Incoming Sony chief executive Kazuo Hirai has said that the company must not rely on its hardware but improve “user experience” if it is to avoid landing in “some serious trouble”.
Kazuo Hirai takes the reins at the world’s biggest black box manufacturer following what I’m going to generously call a difficult year. If I squint a bit, I can remember a serious PSN hack, baying crowds and the severed head of predecessor Howard Stringer rolling down the marble steps of the company’s headquarters. As Sony‘s stock lolls about at a two-decade low, Hirai suggests that it must improve user experience, or end up in “some serious trouble”.
“We really need to buckle down and be realistic,” said Hirai to the Wall Street Journal. “I don’t think everybody is on board, but I think people are coming around to the idea that if we don’t turn this around, we could be sitting in some serious trouble.”
“We can’t just continue to be a great purveyor of hardware products, even though some people expect us to do that.”
Earlier today, we reported that Sony will be rebranding PSN as the Sony Entertainment Network in preparation for the release of the PS Vita.
You can keep up to date with news on Sony here at BeefJack.
Even at a company known for its unconventional choices of leaders, Mr. Hirai’s background is unorthodox. He said he joined the company after graduating from college in 1984 because he believed the company offered a “rock ‘n’ roll” lifestyle that, for example, allowed wearing jeans at work. At ease in both English and Japanese, Mr. Hirai peppers his conversations with equal doses of “dude” and corporate jargon: It is “important to right-size the business.”
As the son of a Japanese banker, Mr. Hirai spent his childhood in the U.S., Canada and Japan. He attended the American School in Japan—a private school largely attended by the children of expatriates—because he worried about fitting in at a traditional Japanese high school. He founded the school’s audiovisual club and his hobbies include building model trains and cars—his geek credentials.
In his first job at CBS/Sony Inc., a now defunct music joint venture between the U.S. network and Sony, he served as a translator for such bands as the Beastie Boys and Journey during their visits to Japan.
In the mid-1990s, Sony’s music and electronics arms huddled to create a rival videogame business to Nintendo Co. and Mr. Hirai was assigned to run the U.S. division after several more experienced executives declined.
Legions of fans turned PlayStation into a popular and profitable gaming platform when videogame entertainment emerged to rival movies and music. Mr. Hirai took a high profile during Sony’s annual appearances at the videogame industry’s E3 trade show in Los Angeles, which drew game fans from around the world.
His prominence also made him a target of rival Microsoft Corp. during an E3 skit in 2004. In a spoof of then-popular reality TV show “The Apprentice,” an actor played a frightened Mr. Hirai who sold out his fictional colleagues before Donald Trump fired the Sony team.
Mr. Hirai got his chance to run the operation in 2006. Ken Kutaragi, the executive credited with starting the PlayStation business, surprised Mr. Stringer in front of the board of directors by revealing the new PlayStation 3 would lose more than $2 billion in its first year. Mr. Kutaragi soon left the company and Mr. Hirai took over with orders to restore profits.
Mr. Hirai prodded Sony’s semiconductor manufacturing partners to slash costs. In one small but symbolic move, he urged designers to swap out the plastic lettering of the PlayStation 3 logo with silk-screened paint, saving money.
Mr. Hirai also corralled PlayStation employees, who had long reveled in their independence from the main office. He transferred the videogame group from its plush offices in Tokyo’s ritzy Aoyama neighborhood to Sony’s less glamorous corporate headquarters.
“He did it in such a way that tempers didn’t fray and anxieties didn’t multiply. He is someone who can bring people together for common purpose, which is easier when you speak the common language,” said Mr. Stringer, who doesn’t speak Japanese.
The Stringer File
Howard Stringer, soon to relinquish daily management responsibilities at Sony, leaves a long trail of colorful quotes. A sampling:
“It’s not a brave new world; it’s a bad new world.”
—on the hacking scandal that hit the company, May, 2011
“He is the leading candidate. The logic is inescapable.”
—on Kaz Hirai as his likely successor, WSJ interview, March 2011
“I’ve said to everybody that efficiency doesn’t end. I don’t want complacency to set in.”
—After a strong earnings report, WSJ interview, July 2010
“We’re not in the bunker anymore. We’re blinking in the sunlight…. We’re showing signs of life everywhere, but I don’t feel ready to celebrate.”
—On the company’s improving finances, May 2008
“I’m asking you to get mad.”
—At a Sony management conference, May 2008
“Look, in America, I was told to cut costs. In Japan, I was told not to cut costs. Two different worlds. In this country, you can’t lay people off very easily. In America, you can…. You can’t go through a Japanese company with a sledgehammer.”
—WSJ interview, March 2007
“No other content company has such a complete understanding of technology, and no other technology company has Sony’s insight into content…. Content and technology are strange bedfellows, but we are joined together. Sometimes we misunderstand each other, but isn’t that the nature of a marriage?”
—January 2006, Consumer Electronics Show in Las Vegas
“I have to choose which obstacles to break down and which obstacles to ignore.”
—WSJ interview, Sept. 2005
“Free is not an alternative. My company didn’t turn a profit last year.”
—Davos World Economic Forum, January 2003
”Doesn’t anyone here think this sounds like a vision of hell? While we are all competing or dying, when will there be time for sex or music or books? Stop the world, I want to get off.”
—Davos World Economic Forum, January 2001
Sony’s Hits and Misses
Based on Mr. Hirai’s success with PlayStation, Mr. Stringer promoted him in April 2011 to oversee the consumer-electronics division—still the spiritual soul of Sony. By November, he tackled the difficult TV business.
Televisions were once the cornerstone of a thriving electronics unit but Sony was late to embrace liquid crystal display models. The decision triggered seven straight years of losses for its TV business. With the company’s history so rooted in television sets, executives had been unwilling to take a step backward. But Mr. Hirai declared three months ago that Sony would no longer pursue a long-term goal of selling 40 million television sets a year and told the television group he was cutting their sales goals in half.
Mr. Hirai said Sony would “build only what he could sell” and televisions would lose ¥175 billion, about $2.3 billion, in the fiscal year ending in March. The losses would cut by half in the following fiscal year before returning to profits in the year ending March 2014, he said.
The move upset Sony’s global sales teams, because they worried it would anger retailers and hurt the company’s ability to sell other electronics. Company managers saw the scaled-down goals could require job cuts.
To cut costs, Messrs. Stringer and Hirai abandoned an LCD panel-making joint venture with rival Samsung in December. The alliance was formed when panels were hard to procure. But a new glut meant Sony was paying more to buy screens from its own venture than on the open market.
In another significant shift, Mr. Hirai assumed more control of product planning from Sony’s powerful business units. In August, he created a new centralized unit called the Integrated UX, or user experience, and gave it authority over product planning managers for digital cameras, TVs, PlayStation machines, audiovisual products and Vaio computers.
In the past, the different business groups would map out products independently. As a result, he said, Sony’s product portfolio became bloated and disjointed. “We’re going to tell you what you are going to make—not the other way around,” Mr. Hirai said. “This is a complete sea change.”
Kunimasa Suzuki, who is Mr. Hirai’s deputy in overseeing the videogame and consumer-electronics divisions, said before the UX group was formed, they discovered that four different product category groups were working on separate projects for a tablet computer to challenge the iPad.
Write to Daisuke Wakabayashi at Daisuke.Wakabayashi@wsj.com
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