Interview with Nobuyuki Idei -- "We have to believe that we'll be out of the darkness some day"

Interview with Nobuyuki Idei

Apr 9, 2001

Nobuyuki Idei
Chairman and CEO of Sony Corporation

INTRODUCTION:

Idei joined Sony in 1960 after graduating from Waseda University with a bachelor's degree in politics and economics. In his third year at Sony, he went to Geneva to study at his own cost, spending nine years thereafter in Europe during which time he engaged himself in the incorporation of Sony France. In 1989, Idei was appointed to the Sony Board of Directors. He was made in charge of overseeing the company's merchandizing strategy and public relations. In April 1995, he was made President ahead of fourteen more likely candidates. With slogans such as "rebirth" or "re-generation," Idei pushed forward with the company-in-company system as well as operating officer system. Idei became Chairman & CEO of Sony in June 2000. In July that year, he was asked by the then Prime Minister Keizo Obuchi to chair his IT Strategy Council. Idei is often introduced in the press for his radical remarks like "I will review the conventional business structure of making something and selling it" or "If NTT cannot change on its own, we should create a structure that will force it to change through competition." Idei was born on November 22, 1937.

Sony appears to be leading the network age with confidence. I think the fact that you were chosen the number one in the reader questionnaire survey of Nikkei Electronics shows how people are anticipating highly in Sony. How do you plan to explore this age?

Nobuyuki Idei: In the 21st century, Sony will have to continue proposing its original technologies. Our challenge is to come up with new technologies that change the world in the broadband age. One can only say that a company has changed essentially only if it challenges introduction of new technologies. As we are, people may remember Sony as a company that developed transistor radio. But I am worried that people may not remember Sony as a company that contributed in the network age. Sony started off as the leader of applied transistor products. From there, we transformed ourselves into a company in the information equipment field and now we're headed towards the network field. But offering access to the network isn't the same as offering solution. More important is what we can create out of network access. Just like we introduced "Walkman" and CD players, there is a need for us to propose things that people will find convenient in the network age. Honestly speaking, Sony has not yet found the solution in the network age and I think we will be experiencing a tough time for the next five years. In fact, I would even say that we would be in complete darkness for the next five years. As use of the network spreads, pressure on Sony will increase to present its solutions. But neither Microsoft nor Sony has found a solution. We have to believe that working hard will one day bring a solution.

Waves of homogenizing

Q: How do you see the world to be changing as a result of the network?

A: Homogenizing is spreading at a tremendous speed. The power is much larger than homogenizing that is brought about by mass production.

Q: Mass production of electronics makers was one pattern of homogenizing in the sense that the goal was to provide hardware at low cost to consumers around the world. How will the network change this?

A: Napster is a good example. The Japanese law prohibits a music file swapping service like Napster. But no matter how strictly the Japanese law prohibits the service, it is impossible to stop the individuals around the world from illegal swapping of music files. This could lead to collapse of the copyright system. Even a country's law could collapse. How a country ought to be or how a company ought to be is now being questioned. No one will know how to deal with such a problem. To date, for example, when the issue was about CD, people from certain industries would gather to address it. This is possible because there is a platform with a physical product. But there is no platform with networks. It's virtual. So, no one knows who to talk with or how to address a certain issue.

Q: With a pirate CD, it is possible to control any illegal acts on a region-by-region basis. But file swapping on the network is an exchange between individuals. This makes it difficult to seize the "bookmaker."

A: An unknown company with a new technology can become a major company all of a sudden. But it does not mean that venture businesses will lead the field of new technologies. If I was to liken the current situation to the PC industry, I would say that we are now in a situation where Intel or Microsoft were the subcontractors of IBM. We don't even know who is competing with whom. It's a very complicated age. I think the age of true transformation has begun.

Network access is a means

Q: You seem to be emphasizing only your worries as we head for the network age. In contrast, there are many who say that IPv6 could explore a new future.

A: I think that the world may become even more difficult to understand in an age where IPv6 is the standard. We're connected with IPv6. So what? If connection with IPv6 is the goal, there's no difference between Sony, Matsushita, Toshiba and Hitachi. There's no corporate identity. That's what I meant by saying that I cannot find the solution in the network age. IEEE1394, HAVi, Bluetooth, IEEE802.11 a and b…there are already many technologies for connection. No matter how hard we work on the technology side, it won't bring a new culture. We need to introduce something from there in order to benefit the consumers.

Q: So, Sony is a company that considers the purpose as well. Is this why you feel an anxiety in the network age?

A: Yes. The communications protocol is made up of seven layers. The industrial circle is also made up of layers. Sony belongs to the application layer, and are closer to the consumers. In this respect, we belong to the same layer as Toyota or General Motor. We are certainly not in the same layer as Sun Microsystems or Cisco Systems. That's why Sony has to think about the meaning of IPv6. IPv6 is merely an environment. Sony has to think about how to use mobile communications in the IPv6 environment. Otherwise, we would only be a component maker that offers a variety of technologies. If we live by the component business, that's okay. But we live by the application business. We can't let the other application layer companies be the gallant ones.

Individuals grow stronger

Q: If Sony is in the application layer, doesn't the current situation present an opportunity?

A: In the network age, individuals accumulate strength very rapidly. Companies in the application layer are affected more and more as individuals grow stronger. To look at it from a different angle, we are in a very interesting position. In its process of proliferation, the network made hardware lower and lower in price. But today, capabilities of the network are starting to concentrate on terminals. The fact that terminals are growing stronger means that individuals are growing stronger. And as individuals grow stronger, not only the companies but also the individuals could be attacked on the network. In other words, individuals are growing stronger but so is their anxiety. Sony has faced various different entities in its history. When we were the champion of transistor radio, we faced the transistor. In the age of personal computers at their peak, we faced Microsoft. Now that we are in the network age, we will be facing the individuals. We have to think about how to face the individuals. Sony is a company that makes things that move people by using electronics and entertainment. If, for example, Sony was to work with Toyota, we have to be sure about what our strength is, because we could otherwise be swallowed by our partner. Sony's identity is becoming increasingly important.

It's a tragedy not to have intellectual property

Q: While you say that Sony is an application layer company, it seems that Sony is also intensifying its semiconductor business?

A: There are several reasons. The ways of a manufacturing business in the application layer are beginning to change from an industry based on components assembly to an industry based on high density processing such as microprocessor or systems LSI. If we continue to lag with the old business model of merely assembling components, we will start losing competition. We have to transform ourselves into a manufacturer based on semiconductors. I say so because there is know-how in LSI. Creating the know-how has a meaning. The production layer could be horizontal but the intelligence layer has to be vertical. If that portion is horizontal, that's the same as the PC industry and all profits will go to Microsoft and Intel. It is quite a tragedy to manufacture something without intellectual property. In the network age, combination of intellectual property and semiconductor will generate profit. Sony considers semiconductor as a technology that strengthens the final product. We want people who open our product to think that the looks could be imitated but not the inside. As our product base expands, and as networking spreads, such differentiation becomes important.

Q: So you are going to be engaged in the semiconductor business to support applications and not to become TSMC of Taiwan?

A: Definitely not. We have to have a variety of application engines. Take golf as an example. It's such a simple game but you use 14 engines (golf clubs). You need engines that meat the purpose. To date, Intel's microprocessor may have been enough. But once an application becomes information equipment, more diversified solutions will be needed. In order for the Japanese electronics industry to revive, semiconductors have to be stronger. Semiconductors have to be strong and the application layer has to be strong.

Q: If you change your values this much centered around semiconductors and application, won't some of your engineers be left behind?

A: We have many engineers: There are those in charge of production design and others in charge of cost-cutting. Cost-cutting is now a role played by semiconductor process compression. For example, the price of a Memory Stick includes the conventional mechanism. If this is so, engineers engaged in developing the mechanism will inevitably have lesser roles to play. But these engineers can devise something that surprises the others. If they are in a section that manufactures something that is smaller and customized at higher prices, the traditional technologies will come in handy. There is a need to think whether acquired technologies can be applied in the frontline. Technology is not something that is useless if it's old. Engineers who know how to express themselves will never lose their jobs in not matter what environment.

Be a large company that can realize dreams

Q: Supposing that you are an engineer in your 30s in the prime of business life. What would you do?

A: If I had the talent to manufacture something new in the true sense, I would either leave the company to make that something new or make use of the backing of the big company to draw a grand plan. If I were to choose either of the two, I would probably go the latter way. I want to make use of a big company to realize my dreams. Venture business is a tough game to play. With the world so big and technology spreads so fast, anyone can imitate you once you announce a new technology. There is no time for the company to grow. I think the larger companies will be incubating the smaller companies.

Q: Can Sony offer backing to engineers so that they could realize their dreams?

A: Before coming in for this interview, I was talking away with an engineers and I even forgot to have lunch. He said, "You say that IPv6 connection will open a new world but that's too much of a dream." So, I told him that he was right. Then he said that the employees were mistaking me. So, I said to him that IPv6 is a means and not the purpose. Then he said that I should clarify what the purpose is. I think it's good for the engineers to call me to tell me that I wasn't doing the right thing. Of course, I can't tell if IPv6 connection is good or not. But Sony is a company that allows such exchange of opinions. I think it is good that we could worry ourselves over such issues.