The Sony AIBO and the Product Development Process in the
Consumer Electronics Industry
Peter J. Favia
peter.favia@yale.edu
For completion of the requirement for the degree of
Bachelor of Science in Engineering Sciences (Electrical)
May 2003
Yale University
Department of Electrical Engineering
15 Prospect Street
New Haven, CT 06511
Advisor: Richard Lethin
Abstract
This paper investigates the development of the "Entertainment Robot" AIBO, from its
conceptual origin to production, as an example of how Sony brings a product to an
international market. Its history is compared to that of other Sony products to see how
Sony’s engineering design and business methodology has changed over time. Finally, it
will critically compare Sony's product development process and management of
technology to that of its competitors and consider how Sony is preparing to meet the new
challenges it will face in an ever-changing market.
2
This paper studies the development of Sony’s popular robot pet, the AIBO, to
determine the process through which Sony creates a product and manages its
technological innovation. We examine the literature of product development and travel
to Japan to interview a senior executive at Sony in charge of the AIBO project. We
compare the development of the AIBO to past Sony products to determine whether the
technological complexity of an artificially intelligent consumer robot has unique
requirements that differentiate its development processes. Using this as our basis, we
subsequently examine potential cultural differences in the research and development
process between Japanese and European/Western instances. Finally, we consider how
Sony is changing its product development process to adapt to the complex intertwining of
technology in the information age, its aspirations to be an innovator in broadbandnetworked products, and the needs of an ever-changing consumer market.
We find that, compared to its rivals within and without Japan, Sony takes a much
riskier yet innovative approach to product development, commonly focusing on products
that have no equal yet on the market. Sony uses a corporate product vision to drive the
development of necessary technologies, employing what is known as a product-focused
strategy that allows the company to concentrate only on acquiring the technologies
needed to complete a certain product. This allows Sony to not waste precious R&D
resources and spread development too thin by attempting to enter every possible section
of the electronics market. The tradeoff between developing specific technologies and
developing a non-specific core of technologies is losing the chance to potentially stumble
upon a revolutionary technology (or a fundamental contribution to science) while being
focused on developing something in particular. The risk involved is being beaten to the
punch to the market by another company who is able to develop the technology faster,
causing Sony to lose a chance to grab considerable market share. This risk is countered,
however, by Sony’s ability to create completely new markets in which it is the sole
supplier. Being the first on the market also gives Sony a technological advantage over its
competitors; while they are catching up, Sony is making the next technological step in
improvements to its product.
While one might think that Sony’s development process is uniquely Japanese
given the apparent strength of Japan’s consumer electronics industry, in actuality we find
that it is the result of Sony’s corporate directive and its product-focused strategy. To
compare the product development process and management of R&D across companies
and cultures, we will now examine the process of several corporations.
Western corporate examples
Motorola is a company focused on high-tech commercial, industrial, and defense
electronics. Though they have gradually phased out from producing consumer
electronics because of heavy Japanese competition in the 1970s and ‘80s, they are still a
large producer of cellular phones and microchips for use in other consumer products.
Motorola recognizes that it is critical to minimize the time required for the product
development cycle because of shortened product lifecycles, especially in the low-end
markets.
Teams comprise the redesigned product development process at Motorola. Each
employee is a member of one or more teams. There is early supplier involvement and
3
extensive use of computer simulation, all under the direction of a program manager (who
is not an engineer) who takes full responsibility for the success of the project. Kevin
Kreitman, in her New York University Ph.D. dissertation for Advanced Technology,
says, “The key to developing new products at Motorola is to identify products which will
be a clear improvement over what is available on the market today (not just a clear
improvement over the in-house product it replaces); engineer it with a more fault-tolerant
design; improve the process of production; reduce the cycle time.”1 With this in mind, in
the first phase, five or six program managers meet and select a desirable product to
develop. Next, a multifunctional management team will decide which groups of people
will “touch” the product during the process from development to sales and customer
shipment. After a development plan is created, each group signs into a “contract book”
as a formal commitment to meet their functional role. This contract cannot be changed
unless everyone, from marketing to shipping, agrees. Only at this point does the team
start any product development.
A similar method is used within the process of product development to solve
problems: when a problem is identified, another team is assembled from each function
that touches the process in question, and this team is responsible for solving all aspects of
the problem. The teams are fairly autonomous and are empowered to and responsible for
developing the solution themselves. Motorola finds that their teams have improved cycle
times, quality in both manufacturing and support operations, and customer order
processing. Motorola’s quality approach is focused on continuously analyzing and
correcting the development process.
The use of a contract book seems contrary to speeding up process time for
Motorola’s operations. In actuality, entering into a formal commitment with the
responsibility to do one’s part and the empowerment and autonomy to get the job done
improves employee performance, by Motorola’s account. The team-based strategy
allows Motorola to cover all the bases in product development; with a member from each
aspect of a product’s life cycle, from soldering to shipping, on a team, Motorola can
ensure the removal of process bottlenecks through communication between team
members. Team members are able to catch each other’s mistakes, and the earlier a
mistake is found the faster and easier it can be solved. Regarding Motorola’s process,
Kreitman writes that, “the combination of better ways of doing things, with immediate
feedback, and the tools to analyze the feedback is the way to improve performance.”2
IBM’s Rochester, Minnesota product development plant has, from its inception in
1961, been one of the most productive plants with the highest morale and success rates of
any plant in the corporation. The man who created IBM from the faltering CTR
Company, Thomas Watson Sr., had three key business beliefs that were incorporated into
IBM’s business doctrine: respect for the individual, the best possible service for the
customer, and the pursuit of excellence. The beliefs worked well for IBM, but in the
modern complex business environment they were not enough to keep up with
competition. In the early 1980s, Fujitsu began entering their computer products into
Kevin Kreitman, “The ECCO System: Foundations for Total Quality Management,” Ph.D. dissertation for
New York University (1992), available at http://www.well.com/user/kbk/dissertation/, Internet, accessed 3
April 2003.
2
Kreitman.
1
4
European and U.S. markets, and in the face of stiff Japanese competition, IBM found that
it would have to rework its operational effectiveness in order to stay competitive.
IBM’s product development process is similar to Motorola’s, and in fact drew off
Motorola’s quality initiative, which IBM began in the late 1980s. Product development
teams were originally composed of design engineers, with some informational input or
participation from the Marketing Department. As successive quality initiatives were
pursued, development teams evolved to include not only marketing, design, and
manufacturing personnel, but also representatives from purchasing, site support, plant
facilities and any other departments which might impact or be impacted by the
development project.3 Teams are used, like at Motorola, but are “so deeply embedded in
the culture as a way of doing business that they are not uniformly mandated, formally
tracked, or formally empowered as new decision-making entities,” says Kreitman.4 A set
of six “Critical Success Factors” is the basis for IBM’s new strategy: product strategy and
planning; improvement of the customer requirements definition; Six Sigma defect-level
quality strategy; creation and deployment of an Excellence in Education plan;
enhancement of employee involvement; reduction of total cycle time (inception to
delivery). In order to achieve these goals, IBM employs and tailors several generic
industry practices. Major improvements in reducing development time, errors, and
subsequent problems were achieved through extensive use of simulation of the entire
system being developed, instead of just functional component performance. Concurrent
engineering is the integration of the product design, development, and manufacturing
process in order to continuously innovate both the product and the product production
processes. This engineering practice is important because of the need to respond quickly
to market changes and to reduce the risk of failure, and is thus used endemically in the
development process.
Even with these quality management improvements, the early 1990s were
troubling times for IBM, as the company was losing money fast and ideas were not
flowing out of the research labs. The current CEO, Lou Gerstner, arrived in 1993, and
found that “the company was too consistently slow to seize innovation, turn it into
products and get them to market. That was a much bigger institutional shortcoming than a
lack of innovation,” he said.5 Gerstner’s winning formula was to take the traditionally
hardware-based company into the services sector, now the fastest-growing segment of the
company. The services department actually complements the hardware department,
because the need to run more complex and larger workloads for e-business will require
faster and more reliable infrastructure. IBM did not change the way it researches into
new technologies; it merely closed the gap between the labs and the marketplace.
Gerstner says, “You're never going to implement a strategy without a structure that
reinforces and complements it. We've evolved our e-business strategy for four years now.
And we're to the point in that strategy that it has taken hold in a way that an entire new
market is exploding all around us.”6 Gerstner is not resting on his laurels; as Robert
3
Kreitman.
Kreitman.
5
Robert Buderi, “What New Economy? Q&A with Lou Gerstner of IBM,” Technology Review,
January/February 2001, available from http://www.enginesoftomorrow.com/gerstner.htm; Internet;
accessed 8 May 2003.
6
Buderi, “Economy.”
4
5
Buderi, a writer for the Massachusetts Institute of Technology business magazine
Technology Review reports, Gerstner “reorganized the firm to focus more sharply on the
twin needs to protect and build current businesses while also going more aggressively
after emerging opportunities – in particular by applying its computing and database
expertise to plumb huge opportunities in genomics and the life sciences.”7
Like IBM, Hewlett Packard struggled with sluggish growth and inconsistent
performance recently, and thus is turning to a similar direction with its research labs to
manage developing technology. A year after orchestrating the takeover of Compaq
Computer, Hewlett-Packard CEO Carleton S. Fiorina faces the difficulty of continuing
the consolidation of the two companies, cutting costs, and continuing to innovate in the
fast-paced computer industry. HP was once a strong computing and materials science
researcher until 1999, when it spun off its scientific equipment and medical instrument
business Agilent, dividing up the research lab and, as some feel, taking away its
previously strong synergies between the different product divisions. Before Fiorina’s
succession, HP also split into four separate semi-autonomous business divisions, each
with its own president and CEO. Fiorina considers that cooperation between engineers
and scientists is crucial to restoring the company’s ability to compete.8 She favors a more
cohesive business structure with one chief executive: herself. She supports the earlier
breakoff of Agilent Technologies, however, because she feels that focus is crucial for the
two companies, and says, “Both companies will be able to innovate better and faster as
separate entities.”9 Fiorina is aiming for a “high-tech, low-cost” approach in order to
outdistance HP’s rivals. In comparison, Fiorina explains, “I.B.M. had a ‘high-tech, highcost’ strategy, while Dell Computer had a ‘low-cost, low-tech’ approach. [HP’s method]
will be to outwit its competitors with advanced technologies sold at consumer prices.”10
Shane V. Robison, the head of HP’s R&D, says that big companies like I.B.M.
and AT&T were able to support research into a vast array of subjects. But "given the pace
of change and the amount of change, that's not possible," he said. "I want to reach deep in
the areas we care about."11 Fiorina also feels that HP has the resources to be able to
support development of “disruptive technologies,” or those technologies that have the
potential to create an entirely new market. She emphasizes the importance of working on
long-term technologies despite the pressures of the current economic environment, or you
“risk being left behind or missing out altogether.”12 In order to change the development
process in order to respond more quickly to market changes, HP is creating a technology
subcommittee, the first company of any size to do so, in order to help make faster and
more intelligent technology decisions.
Both Motorola and IBM have found that using cross-functional involvement of
corporate divisions, from marketing to shipping, in product development greatly
improves the quality and speed of the development process. Their restructuring of the
development process allowed them to compete again with the Japanese competition that
forced them to re-examine their process in the first place. It also has the positive side
Buderi, “Economy.”
John Markoff, “Innovation at Hewlett Tries to Evade the Ax,” New York Times, 5 May 2003.
9
Robert Buderi, “Wake-Up Call for HP,” Technology Review, May/June 2000, available from
http://www.enginesoftomorrow.com/wakeup.htm; Internet; accessed 10 May 2003.
10
Markoff.
11
Markoff.
12
Buderi, “HP.”
7
8
6
effect of aligning R&D towards market success, allowing the entire process from start to
finish to be more flexible towards and respond faster to market changes. IBM’s
turnaround in the 1990s was due to Gerstner taking the firm in an unexpected direction
that resulted in the positive benefit of the new department increasing business for the old
established businesses of IBM. Finally, in contrast to IBM’s “high-tech high-cost”
approach, Fiorina’s plan is to develop high technologies for Hewlett Packard and sell
them at consumer-level prices in order to distance themselves from the competition. The
outstanding feature in all the companies, however, is the distance between the research
laboratories and the marketplace, and how this gap has shortened with time.
Furthermore, each company sees the importance of having its research labs strengthen
current businesses while simultaneously developing long-term technology to benefit in
the future, no matter what the current economic situation is. With the accelerating speed
of the technology industry, companies are finding that they must remain focused in
specific areas they want to be successful in while carefully guiding the development of
future technologies towards business interests. We will now examine Sony’s biggest
Japanese rival, Matsushita, in order to determine if there are any differences between the
Western and Japanese product development process.
Matsushita corporate examples
Matsushita Electrical Industrial Co. Ltd. is perhaps Sony’s chief competitor in the
field of consumer electronics through its Panasonic division. Matsushita, a large and
diversified company, also deals with home appliances and other electronic equipment.
As a direct result of always focusing on consumer-related products, Matsushita
development engineers have been encouraged to work closely with their manufacturing,
marketing, and sales counterparts. Teams of engineers and sales employees recently
visited 10 million households throughout Japan to listen to customers’ comments about
various consumer-related products.13 Even when Matsushita began to move into
commercial electronics for businesses, the company continued to have engineering
interacting with the marketing, manufacturing, and sales divisions. “In general,
Panasonic has preferred the ‘fast-follower’ model,” explains Paul Liao, CTO of
Matsushita Electric Corporation of America.14 Because consumer markets are often
unpredictable and the cost of creating a new market is very high, the fast-follower model
allows someone else to test out new platform technologies. More simply stated, if Sony
comes out with a popular product, such as the Walkman, Panasonic will quickly come out
with a similar product of its own, often at a lower price, to capture part of the market. In
the late 1990s, however, Panasonic found itself in the leadership position in certain areas
such as the introduction of DVD and digital television into the U.S. market.15 Panasonic
needed a way to stay at the forefront of technology in these areas, which the “fastfollower” strategy would not allow.
Fumio Kodama, Emerging Patterns of Innovation: Sources of Japan’s Technological Edge (Boston:
Harvard Business School Press, 1995), 45.
14
Jeremy Tachau, “Innovating an ‘Outsourced R&D’ Process for Matsushita Electric (MEI): Launching the
Panasonic Digital Concepts Center,” Harvard Business School Case Studies, no. 9-602-120 (8 February
2002): 10.
15
Tachau, 10.
13
7
In the past, Panasonic found it was not profitable to make large investments in a
small number of technology companies. Charles Wu, who was recruited to Panasonic by
Liao, recommended that it would be much more rewarding to “invest in smaller
increments in earlier-stage technology companies.”16 The creation of the Panasonic
Digital Concepts Center in 1998 represented Panasonic’s intention to create a technology
transfer partnership strategy by partnering with the Silicon Valley venture community
and investing in small start-up companies. For example, Panasonic was manufacturing
mobile phones as part of the popular I-Mode standard, and they needed a way to allow
their customers to surf the wireless Internet, which is a popular use for mobile phones in
Japan. They discovered a company called 2Roam that developed a way to transfer data
from a computer to a wireless device, and entered into a partnership with them to solve
their technology problem.
Panasonic describes the strategy with the PDCC as “outsourcing R&D.” Instead
of merely creating a R&D facility in Silicon Valley that is still part of the corporation, as
Sony, Philips, and Epson have done, Panasonic instead relies on venture capital to invest
in and develop partnerships with companies that have the technologies they are looking
for. Liao calls this “spinning-in technology.” Instead of looking for new lines of
business to enter, the PDCC is “trying to find companies that will effectively integrate
what they are doing into Matsushita’s or Panasonic’s strategic paths,” says Wu.17
Differences in development
These four examples show us that even top companies are finding the need to
refine and improve their development process because the products are central to their
long-term strategies. The biggest similarity is how these companies are making their
research laboratories focus on the products to bring to market. All the companies use
multi-member product teams with researchers, marketers, engineers, etc., working
together to improve quality and focus on the end product. The differences lie in the way
these companies are using technology to drive business. IBM’s strategy is to create
business for its other departments using the services it can provide for companies. In
contrast, HP is focusing deeply in the areas it wants to be concerned with in order to
bring out higher technology products. Going in a third direction, Matsushita starts with a
product in mind and then searches for the technologies it needs either in-house or through
its venture investment center.
The intense recent level of venture capital investment has caused large
corporations from all over the world to rethink their research and development divisions.
Small companies, often with little more than an idea, seek funding from larger
corporations in order to bring their technologies to fruition. Not only does this bring
technology and R&D into the free-for-all market, but it is also a challenge to the
established tradition of doing all research in-house.
This is still a relatively new idea for Japanese companies especially, and they
have been slow to take advantage of it. When they do embark on a venture capital
strategy, however, they focus primarily on the United States market. “The Japanese
culture does not encourage risk takers, and there is no established support system and
16
17
Tachau, 11.
Tachau, 4.
8
infrastructure for startups in Japan,” says Tom Stein, a writer for the technology business
magazine Red Herring.18 Jeremy Tachau, a research associate at Harvard Business
School, mentions that major Japanese companies such as Matsushita, Sony, Toshiba, and
NEC have favored partnering over investing in small start-ups. Furthermore, when
investments have taken place, it is for a specific technology. On the other hand, U.S.
companies such as Intel and Microsoft often engage in venture capital investment to fund
technologies they are looking for. For example, Intel invested in four companies in just
two months and started a venture capital fund to seed money to software developers
working on applications for its new chips.19 Intel’s strategy is to invest in venture capital
companies that are involved in markets that Intel wants to begin competing in, in contrast
to the specific product benefits that Japanese companies are searching for. According to
Jean Yaremchuk, a research director for industry tracker VentureOne, “the Japanese are
looking for very specific technology to complement their products.” In contrast, “the
U.S. companies are…looking primarily for development teams – for the human resources
that a start-up can give,” in addition to their technology.20
What accounts for this discrepancy in venture capital investment is that,
“traditionally, any Japanese company making an equity investment has to have decisions
approved by the president of the corporation,” notes Wu. “As a result, Japanese
companies infrequently make direct investments in companies.”21 There appears to be a
choice regarding technology investment by Japan and the United States that is based
primarily upon the structure of business. But what companies such as Panasonic are
realizing is that they will have to do more than leverage their own internal capabilities
and as such they are starting to branch out into more investments and partnerships.
Ronald Coase, a Nobel prize winner in economics, tries to explain why the
economy is populated by a number of business firms, instead of consisting exclusively of
a multitude of independent, self-employed people who contract with one another in his
1937 paper “The Nature of the Firm.” Economic theory says that the market is efficient
because everyone is producing what he is most easily able to produce, or the comparative
advantage theory; therefore, it should be cheaper to contract out than to hire. The cost of
obtaining a good or service through the market, however, is actually more than the price
of the good, Coase noted. Transaction, search, information, bargaining, and other costs
add up on goods on the market. Coase theorizes that firms arise when they can produce
things cheaper internally and avoid these costs. There are “decreasing returns to the
entrepreneur function,” however, resulting in a natural limit to what can be produced
internally and a counterveiling cost to using the firm. Coase says that the size of a firm
will be the result of an equilibrium between the competing costs. The venture capital
strategy is a result of Coase’s theorem coming to life; corporations find that they can no
longer develop all the necessary technology through in-house R&D. The cost of
Tom Stein, “Japan’s VCs engage in foreign exchange,” Red Herring, 6 February 2001, available from
http://www.redherring.com/mag/issue91/560015456.html; Internet; accessed 17 April 2003.
19
Tachau, 9.
20
Jim Davis, “Venture Capital Crossing the Pacific to the United States,” CNET News.com, available from
http://news.cnet.com/news/0,10000,0-1003-200-343526,00.html; Internet; accessed 11 June 1999, quoted
in Jeremy Tachau, “Innovating an ‘Outsourced R&D’ Process for Matsushita Electric (MEI): Launching
the Panasonic Digital Concepts Center,” Harvard Business School Case Studies, no. 9-602-120 (8 February
2002): 10.
21
Davis.
18
9
investing in companies with the desired technology is much lower than the potential
increased cost of developing it in-house because of the diminished returns. Now we shall
examine Sony’s product development process to see how Sony’s strategy compares to the
Western and Japanese examples given above.
Sony’s development process and corporate strategy
In the Sony corporate research labs, ideas for new research are as likely to come
from the researchers as they are from the upper management. For a long time, Morita
and Ibuka were the pioneers taking Sony into uncharted territory, risking a lot to enter the
portable audio, television, video recording, camera, media, and several other markets. In
the process, they sometimes recognized the competitive potential of entering a new
market and sometimes created a whole new market with a never-before-seen product.
This way of introducing a product idea into development is a drastic contrast to the “fastfollower” model previously employed by Matsushita. Sony has always labeled itself a
company of innovation; even when entering established markets, it does not do so unless
it is offering something new, such as the Trinitron model of television sets. The “fastfollower” model is the opposite of Sony’s product strategy.
Koji Kageyama, general manager of Sony’s Entertainment Robot Company and
one of the original engineers who started the AIBO project, explained that Sony uses a
pretty basic industry strategy to go about product development. “First, we begin the
feasibility study phase. After a certain period of time, we go to the next step, such as
making a prototype. After that, we decide whether to continue further or to stop
research.”22 When a problem is encountered during product development, the problem
solving process is similar: establish milestones and make steady progress.
Compared to the other organizations mentioned above, Sony appears to prefer
small development teams on a project. Moreover, these teams are comprised entirely of
engineers. Without a marketing member on the team, Sony’s marketing input for new
products is appears to be almost intuitive, given by the managers who have insights into
new product areas and lead the project teams towards them. As can be expected, these
insights are not always correct, given the failures Sony has experienced through its
history, like Sony’s unsuccessful attempt to replace floppy drives with its proprietary
“Minidisc” data storage format. The intuition of Sony’s management, however, has led
the company to hits like the Walkman, the idea of home videotape recording (despite the
failed Betamax product), and the compact disc. More differences between the
corporations lie in the way Sony manages its technological strategy.
Fumio Kodama, a professor at Tokyo University, says, “Throughout Sony’s
history, corporate product vision has driven the development of specific technologies.”
He goes on to note, however, that Sony has not attempted to develop all the technologies
common to the consumer electronics industry, 23 instead following a product-focused
strategy. A product-focused strategy concentrates on specific groups of products that do
not have a lot in common. Sony’s pursuit of portable audio, televisions, and digital
cameras, among other products, is just that. Instead of following a technology-focused
22
Koji Kageyama, interview by author, tape recording, Sony Entertainment Robot Company headquarters,
Shimbashi district, Tokyo, Japan, 18 March 2003.
23
Kodama, 46.
10
strategy of deriving products from a core set of technologies, Sony creates products that
include whatever technologies are required, whether or not these technologies are
available in-house. “Sony’s major goal is to give each business unit the flexibility of
making investments in areas they feel are appropriate, primarily because those guys are
closest to what’s going on in the marketplace, and will see opportunities sooner,” says
Jim Bonan, vice president of corporate strategy and business development for Sony
Electronics.24 Around 1996, however, Sony brought together all of its different research
divisions under its head research center. This was done because R&D handled by
individual business divisions tended to concentrate on extending existing business lines,
making it harder to change the firm’s direction.25 This was done primarily to allow
Sony’s administration to coordinate its corporate product directions more easily in the
future and give the divisional R&D groups a forum through which to synergize their
efforts. This parallels Fiorina’s efforts to bring back together the separate divisions of
HP under one executive.
A product-focused strategy often places strain on a company’s finances for need
of developing specific technologies. Sony developed the first transistor radio in 1955
after four years of R&D investment. The Trinitron television picture tube took eight
years of investment. After thirteen years of R&D investment in charge-coupled device
technology, Sony developed an electronic camera in 1983. These significant long-term
investments put a strain on Sony’s finances, but a corporate product vision drove the
development of the specific technologies needed for each product.26 This strategy also
complicates technology management practices like those of IBM and HP, where
developing core competencies is essential for the firm. Sony is more similar to
Matsushita, in that it chooses a product first and then develops the technology later.
Another consequence of the product-focused strategy is that there is no typical
development method that can encompass all of the products in Sony’s line. Kageyama
says that each product from the Walkman to the camcorder to the PlayStation has its own
unique development story. Kodama comments on Sony’s strategy:
Sony prides itself on its ability to move quickly into any technology needed for a
strategic product. It defines itself by its technological agility, not by core technologies.
Therefore, Sony’s technology strategy is product driven and focuses on the ability to
master or acquire any technology needed to realize its product goals. …Such a
competence is impressive from the perspective of technology management.27
Sony’s empowerment of the business divisions to make suitable investments also
goes down to the small development teams to follow a development strategy that they
feel is effective and appropriate. The flexibility of allowing teams to discover their own
route of development along with the basic management practice of setting milestones to
achieve within a certain amount of time to keep the process flowing appears to be Sony’s
preferred method of developing products.
Another strength of Sony’s marketing is the product platform or family strategy.
The Walkman is perhaps the most visible example at Sony of the product family strategy.
In 1992, for example, Sony manufactured 18 different Walkman models for the Japanese
24
Davis.
“Japan Revamps R&D Labs for Valley-Style Collaboration,” Nikkei BP AsiaBizTech, March 2003,
available at http://www.asiabiztech.com/nea/200003/srep_mar.html; Internet; accessed 4 March 2003.
26
Kodama, 89.
27
Kodama, 89.
25
11
market: 5 playback (3 conventional and 2 water-resistant), 3 with built-in tuners, 4
professional (high quality models with low production volumes), 2 wireless, and 4
recording models. The multiple product variations in the categories allow Sony to target
different parts of the market at low incremental cost. This is a common strategy used in
business, but works well to Sony’s advantage in new markets to quickly establish a
strong presence.
Kageyama says that collaboration with universities, the government, and other
corporations is becoming more prevalent at Sony. “Technology development is a timeand money-consuming activity, so as one company, it is very difficult to develop all the
[possible] technologies, so we have to think about some kinds of collaboration,” he
says.28 As announced in Sony’s SEC 2002 annual report, there are several business
alliances that Sony is currently involved with. In the field of semiconductors, Sony,
Toshiba, and IBM have agreed to jointly spend several hundred million dollars
developing next-generation and beyond semiconductor process technology with features
as small as 0.05 micron on 300mm wafers over the next four years. Sony and Toyoda
Automatic Loom Works, Ltd., have created a joint venture company to develop and
produce low-temperature polycrystalline silicon TFT LCD flat-panel display screens.
Sony and Ericsson of Sweden also jointly established Sony Ericsson Mobile
Communications to control their mobile phone operations.29
It can be seen that these collaborations take the pressure off Sony to develop every
possible type of technology needed for its desired products in-house while still allowing
the results of the collaborations to be used in future Sony products. While Sony has been
involved in a few venture investments, it has not undertaken anything to the extent that
Matsushita has with the PDCC. Sony clearly prefers university and corporate
collaborations to venture capital investing. Regarding the Toshiba/IBM collaboration, it
is clearly in Sony’s favor to work with such well-established names in the computer
industry in order to create next-generation technology. It is not clear, however, why
Sony does not look into venture capital as a relatively fast way to develop technology.
There is naturally a preference to develop all the necessary technology for a product inhouse, as Sony has done with the AIBO. At this moment, Sony apparently only
collaborates on projects in which it would be an incredible strain on resources to fund,
like the next-generation computer chips and the flat-screen production plant, or to gain a
strong entrance into a market, like Ericsson’s established cellular phone market. If Sony
hopes to synergize the divisions in the future, however, venture capital may be a
necessary strategy to push products onto the market faster. Now we will take a closer
look at the AIBO and the development process that created it.
AIBO: The world’s first “Entertainment Robot”
Of the three different AIBO models currently available on the market, unless
otherwise specified, I will be talking about the middle-of-the-road model, the AIBO ERS28
Kageyama.
Securities and Exchange Commission, Sony Corporation Annual Report 2002, prepared by R. R.
Donnelly Financial, available from http://www.sec.gov/Archives/edgar/data/313838/000095010902003508
/d20f.htm; Internet; accessed 4 April 2003.
29
12
210. This second-generation model is available for approximately $1200. The AIBO
ERS-3XX series is “cuter” but has slightly less functionality, costing approximately
$800. The AIBO ERS-220 model looks more “robotic” and has slightly more
functionality at a higher price, approximately $1500.
AIBO is a stunning combination of hardware.30 The CPU is a QED (Quantum
Effective Devices) MIPS processor, part number RM5231A-200H. It uses the MIPS IV
instruction set, 32-bit data bus, and has a maximum speed of 200MHz. Dynamic
memory is in two NEC D4518163G5-A80 memory chips giving a total of 32MB of
SDRAM memory. Read only memory is in a single Toshiba TC58FVB321FT-10 flash
memory chip giving a total of 4MB of flash ROM. The memory can be augmented by
the Sony Memory Stick slot (Sony’s proprietary memory storage medium) and a PC Card
Type 2 slot, both of which can supply program instructions as well as data. There is a
separate 8-bit microcontroller that performs I/O functions as well as controlling the main
CPU (including powering it up and acting like a watch-dog). The microcontroller is an
NEC D780023AY running at 4MHz, with 24KB of ROM and 1KB of RAM, an analogto-digital converter, a real-time clock, a buzzer circuit (for the boot failure tune) and two
serial ports (among other features). There are several other smaller chips. On of interest
is the TI TUSB2036, which is a USB hub controller chip, which allows AIBO to be
hooked up to a computer for analysis and/or attach accessories in the future. There are
two custom Sony chips on the main board. The Sony chips are marked "CXD9561GB"
and "CDX9540TG". Their functionality is a mystery.
Figure 1. Main controller board, top. Courtesy of AiboHack, <http://aibohack.com/210/hardware.htm>
30
Part names and component pictures (Figures 1 and 2) are courtesy of AiboHack, available at
http://aibohack.com/210/ hardware.htm; Internet; accessed 22 March 2003.
13
Figure 2. Main controller board, bottom. Courtesy of AiboHack, <http://aibohack.com/210/
hardware.htm>
In total AIBO has 20 degrees of freedom through motors in its various joints (see
Appendix 1 for details). A color 100,000-pixel CMOS image sensor in its nose provides
AIBO with sight and can also take pictures upon voice command. AIBO is able to
recognize objects and can search for its favorite colors, which are pre-programmed into
the software (see Figure 3). AIBO is also programmed to dislike certain colors; however,
this may be able to be modified through training. Stereo microphones give AIBO hearing
and the ability to discern from which direction a sound came from. AIBO has the ability
to recognize about 75 voice commands in total. A miniature speaker gives AIBO a voice
and lets AIBO bark, whine, speak, and even read your E-mail to you. Temperature,
infrared distance, acceleration, vibration, and seven pressure sensors (head, back, chin,
and paws) round out AIBO’s senses. The acceleration sensor, essentially a gyroscopic
sensor, allows AIBO to tell if it has fallen over and how to right itself, and if AIBO has
been picked up (which disables the legs for safety). LEDs in the tail and head allow
AIBO to visually express emotions.
14
Figure 3. Color map of AIBO ROM. The first row represents AIBO’s red ball, and the second row
represents AIBO’s pink ball. These colors are distinct for easy recognition of the ball by the software. The
third row is skipped. The fourth row represents colors of flesh for recognition of humans. The fifth row is
AIBO’s “favorite” color (blue), and the last row is AIBO’s “hated” color (green). There is normally one
more color row that is missing from the ROM. Each Memory Stick software program has a slightly
different color file. Map courtesy of AiboHack, <http://aibohack.com/210/colors.htm>
In the summer of 2001, Sony announced the distribution of OPEN-R, the new
robot architecture it designed. OPEN-R is an open-API (application program interface)
that allows AIBO’s behavior to be controlled by software modules run from the robot’s
Memory Stick storage media. RCode, the simplified script language, is an open language
accessible to and useable by anybody. It is very similar to C++ and uses “code names” to
control the appendages and sensors of the AIBO; for example,
Execute(MoveLeftEar):
Owners can run new software simply by popping in different Memory Sticks, and thirdparty developers can create applications for the AIBO. OPEN-R also allows the
development of hardware modules for AIBO. Eventually, owners will be able to
customize their AIBOs by literally swapping body parts at will. Currently, only software
is available for purchase or download.
After the release of OPEN-R, software applications and accessories were released
with increasing speed from Sony and third-party developers. AIBO Party software
allows owners to play games like “rock, paper, scissors” with their robots. AIBO Dancer
includes beat-detection software so AIBO can dance to any music it hears. And the
AIBO Speed Board is a skateboard for AIBO. Controlled by the included software,
AIBO will skate around, and owners can navigate with voice commands.
By inserting a wireless LAN card into a slot on AIBO’s belly, AIBO can
communicate remotely with a PC. The new software applications available to take
advantage of this technology include:
 AIBO Messenger software ($150), which allows AIBO to “fetch” its owner’s email; AIBO will “bark” when the owner receives new e-mail, and it will also read
it out loud. AIBO can also read text from pre-selected web sites.
 AIBO Navigator software ($150), which allows owners to remotely control
AIBO’s movements with a PC and see and hear what AIBO does in real-time.
 AIBO Master Studio ($500), which allows owners to create entirely new
behaviors for AIBO using a computer program, and gives AIBO the ability to
recognize about 50 more voice commands of your choosing. Many behavior
15
programs can be downloaded from websites, like the AiboHack website, so you
can make AIBO do anything from disco dance to talk like Scooby-Doo.
With the second-generation AIBO models, Sony has improved the vision and
object detection and has introduced software that allows AIBO to detect on its own when
its batteries need recharging, and, using a colorful post, navigate itself to its recharging
station without human intervention. AIBO will also be able to recognize its owner’s face,
voice, and name from other humans.
The crowning feature of the AIBO, the aspect that sets it far apart from all its
imitators, is the software that allows AIBO to “grow” from a newborn puppy to an adult
dog. The software is called AIBO Life, and is sold separately from AIBO itself. There
are actually several versions of AIBO Life that have been produced as AIBO’s
generations have progressed, but for the explanation I will use the most recent AIBO Life
2 version.
When AIBO Life 2 is initialized, AIBO will begin as if it were a newborn puppy
(or Baby Stage 1) (see Figure 4). Its abilities are limited, and it mainly cries a lot.
Interaction with AIBO will allow it to begin to learn words and phrases. As one interacts
with AIBO, it will eventually “evolve” and move on to the next life stage. Note that once
AIBO evolves into a “child,” there are several personality traits it may take on. (See
Appendix 2 for life stage details.)
Figure 4. Evolution Map of AIBO Life 2 with time and points required to progress to the next stage. Grey
lines represent personality type changes that can occur at any time. Totals are cumulative. Map courtesy
of AiboHack, <http://aibohack.com/210/evolve2.htm>
16
The way AIBO evolves from stage to stage is described in detail on the AiboHack
website (not affiliated with the Sony Corporation). Progression through the stages of
evolution is affected by three factors: “points,” Real Time, and Day Count. Points are
“experience points” that increase as you interact with AIBO. One point is approximately
equivalent to one second of interaction time with AIBO. Real time is the amount of time
that AIBO is turned on. Day Count is the number of days that AIBO has been at that
evolutionary stage; however, only days that AIBO is played with will count. The Day
Count essentially prevents AIBO from being stuck in a certain evolutionary stage for too
long. The fastest way to get AIBO to evolve is to interact with him. AiboHack gives an
example:
You turn on the dog, play with him for 20 minutes, leave him alone for an
additional 40 minutes, then turn him off. The Real Time has gone up by 60 minutes. The
Experience Points have gone up by 1200. …The dog will evolve to the next stage when
the Experience Points AND Real Time hit a certain limit, OR when the Day Count hits a
different limit -- whichever comes first.31
There is another feature to AIBO’s evolution: the quality factor. The quality
factor is simply a calculation of the number of experience points gained per 100 seconds.
As long as the quality factor is above 22.2, AIBO will evolve as fast as possible (with
Real Time being the limiting factor in each evolutionary step in this case).
AIBO’s personality in each stage is determined by a number of factors, among
which are the quality factor and the types of experiences it has. AIBO contains touch
sensors on his head, chin, and back that allow the robot to distinguish between soft pets
and sharp smacks. With repeated reinforcement, AIBO will learn to avoid actions that
result in punishment and repeat actions that are rewarded. For example, if you smack
AIBO whenever it plays with its ball, AIBO will learn to avoid the ball. The rules
determining personality are applied all the time, not just at evolution time. Therefore, if
you have done certain things to raise AIBO to a “Ball-Crazy Youth,” you must continue
to raise him properly or his personality might change to a “Mischievous Youth.” Even an
Adult-stage personality will change depending on how AIBO is treated. But no matter
what the personality, AIBO alone decides whether or not it will do something; sometimes
when you call its name, AIBO will ignore you. Occasionally it loses interest in its ball by
itself. These “attitude” swings add to the realism and attraction of AIBO. As Jon Piazza,
a spokesman for Sony Entertainment Robot America says, “He still won’t always do
what you tell him. Behaving every time would be like a toy, not a pet.”32
Development of the AIBO
AIBO began secretly within Sony’s development laboratories in 1993. Toshitada
Doi, one of Sony’s top computer engineers, learned that a competitor was working on a
project to develop a housecleaning robot. He didn’t think that artificial intelligence
technology was mature enough to handle a task of that complexity, but he became
“[AiboHack] ERS-210 Evolution ‘AiboLife 1’,” AiboPet’s AiboHack Site; available from
http://aibohack.com/210/evolve.htm; Internet; accessed 26 March 2003.
32
Barnaby Feder, “A Robotic Pet Gains an Independent Streak,” New York Times, 17 October 2002.
31
17
fascinated with the idea of putting robots in the home. After thinking about robots for
several months, Doi had a breakthrough idea: Why not create a robot that didn’t do
anything at all, but was simply entertaining to people?33 Doi, Kageyama and Masahiro
Fujita, began a project investigating autonomous robots.
Kageyama recalls that, “at that time, we were searching for a new theme for the
laboratories, and recently we had been interested in robotics, artificial intelligence, image
processing, image analysis, and things like that.” So the group decided to focus their
research on autonomous robots. Because the head of the research laboratories was on the
robot team, they had no trouble acquiring funding for their research. The goal from the
very outset was to develop an autonomous robot for sale to consumers within three to
five years.34
The first prototype, constructed in only two weeks, was an insect-shaped robot. It
contained a commercial microchip, a battery, a motor from a remote-controlled vehicle,
and six legs attached with tape to an aluminum board. After the prototype was finished,
the project team decided that the robot would become a dog-shaped pet with only four
legs to create a more familiar-looking device to interact with humans. This created
several challenges for the engineers. AIBO not only needed the ability to walk, but it
needed to walk well for the greatest pet-like effect. In order to avoid bumping into
obstacles and navigate unknown rooms, AIBO needed a way to “see” objects around it.
AIBO also needed the ability to pick itself up if it fell over, meaning it had to be able to
distinguish “up” from “down,” as well as possess the motor skills and flexibility to get
back on its feet from any position it found itself in.35
The team also decided that AIBO needed to possess two other pet-like
characteristics before it could be released to the public. First, it had to be able to
“communicate,” which meant that it had to be able to both hear and project sounds.
Second, AIBO had to have the ability to “learn” things over time in response to “training”
from its owner. This required the development of sophisticated artificial intelligence
software (the AIBO Life software) to control AIBO’s behavior.36 The Sony engineers
were aiming at implementing as many dog-like behaviors as possible into AIBO to
increase the quality and desire of the end product. This is a direct example of Sony’s
product-based development strategy. The AIBO development team determined what
technologies they wanted AIBO to have and was given the freedom to create and
implement them.
In 1996, a prototype was developed with a camera and microphone. It was barely
able to walk and often ended up stopping under its own weight. Improvements were
added, and finally, in February of 1997, at the International Conference on Autonomous
Agents held in California, Sony announced its experimental project and presented a
prototype. It had image recognition, musical scale recognition, and an emotion model,
but it still lacked the “growth software” that was still under development. Later in the
year, the very first robot soccer World Cup (RoboCup ’97) was held in Nagoya, Japan.
Youngme Moon, “Sony AIBO: The World’s First Entertainment Robot,” Harvard Business School Case
Studies, no. 9-502-010 (24 September 2002): 3.
34
Kageyama.
35
Moon, 3.
36
Moon, 4.
33
18
At RoboCup ’97, Sony demonstrated its prototype and even had it play soccer by remote
control.
In 1998, Sony announced the development of OPEN-R, the robot architecture that
Sony proposes to be a robot standard. OPEN-R was demonstrated through another AIBO
prototype that chased an orange ball and acted delighted after being petted. Sony also
declared their intention to enter the “Entertainment Robot” business by the end of the
century. RoboCup ’98, held in Paris, France, displayed AIBO playing soccer completely
autonomously from software loaded on-board. The “Sony Legged Robot Exhibition”
performance gained the attention of robot fans, and by this time it was clear that AIBO
was becoming a true product. Kageyama recalls that product development in earnest
began in 1998, and the goal was to have AIBO out and on the market in one year.
Kageyama remembers that there was a lot of doubt at Sony about the potential
success of AIBO:
The ERS-110 cost ¥250,000 [$2,500 for U.S. customers], it was very expensive,
and there were no products like AIBO [on the market] for people. So we decided to limit
the AIBO to just 3000 for the Japanese market and 2000 for the U.S. market.37
Yazawa, the Vice President and General Manager of Sony Entertainment Robot
America, also recalls the initial skepticism about AIBO:
We had lots of arguments about whether AIBO should do something or not. But
in the end, we all agreed that it wouldn’t do anything useful at all. It would be a pet.
AIBO loves you, you love AIBO, and that’s it.
Of course, we got lots of questions within Sony about this decision. Mr Idei
[Sony’s current chairman and CEO, Nobuyuki Idei] asked the same question that
everyone asks when he saw the first prototype – ‘But what can AIBO do?’ But then his
second question was, ‘Can we sell this?’ (laughing).38
Idei eventually threw his support behind the project, giving the team the impetus
it needed to begin work in earnest. In 1999, almost exactly on schedule, the original
research team’s hard work paid off.
On May 11, 1999, the world’s first Entertainment Robot, AIBO model ERS-110,
was introduced to the world. Sony had an initial production of 5,000 AIBOs, 3,000 of
which were reserved for Japan and the rest for the United States. Priced at $2,500, AIBO
was only available for purchase through the Internet. And the response?
Japan’s 3,000 AIBOs sold out in twenty minutes. The remaining 2,000 sold out
in days as thousands of customers crashed Sony’s servers to compete for the remaining
AIBOs. In response to the demand, Sony offered a lottery-based sale of 10,000 units of a
special-edition AIBO ERS-111 through the Internet in November of 1999. 135,000
orders came in just a few days. An additional 30,000 AIBOs were offered for a limited
time in February of 2000.
What can account for the popularity of the AIBO, a $2,500 robot that doesn’t
exactly “do” anything? One plausible explanation is the human tendency to nurture
creatures. Just like real pets, when we feed them and take care of them, they give back
gratifying expressions. In 1997, the Tamagotchi craze hit Japan and eventually caught on
around the world. A Tamagotchi is nothing more than a small egg-shaped key chain with
an LCD screen that displays a “pet” of some sort and requires its owner to press buttons
to “feed” it and “play” with it, or it would “die.” Indeed, as Timothy Bickmore, an MIT
37
38
Kageyama.
Moon, 3.
19
Media Labs researcher explains, “The commercial success of the Tamagotchi toys is at
least partly attributed to the care-giving relationship it fosters in its owners.”39 As Sherry
Tuckle, a professor of the sociology of science at the Massachusetts Institute of
Technology, put it:
We are programmed to respond with affection to creatures that ask for our
nurturance. These new objects do something none of the earlier computer systems did –
they ask for our care. When you give it to them, they thrive. It’s a feedback loop to an
area in which we are emotionally vulnerable. These toys are plugging into that impulse.
They’re pushing our Darwinian buttons.40
But this doesn’t account for the discrepancy across countries. The most notable
feature aside from the popularity of the AIBO is that the vast majority of them were sold
in Japan, approximately 98% of the second sale and 90% of the third sale. Considering
the virtually even public exposure the AIBO had in both Japan and the United States, and
that it was available for sale exclusively through the Internet, location can be ruled out as
a factor. Even as the second-generation AIBO ERS-210 went up for sale in November of
2000 at a reduced price of $1,500, in the first six months, most of the 50,000 units sold
ended up in Japan. Yazawa tries to explain the contrast:
When we first introduced the AIBO concept, the Japanese people “got it”
immediately. And today, there is no question that the AIBO is booming in Japan. In the
United States, it’s a different story; a lot of Americans don’t understand this product at
all. We have a wonderful base of hardcore AIBO owners in America who are extremely
passionate about their AIBOs. But aside from them, most Americans don’t “get it.” It’s
not a mainstream product yet.41
Several factors can be attributed to the lukewarm American reception to AIBO.
Youngme Moon, a Harvard Business School researcher, considers that “for most
Americans, $1,500 was a ridiculously high price to pay for something that didn’t do
anything useful.”42 Indeed, one can justify paying $1,500 for a computer that can be used
to write papers, check e-mail, go on the Internet, and play games, but a small plastic dog?
Amy Emura, a reporter for AIBO Town magazine, a magazine for AIBO enthusiasts in
Japan, interviewed mainstream consumers and asked them what would persuade them to
purchase an AIBO? In response to answers from both the United States and Japan, she
concludes, “in the United States, people expect AIBO to provide some kind of utility; in
Japan, people expect AIBO to provide entertainment.”43
In response to these views, Sony is attempting to implement as much functionality
as it can for AIBO to increase its popularity and possibilities. The OPEN-R open API
allows users to make AIBO do what they want. AIBO now can indeed check your e-mail
using AIBO Messenger software. It can play games using the AIBO Party software.
And using the Internet, you can control AIBO from anywhere in the world with AIBO
Navigator software and a wireless LAN card. But reaching the U.S. will take more time.
Timothy Bickmore, “Friendship and Intimacy in the Digital Age” (Final Paper, MIT Media Lab MAS
714 – Systems and Self, Massachusetts Institute of Technology, 8 December 1998); available from
http://web.media.mit.edu/~bickmore/Mas714/finalReport.html; Internet; accessed 27 March 2003.
40
“Dog Bytes Man,” The Los Angeles Times, 22 March 2001, quoted in Youngme Moon, “Sony AIBO:
The World’s First Entertainment Robot,” Harvard Business School, no. 9-502-010 (September 24, 2002):
7.
41
Moon, 2-3.
42
Moon, 12.
43
Moon, 12.
39
20
Sony’s product strategy across time: The Sony Walkman
Sony’s product development process and product strategies, described above, are
not only evident in the AIBO, but in a product 20 years AIBO’s senior: the Sony
Walkman. Except for a few contrasts, notably in the early beginning of the Walkman’s
development, its design process and post-market-introduction development is similar to
AIBO’s and also lends a window into possible AIBO future developments.
The Sony Walkman project began in the fall of 1978, when Masaru Ibuka, cofounder and honorary chairman of Sony, walked into the office of Akio Morita, the other
founder and chairman and CEO of Sony, carrying a set of headphones and a Sony
cassette tape recorder. The cassette tape recorder, called the Pressman, was designed by
Sony to be used by journalists. Ibuka had been using the device to listen to music
privately (portable players did not exist at that time, only portable radios), but
complained that the recorder-headphone combination was too bulky and heavy for easy
use, especially on planes.
Morita and Ibuka went to Sony’s Tape Recorder division and requested them to
redesign the tape recorder model for stereo playback. The engineers “were not sure a
product without such fundamental functions as recording and speakers would sell,” but
when the prototype cassette player was demonstrated, everyone was surprised at the
quality of the stereo sound it produced.44
Morita was positive about the product’s potential while others around him still
had their doubts. The advertising department showed prototypes to their dealers around
Tokyo and asked for their reactions. Eight out of ten dealers reacted negatively.
However, Morita noticed the younger sales staff and the dealer’s children reacted
favorably. Paired with a new type of lightweight headphones that another Sony team
designed, Morita insisted that the product be priced at a level that was affordable to
teenagers, and named $125 as the price. By comparison, the Pressman retailed for $400,
and Sony needed a production run of 30,000 units of the new cassette players to achieve
economy of scale. However, Sony’s most popular tape recorder was selling only 15,000
units a month, and the sales force expressed dismay at Morita’s insistence on producing
the product. Even Ibuka has his doubts. Morita was so confident in the product’s
potential that he announced to the entire Audio Division that he would resign as chairman
if 30,000 units failed to sell.45
Morita launched a large advertising campaign, with press releases (including
models for the reporters to try themselves) and young Sony employees creating product
awareness by using prerelease versions on their train rides home. Print ads were released,
emphasizing the lightness of the headphones and implying the Walkman was a new
fashion statement.
The Walkman was launched in Japan on July 17, 1979, and for about a month,
nothing happened. Suddenly, sales rapidly accelerated, and within three months, the
entire pre-launch inventory of 30,000 units was sold, and production could not keep up
with demand. In just two years, the first Walkman model sold 1.5 million units.
Robin Cooper, “Sony Corporation: The Walkman Line,” Harvard Business School, no. 9-195-076 (30
May 1997): 2.
45
Nathan, 152-153.
44
21
Skepticism among Sony’s competitors about the sales potential of a product such
as the Walkman delayed the emergence of a copycat product for over 12 months, unusual
for the Japanese electronics industry, which was renowned for its ability to introduce
competitive products within months of the original’s appearance. However, Sony
introduced a second-generation model, the WM-2, nearly two years after the release of
the first model using a worldwide sales campaign that “established both the personal
audio system and the dominance of the Walkman line throughout the world.”46 The
second-generation model was a drastic improvement over the first; the player’s weight
was reduced nearly in half, headphone weight was reduced, and it produced higherquality sound. Professor Robin Cooper of the Peter F. Drucker School of Management at
the Claremont Graduate School notes, “when introduced, the WM-2 not only beat the
full-scale market entry of other manufacturers but also set a technological standard that
was hard to match, let alone exceed.”47
Sony began to introduce several product variations while continuing to improve
the player’s size, weight, and technology with each model. The introduction of the
Stamina models in the 1990s represented astounding achievements in battery life, with
each model able to last 22 hours, then 36 hours, and then 50 hours using a combination of
rechargeable and replaceable batteries. A water-resistant sports model was very
successful in North America but not very popular in Japan. Professor Cooper noted these
observations about Walkman development:
New product development for Walkman stereos was shaped by Sony’s overall
strategy of being a technology, not price, leader. Sony viewed itself as a technology
pioneer with no equal and tended to compete on product functionality, not price. In
markets like the Walkman, it tended to compete more with itself than other firms. It
would aggressively try to make its own products obsolete by bringing out new models
with enhanced functionality with the objective of maintaining the highest level of
customer satisfaction possible. Based on the enhanced functionality of its products, their
reliability and brand image, Sony Walkman stereos typically sold at a slight price
premium over competitive products.48
Sony’s strategy with developing AIBO draws several parallels to the Walkman,
despite the 20-year difference. In both instances, Sony was bent on creating a product for
the consumer market. While research may have been actively going on in certain
technologies used in the products, the products themselves were entirely created from a
project team with a goal in mind, and not the result of a product idea coming out of a pool
of core company technology.
Another parallel is that both products were completely ahead of their time.
Neither the Walkman nor the AIBO had a comparable competitor previously on the
market. While this gives Sony an undeniable edge in creating a market, it also weighs
some risks. How do you create demand for a product that consumers have never seen
before? Also, as both products were priced below cost in order to create a market faster,
there was a serious financial risk involved. This type of product promotion displays
incredible foresight on the part of Sony, or the managerial marketing intuition that is a
key component of product development. Morita knew that the portability and
convenience of being able to listen to music on the go would be irresistible, so much so
46
Cooper, 3.
Cooper, 3.
48
Cooper, 7.
47
22
that he was willing to stake his job on it. Likewise, Idei was able to see the attraction to a
robotic pet, perhaps due to the popularity of other “virtual life” phenomenons that have
swept Japan like the Tamagotchi. Granted, both CEOs played it safe with a modest
initial production (though the risk was larger in 1979), but the scale of the ensuing
popularity of the products was a surprise to everyone.
As mentioned before, one of Sony’s successful marketing strategies is its product
family strategy. It appears that this strategy is also slowly being incorporated with AIBO.
Currently, the three models available on the market are a sharply pronounced example of
different targeting within a market, with the cute and cheap AIBO to target the 20something girls living alone in apartments and the expensive but functionality-laden
AIBO for the technophiles.
Similarly, not satisfied to rest on its laurels with a majority market share, Sony
was continuously improving the Walkman and adding functionality that consumers didn’t
even know they needed. Being smaller, lighter, and longer lasting, all these qualities
improved consumer perception of the Walkman and kept them coming back to the Sony
brand name. Though it has only been a few years since AIBO was introduced, Sony
already has improved the image recognition to the point where it can recognize human
faces, voice recognition to where AIBO can recognize spoken commands instead of
commands from a remote control that beeped commands, and has three models in
different price ranges to improve market penetration. Professor Cooper had this
comment on Sony’s technology strategy:
To maintain its strategy of being a technology leader, Sony competed only in
markets where products had yet to reach technological maturity. Such markets allowed
technology to be used to create products with significantly enhanced functionality that
would be well received by the consumer. In such markets, Sony usually did not
undertake extensive consumer analysis because it believed that customer requirements in
such markets were either obvious or were unknown to the consumer. For example, the
development of the Stamina was not based on extensive consumer analysis but on the
general awareness that battery life was considered critical. This assumption proved to be
correct: the revolutionary design of the Stamina caused it to become the industry standard
against which competitive products were measured. In contrast, the original Walkman,
again undertaken with no consumer analysis, created its own market: portable headphone
stereos. Sony relied on its strength and experience in product planning rather than on
consumer analysis to propel its success.49
One interesting contrast is the lack of advertising with the AIBO. Morita’s large
campaign with the Walkman was one part advertising and one part careful strategy. At
the time, in Japan, deafness was a taboo subject, and anything you put in your ears to hear
with, including headphones, was associated with impaired hearing. Morita anticipated
this objection and focused his advertising on how fashionable the headphones were, in
part to dispel the myth.50 On the other hand, there were no cultural taboos at risk with
AIBO. One can also consider that the popular media provided the best type of
advertising: free. AIBO has been mentioned in media from the New York Times to
Popular Science to BusinessWeek. The notion of a robotic pet is so interesting and new
that periodicals from every industry are interested in it.
49
50
Cooper, 7-8.
Nathan, 154.
23
Looking ahead
Sony’s product-focused strategy is a logical consequence of its corporate makeup:
many separate business divisions under one common leadership, with each business
division naturally focusing on what it knows and does best. While developing long-term
technologies through corporate collaborations, Sony continues to refine its current
products to strengthen business today while searching for new products to develop
tomorrow, the key technological strategy of all the corporations mentioned in this paper.
Sony is also following the advice of Gerstner; in order to create a line of interconnected
products that fall into many categories, Sony is trying to restructure itself to support that
plan. Under the common roof of the head research division, however, research and
development may see infighting amongst each other as they attempt to create integrated
products. Aside from the minor restructuring, there has not been any news on how the
process of product development will change. I think, however, that this plan will require
great changes in the R&D and product development structure because more people will
be involved on a project at any given time. Sony’s previous process of small
development teams of engineers will be ineffective; they may need to implement a
heterogeneous team-based development process like Motorola, giving each group that
may “touch” a certain product a say in its development. Streamlining the process from
the laboratories to the markets will be crucial for Sony, or they risk falling behind another
company that can push products out faster. Like the other Sony products that were ahead
of their time, Idei’s grand restructuring plan brings financial risk, and we don’t have the
luxury of hindsight to see if his chances will pay off. Another financial risk involved can
currently be seen in Sony’s profit margins. While traditionally known for its consumer
electronics, Sony’s profits have been undercut by stiff competition offering lower-cost
products. In order to succeed, Sony must devise a way to not only link all of its devices
together, but also to do so in a way that cannot be imitated cheaply by other
manufacturers.
Sony creates devices that allow consumers to download songs in MP3 format
from the Internet and listen to them on the go; however, now that Sony is one of the
world’s biggest holders of copyrighted material, they tried some initial measures to curb
piracy by crippling their network-based devices to prevent copying. Customers were
outraged, and Sony loosened the reins. These troubles with copyright infringement and
customer outrage highlight the lack of market research being done at Sony. Sony must be
able to determine what the consumer needs and what it is able to deliver before taking
risks that may alienate consumers or clients. Do consumers want the ability to download
and play and trade MP3 files of their favorite music for free? Yes. Can Sony, as an
owner of a large amount of copyrighted material and producer of many musical artists
allow rampant copyright infringement? Of course not. It is in Sony’s best interest to do
market research first to determine what consumers want, and then find a desirable middle
ground that consumers and artists can agree on. In this example, Apple Computers got
the jump on Sony, providing thousands of songs that users can download from a website
instantaneously for one dollar each; artists get paid for their work, and users get the songs
they want when they want them, without having to pay for an entire compact disc.
AIBO is a successful product. Sony took a risk in introducing AIBO, and it paid
off. Had Sony done market research to determine the need for AIBO, or the need for a
24
Walkman back in 1979, these products probably wouldn’t exist. Introducing innovation
is a risky but profitable endeavor. However, more formal market research would allow
Sony to grab the innovative ideas that are already waiting for someone to develop, like
Apple’s music download website. Sony and Hewlett Packard’s technology strategies are
becoming parallel, with both companies making it their strategy to surpass the
competition with superior technology. For guidance towards the future, it may benefit
Sony to watch HP’s restructuring to see how they combine the HP and Compaq research
labs to coordinate on research for future products.
Conclusions
We have shown that Sony’s method of product development uses a corporate
product vision to drive the development of necessary technologies and employs what is
known as a product-focused strategy that allows the company to concentrate only on
acquiring the technologies needed to complete a certain product. Compared to other
Western and Japanese companies, Sony does not have a clear development process,
instead preferring to give its development teams the freedom to follow their own path.
Venture capital investment is not popular at Sony like at many Western companies and
Matsushita, and Sony tends to only enter into collaborations for technologies that would
be too massive to undertake on its own. These practices may be shaken in the future as
current CEO Nobuyuki Idei attempts a restructuring of the company to focus the
corporate vision on interconnected broadband-networked products. Sony may have to
greatly change its product development process in order to contend with many different
research divisions contributing to a technologically complex product. It may also be in
Sony’s best interest to attempt more venture capital to save R&D resources and time in
pushing new products out to the market. Many corporations in the consumer electronics
industry have been forced to restructure their model of doing business in the face of
competition, technology, or inefficiency. Sony’s model, abstract as it is, has held up so
far, but the future Sony that Idei envisions may find its business practices challenged like
so many others have been before. Sony’s labs are doing what they should to strengthen
current businesses while simultaneously developing long-term technology. Innovation
has never been missing at Sony. If it does not focus on the gap between the research lab
and the market to streamline product development, however, it risks being left behind just
as IBM was in the early 1990s.
25
Appendix 1: AIBO ERS-210 Specifications
Processor
Memory
Components
Program Storage Medium
Movable Parts
Input/Output
Image Input
Audio Input
Audio Output
LCD Display
Built-in Sensors
Built-in Clock
Operating Time
Mass
64-bit RISC processor
32-megabytes built-in memory
Body, Head, Tail, Leg x 4
Sony Memory Stick
Mouth
1 degree of freedom
Head
3 degrees of freedom
Leg
3 degrees of freedom x 4 legs
Ear
1 degree of freedom x 2
Tail
2 degrees of freedom
Total
20 degrees of freedom
PC Card slot Type2 In/Out
Memory Stick slot In/Out
AC IN Power Supply connector Input
CMOS Image sensor
Miniature Microphone
Miniature Speaker
Time, Volume, Battery condition
Temperature Sensor
Infrared Sensor
Acceleration Sensor
Pressure Sensors (head, back, chin & paws)
Vibration Sensor
Date & Time
Approx. 1.5 hours (Standard operation in autonomous mode)
Approx. 3.3 lbs (1.5Kg) (including battery & memory stick)
Source: AIBO Homepage <http://www.us.aibo.com/ers_210/ers_210_spec.php>
26
Appendix 2: AIBO Life 2 Life Stage Details
With AIBO Life 2, AIBO grows up from a baby to an adult. AIBO's growth is divided into four main
stages with sub-stages. At any time, you can ask AIBO, "How old are you?" to find out what stage
it is currently in. Following is a breakdown of the stages.
Growth Stages:
Baby Stage 1 - AIBO cries a lot

Newborn AIBO - At first, AIBO is unable to understand what it sees or hears. Talk to
AIBO to teach it words and phrases.
Baby Stage 2 - AIBO learns to recognize the pink ball

AIBO and Ball - When AIBO sees the ball it will become happy. Praise AIBO.
Baby Stage 3 - Teach AIBO its name and it will recognizes it.

AIBO Stands - AIBO struggles to stand. Teach AIBO to stand by praising it.
Child Stage 1 - AIBO plays and learns a lot


Playful AIBO - AIBO is sociable and wants to communicate
Walking AIBO - AIBO is curious and explores its surroundings
Child Stage 2 - AIBO's character starts to develop


Talking AIBO - At this stage, AIBO likes to talk and listen
Performing AIBO - AIBO will start to sing and dance
Adolescence Stage 1 - The most mischievous stage



Studious AIBO - AIBO will learn gestures from communication with you
Ball Playing AIBO - AIBO will constantly search for its ball
Cry Baby AIBO - If you ignore AIBO, it will be sad. Play with AIBO
Adolescence Stage 2 - Further character development



Cheerful AIBO - AIBO is happy and likes to be with you
Ball Crazy AIBO - AIBO wants to play with its ball
Mischievous AIBO - AIBO may get angry if you don't pay attention to it
Adult Stage - AIBO is now a full grown adult




Sheltered AIBO - AIBO is still a child and wants to be with you all the time
Nice Guy AIBO - A good natured AIBO
AIBO the Adventurer - An independent AIBO that likes to explore
Selfish AIBO - AIBO is selfish and does not obey
27
AIBO Life 2 - Teaching AIBO motions and actions
With AIBO Life 2, you can train AIBO in two different ways.
Choreography - Put AIBO into Action Registration mode and you will be able to create and teach
AIBO new leg motions. A name or number can be assigned to these new motions.
Training - Here, you can train AIBO to master a set of pre-programmed actions. You can also
assign a name (up to 10 names max) to these actions.
Source: AIBO Homepage <http://www.us.aibo.com/ers_220/life.php>
28
Acknowledgements
I am grateful for the help of and greatly indebted to:

Richard Lethin, my advisor. His knowledge of business and research and
development practices was immensely useful and informative, often making up
for my lack of a basic business education, and his comments and suggestions over
the course of this project were always helpful. In addition, his company,
Reservoir Labs, was extremely generous for giving me the frequent flyer miles
needed for a ticket to Japan to interview Mr. Kageyama for this project.

Koji Kageyama, general manager of Sony’s Entertainment Robot Company, for
taking the time out of his busy schedule to grant me the honor of an interview.

Koichi Hiroe, my Japanese teacher, for helping me write and correct my business
letters in Japanese that I used to contact Sony with and that subsequently allowed
me to obtain an interview with Mr. Kageyama.

Toshitada Doi, executive director of Sony Computer Science Labs, and his
secretary, Midori Kimura, for responding to my initial letters and referring me to
Mr. Kageyama.