OCT. 13 | IN U.S. POLITICAL CIRCLES, there’s an old joke that a gaffe is when someone inadvertently speaks the truth. If Japanese corporate politics work on anything like the same principle, then former Sony Corp. chairman and group CEO Nobuyuki Idei committed a major gaffe last week.
Speaking at the European Technology Round Table in Barcelona, Spain, Idei declared that the Japanese consumer electronics industry “is dying.”
According to Idei, who now serves as chairman of Sony’s corporate advisory board, Japanese hardware makers were slow to respond to lower cost—but increasingly capable—competition from Korean (and now Chinese) manufacturers and still have not adapted effectively to changing consumer demands.
“Because of the change of the flat TV, still people believe that the consumer electronic market is one you can defend,” he said, according to the Bloomberg news agency. “But people want to use TV as a portal to the Net. Consumer electronics companies should change themselves and also should integrate their operations.”
Idei himself, of course, presided over Sony from 1995 to 2005, a period when the company experienced some signal and embarrassing setbacks. The most notable was getting outflanked in the portable music market Sony had invented by the U.S.-based Apple Computer, whose iPod now claims 80% of portable player sales.
In another telling comment, Idei blamed Sony’s failure in part on the encumbrance of owning a record company, Sony Music, which was leery of the shift to digital distribution.
“Steve [Jobs] has a lot of freedom compared to Sony,” Idei said, referring to Apple’s CEO.
Idei also called Sony’s 1989 acquisition of Columbia Pictures “a mistake.”
ALTHOUGH IDEI STEPPED down in 2005, he was in charge when the PlayStation 3 was put into development.
Asked in Barcelona about the consoles’ delayed introduction and the full-year head-start it gave to Microsoft’s Xbox 360, Idei attributed Microsoft’s greater speed to market to its not being a “technology company,” by which he meant that it’s a software company, not a hardware engineering company.
While Microsoft relied on “an ordinary chip” to power the Xbox, Idei said, Sony (along with IBM and Toshiba) took longer than expected to develop the revolutionary, and far more powerful, Cell chip.
Though Microsoft would probably dispute that it’s not a “technology company,” Idei undeniably had a point, perhaps even more than he knew.
The real challenge to the Japanese consumer electronics industry isn’t coming from Seoul or Shanghai but from Silicon Valley.
As CE devices become ever-more digital, with few moving parts, the chips that power them and perform their various functions quickly become standardized and commoditized and can be easily and cheaply assembled almost anywhere.
It’s very nearly impossible today for companies to gain any meaningful advantage in quality or functionality through hardware design alone—long Sony’s strength. Rather, differences in consumer experience are mostly a function of the software running on those chips.
The consumer electronics business, in other words, is becoming a subset of the IT industry, while Sony and its peers in Tokyo and Osaka remain—at their core—engineering and manufacturing companies.
In developing Xbox 360, Microsoft’s focus was on improving the consumer experience by improving the software that runs on off-the-shelf chips. Sony, on the other hand, sought to engineer an improved experience into the silicon and Blu-ray Disc drive included in every PS3 console.
At a minimum, that has bought Microsoft a year’s head-start in the market and the favor of many game developers, who already know how to write software for the chipset in the Xbox.
The Cell chip, meanwhile, remains a challenge to many developers, which means that cool games—the heart of the consumer experience—will be slower in coming for the PS3.
SOMETHING OF THE SAME tension between hardware and software engineering can be seen reflected in the battle between Blu-ray and HD DVD.
Once again, Sony (along with Matsushita and other hardware companies) sought to create a new consumer experience by re-engineering the optical disc and disc drive to store more data.
With HD DVD, on the other hand, Toshiba (with a major assist from Microsoft) recognized that the same consumer experience could be achieved without the radical boost in storage capacity through improvements in data-compression software.
Again, the result was greater speed to market, comparative ease of manufacturing and lower costs.
Blu-ray supporters, of course, would argue that the experiences are not truly comparable. That only Blu-ray’s superior potential capacity will allow content owners to create the sort of rich, multi-media experiences that will entice consumers to embrace a new consumer electronics format.
Perhaps. But consumers also increasingly demand that the experience transcend the device—that it become network-able, and interoperable, and easily and ubiquitously accessible.
Achieving that inevitably takes the industry into the realm of operating systems, and middleware platforms, and other types of complex software architecture.
That’s not the sort of thing your average hardware engineer is up to speed on.
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