mojo, July 2017, http://www.boxofficemojo.com/studio/, accessed July 2017.

23 Tom Huddleston, “Sony Could Be Looking to Sell its Film and TV Studio Unit,” Fortune, January 20, 2017, http://fortune.com/2017/01/20/sony-pictures-sale/, accessed July 2017.


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24 The approximate rate was calculated based on historical consumer price index. “Bits of knowledge on history of Bank of Japan and financial system,” https://www.boj.or.jp/announcements/education/oshiete/history/j12.htm/, accessed May 2018.

25 “Message from Founders, Masaru Ibuka and Akio Morita” Sony Corporation, March 2015.

26 “Message from Founders, Masaru Ibuka and Akio Morita,” Sony Corporation, March 2015.

27 Sony Corporation Corporate Communications Department, Genryu (Origin), Tokyo, Japan, November 1996, p. 86.

28 Sony Corporation Corporate Communications Department, Genryu (Origin), Tokyo, Japan, November 1996, p. 86.

29 “Corporate Information, History, Product & Technology Milestones,” Sony Company website, https://www.sony.net/SonyInfo/CorporateInfo/History/sonyhistory-b.html, accessed July 14, 2017.

30 “Corporate Information, History, Sony History, “Chapter 14 Trinitron Takes Off,” Sony Company website, https://www.sony.net/SonyInfo/CorporateInfo/History/SonyHistory/1-13.html, accessed July 20, 2017.

31 Leslie Helm, “Shake-up at Sony: Idei Man: Schulhof ouster may signal tighter control by new Sony chief,” Los Angeles Times, December 6, 1995.

32 “Sony Consolidated Historical Data 1960–2000,” Sony Corporation website, https://www.sony.co.jp/SonyInfo/IR/library/historical/, accessed September 14, 2017.

33 Leslie Helm, “Shake-up at Sony: Idei Man: Schulhof ouster may signal tighter control by new Sony chief,” Los Angeles Times, December 6, 1995.

34 Andrew Pollack, “Remaking Sony, Bit by Bit, “ New York Times, May 19, 1996, http://www.nytimes.com/1996/05/19/business/remaking-sony-bit-by-bit.html?mcubz=1, accessed September 18, 2017.

35 Seiichiro Yonekura, “Fall of Sony, an example of management issues in Japanese companies,” Nippon Communications Foundation, March 20, 2014, http://www.nippon.com/ja/currents/d00113/, accessed September 21, 2017.

36 “True and false of Sony’s resurgence,” Weekly Toyo Keizai, July 29, 2017, p. 94.

37 Joel Dreyfuss, “Sony struggles to adapt in digital age,” Boston Globe, May 30, 2004, http://archive.boston.com/business/technology/articles/2004/05/30/sony_struggles_to_adapt_in_digital_age/, accessed September 21, 2017.

38 Joel Dreyfuss, “Sony struggles to adapt in digital age,” Boston Globe, May 30, 2004, http://archive.boston.com/ business/technology/articles/2004/05/30/sony_struggles_to_adapt_in_digital_age/, accessed September 21, 2017.

39 “Howard Stringer, Sony’s road warrior,” New York Times, May 28, 2006, http://www.nytimes.com/2006/05/28/business/yourmoney/28sony.html?mcubz=1, accessed September 21, 2017.

40 “Howard Stringer, Sony’s road warrior,” New York Times, May 28, 2006, http://www.nytimes.com/2006/05/28/business/yourmoney/28sony.html?mcubz=1, accessed September 21, 2017.

41 Shu Hayakawa, “Failure factors of the Japanese manufacturing,” Aichi Gakusen University Bulletin 50 (2015), p. 92.

42 “Stringer theory,” The Economist, May 26, 2011, http://www.economist.com/node/18745381, accessed September 21, 2017.

43 “Stringer theory,” The Economist, May 26, 2011, http://www.economist.com/node/18745381, accessed September 21, 2017.

44 “Reportage of SONY: 2012–2016,” Nikkei Book, May 2016.




48 “True and false of Sony’s resurgence,” Weekly Toyo Keizai, July 29, 2017, p. 94.

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53 Sony website, https://www.sony.net/SonyInfo/design/works/products/lifespaceUX/?s_tc=sd_fd019ls01_gwls&ad_id= 2551&ad_type=1, accessed November 14, 2017.




57 4K television delivered clear images with an extremely high contrast ratio. A 4K picture projected onscreen contained 4,096 x 2,160 pixels (or tiny dots), which was over four times the number of pixels on full HDTV. Sony had a more than 75% share of the 4K market as of December 2013.

58 Sony press release, February 6, 2014.




62 “Experience the PlayStation VR,” Sony Interactive Entertainment Inc., PHP Institute Inc. (Tokyo), October 26, 2016, pp. 94-98.

63 “Reportage of SONY: 2012–2016,” Nikkei Book, May 2016, pp. 136-137.

64 https://www.playstation.com/en-us/explore/playstation-vr/buy-now/, accessed November 16, 2017.

65 “Reportage of SONY: 2012–2016,” Nikkei Book, May 2016, pp. 106-107.

66 Augmented Reality was the real-time integration of computer-generated information into the environment, where the environment a user perceived was enhanced with digital sensory input such as sound and graphics. “Virtual Reality vs. Augmented Reality,” Augment, http://www.augment.com/blog/virtual-reality-vs-augmented-reality/, accessed July 2017.

67 “Virtual & Augmented Reality—Understanding the race for the next computing platform,” Goldman Sachs Equity Research, January 2016, p. 4, http://www.goldmansachs.com/our-thinking/pages/technology-driving-innovation-folder/virtual-and-augmented-reality/report.pdf, accessed November 2017.


https://www.sony.net/SonyInfo/design/works/products/lifespaceUX/?s_tc=sd_fd019ls01_gwls&ad_id=%0b2551&ad_type=1

https://www.sony.net/SonyInfo/design/works/products/lifespaceUX/?s_tc=sd_fd019ls01_gwls&ad_id=%0b2551&ad_type=1

https://www.playstation.com/en-us/explore/playstation-vr/buy-now/

http://www.augment.com/blog/virtual-reality-vs-augmented-reality/

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