Former Sony CEO Hirai explains how he reinvented an electronics icon
TOKYO – The Sony Group is regaining momentum, as evidenced by its first-ever net profit above 1,000 billion yen ($ 9 billion) in fiscal year 2020 ended in March of this year.
Former Sony senior executive Kazuo Hirai, who is currently the company’s chief advisor, gives a behind-the-scenes look at Sony’s rejuvenation even as other Japanese electronics titans face onslaught from Chinese, Taiwanese and South Korean rivals.
Sony was also on the ropes less than ten years ago. When Hirai took over as chairman and CEO in April 2012, Sony had experienced its fourth consecutive year in the red, posting a record net loss of 456.6 billion yen ($ 4.1 billion at rates of current changes). Hirai faced serious doubts about his leadership skills among those around him and powerful shareholders.
The skepticism stemmed from Hirai’s career outside of Sony’s main electronics business. He joined CBS / Sony, now called Sony Music Entertainment, in 1984, where he spent over a decade.
Fluent in English from his childhood in the US and Canada, Hirai first worked in the music business before helping to rebuild Sony’s gaming subsidiary in the US, remaining in the industry. games for many years.
Hirai only got involved in what was then Sony’s main electronics business when he was appointed executive vice president in 2011, just a year before his promotion to the top job.
âI thought I had to do it. I didn’t have the option to turn down the job,â Hirai recalls. He was pushed to oversee electronic operations as a vice president. âI thought there would be no chance. I was painfully aware that the electronics industry was without direction,â he said. âAt that time, we were a doormat for Samsung Electronics and LG Electronics in South Korea. Our whole organization lacked confidence,â Hirai said.
One day, while an employee was giving a presentation to executives about a new model of Sony television, Hirai was struck by the lack of initiative. From the start, it seemed like the company was just taking action – rolling out a TV with no certainty that it could beat Samsung or its other competitors.
When Hirai took over as head of Sony, its TV business had been in the red for eight consecutive years. The glory days when Sony introduced bundles that won over people around the world, such as a 5-inch micro-TV and an early model of a flat-screen TV, were long gone.
Hirai saw the dismal presentation as a reflection of Sony’s recent habit of losing. For him, the electronics industry was the symbol of a âfallen Sonyâ.
But Hirai didn’t just preside over Sony’s decline. He listened intently to the staff to find out what they were thinking. âEmployees, especially young people, have joined Sony with pride. Speaking directly with them, I realized the company just wasn’t listening to them. Even if they had ideas, [their superiors] turned a deaf ear to them, âHirai said.
âThe situation was critical. But seen differently, there was a huge puddle of passion. I found Sony to be still valuable,â he said.
The overhaul of the electronics business dear to the company was inevitable if the group as a whole was to be rejuvenated. Hirai began by applying a scalpel in an unexpected place: he sold Sony’s US headquarters in New York, known for its unique design.
Although the sale was financially necessary, “sending a message to the employees was more important,” Hirai said. “The American subsidiary absolutely opposed the sale, but I told them to sell immediately [the building] as a statement of my determination. Sony’s rise as a global brand is directly linked to the success of its TV business in the United States. The head office, with its prime location in Manhattan, epitomized this success. By selling the property, Hirai announced that his restructuring lead would spare no sacred cows.
With this, Sony embarked on far-reaching reforms, including the sale of its chemicals, batteries and personal computer businesses; the spin-off of the TV business; and the elimination of approximately 10,000 positions. While outsiders say the measures are a sign that Sony is bouncing back, former employees, who took pride in the company’s electronics business, were dismayed.
When Sony announced that it was selling its Vaio PC business, which had given it a tremendous market presence, Hirai began to receive a series of written proposals from Tamotsu Iba, Sony’s first CFO, who had backed the company. company since the time of its foundation by Masaru Ibuka and Akio Morita. Hirai deliberately ignored Iba’s request to sit down and chat.
âIn short, the proposals said, ‘Things were better in the good old days’ or,’ It is unacceptable that management is laughing at the electronics industry. There was also a proposal calling for the resignation of the [top] management, including me, âHirai said.
Hirai has heard calls from retirees asking Sony to go back to the days when the company was praised around the world for its electronics business. He had no intention of denying the accomplishments of Ibuka and Morita, who founded Sony with high ideals barely five months after the end of World War II, attracting ambitious young people under their banner.
But “such calls now are just nostalgia,” Hirai said emphatically. “We can no longer survive simply by holding on to the ‘[idea that] Sony produced the Walkman. ‘”
In the six years at the helm of Hirai, he reduced Sony’s payroll to 117,300 from 162,700, or nearly 30% of its employees. In talks to divest various operations, Hirai called on potential buyers to keep the workers, at least for a while. Nonetheless, Hirai admitted that the reforms were “with pain.”
Amid a flood of criticism that Hirai, a newcomer to the electronics industry, could not serve effectively as chairman, he began planning Sony’s next phase of restructuring. He acknowledged that “Sony had no mission, value or vision of any kind for the type of business it wanted to be.” Its electronics, games, movies, music and other segments were rambling and moving in their own direction. He therefore found it necessary to define “why we exist and how we should exist”.
Believing the answers lie in the company itself, Hirai toured Sony factories and research and development centers around the world, listening to what people had to say. He found the Japanese word “kando, “ which means “deeply moved”.
“I thought I could rephrase what the people of the founding days were trying to accomplish and recall kando“Said Hirai. Sony was founded with the aim of creating products that would make people say” Wow! “as mentioned by Ibuka in Sony’s charter. The document called on the company to establish a factory that emphasized freedom and openness, and where sincerely motivated engineers could take their technical skills to the highest level.
Hirai interpreted Sony’s mission as to become a “company that manufactures products infused with kando. “
About twenty years have passed since consumer electronics were widely used. In the years that followed, gadget makers around the world, including Sony, were caught in a wave of commoditization. Manufacture products impregnated with kando would require distinguishing the company’s products from the crowd. In the television business, for example, Sony has abandoned its goal of selling 40 million televisions per year. Eliciting a deep emotional response from consumers meant looking for quality over quantity.
Four years after the start of his reform campaign, Hirai stepped down as President and CEO, handing over the reins in April 2018 to Kenichiro Yoshida, who previously ran Sony Network Communications and was CFO at Sony. . Like Hirai, Yoshida rose through the ranks outside of the electronics division.
Yoshida reportedly told Hirai upon accepting the job, “I won’t be a yes, but I will say what I have to say.”
âThat’s what I want,â Hirai replied.
Hirai’s management philosophy is to “solicit opinions that are different from mine,” says Hirai. “You should find people with different opinions from yours and let them speak.”
Hirai used to be challenged from a young age. When his father’s job brought him to New York City, Hirai ended up in Queens as a freshman. He spent his childhood commuting between Tokyo, Toronto and San Francisco every few years.
“It was in the ’60s and’ 70s, and back then I was called a ‘Japanese’ opposite,” Hirai recalls. Upon his return to Japan, he was taken aback by the teachers who berated him for raising even small questions, saying, “This is Japan, not America.”
âWherever I was, I had to recognize that I was a minority,â Hirai said. This experience shaped Hirai’s perspective on management, on the need to harness diversity as a source of strength.
After stepping down as CEO, Hirai became chairman of Sony. A year later, in 2019, he resigned and left the company.
Three years later, his successor continued along the path traced by Hirai. Start creating a “kandoA “value-infused chain” of Sony products and services, Yoshida tries to create a business model that organically links electronics, movies, music, games and other Sony businesses. He even announced an ambitious plan to expand the “community of interest to convey the spirit of kando“to 1 billion people.
Asked about his opinion on the company he helped transform, Hirai is reluctant. “I am able to effectively run a business when it is in difficulty. There are people who know better how to define growth strategies. I have retired from the business world and I will never return.”
With those words, the reformer who started out in a Sony backwater left the forefront of business as one would expect – on his own terms.