Sony ahead of the game

PlayStation 2 is the latest stage in the company's transformation from lumbering giant to world beater

In 1994, when Nobuyuki Idei became the surprise choice to take the helm of Sony, the Japanese electronics giant had blown not just one fuse but several. Sony's music division had been humiliated by George Michael's high-profile campaign to release him from his contract. The ill-fated purchase of Columbia Studios, which gave rise to such spectacular Hollywood turkeys as Hudson Hawk, had left Sony with a loss of $3.2bn (pounds 1.98bn). Memories of its disastrous gamble that Betamax videos would outsell VHS were still vivid. Most serious, however, was that even in 1994 Sony had refused to accept the growing importance of the internet at a time when PC sales in the US had already overtaken those of televisions.

When Idei was chosen, he was dumbstruck. Norio Ohga, Sony's patrician chairman who had just turned 65, promoted Idei ahead of at least 16 more senior executives. John Nathan, Professor of Japanese Cultural Studies at the University of California, Santa Barbara, has studied the relationships within Sony that led to the appointment of Idei. In his book, Sony - The Private Life, he describes how Idei felt he had inherited a "mission impossible" when he learnt of his surprise promotion.

"I felt that running Sony was impossible," Idei said, "because it was a company driven by the founders' vision."

Idei told Nathan how his predecessors Ohga and Akio Morita, Sony's enigmatic co-founder, had mentalities very different to his.

"For Mr Morita, what mattered was the position and proper function of a switch, a start button, on a Sony product. If he took one home and tried it and the switch was hard to reach, that was an `insult' - the engineer responsible had insulted him. Mr Ohga is an artist: he has an artist's pride and an artist's jealousy."

But the days when Sony's interests were best served by the unchecked power of its senior mangement were gone. The appointment of Idei immediately wiped away decades of Sony arrogance as the new man instilled a new humility to the company, bringing Sony into the modern world of rational decision making and accountability. The result is that Sony's performance has shone like a beacon on the otherwise dismal economic landscape of Japan during the 1990s.

One of Idei's first achievements was single-handedly to overturn the international reputation of Japanese businessmen as introverts. The ease with which he mingles with Westerners was demonstrated by his appearance in 1997 at a gathering organised by Wall Street financier Herb Allen. Flanked by the likes of Disney's Michael Eisner and Microsoft's Bill Gates, Idei realised he was the only guest in a suit. Quickly, he changed into a T-shirt advertising Men in Black, a Sony film. "Just a little marketing gimmick," he quipped.

He has broken the national mould on other occasions, not least in March when he announced a plan to close 15 of Sony's 70 factories with the loss of 17,000 jobs. At any time this would have been a daring move in Japan - a country where companies are averse to making redundancies. But coinciding as it did with news of record quarterly earnings of pounds 550m, the decision stunned the nation.

Some of that profit has been generated by a music division which has shrugged off the George Michael case thanks to the success of Celine Dion, Mariah Carey and the Fugees.

Of course, the nuts and bolts of Idei's task have been to ensure that Sony is at the forefront of technological advances rather than trailing in their wake. He realised quickly that Sony could no longer rely simply on the excellence of the hardware that had been the cornerstone of its success. The bombshell was dropped at a technology fair in 1998.

"It won't matter [in the future] whether TV screens are bright or have beautiful resolution," he told a stunned audience. "What matters will be the network: who creates it and who controls the network that distributes it."

Hence the job cuts, which formed part of Sony's move out of the traditional production of TVs and hi-fis in favour of new digital products. He has continued a digitalisation process that began in 1982 with the introduction of the compact disc - Sony still receives a royalty every time a CD is sold. But the digital revolution has much further to run, and Sony's progress is such that it is even threatening to challenge Microsoft.

But amid all the technological buzz words of digitalisation and interactivity, the key to Sony's future may be much more familiar: PlayStation

The rampant success of Sony's computer games console, which has sold more than 50 million units in four years, has underpinned its improved performance, but the market remains fiercely competitive.

Nintendo and Sega, which recently launched its new Dreamcast system, are formidable opponents, but the smart money is on Sony prevailing.

Its successor to PlayStation, known for now as PlayStation2, will not be available until March but the glimpse afforded at he launch last Mon- day in Tokyo has left few doubts about its potential. The graphics, of course, were incredible but it is more practical advantages that bear the hallmark of Idei's pragmatism. Like the way users will be able to play their existing PlayStation games on the new console.

This is typical of Idei, who became the toast of games designers by keeping them abreast of the technical specifications of Sony's products. This explains the number of games available on PlayStation. Ken Kuteragi, Sony's console head, is, like his boss, totally at ease with the key figures in the critical American market.

If reports are to be believed, the computer games market is now so important that even mighty Microsoft is planning to take it on. Even though it co- operated in the creation of Dreamcast, Microsoft is ru-moured to be working on its own console and aiming for a 2000 launch to coincide with that of PlayStation2.

Whatever Bill Gates decides to do, Idei will not be complacent. He explained to Nathan how his sleep is interrupted by worries about whether "Do you dream in Sony?" is the right slogan for a company that has changed so much.

"I worry it could mean `I remember Sony, they used to make wonderful TV sets'."

n `Sony - The Private Life' is published by HarperCollins and costs pounds 19.99.