Sony had posted four years of losses when Hirai became CEO in April, taking over from Sir Howard Stringer. He talks with Bryan Gruley about developing products that move customers emotionally and why making TV sets still matters.
I’m going to start with a hard question: Are you having fun?
You know—it’s been less than four months into the job. I try to get out to the field as much as possible. I spend time with the employees as much as possible, as opposed to just being in the office in Tokyo. [There are] a lot of challenges, but I think that we have a good management team. Overall it’s been very exciting and very fulfilling. So am I having fun? Absolutely.
What’s the challenge?
It’s making sure that we transform the company so that we are in a position of strength. That means that we need to redouble our efforts to focus more and invest more in our core businesses, which we’ve identified as being the digital imaging space, games, and the mobile space. We also need to turn the TV business around. As you probably know, that’s a business that’s a challenge for not just Sony (SNE) but all the electronics manufacturers at this point, in Japan and Korea as well.
And also, obviously, we need to make sure that we continue our success in the entertainment space—in the music space, in the video game space, and in motion pictures. That’s an area where we are profitable, and it needs to continue to grow.
Is the TV [set] business then not one of the core businesses?
The television business is not one of those businesses. However, it’s a very important category in that [it] is probably the biggest point of contact between Sony and our customers.
You’ve said publicly that you plan to make the TV business profitable in two years. How?
First, it’s making sure that we do everything possible to reduce costs. That is, cost of components, logistics, [and] operations. As you probably know, we dissolved our joint venture with Samsung so that we are now able to go into the open market to get the best pricing for our LCD panels. We also dissolved our joint venture with Sharp for the same reason. So that’s giving us more competitive edge.
We’ve also started to move a lot of the engineering resources out of Japan into our operations down in Malaysia, again cutting costs. But at the same time, we need to make sure that we have TV products that consumers will say, well, that’s a great picture, that’s a great sound quality. There’s still a lot more to do, even in this commoditized LCD business.
For a long time, Sony was one of the coolest companies in the world. It seems that mantle has passed to others. Can Sony get that cool back?
You know, there have been ups and downs for a lot of brands that are in the leadership position today but may have lost that edge during their history. A great example, obviously, is a great competitor of ours, Apple (AAPL). If you look at their situation maybe 10, 12, 15 years ago, [it’s] quite different from the leadership position they had in a certain sense back in the ’70s or the ’80s. Now they’ve obviously roared back, and it’s a premium brand once again. Ultimately it comes down to the products that we bring to the customers and the user experience. If we can’t deliver, then the brand is going to take a ding.
I’m fully confident that given the imaginative team I have in place as of the first of April, the commitment, the renewed commitment, if you will, to product development and bringing quality products that really excite our customers, that we can take the brand to a higher level. And also I’ll just mention that in some of the markets that we do business in—for example in India—we continue to have a very high brand premium.
You’ve been emphatic in some of your public statements in saying Sony is going to be a company that makes things.
What I’ve stressed actually is a Japanese word called kando. Literally, it means to move people emotionally. That’s what we’re all about, moving people emotionally. Or, simply put, to put a big smile on our customers’ faces around the world. That connects everybody with Sony, whether you’re an engineer improving picture quality on an LCD television or you’re a video game producer. That’s why I’ve stressed the phrase “one Sony.” It doesn’t matter which part of Sony you’re from; it’s all about bringing that kando.
What are your everyday go-to devices, the things you use?
Let’s see. First of all, an Xperia smartphone, Sony mobile communications. It’s an Android-based smartphone. I have two of them. I also have a traditional flip phone with me right here, a Sony flip phone that I use for just daily voice communication. At home, even this morning, I found out that the euro is 95 yen to the euro on my Bravia HX920, 55-inch. And last Friday we were out with some customers, and before we had dinner—this was out in the suburbs—we actually went to a park with a lot of orchids where we did some photo shooting of flowers. I took my Alpha 77 and my NEX-7. Those are fantastic cameras.
I can go on, but those are probably the ones I use most. Obviously on the plane I’ll use a Sony Reader, and one of the things that I touch every day at the office is the VAIO. When I go into meetings, I usually carry my tablet with me.
That would be a very expensive commercial if it ran on the Super Bowl.
I’m telling you the God’s honest truth.
Where do you think personal technology will be in five years?
People are moving more and more to the mobile space, so the two keywords, and you’ll probably hear this from everybody: smartphones and tablets. Related to that is moving a lot of things to the cloud. That’s why, for example, we felt that it was very important that we acquire the 50 percent of our joint venture in Sony Ericsson and make the cell phone business or the smartphone business a 100 percent-owned subsidiary of Sony. We needed to make decisions a lot faster. In regards to the cloud, one of the things that you probably saw is our acquisition of a company called Gaikai. That is a company that’s going to propel the movement of the video game business into the cloud space very quickly.
You have repeatedly insisted, and you see this phrase on Sony’s website, Sony will change. What are the one or two things that absolutely must change?
Let me give you several. First is a renewed focus on our core. We’ve also divested, of course—for example, the chemicals business. The other thing is, we need to execute with a lot faster speed, which means faster decision-making, faster execution. Those are the things that I’ve stressed over and over, certainly with the management team, but again, in all of the town hall meetings that I’ve done, whether it’s in the Amazonas, in Manaus, down to Malaysia, in Thailand, in all of the factories in Japan. It’s up to me to make sure that we bring that to the forefront and remind people that we need to work as one team. That’s why I expanded on the Sony United concept that [former CEO] Howard [Stringer] brought and basically said we need to be one Sony.
Do you think manufacturing in the U.S. can grow again in earnest, or is that a bygone era?
It depends on what kind of manufacturing we’re talking about. This applies to Japan as well, where there’s a similar debate. My response to that is that, depending on the kinds of products, the kind of technologies that are involved, there is still potential for a lot of manufacturing to happen and be kept in the United States or in Japan.
The other thing that’s important, at least from a Sony perspective, is that we continue to manufacture televisions in Japan, as well. Now is that effective from a cost standpoint? Absolutely not. But unless you’re able to keep the know-how and the technology for actually manufacturing the products in-house, then what you’ve done is effectively outsourced even the fundamental know-how of putting together a television set.
Sony’s head count has got to come down by about 10,000 by next March. Do you have any idea where those cuts are going to come from? Do you think you’re going to have to do more after that?
These reductions are—you know, it’s an ongoing process. After we complete this, I don’t know that anybody can say we’re never going to do reductions again. We just need to look at how we maximize our business. But I’ve basically also said that it’s not an easy decision to make, but if the decision needs to be made for the right reasons, to make sure that we’re putting Sony back into a growth mode, those decisions have to be made. Let me just mention, though, when you say 10,000, obviously it’s not 10,000 people are going to lose jobs. For example, we’ve sold off our chemical business. We have sold off our small LCD business, and so those employees are in that count. They just moved to a different work environment or under a different parent company relationship. They still have jobs; they’re just not on Sony’s payroll.
Are there other companies out there that you look to as a model for addressing some of the challenges Sony faces?
I look at a lot of companies that have been able to successfully transform themselves, either to a completely different line of business or staying in the same business and just being better at it. An example of the first would be IBM (IBM), where they were able to transform themselves from a PC company to a completely different services company.
A company like Apple—they had huge challenges. Their line of products hasn’t changed that significantly, but they’ve done just a lot better job in terms of bringing that user experience. I’ll give you a Japanese company: Toyota (TM). I mean, the Prius has been around for a very long time. I remember when it first came out there were a lot of skeptics about, why would anybody want a hybrid car. They basically transformed the automotive landscape with hybrid technology, and they were the first to do it.
Does Sony have any potential blockbusters in the pipeline on the level of, say, the Walkman?
One of the challenges that I’ve given to the R&D folks and the product development guys is, let’s see if we can come out with products that fundamentally change consumer behavior. That’s what the Walkman did. That’s what the PlayStation did and many other Sony products, fundamentally changed the way consumers behave. One of the things that encouraged me personally was that as I became president on the first of April, the design center presented me with a huge thick booklet of about 200 product ideas. Some are really far out in left field; others are like, you know what, these we can do tomorrow. It just showed that the creativity within Sony is certainly still vibrant.