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Kando man

Sony CEO Kazuo Hirai combines American pragmatism with a Japanese touch.
Saturday, October 29, 2016 - 05:50

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Kazuo Hirai

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"First of all, we need to look at what reality is and then we need to deal with the reality. We are not going to push the ball down the road."

The first thing Kazuo Hirai does on meeting this writer is congratulate him on his choice of digital recorder, a Sony model. The affable and charismatic president and CEO of Sony Corp says that sometimes people come to interview him carrying an Olympus recorder. "It usually doesn't work; security takes it away from them before they get here, but anyway..."

Mr Hirai's sense of humour is infectious. He can also get passionate, especially when talking about his company.

When it is pointed out to him that, about a decade ago, Sony had all the plug-ins - the tech, the content, the branding - but somehow could not put it all together and had to cede space to Apple in the music and mobile space, he agrees and adds: "This is a criticism that is levelled against Sony; it is probably right to a certain extent but let that be a lesson learnt."

"On my watch," he adds, "I'm not going to see a newspaper article five years from now that says Sony had entertainment, they had PlayStation, they had design, they had professional equipment and yet they couldn't get things like virtual reality (VR) to work. I 'm not going to read that article and neither will my colleagues because they wouldn't have a job."

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Much had been said in the past about how Sony's various divisions - such as electronics, music, movies and professional equipment - tended to work in silos and hence could not feed off each other's knowhow and excellence to come out with products that "wow" people. This is cited as one of the factors which prevented it from creating an ecosystem spanning its various products and services.

Mr Hirai intends to bring back the "wow" in the Sony brand, but in a very Japanese way. "From the day I came on board (in 2012) the key for me has been the Japanese word kando, which literally means, in Chinese characters, to move someone's emotions - I want to have people say 'wow, this is a great product, this is great design and something that I want to show off to my friends'."

He adds: "It's going to take time. It's gotten to the point when I use the word and a lot of people say, 'Here he goes again!'... I talk of the kando experience both internally and externally."

How exactly does he plan to bring kando into Sony products and branding?

"I firmly believe that Sony has a tradition of injecting emotional value into a product. We are not just competing on price and specification. We are competing in design, the brand itself and the history of the brand, all those things combined." He wants to reinforce this so that, in consumer perception, it becomes ubiquitous with the brand.

"This allows us to command a premium over competitors who are just competing on specifications and price. That's a very important part of the philosophy I bring to the electronics business," says Mr Hirai. It's a concept that can be applied to the other divisions of Sony as well, he says.

Indeed, a lot of the new initiatives Sony is taking to bring in the kando experience are cross divisional in nature, he adds. "I make sure we have periodic business meetings where heads of the entertainment companies spend a day-and-a-half, sometimes two days, with the heads of all the electronics-based companies; we never had that before. We gather sometimes in Tokyo, sometimes in New York, we kind of rotate to talk about business issues and where we can collaborate and just get to know each other more.

"A prime example of this is, we now have our top research and development (R&D) guy, executive deputy president Tomoyuki Suzuki, spending time with Doug Morris, CEO, Sony Music Entertainment, and Martin Bandier, chairman & CEO, Sony/ATV Music Publishing, who together run the music publishing business and Michael Lynton, chairman & CEO, Sony Pictures Entertainment, at least twice a year. They are in the same group dinner, having a glass of wine while getting to know each other."

At first, there was a pushback, he reveals. Sony, after all, is a deeply traditional engineering- focused Japanese company. Mr Hirai heard comments like: "I run R&D so why do I have to go and see entertainment guys?"

But now it's kind of second nature because they have been doing this for four years, he says. "It - meaning cross-divisional collaboration - is not really just talking about it. You sometimes have to force the issue. They understand that's what is required... We are trying to mix the arts with the sciences."

Sony was founded in war-ravaged Japan in 1946 by Akio Morita and Masaru Ibuka. It has been synonomous with the manufacturing excellence of the country. Over the decades the company has expanded into a wide variety of areas: electronic and electrical manufacturing, films and music, among others. Over the past decade or so it has found it a bit difficult to adapt to a fast-changing business environment, especially in electronics. Since 2005, it has lost about a fifth of its value. However, in the 2015-2016 fiscal year, the company registered a rare profit.

Mr Hirai, who has been in Sony all his working life, took over from Howard Stringer in 2012. Like Mr Stringer before him, Mr Hirai is not an engineer. He grew up in Canada and spent much of his early life in that country and in the US. As a boy in Toronto in the 1970s, he delivered newspapers to save up money to buy a Sony Walkman cassette player. His father and grandfather were loyal Sony fans and he inherited their love for the brand long before he joined the company.

Talking about his early love for Sony, Mr Hirai says it got to a point where he would go out and buy any Sony product that came out, including things that didn't do well. "So (at team meetings) I can't do the engineer talk but if it's talking about products that were successes and failures over the past 30-40 years, I can speak with the best of them. They know that I'm not an engineer but they understand I have a passion for products."

When he took over in 2012, the CEO notes, the electronics business was the most challenged. "That's where most of the restructuring and some of the tough decisions had to be taken. We obviously had a lot of internal discussions about the kind of restructuring we had to do. But I think, myself, together with our chief financial officer (CFO) and other senior members of the management team, felt that if we don't make the tough decisions that we need to make now, then we would have to deal with a bigger problem down the road.

"And so one of the things that I have always impressed on my senior management team is, first of all, we need to look at what reality is and then we need to deal with the reality. We are not going to push the ball down the road."

He says that there were a lot of challenges, a lot of different opinions, both internal and external, from various stakeholders and "we dealt with it".

"I firmly believe if it's the right decision we take it now and it has actually worked for the better. These are hard decisions because employees are involved, but ultimately it ends up being the right decision for the employees as well because their positions are protected and the business goes, perhaps under a different management team, but it continues."

While Mr Hirai hasn't shied away from selling off businesses, he has resisted doing so in the case of the company's smartphone business which is still losing money. "A lot of people ask me about this. Mobile communications has been with us for a long time and will be part of our daily lives going forward. How will the device look and feel, is another story and we don't know that yet."

But "what I do know", he says, "is that every time there is a paradigm shift of how we communicate in the mobile space - the last time that happened around 10 years ago when we shifted from the feature phone to the smartphone - it was a game changer, not only to the consumer experience but also to the companies involved in this space.

"We had Motorola, Nokia and they were the giants. They don't seem to be around anymore, it is being dominated by two different companies.

"So my fundamental strategic reasoning for being in the mobile space is not to try and unseat Apple or Samsung, but to make sure we continue to be a player in this space so that when there is the next paradigm shift we have an opportunity to be part of the leading team, if not, in fact, be the company itself that brings about that paradigm shift. If we're not in that space there is no paradigm shift to take advantage of and there is no wave to ride and we are giving away a huge market that's going to be around for the longest time.

"However, if we are losing money, then I can't stand up in front of shareholders and say 'This is a good idea, even if it's strategic'; that is why the managing team is aggressively moving to turn the business profitable by next year."

Playing to its strengths, Sony is betting big on VR, artificial intelligence (AI) and robotics.

Noting that PlayStation VR came out earlier this month, Mr Hirai says: "You can plug and play it on the PlayStation. When we looked at how we want to get into the world of VR, we looked at the most powerful platform we have, which is the PlayStation 4 and we believe that video gaming lends itself naturally to good VR."

Explaining, he notes that in video games, everything can be tweaked with a keyboard. "If (the VR) doesn't feel right and makes you sick, you can change how the view looks. That's more difficult to do with a live action VR film or production. So we feel video games is probably the right way to start.

"If we are able to establish VR as a real and viable medium for video games, then I think the potential for VR beyond video games is bigger by two- to three-fold in areas like on-the-job training, especially if it's dangerous jobs like maintaining aeroplanes. You can give on-the-job training over VR before sending someone to fix a fuselage. Or in another case, where the actual on-the-job training costs a lot of money, you can train over VR and then go into the field."

Mr Hirai adds: "The larger point is, because we are into professional cameras, editing equipment all the way to the actual PlayStation VR playback, we have the entire value chain. This means if VR progresses beyond video games (into films) we gain the most because we can gain from the entire value chain."

At the turn of the century, Sony came up with its first robotic dog, Aibo, which was a hit. While some members of the original engineering team for Aibo have left the company, many others stayed on, working in other divisions, Mr Hirai notes.

"We want to harness that in-house knowhow and combine it with some of the new AI technologies that we have and fill the gap with funding that we have in some companies outside of Sony. We want, first of all, to come up with a robot combined with AI that can be used in the home both for entertainment and productivity."

Talking about his philosophy, Mr Hirai says that growing up as an overseas Japanese, he tends to be a lot more Japanese and is most protective about Japan and its heritage. "I tend to protect it because I know how valuable it is from looking in from the outside."

Mr Hirai then turns to his Japanese colleagues and says with a smile: "They look at me and think: 'The guy is American, what is he talking about? He's out of his mind!'

"From my perspective, I am Japanese and I speak Japanese fluently, at least most of the time. I try to think I bring that Japanese touch in whatever I do with an American flavour; I think that's the kind of balance that I create for myself."

How does he relax? Mr Hirai likes getting behind the wheel of a cabriolet and feel the wind on his face as he drives on the highway. Within speed limits, he adds.

"When you are cruising down the highway at 100-110 kmph, with the top down, the hair all over the place and all the other cars are obviously square, it feels like you're doing something anti-social in a good way. I think it's the adrenalin rush that in some ways melts the stress away. I don't know, maybe I'm weird but I love that feeling. I just love mechanical things, I can't explain how an engine works in any detail but I sure do know how it feels to be behind the wheel."


KAZUO HIRAI

President and CEO, Sony Corp

December 1960 Born in Tokyo, Japan

1984 Bachelor of Liberal Arts degree, International Christian University in Tokyo

Career highlights

1984 Joined CBS/Sony Inc (currently Sony Music Entertainment (Japan) Inc)

1995 Joined Sony Computer Entertainment America (SCEA)

1996 Executive vice-president and chief operating officer, SCEA

1997 Corporate executive officer, Sony Computer Entertainment Inc

1999 President and COO, SCEA

2003 President and CEO, SCEA; Corporate executive, COO, SCEI

2006-2007 Held various executive leadership positions in SCEA and SCEI

2009 Corporate executive officer, EVP; President of Networked Products & Services Group, Sony Corp

2011 Chairman, SCEI; led various groups in Sony Corp

Since 2012 President, CEO and director, Sony Corp

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