Category: Management

Two stories on Sony in the business press. The first one is from Fortune and it looks at the new ideas and products Sony is building for the broadband future.

For the past two years, Ando and Sony’s chairman and CEO, Nobuyuki Idei, have been trying to fast-forward the company into a broadband entertainment future, one in which nearly every Sony consumer product–mobile phones, digital cameras, televisions, multimedia computers, game consoles, portable stereos, video recorders, set-top boxes, handheld PDAs, even robots–will be connected to the Internet or an Internet gateway device.

Once all these products are so joined, Sony will be able to deliver its music, movies, television, games, and data services to customers wherever they may be, in the office, at home, in the car, or wandering down the street. The customers will be able to instantly share their own digital pictures, videoclips, and text and voice messages–put another way, their ideas and emotions–at the touch of a button. Sony executives say, with a sincerity that disarms even cynical observers, that a core design criterion for all Sony products is to touch the heart.

But this new vision has wrenching implications for the $57-billion-a-year company. Before Sony can touch the hearts of customers (and reach into their wallets), it has to win their minds. That means selling the broadband vision to consumers who have been slow to embrace high-speed networks. It also means selling the vision to dealers, who may actually have to reconceive and reconfigure their stores to accommodate the new Sony products.

The second story is from the Wall Street Journal and it looks at the possibility of Ken Kutaragi emerging as the new CEO of Sony. Kutaragi is the brain behind the PlayStation.

Mr. Kutaragi would fit Sony’s pattern. Sony venerates its mavericks, a culture inspired by late co-founder Masaru Ibuka, a puckish inventor who bet the franchise on long shots that turned into hits, such as the transistor radio and the Trinitron television. A maverick is traditionally tapped to lead the company, with the expectation that he’ll shake things up. Mr. Idei, a marketing whiz, leaped more than 10 places in the executive rankings in 1995 when he was named president by Norio Ohga, who moved up from president to chairman. Mr. Ohga himself was a former opera singer whose hard-nosed ways irked colleagues but launched him to the top ranks in the early 1980s.

It was Mr. Kutaragi who pushed Sony into the risky videogame business with the original PlayStation game machine in the early 1990s. Later, he made a $2.5 billion bet on the PlayStation 2 console, a gamble that initially pummeled Sony’s profits. Along the way, he spurned a partnership with Bill Gates , insulted colleagues and once sought to settle a strategy dispute by offering to arm-wrestle a fellow executive.

But he delivers. The unit he created and now runs as president, Sony Computer Entertainment Inc., had sales of nearly $10 billion in the year ended March 31, second only to the electronics division and larger than Sony’s movie or music units. The games business posted a huge loss in 2000 but has bounced back, contributing 60% of Sony’s operating profit of 135 billion yen ($1.12 billion) in the last fiscal year.

From Business Week (cover story):

McNealy has a plan, one that he says will lift Sun not only back to profits but to the apex of the Information Economy. At the heart of the plan is Sun’s classic franchise: heavy research and top-of-the-line computer systems. In a world of specialty players, Sun is a rare bird that designs its own chips and writes its own server software and computer chips. And McNealy’s sticking to his integrated model. He’s pouring research dollars into network software. His goal, stunningly ambitious, is to have Sun servers and Sun software running superefficient networks of the future–marvels that run virtually free of human attention.

At the heart of McNealy’s vision is an ambitious software project called N1. Sun’s software developers have been working on the technology for two years, tucked away in a space-age data center at Sun’s Sunnyvale (Calif.) facility. The idea is to create vast networks in which the software administers itself. If one computer runs out of memory, the software seeks spare capacity elsewhere on the network. If the software develops a glitch, the program itself will work to fix it, without calling on costly human administrators. Sun will be releasing the first components of the program by the end of the year.

The trouble is, McNealy must invest heavily in N1 just to stay in step with competitors. IBM and HP are hard at work on very similar systems. On Oct. 30, IBM CEO Samuel J. Palmisano told customers that he was betting the future of his company on a vast, N1-type project called “on-demand computing.” He’s investing billions to develop new products and will spend $800 million on the marketing. And although HP CEO Carleton S. Fiorina keeps it quiet, HP’s version of N1, called Utility Data Center, already has 450 engineers behind it and 10 customers in pilot projects.

Given that this week’s Tech Talk is on Books, this WSJ article on book summaries makes interesting reading. Its recommendation: Audio-Tech Business Book Summaries . Others covered include: Soundview Executive Book Summaries, MeansBusiness.com, getAbstract.com and Summaries.com.

An interesting statistic: last year, 3700 business books are published (thats 10 books a day!), with the number expected to rise 5% this year.

From Fortune on Intel’s USD 10 billion investment in its newest fabs:

Intel is gambling that by pushing the state of the art in chipmaking faster than rivals are able to, it will reach a point where it can use sheer manufacturing prowess and capacity to undercut any competitor in price, performance, and variety. That means not just fending off would-be archrival Advanced Micro Devices and continuing to dominate the business of making chips for PCs, but also challenging Texas Instruments, IBM, Motorola, and a spate of smaller competitors in chips found in everything from cellphones to cars.

“Capacity is strategy,” says Andy Grove, Intel’s chairman and former CEO. “Henry Ford used it to revolutionize the automobile industry; the Japanese used it to push us out of the memory-chip business 25 years ago; we used it a decade ago to ignite the explosion of the PC industry. Now we’re using it again so we can broaden our business beyond the PC.”

Intel thinks its manufacturing capabilities will speed the introduction of incredibly powerful chips that take the Internet to the next level, enabling hundreds of millions of computers, phones, and other devices to be always tied to wireless networks. “We’re talking about a half-billion transistors on a chip, and perhaps even a billion,” says Paul Otellini, Intel’s president, COO, and likely the next CEO. “Suddenly there will be very little limit to what you can design into a single integrated circuit. If you want to talk about a golden age for semiconductors, that’s when it will be, and the IT and telecom and consumer electronics industries will be the biggest beneficiaries.”

Fortune writes that Intel’s big bet is on communication chips. Its strategy gives an idea of the future we can expect.

The chips allow notebooks to speak wirelessly to networks, enable cellphones to make calls, and help route web pages, e-mail, and streaming media around the Internet. Intel thinks it can win business by finding a way to marry computing and communication, quite literally on the silicon chips themselves.

Chief technology officer Pat Gelsinger dubs the strategy Radio Free Intel. Simply put, he wants Intel to incorporate, right into many of its processors, radio transceivers that can automatically detect and connect to hot new Wi-Fi wireless networks and even cellphone networks. “How can we beat Texas Instruments or Motorola, companies that have decades more experience than we do in communications technology?” Gelsinger asks. “By changing the rules and defining a new architecture for integrating communications into smart devices. We want to make a radio transceiver something that you expect to be just another feature of just about any device with a microprocessor.”

The most accessible market for Intel’s radio-enhanced processors is mobile PCs. By the end of the year Intel will begin shipping samples of specially designed chip sets for notebooks that include ultra-low-power Pentium processors, graphics chips, and other support circuits, and a built-in ability to attach to a Wi-Fi network. These chip sets will enable a notebook computer to sense and connect with wireless networks as its owner moves around, and even switch from one network to another on the fly. “In mobile computing, to focus on the processor performance as we have in the past would be missing the point,” says Anand Chandrasekher, the vice president in charge of the product line. “The trick is to make all the extra performance that wireless requires invisible, so it just works, and the user can count on it.”

A second big target for the Radio Free Intel initiative involves cellphones and PDAs–markets Intel competes in but doesn’t dominate. This year 400 million cellphones will be sold, and many of them will contain Intel’s flash memory chips. But phones are also getting smarter and beginning to resemble PDAs in their ability to handle address books, calendars, and the like. Meanwhile Intel’s XScale processor is the brains for most PDAs that use Microsoft’s Pocket PC software, and it recently won the support of Palm. It has a shot at becoming an industry standard, much as the Pentium is the standard processor in the PC.

Intel’s grand plan is to couple its XScale chip with flash memory as a way to get more of its chips into cellphones. It also plans to use the same part, attached to a new Wi-Fi chip, to make PDAs more versatile communicators. Ultimately Intel wants to put everything–the communications transceiver for both Wi-Fi and voice cellphone service, the XScale processor, and loads of flash memory–into a single part that would function equally well as the heart and soul of a PDA or a cellphone. Creating that can be achieved only if Intel can make chips with much smaller transistors, and if it can learn how to place radios, logic circuits, and memory in the same chip package without having their electrical signals interfere.

Andy Grove on the future that will be: “Just wait five years. Hundreds of billions of dollars we now spend on voice telecommunications will become a freebie–just like [Cisco CEO] John Chambers has said. That’s Moore’s Law at work. The entire entertainment industry will be digitally distributed over broadband networks. [Media companies are] going to tip over, because one of them, with its back to the wall, will make the transition, and the others will have to follow. That’s Moore’s Law at work. Houses will be wireless, broadband will be delivered wirelessly, and home and portable computers and consumer electronics are going to be built to facilitate all of the above. Okay, it hasn’t happened in the first five years; it’s going to take ten. And there will be a lot of pain for some. But it will happen, and we’ll all benefit.”

Continue reading Intel’s Big Bet

The Internet as integrator – Tech News – CNET.com is the title of an article in Strategy+Business: “Brand building is an area in which the Internet could change everything. Indeed, the real transforming power of the Internet derives from its ability to serve as the central organizing platform for integrated marketing communications programs–the glue that holds disparate channels and executions together, making them a cohesive force. Turning the Internet into the medium that rationalizes a firm’s multiplicity of brand-building programs has the potential to change both perception and (the resulting) reality for the brand marketer.”

NYT writes about a technology success story – video game maker Electronic Arts. Its shares closed at an all-time high recently. The company is preparing to release a new online game soon: The Sims Online.

The game is an Internet version of the Sims series, which is one of the most successful video games of all time and has an usually high number of female players. In it, players oversee their online characters as they go to work, build a home, and develop relationships. In the online version, players will be able to interact with one another over the Internet, conceivably creating a virtual world where people play out real-world pursuits.

Continue reading Electronic Arts

In Internet Access, AOL Feels Microsoft’s Evergrowing Reach is the title of the WSJ article. It begins with a frightening (from AOL’s point of view) question: “Could America Online get Netscaped?” Both companies are releasing new versions of their browsers shortly.

For the last few weeks, we’ve been having open-house company meetings each Saturday afternoon. It began a few weeks ago when one of the developers sent a email saying he wanted to talk about WiFi and the work he had done. Seeing the positive response, I decided to make it a weekly feauture with a small group each week sharing the work that they’ve been doing with the others. This helps make everyone aware of all that we are doing – and we are doing a lot of things for a company our size (40 people).

Last few Saturdays, we’ve added a twist to the sessions. After the presentation, everyone has to think for a few minutes and answer 2-3 questions (eg. what did you like about the software being developed, what are the 3 features you’d like to see, etc.) Then, everyone talks about what they’ve written. This converts passive observers into active participants. Just asking people a few questions means only a few answer. By getting them to write makes sure we get the opinion of everyone present. Most importantly, the presenters get a nice collection of ideas to think about.

Last Saturday, the session was on Emergic Freedom. The question: “What are the 3 things you like about the Thin Clients, and what are the three things you don’t like?” In the space of two hours, we had gotten lots of otherwise small (pain) points which had been largely ignored by both the users and the support team. It was a wonderful feedback session. As I told our team, “Individually, we may be good, but as a group, we can match the best in the world.” That is what the Saturday sessions are bringing out – the Power of the Collective.

I have never used the Tivo, but from all that I have read and heard I think it is one of those “cool things”. That doesn’t seem to necessarily translate into marketplace success.

Slate’s obituary offers some history lessons:

You can ascribe TiVo’s struggles to the business axiom known as “first-mover disadvantage.” Technology pioneers typically get steamrollered, then look on helplessly from the sidelines as a bunch of Johnny-come-latelies make billions. First movers, the theory goes, are too smart for their own good, churning out gizmos that are too expensive or too complex for the average consumer’s taste. The big boys survive their gun-jumping%u2014think of Apple and its proto-PDA, the Newton, which might have dusted the rival PalmPilot had the company merely waited a year or two to iron out its kinks. Smaller fry go kaput.

The technology roadkill that TiVo’s brain trust ought to be studying is Commodore, the defunct company behind the venerable Commodore 64 home computer. If you’re on the younger side of Gen X, chances are you learned to program a few lines of BASIC on a C64, which sold 22 million units in 1983. Nearly a third of all computers sold worldwide that year bore the Commodore logo. The conventional wisdom held that the company’s follow-up couldn’t fail.

Except it did. Miserably. The Commodore Amiga was a multimedia machine designed to become the centerpiece of the family den. The designers foresaw the not-too-distant day when people would jack their VCRs and televisions into a PC like the Amiga, which featured such revolutionary perks as a full-color screen (a big plus in the age of green-and-black Apple IIc monitors) and stereo sound. The Amiga could be a video editor, a gaming console, a musical instrument. Geeks were dazzled.

Joe Six-Pack, however, was stumped. VCRs and video-game machines had just recently made a splash in the mass market. Now Commodore was asking people to add yet another box to their living-room array. The Amiga suffered from an identity crisis that the company never solved. Was it a gaming machine? People were happy enough with their Ataris. A music synthesizer? Cheap Casio keyboards were ubiquitous. A video editor? The camcorder revolution had yet to take hold. The Amiga flopped, and Commodore slowly lapsed into bankruptcy. Now the Mac renaissance is being driven by Amiga-like multimedia features, much to the chagrin of busted Commodore shareholders.

Slate’s advice for Tivo’s survival: licencing.

Dan Gillmor summarises Clay Christensen’s (author of “The Innovator’s Dilemma”) talk at a Harvard Business School conference:

Middle managers decide which ideas get carried forward. Senior managers don’t see the ideas first. What happens too often is that middle managers only propose things they think will be successful — and don’t propose things they believe senior management will reject. The proposals that get forwarded, he says, look like the ones that have been approved before.

“It doesn’t need to be that way,” he says.

Ideas need to go through different evaluation processes, he says. The ideas that reinforce existing things should go through one, and ideas that are disruptive should go through another.

Strategies for new opportunities: The ideal customers for a new idea are not already customers.

Johnson & Johnson’s medical device business acquired disruptive technologies. Litmus test: “Does it allow larger population of less-skilled people to do things?” All growth has come from those businesses, he says.

As it turns out, the last paragraph is what I have taken as the base for the Tech Talks in the coming week – Technology’s Next Markets.

Other notes from the conference: Kevin Marks, Denise Howell.

A few interesting points from Kevin Marks’ blog on what Christensen had to say (and which are very relevant for us in Emergic):

You need to recognise disruptive situations – there is an asymmetry of motivation, which is easier in a new business.

When you enter a market, the established competitors are motivated to leave if there is an asymmetry of motivation – if they have a place to move to that is higher margin they will. With a sustaining tech the incumbent will win about 100%. You need to harness the asymmetry.

Current customers are no good for a new opportunity. A type 1 disruption is finding the new, low cost market that the established busines doesn’t want. eg personal computer vs minis/mainframe.

Type 2 disruption is compete against non-consumption – find a new plane of competition. Cisco packet switch not good enough from telephony to start with, so market was open.

Non consumers are the ideal initial target.

Market segmentation obscures the targets for innovation – segment by goal, not by demographic.

Choosing a team – standard way is to use adjectives like visionary etc. Skills are developed by the problems they have previously wrestled with. In a successful business, the problems they have wrestled with aren’t the right kind for new growth companies. Look for experiences needed to be successful in a new business. Need to provide these experiences.

How do you compensate a disruptive team in a large organisation? Hasn’t seen correlation with stock options – offer excitement of building something big and new.

Adds Halley Suitt:

Yesterday, at our conference Clay Christensen was talking about how Sony put little cheap, crappy, transistor radios in the pockets of kids’ bluejeans when rock and roll was new and their parents didn’t want them listening to rock and roll or even wearing bluejeans. I remember listening to WABC and Cousin Brucie on a little radio like that. He was talking about competition. He was explaining how Sony sussed out the fact that they were competing against non-consumption. That is, they weren’t getting these kids to replace a table top radio like their parents owned. They were getting these kids to buy something they really wanted that they’d never bought before and therefore, they were competing against nothing. Imagine the freedom you have when you are the only guy in the game and you’ve hit on something someone really wants and will pay you whatever price to own.

Then he talked about voice recognition software and the picture of an administrative assistant on the box, looking thrilled to wear a little headset and use this impossibly clumsy software, which instead of simply typing 80 words per minute with 99% accuracy, she could now learn to talk really SLOWLY and have a 60% accuracy rate and spend lots of time making the software work instead of using something that did work for her.

He said one thing that stuck with me. Maybe you should consider making a product that does something people really need to do and helps them do it easily. Maybe you should sell products people actually need.

Continue reading Christensen on Innovation