The king has fallen from his crown. The sentence cannot be more perfect to describe the failure of the once-upon-a-time master of consumer electronics industry: Sony. From early 1980s until 1990s Sony was known for its cutting-edge technology, sophistication, and desirability. With infamous Walkman and Trinitron, Sony was considered as Apple of its era.
Now everything has changed. Sony may continue to produce high-quality products, but people do not get excited from them anymore. As people moved to competitor products and sales declined, some of Sony products were discontinued. In this case, we will look further why exactly Sony discontinued artificial intelligence robot as known as AIBO and how they revive it.
The History of Sony AIBO
ERS-110. Picture: Sony
Sony AIBO – a robotic dog pet designed as adult companion – was first introduced in May 1999. The first model, called ERS-110, were sold in Japan and U.S. at ¥250.000. Several months later, Sony decided to introduce ERS-111 limited edition to the European market and surprisingly there were 135.000 orders in a week. This first version of AIBO can walk, perform some movements, and show different moods.
ERS-210. Picture: Sony
In October 2000, Sony launched the second generation of AIBO which called ERS-210. This newer version offered improvement in mobility, touch sensors, and facial LEDs. With additional features such as Name Recording Function and Face Recognition, ERS-210 was closer to its owner. The ERS-210 could also respond up to 40 words and phrases.
Almost a year later, Sony introduced LM series of AIBO. L stands for Latte, while M stands for Macaron. The ERS-311 Latte was only available in white color, while the ERS-312 Macaron was available in dark grey and black colors. Although there were some features lacking, such as LED facial expressions and wireless capabilities, they had advantage in terms of price.1
ERS-311 Latte. Picture: Sony
ERS-312 Macaron. Picture: Sony
ERS-220. Picture: Sony
In the same year as LM series launching, Sony introduced the futuristic-looking dog called ERS-220. Compared to the previous version, ERS-220 had additional digital camera for this AIBO version for taking pictures.
ERS-7. Picture: Sony
Two years later, Sony launched its ambitious AIBO project called ERS-7 which capable of speaking 1000 words and understanding more than 100 words. This version was special in terms of its functionalities. Scheduling, news or email reading, music playing, video recording, and diary writing could be done with this ERS-7 version. The ERS-7M3 version, variant of ERS-7, was the last AIBO that Sony produced before it being discontinued in 2006.
Sony Struggles Over Lost Opportunity
If we must choose the day when Sony lost its title as the king of technology industry, it was October 3rd, 2001. That was the day when Steve Jobs introduced iPod in Apple Music Event. A small, portable music hearing device with high regard of simplicity and carry more than 1000 music inside.
At that time, Sony had the all the resources needed to build something like iPod. The question is, why did not they make one? To answer this simply is because they were too late to realize the importance of digitalization, a shift towards software or user experience, and the importance of Internet.2
“Why Sony did not invent iPod is one of the great lessons in corporate failure.”
-Michael Pascoe, editor. Source: The Sydney Morning Herald
Many argued that one of the reasons why Sony did not invent something like iPod is bad-timing. Two years prior iPod launching, Sony had tried to create something similar but failed due to expensive small hard drive. Because of these first expensive players, Sony left the idea behind.
Although some people may agree that Samsung failed because they lost their timing, but others like CEO ChangeLabs Dominic Thurbon and New York Times journalist Hiroki Tabuchi argued that the most reasonable cause of Sony’s lost opportunity is their silo structure and culture.
“With its catalog of music and foundation in electronics, Sony had the tools to create a version of the iPod long before Apple introduced it in 2001. It didn’t happen. Initially, Sony engineers resisted the power of the company’s media divisions.”
-Dominic Thurbon, CEO ChangeLabs. Source: The Sydney Morning Herald
To create something as radical as iPod, all Sony divisions had to forget their jealousy of each other and move towards common purpose. For example, Sony hardware engineers had to cooperate with software engineers. On the other hand, Sony Music need to support this invention by completely tear down their current distribution process and make it align to support the iPod-like product from Sony. The lack of common purpose and highly competitive silos eventually damage the company reputation in technology industry.
This is the proof that the more expert and balanced a company is, the more they probably resist to change. All their effort can be too focused on the existing dominant design and it will slower their reaction to new technology architecture. This kind of “comfort zones” can be alluring trap for a successful company, and Sony is living proof for that.
One of the greatest mistakes of Sony is they failed to reevaluate their business strategy amid technological changes. There are at least three mistakes that Sony did. The first mistake is Sony was too late to realize the importance of software, hardware, and service integration in its products. This mistake was mainly caused by the company’s silo structure. The second mistake is Sony completely missed changes in mobile phone industry. Sony completely exit the mobile phone industry now, due to its unpopular product. This can affect Sony badly, because nowadays consumers using mobile phone more than digital camera. The third mistake of Sony is its “kludgy” software in products.
As technology innovation moves in very fast phase, change within industry is unavoidable. There are two choices: change or become extinct. The story of Kodak is a proof for this. When Kodak had failed to move from chemical photography to digital photography, Fujifilm existed to “kick” Kodak out of business.
The need to change is not only driven by the company, but also by user. The big part of Sony success story from 1950s until 1990s was their disruptive technology in hardware. Unfortunately, they became too focused in innovating and selling hardware while the shifting from hardware to software started to happen. It was not enough for user to have smaller, lighter, MP3 version of Sony Walkman. Users’ typical question of “What are the specs?” slowly changed to “What is it like to use?” They need a new user experience – combining hardware, software, and social identity in one device, which Apple’s iPod successfully achieved. 3
The failure of Sony to realize the business change in technology industry came with huge price. The shifting from product-oriented customer to experience-oriented customer made Sony market value today is roughly the same as when Walkman ruled in 1980s, only one-ninth of Samsung Electronics and just one-thirtieth of Apple’s.
In 2004 until 2005, Sony’s annual revenue of US$68.6 billion were the lowest for five years, and it also were 5% below forecast. Moreover, Sony reported loss three times between 1999-2005: in 2001, 2003, and 2005.
Decreasing sales, especially in gaming entertainment and consumer electronic segment of Sony, forced Sony to change their business strategies. Sony needs to make its business operation lean to get more profit. One of the impacts from this situation was Sony decision to discontinue AIBO until Sony get better financial outcomes. This decision was made with consideration of AIBO’s high production and maintenance cost. With Sony’s struggle in consumer electronic industry, it was just not profitable for Sony to pursue such an ambitious project.
Samsung Is Now What Sony Once Was
When we talk about consumer electronics industry today, it is not complete without Samsung. Twenty-six years ago, Samsung was known as a supplier, a high-volume, low quality manufacturer without brand recognition outside Korea. At that time, Samsung’s chairman, Lee Kun-hee, had been traveled around the world to review how his company was faring. To put it simple, he was not happy with what he saw. After he ended his trip, he called a spontaneous meeting with his top executive and said literally and figuratively:
“Change everything but your wife and children.”
-Lee Kun-hee, Chairman of Samsung. Source: Forbes
At that time, Lee already recognized the need to change the way the company was doing business. The process is known as business process reengineering, which in some way was the catalyst for Samsung’s transformation in the market.
So, what makes Samsung can surpass Sony today? There are at least two reasons why Samsung – an unrecognized brand in 1990s – was able to beat Sony. The first is strong value proposition from its products, and the second is the business model that enable value to be delivered to customer. For value proposition, Samsung always consider quality, design, and price of products. Samsung wants to be a premium brand, therefore Samsung management had to ramp up the quality, established design centers around the world, and release the product at competitive price. Combined with innovation and relevance, Samsung give customer what they want to and can buy into. To balance quality, design, and price, Samsung needed to create business model as enabler.
From Sony case, Samsung had learned the consequences of misses of inflection points. To sustain in high-technology industry, Samsung cannot ignore that sensing changes in the market is also important. In this competitive industry, there is always something new, and if the firm does not realize that, it will fall out of favor quickly. 4
The Revival of Sony AIBO
In recent years, Sony was slowly regained its standing. Sony’s PlayStation sales in Q2 2018 caused Sony’s operating profit jumped by 59 percent and revenue increased by 6 percent. Analysts said that Sony was entering a growth phase after many years of huge losses.
Samsung Revenue 2007-2017. Source: Statista
After watched its prominence evaporate in nearly everything from televisions to smartphones, Sony decided to relaunch AIBO in 2018, twelve years after it was discontinued. It was Sony’s attempt to show its prowess in AI, robotics, and high-quality consumer electronics.
AIBO also acts as a proof that Sony learned from its past mistakes. Under the leadership of Kazuo Hirai, Sony had to knocked down barriers between divisions and created products that connect with people at emotional level. While most of its products may not captured consumers affection yet, Sony hoped that AIBO will serve as a statement of the brand-new Sony.
AIBO was set to be a personal companion of adults. With more than 400 parts, this new AIBO can move like a real animal. Its eyes are Sony displays which can follow the owner around the room. It also can imitate gesture, act on commands, and take pictures with voice initiation.
With $2900 price tag, it is sure an expensive pet. Even so, this new Sony AIBO was already sold as many as 20.000 units in Japan. Sony AIBO was a true expression of brand-new Sony, it was made to show Sony’s ability of high-technology consumer electronics innovation. Sony AIBO may not as profitable as Sony PlayStation, but this product is a statement of how the company is changing towards the future and that is highly important to regain Sony’s own reputation.
It still to be seen whether this new Sony AIBO will be continued. It was mentioned by Mike Fasulo, the president and COO of Samsung Electronics, that demand of AIBO outside Japan predicted to be fewer. Moreover, the high-price of AIBO does not ensure its profitability. As mentioned before, there is a risk of discontinuing the product if Sony does not have good financial outcomes. There are other factors too, such as change in trends and highly competitive market that may disrupt the growth of Sony. Therefore, Sony’s future business strategy will play a vital part of Sony AIBO continuity.
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