Kazuo Hirai, Sony — modernising a venerable brand

When Kazuo Hirai was a boy growing up in Toronto in the 1970s, he delivered newspapers to save up for a Sony cassette player. His love for the Japanese brand was inherited from two generations of Hirais: his father and grandfather, whose first colour television was Sony’s original Trinitron.

In the Hirai household, consumer electronics were synonymous with Sony. Only their refrigerator was manufactured by Toshiba.

For the past 32 years, Mr Hirai has lived out his dream of working in music and gaming at Sony Corporation in Japan. He became president and chief executive in 2012, taking over from Sir Howard Stringer.

Mr Hirai, who is not an engineer, has had the unenviable job of overriding a powerful old guard at the deeply traditional 70-year-old electronics conglomerate in order to sell off part of Sony’s legacy gadgets business. He had inherited a company that had shed a fifth of its value since 2005 but his focus on streamlining lifted it out of years in the red to a rare profit in 2015-2016.

He has even stemmed losses in its television and smartphone divisions, which has led Sony to pay him a $5m annual salary, a record for the company. Next, his goal is to surprise customers by proving that Sony can still innovate.

Today, the slim, coiffed 55-year-old is in a jovial mood, having just announced two new smartphones, a line of high-end audio products including a gold-plated Walkman, and a smattering of smart gadgets such as intelligent robot assistant Xperia Agent and the Xperia Ear wearable to a packed auditorium at Berlin’s IFA show.

His jocund, American “Alrighty!” is in stark contrast to the quiet courteousness of his Japanese colleagues — a product of his childhood years spent in New York, Toronto and San Francisco before settling down in Tokyo.

“I’m really happy we doubled down on innovation when times were tough a few years ago,” he says. “We made a commitment that we weren’t going to skimp on R&D and centres of innovation. We actually made more of an effort to create those departments and now, coincidentally, products are coming out of those efforts.”

Second opinion: the author

Osamu Katayama, author of The Rules of Sony, met several Sony presidents and says Mr Hirai is “totally different”.

“He overthrew the old image of a Japanese CEO.” Mr Katayama once asked Mr Hirai how he would describe himself. “He said, ‘stubborn. I am a cheerful stubborn man’.”

Sony’s former executives have been critical, but Mr Katayama says Mr Hirai is unafraid. “He doesn’t care at all about those voices and critical articles. He said that he doesn’t read those articles.”

The first of Sony’s potential frontrunner innovations is the PlayStation VR which launches next month as a challenger to Facebook’s Oculus Rift and HTC Vive. Some analysts are betting the $399 Sony virtual reality headset could be a breakthrough device because of its compatibility with 40m PS4 games consoles — it will not require a $1,000 gaming PC like its rivals.

Analysts at Nomura have estimated 700,000 PS VRs will be shipped in the first year, compared with 400,000-500,000 each for Vive and Rift units.

Mr Hirai joined Sony after college in 1984 in Tokyo as a junior music marketing executive. He never left. “I thought [being] in the record business was a nice combination of what I wanted to accomplish, to be in the creative industry but not part of the creative process,” he says.

After 10 years in music, launching the US careers of Japanese artists such as all-female funk metal group Super Junky Monkey and traditional drumming band Kodo, he went on to launch and build the PlayStation, and was promoted rapidly.

As chief, Mr Hirai’s global outlook has clashed with the company’s legacy employees. He sold off the Vaio laptop business, scaled back on smartphones and spun out television and audio into subsidiaries. In July, he agreed to sell its lossmaking battery business to Apple supplier Murata Manufacturing, 25 years after Sony launched the first commercial lithium-ion battery.

“Sony is like a ship that is navigating through the stormy waters of the electronics business with a captain that is using the wrong sea chart,” former chief financial officer Tamotsu Iba wrote in a letter in April 2015, adding a warning about the danger of sinking.

Mr Hirai has proved his detractors wrong, given last year’s profit, but he must show the recovery is sustainable.

He is hoping PS VR has a market beyond gaming for Sony, especially in smartphones and entertainment. “We have the entire value chain of VR creation all the way to VR enjoyment, all the cameras, the editing equipment, the IP, all the way down to PS VR,” he says.

Sony will launch “aggressively” into mobile games, a strategy vindicated by rival Nintendo’s success with Pokémon Go, which made an estimated $268m in revenues its first five weeks alone and has now had 500m downloads.

For Sony to dominate the gaming market, whether on mobile, consoles or VR, it has to succeed in China. After a 14-year ban on foreign consoles, in
2015 the Chinese government lifted restrictions in the world’s largest gaming market, with an estimated 130m PC gamers and almost 400m mobile gamers. The console market is wide open, but launching government-approved games that appeal to Chinese consumers has been a struggle for outsiders such as Sony and Microsoft.

“You have a lot of creative talent in China, and we want to make sure to support growth of the Chinese game development industry,” he says. “Hopefully like Japan at some point of time, it [can] become an export industry.”

Because of the sprawling reach of the Sony empire, Mr Hirai’s biggest job will be to unite the disparate parts around a single aim: “Making sure the company was able to rally around the cause of kando [wow factor], the driving force that really changed the culture of the company, that would be a pretty good legacy,” he says.

But for Sony to forge ahead, Mr Hirai is going to have to chart his own course, like Sony’s co-founder and former CEO Akio Morita did in 1946. When he launched the genre-defining Walkman, he ignored criticism, saying: “We don’t ask consumers what they want. They don’t know. Instead we apply our brain power to what they need, and will want, and make sure we’re there, ready.”