EP51 SONY & Akio Morita - Made in Japan

Highlights

• 2024-11-12 15:17 They pioneered many fundamental breakthrough technologies across audio with radios and tape recorders. Then in the video systems, cameras and recorders, and then in TV formats as well with color TVs. So Sony has been truly a pioneer in the technological world.

• 2024-11-12 15:18 To me, one of the coolest observations was that in many ways, Aio Morita was Steve Jobs before Steve Jobs himself. We’re going to see throughout this episode many of the genius marketing tactics that Steve Jobs would later use to market Apple products. They were first uncovered and created by Akio Morita and his Sony team. So this is a wonderful story.

• 2024-11-12 15:20 I was born the first son in 15th generation heir to one of Japan’s finest and oldest sake brewing families. The sake of Japan is not only the national drink, but also a cultural symbol to the Japanese people. It is even a part of many religious rituals. At traditional marriage ceremonies, the couple shares a cup of sake. The Morita family of Kosugaya Village, near the industrial city of Nagoya, has been making sake for 300 years under the brand name Neno Himatsu.

• 2024-11-12 15:21 If he just waits for them to draft him, he doesn’t know what division he’s going to be placed in, where he’ll be placed. So a very uncertain assignment in the war. He could either take that choice, or his other choice was that he could permanently join the Navy. Permanently as in the rest of his life. So he could commit to permanently joining the Navy, but in the Navy, he would get to work under a certain physics and applied sciences lab. So pretty quickly, Akio Morita realized that that second choice sounds like the better option.

• 2024-11-12 15:21 He decided to permanently join the Navy in that case and luckily he ended up in a lab with Masaru Ibuka, the person who would end up becoming his co founder.

• 2024-11-12 15:21 Mr. Ibuka’s contribution to this group was significant. He had devised a powerful amplifier at his company, the Japan Measuring Instrument Co. Which was being used in a device that could detect a submarine 30 meters below the surface of the water by measuring any disturbance in the Earth’s magnetic flux.

• 2024-11-12 15:35 Actually Nagoya suffered less than Yokohama where 69% of the population was homeless, or Kobe where The number was 58%, or Tokyo with 46%.

• 2024-11-12 15:36 Although the people of Japan had never before heard his voice. We knew it was the Emperor. He spoke in a highly mannered, old fashioned language of the court. And even though we couldn’t follow the words exactly, we knew what the message was, what he was telling us. And we were frightened and yet relieved. The war was over.

• 2024-11-12 15:36 It was first called Tokyo Telecommunications Engineering Company. Sounds like a little bit of a mouthful in the American translation. And that is definitely going to be a reason why later they would change the name to Sony itself.

• 2024-11-12 15:37 He approached all these different companies to produce the wire component for him. And what happened was they all actually turned him down. He got rejected by all these manufacturers.

• 2024-11-12 15:37 It was obvious from just a glance at the new machine that tape was much easier to work with. Unlike the wire, tape could be spliced easily and simply, so that changes could be recorded separately and inserted wherever they were needed.

• 2024-11-12 15:38 When our machine was ready for sale, we were confident that once customers saw it and heard it, we would be swamped with orders

• 2024-11-12 15:38 We could not sell it. So this became a critical lesson for Aio Morita. Yes, they had priced the tape recorders a little high. So part of that he felt like was due to the high prices that they couldn’t sell it. But really, most importantly, he felt like they couldn’t sell this because they just simply didn’t think about the marketing at all.

• 2024-11-12 15:39 They weren’t thinking, how do we position this so everyday consumers, everyday users understand what the use is in their daily lives. And this was a real learning lesson for both Ebuka and Marita. Neither Ebuka nor I had any real training in the consumer end of things or any real experience in making consumer products or selling them

• 2024-11-12 15:17 And to him, he looks at an antique shop and he thinks, many of these things don’t have a real purpose. It’s unlike our technology products that actually have a real purpose. So he’s walking by this antique shop and he notices a customer in the antique shop buying a older, less useful, certainly not everyday useful antique for a very expensive price. And he would describe that when he saw this, his insight, his realization was that Sony cannot just decide to build the best product and just sell it to the masses. Instead, they have to find, we have to find our ideal customers and then pitch the products appropriately to those customers

• 2024-11-12 15:15 And it was in one of their trips to the United States, Ebuka had gone over to the United States where he saw William Shockley’s new transistor technology. This is what we spoke about in the chip war episode. I recommend you listen to that if you’re interested in semiconductors.

• 2024-11-12 15:16 This miraculous device was a breakthrough in electronic technology, but it could only handle audio frequencies. In fact, when I finally signed the patent agreement a year later, the people at Western Electric told me that if we wanted to use the transistor in consumer items, the hearing aid was the only product we should expect to make with it. In those days, there were no transistors made for use in radios. Of course, we were not interested in the hearing aid market, which is very limited. We wanted to make something that could be used by everybody. And we had plans to put our research scientists and technicians to work developing our own high frequency transistor for use in radios. So we’re seeing now that Sony was able to get a license to use the transistor, and they had recognized that the next product they want to build is a radio product, a listening product based on audio. But the big issue was that the current transistor, the very first transistor, couldn’t be used for these radio applications.

• 2024-11-12 15:16 Sony, and they realized that they have to throw their own engineers on the problem to basically create a new transistor for their radio use. They could not simply take the off the shelf one. They have to engineer and literally build upon the existing transistor to make something that could be used for their own radio

• 2024-11-12 15:40 There’s that experimentation again, using new or at least different materials to get the increased frequency we needed. They had to rebuild and virtually reinvent the transistor. So with this impressive engineering work, Sony’s team was finally able to recreate a new transistor an enhanced transistor that could be used for their radio devices, small radio devices.

• 2024-11-12 15:40 He wanted to have a high quality brand and a name that anytime you think of their name, you associate that great brand with. So as they’re brainstorming, they decide to combine the words sonus, which means sound, I believe in Latin, sonus, with Sunny Boy, which was very popular back in the day. So they combined Sonus and Sonny Boy to create Sony. And now he felt like Sony was a company ready to market both a global brand and their global radio product. It seemed to me that our company name didn’t have a chance of being recognized unless we came up with something ingenious.

• 2024-11-12 14:34 We managed to produce our first Transistorized radio in 1955 in our first tiny pocketable radio.

• 2024-11-12 15:43 Pocketable is very important. Pocketable radio. In 1957, it was the world’s smallest, but actually it was a bit bigger than the standard men’s shirt pocket.

• 2024-11-12 15:42 We came up with a simple solution. We had some shirts made for our salesman with slightly larger than normal pockets. Just enough to slip the radio into. Wow, that is just so good to give you some context. Steve Jobs did practically the exact same thing, took the exact same marketing tactic when he released the ipod.

• 2024-11-12 15:56 His whole slogan, one of the really cool lines of his ipod release was that he said, a thousand songs in your pocket. And he was giving the presentation. The ipod picture is on the screen. No one really sees where the ipod is. And he says, a thousand songs in your pocket.

• 2024-11-12 15:42 Japan as quite a large and potentially active market, it was the consensus among Japanese industrialists that a Japanese company must export goods in order to survive. With no natural resources except our people’s energy, Japan had no alternative. And so it was natural for us to look to foreign markets.

• 2024-11-12 15:41 They are truly world builders. We wanted to change the image of Japanese goods as poor in quality. And we reasoned if you’re going to sell a high quality, expensive product, you need an affluent market. And that means a rich, sophisticated country. So, as you might have expected, the first market that Sony wanted to target fits that description of affluent, sophisticated country was the United States and Akio Morita.

• 2024-11-12 15:42 Sony may be able to partner with in selling technology. So he goes out to the US he meets with this prominent company at the time, this company called Belova, and they basically are very close to striking a deal to order 100,000 units from Sony. But at the very last minute, Akio Morita realizes that there’s one pretty restricting condition tied to this order, we would have to put the Beluva name on the radios. That stops me. I had vowed that we would not be an original equipment maker for other companies. We wanted to make a name for our own company on the strength of our own products. This is that high quality brand that Sony is envisioning

• 2024-11-12 15:41 Think about how much business that would be bringing the young Sony company. He’s turning down this huge order because he is that committed to building their own brand. He does not want to be this glorified oem, original equipment maker for other companies. He knows that we are out here. We’re experimenting, we’re reinventing the transistor, building new products like the radio, the tape recorder, many better products or more inventive products over the coming years.

• 2024-11-12 15:16 And I’m going to make a lot of Apple references in this episode because I really think not only was Akio Morita Steve Jobs before Steve Jobs, I also think Sony was like the Apple of its day. It was the high quality technology company of its day. And I think this is an interesting phenomenon here where we’ve probably all experienced making more of a emotional choice in purchasing based on quality than making the most rational choice

• 2024-11-12 14:45 Now the next step to establishing their high quality brand was creating their own retail stores. So Merida would explain, I came to realize from my earliest experience in trying to sell the tape recorder that marketing is really a form of communication in the traditional Japanese system for distributing consumer products.

• 2024-11-12 15:14 We had to educate our customers to the uses of our products. To do so, we had to set up our own outlets and establish our own ways of getting goods into the market. So here again we are seeing another strategy that Apple and Steve Jobs with later copy. This was something where Akio Morita is learning that if they go through the layers and layers of middlemen in a classic electronics distributor model, not only are their margins going to be compressed, they are not delivering the right message to the end customer. They’re not going to be able to show the end customer the true uses of the product.

• 2024-11-12 15:14 So instead he decides that I’m going to go out and set up my own retail stores and my own marketing channels so I can actually show the customer how to use the product. As we know, Apple has done the exact same thing with their own Apple stores. This is how Akio Morita would describe the value, the true value of their retail stores. Back in 1960, I had opened a showroom in the Giza district of Tokyo where potential customers could handle and try out our products with no salesman around to try to sell them anything. And it was becoming quite a popular place.

• 2024-11-12 16:51 And some people may know that Sony joined the New York Stock Exchange. That happened in 1970.

• 2024-11-12 16:53 I want at least one hour of program time on a cassette that size. That was the challenge that created the original Betamax system.

• 2024-11-12 17:08 The way things are going, the way trends are going over time, people are going to want their own TV in their own room rather than having just the family TV that everyone has to share.

• 2024-11-13 10:06 And I think this is another critical point of that high quality brand. It is that even though you may be charging a premium, you could still become a highly successful business because with lower volumes you are getting much more in profit dollars per unit

• 2024-11-13 10:06 I think the best stat to exemplify that is I’ve read in the news Apple and their smartphones, they have I think roughly between a 2021, maybe up to 25% share of the global smartphone market. So they are certainly not the majority 20 or 21% share of the smartphone market. They’re not the majority, they’re not selling the most units in the world. I think that is Samsung. But when you look at the profit pool and you look at who actually makes the most money, at the end of the day, Apple, I believe takes home like 80 to 85% of the profits in this global market. So again, Sony and Apple, they’re very similar.

• 2024-11-13 10:05 Morita would say the idea took shape when Ebuka came into my office one day with one of our portable stereo tape recorders in a pair of standard size headphones. He looked unhappy and complained about the weight of the system. I asked him what was on his mind and then he explained. I like to listen to music, but I don’t want to disturb others. I can’t sit there by my stereo all day. This is my solution. I take the music with me, but it’s too heavy.

• 2024-11-12 17:13 Conventional wisdom produces conventional results. So he had to go against the Conventional wisdom take out that recording functionality to build the Sony Walkman and create a product that could appeal to the masses.

• 2024-11-12 17:16 Akio Morita would like to say our plan is to lead the public with new products rather than ask them what kind of products they want.

• 2024-11-12 17:36 Innovate or die. This is how Akio Morita thinks of business. This is how Phil Knight thinks of it.

• 2024-11-13 10:05 Japan there’s very low turnover amongst employees. So that makes initial hiring that much more important for a company. Since employees have this deep loyalty and they’re expected to stay at a company for 20 or 30, 40 years, their whole career, that means the hiring decision, the first hiring decision, is so crucial.

• 2024-11-12 17:41 So he would speak about Japan as an island means that it constantly has to import all the valuable natural resources.