Sony's Production and Operations

The Sony Corporation is a global organization based in Japan. Its main interests are in electronics (video and audio equipment, televisions, computers and software, telecommunications equipment and electronic components) and entertainment (computer games, record labels and motion pictures). Accessories like the Sony Walkman, the Handycam and the Discman are more than products; to millions of consumers, they represent a way of life. That's not a reputation Sony plans to forfeit anytime soon. And though times have changed, in that Sony's pioneering analog products have been replaced by a raft of digital gadgetry, the mission is the same: produce winners.

Year after year, Sony products are acknowledged as the industry's best by the readers of Incentive Magazine. Their extensive line of consumer electronics is made up of products that people actually use to enhance their time away from the workplace. What could be better? What's more, Sony is entirely dedicated to the premium incentive business. (In fact, incentives are so important to them, they have an entire division to focus on this exciting field.)

Sony's turnkey programs make running a program as easy as turning on a radio. The Sony Collection is a flexible turnkey incentive program that makes getting started effortless. There is an assortment of nine beautifully illustrated "plateau sheets," each containing products grouped by price point. One can use The Sony Collection in its entirety, or mix and match the levels to accommodate one's goals and budget. Introductory levels are ideal for smaller programs and instant recognition. A broader assortment of levels can create extremely effective plateau programs. If these turnkey programs don't quite fit one's needs, Sony will work with one to create the ideal program that does. They build a program together that can include products like Dream Machine(R) clock radios, Walkman(R) personal stereos. DiscMan(R) CD players, Trinitron(R) TVs, Digital Mavica(R) still image cameras, Handycam(R) camcorders. DVD players and Complete Home Entertainment Centers to create a compelling and manageable incentive program. One that's sure to get results.

Sony's Production and Operations

Indeed, the digital age has placed a new importance on Sony's culture of creativity. More than three-quarters of its revenue-expected to jump 20%, to a record $37 billion, in the fiscal year ending this month-comes from electronics. Sony won in the past by staying several technological steps ahead of its competitors. As the company edges into the gist century, however, it faces new rivals in both the computer and broadcasting businesses. No longer is it enough to offer hot products. Now even the simplest gadgets have to be able to talk to each other, or to offer audio, video and computing capability simultaneously, and still be small and user-friendly. If Sony is going to keep its edge, design will decide whether the company becomes a winner or an also-ran in the digital age.

The key to that bet on the future is located in the southern part of Tokyo, in a studio where a team of Sony product designers, about 40 men and women, are busily creating the future of the company. Sony knows better than most that the products blowing off shelves today are tomorrow's cut-rate sale items, next week's doorstops. The result is a company driven by a culture of pure creativity and outstanding quality. It shows in the products-Sony devices have a plastic elegance few companies can match-and in the late 20th century the brand is as magical as Nike, Coke and MTV. At Sony, little distinction is seen between future-looking technology and futuristic-looking products. Shutaro Mukai, a design professor at Musashino Art University and an expert on Japanese industrial design said that Innovation now depends on design.

The torturous process sometimes risks killing even good ideas. When chief designer Akihiko Amanuma headed the U.S. design team during the late 1980s, his group hit on the idea of a special Sony product line for kids. In an era when cool hi-fi meant sleek black easing, Amanuma thought cartoony blue-red-and-yellow boxes with big plastic handles and chunky buttons would nurture a new generation of young Sony fans. Ohga, then Sony's president, hated the idea; Sony did not make toys. But Morita didn't think Sony's hard-won image would suffer at all, and eventually Ohga dropped his opposition. Result: My First Sony and a successful revolution in kids' electronics.

Sony's management secret is simply to allow designers the freedom they need to prove their ideas. And top management is more than willing to join the creative fray, an approach that has inspired unparalleled respect and camaraderie. When designer Teiyu Goto set to work on the PlayStation, Sony's first video-game machine, he knew it had to look bold and simple. So he made the lid for the ROM compartment round like the disc itself and kept the rest of the box rectangular-with rounded corners for children. But the really striking gadget was the handheld controller. After sandpapering away at plastic models for months, Goto came up with a radical new model with handles quite unlike the barbell-shaped ones used at the time by Nintendo and Sega. Ohga didn't like the game-player idea much either, but he supported the imaginative device. Some managers at Sony did not, so Goto went back to the drawing board and crafted an array of more conventional alternatives. But Ohga was willing to take a risk: he continued to back Goto's radical vision. When the designer tried it out on 15 children, they fiddled with it for three hours, and then gave it a thumbs-up. Goto, a talkative man who dresses in black turtlenecks and khakis, all but sobs at the recollection of how his invention could have been trashed before eventually making it into millions of homes around the world. Sony's culture stands out in a country whose manufacturers were for years derided for copying Western designs and using them to make cheap, reliable products of their own. (The copycat ensitivity at Sony is acute: design chief Amanuma remembers when a new-look TV was canceled just as it was about to go into production because archrival Panasonic had come out with something similar.)

In Japan the corporate tradition has been about plodding ahead; radical advances have rarely been encouraged. Sony is the exception. Editor of the Tokyo magazine Designers' Workshop, Naoko Hasegawa, said that Sony is a rare phenomenon in Japan. The heart of the action at Sony is the "eel's bedroom"-a long, low-ceilinged room that once contained a radio-assembly line. Dimly lighted and eerily quiet, except for the clickety-clack of computer workstations, this particular corridor of genius houses the kind of young talent that wouldn't fit in at a more straitlaced organization.

The Sony creed goes back to the company's origins in 1946, when a group of engineers led by Ibuka and Morita founded Tokyo Tsushin Kogyo, or Tokyo Telecommunications Corp., in a bombed-out department store. They bought a tiny, battered Datsun truck for the equivalent of $100, and Ibuka and Morita made deliveries and went out to buy supplies. Because the fledgling enterprise didn't have the muscle to compete with industrial pillars like Matsushita, the giant that makes the Panasonic brand, Ibuka and Morita decided the only way to survive was to be different. The formula at first was simple: find a new piece of technology, and then think up a new product for it. Early attempts flopped. First was an electric rice cooker, a crude wooden device with a heating element in the bottom that left the rice soggy or frazzled; other false starts included a 1950 tape recorder-it worked, if anyone could figure a use for it.

In 1958, after their redesigned tape recorder became popular, the two chose a new company name, Sony, from the Latin word sonus, for sound. It hinted at where the company's future lay. The first major breakthrough came when Sony started using transistors to make radios. (Matami, 1993) The transistor was invented in the U.S., but Sony proved the master at fashioning it into products. In 1957 it produced the first pocket-size radio-and Japan's first transistor radio for export. In 1960 it came out with an even more radical product-an all-transistorized television with minimalist looks and a rounded screen that is now considered a touchstone of postmodern design. Again, design and function merged into an electronic epiphany.

Through the 1960s, rivals would wait and see how Sony's products fared in the market, then copy them. In 1979 Sony introduced the Walkman, which, besides adding a Japanese contribution to the English language, offered a fresh dimension to design: no new technology, just the vision of a new life-style. Morita had seen people lugging huge radios and tape recorders on their shoulders, looking uncomfortable and disturbing other people. His daughter ran upstairs the moment she came home so she could put a tape in her machine. Ibuka complained of the weight of the tape recorder and headphones he carried to listen to music. As Morita wrote, fatuously that he did not believe that any amount of market research could have told them that the Sony Walkman would be successful.

But in the digital age, technological advances come so fast to so many companies that Sony is having a harder time than ever keeping its edge. And Sony's old visionaries are no longer around. Morita and Ibuka were already memories in 1995, when Ohga announced he would take a back seat as company chairman, leaving the day-to-day running of the company to Nobuyuki Idei, a former marketing chief. Idei does not inspire the awe his predecessors did: he joined Sony out of college and is known jokingly as the salary man shacho (president). The question now is whether Sony under Idei can use digital technology to marry audio and video that will produce an array of indispensable new consumer products. Though, Idei may lack his predecessors' technical prowess, he makes up for it in vision. He likes to remind colleagues, "We cannot live by the Walkman alone." In his two years as Sony president, he has overseen a host of gist century efforts, from the development of DVD players to an ambitious plan, announced last month, to vault Sony into the world of satellite broadcasting. Despite that expansion, it may be Sony's traditional strengths-smart marketing and a knack for meeting consumers' needs-that keep the company's products on everyone's living-room shelves. Chief technology officer Minoru Morio has acknowledged that technology in and of itself does not make a good business.

Other Japanese agree that the key to success in the digital age is to celebrate technology rather than hide it away. Masayuki Kurokawa, a noted designer and architect, has said that the next era is about the relation between humans and objects. Designers have to make things humans can love and that fit in with their lifestyle. Since his promotion, Idei has provided a series of clues to the future as envisioned by Sony. He has fired top management at Columbia TriStar Pictures, the Hollywood studio that Sony acquired in 1989. But his biggest directive so far has been to reinvigorate the company's personal-computer program - the very operation Idei managed in the early 1980s, when Sony abandoned it as an also-ran.

Slickly designed in mauve and gray by PlayStation wizard Goto, with sliding doors to the tower panels like the doors in old Japanese homes, the Sony PC differs little from other computers on the inside, its revolutionary appearance concealing a rather workaday PC. Executives say they aren't eyeing the traditional PC market. Instead the idea is to experiment, because someday PC-like boxes will fulfill most if not all consumers' needs. The multimedia computer is a kind of training program for Sony.

Sony has also come out with a dizzying array of other new digital products. The company's digital still camera, the Cyber Shot, stores images on chips, which can be transferred to a VCR or a personal computer. A new portable head-mounted video player, the Glasstron, may do for video what the Walkman did for audio. Rick Doherty of the En-visioneering Group, a high-tech Sea-ford, New York, consulting firm has said that it was the most satisfying [movie] experience he had ever had. The cinema screen was floating right in front of him. Sony's biggest gamble is a stake in Japan Sky Broadcasting, a digital satellite broadcaster. The idea here is the same as buying up record companies in the past: to dispense with worries about whether software providers will latch on to the new technology.

The new age means designers will need a fresh set of skills. Working on a graphic interface for digital satellite TV is Yukiko Okura, a certified master of shodo, a type of calligraphy in which dramatic brushstrokes render Japanese characters in forms that can appear either startling or calm. She says both interface design and calligraphy demand a similar equipoise, but she thinks that shodo is totally analog. Niitsu, for one, confesses to a sense of crisis as a designer entering the new age.

Of course, no one at Sony will talk about its really new products, like the new-generation PC the company plans for later this year. Yet Idei stresses that the company's vision goes far beyond putting every bit of Sony technology in one box. Televisions and PCs will remain separate for years, says Idei. But the margin for creativity in both such boxes is huge, and there is little doubt that the future at Sony is still in its designers' dreams. They have taken one maxim to heart: nothing that looks back is going to make it to tomorrow.

Sony and Entertainment Productions

Some of the series Sony is producing for prime-time cable are breaking even the first season and posting profits as early as the second season. It is pushing the same envelope for original prime-time series it produces for the broadcast networks and syndication, where making ends meet comes with a different set of challenges. When Sony can execute its way it generally makes television series for at least 30 percent less than many of its competitors. It owns all or part of most of the estimated 30 series it produces. One of the best examples of its success so far is "The Shield," which Sony produces in conjunction with Fox Television Studios for FX for about $1 million per episode.

Sources said that is about $800,000 less per hour than it might have cost to produce the series for a major broadcast network that can insist on high-priced talent on and off camera. Such caveats to a series pickup can inflate production costs by as much as $500,000 per episode, high-level industry sources said.

As a result of being able to make what is called "smart choices," "The Shield" will be modestly profitable in its second season. Overall, analysts estimate Sony's restructured and streamlined television operations could post more than $270 million in profits in the fiscal year ending March 31 on about $1.5 billion in revenues. That represents a swing of more than $100 million from the prior year, fueled by an estimated $70 million in cost savings from last year's consolidation and increasing program profits, which should grow at least another $50 million next season, well-placed sources said. It is said Sony no longer maintains a contracted roster of in-house talent that it must support with an endless stream of mostly failed projects, which is an industry wide standard that vexes all of its peers. When possible, it matches the best person to the job and works to stay within a budget that assumes little or no deficit financing. The impetus for doing business this way is simple but effective: It accelerates the timetable for all parties to make money even on a modestly successful project.

By comparison, Sony's production of "The Guardian," which predates the company's new business practices, costs closer to $2 million per episode, reflecting network-mandated talent and other production costs. With deficit financing at an estimated $800,000 per season, the series likely will not see steady profit until syndication.