Made in Japan, big in America

Sony
November 19, 1999

Not many books open the lid on the internal workings of Japanese companies in quite the way that John Nathan's Sony: The Private Life does. Nathan is professor of Japanese culture at the University of California, and was afforded exceptional access to Sony's senior management. In the course of writing it, and with the company's blessing, he interviewed freely across Sony's top management in Japan and the United States; sadly the strokes in 1992 and 1993 that affected both of Sony's founders prevented him obtaining first-hand accounts from Masaru Ibuka and Akio Morita. It is

written as a biography of the company and its personalities; there is not much analysis here of the business context or even business strategy of Sony. Despite (or perhaps because of) this, it succeeds in being an indispensable book for all students of Japanese business and the electronics industry.

Sony, however, is not typical of Japanese electronic companies, let alone Japanese industry in general. It established a much-

envied reputation for innovation and design, and encapsulated the Japanese fixation with miniaturisation. Abroad, Sony became the best known of Japanese companies and the Sony brand climbed the heights of awareness to sit with Coca-Cola and Marlboro in world recognition. Ironically, however, many, if not most, Americans thought that Sony was an American company, which is in fact a tribute to the co-founder Morita's strategy in taking Sony to the United States as soon as possible. That the Sony brand remains associated with quality and innovation rather than with product failures (the Betamax video recorder is the most well known but not the only one) and a disastrous venture into Hollywood (the acquisition of Columbia Pictures) is one of the puzzles that this remarkable book helps to solve.

Much of the book is about the private life of Sony USA, and many of the key second-tier players are the managers appointed to present the face of Sony in the US. Little new, apart from fascinating detail, is revealed in the early part of the book, which deals with the well-known story of Sony's foundation in the ashes of postwar Tokyo by two brilliant engineers.Nathan's account follows Morita when he took the company to the US and then remains there to unfold the intriguing story of how Japanese engineering prowess fared when confronted with New York Jewish chutzpah.

Nearly all of the senior managers employed by Sony USA have been Jewish, something that Nathan explores in detail. First Adolph Gross, then Harvey Schein and later Mickey Schulhof and Walter Yetnikoff wielded extraordinary power within the Sony organisation, mainly not by virtue of formal position but because of their closeness to Morita. The book reveals Sony as a family business - almost a Jewish family business. Nathan points out that Morita's deep

and lasting friendship with Jewish men may be attributable to cultural similarities between the Japanese and Jewish people, in relation to family values and respect for learning.

It also reveals how much power Morita and later Norio Ohga exercised in Sony decision making. The personal role Morita played in creating the product that made Sony a household name - the Walkman - is revealed in detail, and it largely confirms the account given by Morita himself in his autobiographical Made in Japan .

Less known is the personal role Morita played in events that led to Sony writing off $2.7 billion of its shareholders' money on the acquisition of Columbia Pictures. Sony had been very successful with its acquisition of CBS records following an earlier joint venture, and the sales racked up by CBS stars such as Michael Jackson and Bruce Springsteen had boosted the profits of Sony in the US, going some way to cover the losses incurred by its Betamax disaster. The

conventional account of Sony strategy following Betamax is of the need to capture the

synergy between hardware and software in order to secure acceptance for new audio-visual products and prevent a repetition of Betamax.

In a rationally planned company, business decisions made in accordance with such a strategy would be carefully costed and the options explored. In Nathan's account, Sony emerges as an irrational company governed by the gut feelings of its founders. At the crucial moment, it was Morita's sentimental desire to own a Hollywood studio that tipped Sony into paying an extraordinary price for Columbia and into agreeing to a ruinous arrangement with the Hollywood movie moguls Peter Guber and Jon Peters.

It was Sony in Japan and the other side of hunch-based decision making that rescued the company from the Hollywood mess. Ken Kutaragi, a bright and obsessed Sony engineer, wanted to build serious computing horsepower into a games machine, and for this an expensive new chip was required. The games market at that time (1995) was effectively sewn up between Sega and Nintendo - so much so that David Sheff had written a compelling account of the control these firms exercised on the market called Game Over . For Sony,the game was about to begin anew, after Ohga had personally authorised the investment needed for the chip at the heart of the PlayStation. By 1998, the profits from the enormously successful product exceeded Sony's profits from all its other electronics businesses combined.

The initial resistance to the PlayStation from the Americans at Sony USA, and then the product's immense success, hastened the departure from Sony after 20 years of Schulhof and began to bring the US operation (apart from the Hollywood part) into some kind of order, at least for the time being. The really interesting question, which Nathan begins to ask but only begins to answer in the final chapter, is how Sony can survive both the death of its founders and the inevitable problems of leadership succession and, more important, the turbulent business environment in electronics, in which, as Intel's Andy Grove has said in the title of his book, Only the Paranoid Survive .

In Nathan's account, it looks as if Sony could do with a bit more paranoia. The jury is still out on the current Sony leader Nobuyuki Idei's attempt to reinvent Sony as a home network company - ironically more rather than less reliant on a single product, the PlayStation II, which is due for launch early next year. I hope Nathan is already at work on a sequel.

Alan Cawson is professor of digital media, University of Sussex.

Sony: The Private Life

Author - John Nathan
ISBN - 0002570254
Publisher - HarperCollins
Price - £19.99
Pages - 347

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