Hirai Ascendant

Fri 03 Feb 2012 8:00am GMT / 3:00am EST / 12:00am PST
Business

Has PlayStation boss Kaz Hirai just become the captain of a sinking ship?

It's official at last - after being publicly groomed as Sir Howard Stringer's replacement for the past couple of years, PlayStation boss Kaz Hirai has been confirmed as the new president and CEO of Sony. On April 1st, Stringer will step aside (becoming chairman of the company's board of directors, a separate and more hands-off role from company chairman at Sony) and Hirai's reign will begin.

In doing so, Hirai could be seen as completing the plan which PlayStation creator Ken Kutaragi was never able to accomplish. Kutaragi was widely tipped as a future Sony boss after the extraordinary success of the PlayStation and PS2, and various executive moves between 1997 and 2003 seemed to be aimed at installing him in the role. The botched launch of PS3 sank Kutaragi's ambitions, though - so it's Hirai, instead, who fulfills the dream of a PlayStation boss taking over the entire company.

Hirai has a track record of successfully launching platforms, titles and services - there aren't a whole lot of people in Sony who have a track record of doing anything at all successfully in the past decade

We've become so used to the idea of Hirai as the natural successor to Stringer that it's easy to be blasé and underestimate just how important this move is. Sony, for all its recent difficulty in turning a profit and the challenges it faces in many markets, is an absolute giant of a company - one for whom the videogames market started out as little more than a hobby. Hirai's appointment isn't just a testament to his own abilities as an executive - it's a recognition that the confluence of hardware, software and network services in modern consumer electronics has made videogames into the front line of a war between competing visions of the future of entertainment and communications.

In Hirai, Sony has a boss who doesn't just pay lip-service to the strides made by PlayStation and by services like PlayStation Network - it finally has someone who actually understands that market, knows where and why Sony has succeeded and failed, and hopefully, even has a plan to replicate those successes and avoid those failures in future. He's someone who has a track record of successfully launching hardware platforms, software titles and network services - and that's very important, because bluntly, there aren't a whole lot of people in the rest of Sony who have a track record of doing anything at all successfully in the past decade or so.

In fact, when you start looking at the rest of Sony's operations, you start to realise just how important it is to let someone from the PlayStation side of the business run the show. The best thing that can be said for any of the executives in Sony's other divisions is that they have shown great competence in managing decline.

It's not entirely their fault, of course, that South Korea can undercut the prices of TVs made in Japan, or that Apple upended first the portable music market and then the mobile phone business - but in Sony's responses to those crises, there has been nary a glimmer of innovation or flair. In the face of the destruction of entire business sectors, Sony has bowed its head in acceptance, rather than attacking its rivals aggressively and fighting a battle over every sliver of market share.

Compare that attitude to the way SCEI approached the tough times it's been through in the past five years. Lumbered by Kutaragi's white elephant, a console that's expensive to build and largely unloved by software developers, hemmed in by an aggressive Microsoft on one side and an endlessly innovative Nintendo on the other, Sony's performance may not have been flawless, but it's been spirited. Five years after launch, Sony has salvaged this console generation; it won't finish on top, but neither will it experience a drubbing at the hands of its rivals, as seemed inevitable in the past. It cut prices early, redesigned the casing early, pumped money and attention into key first-party titles and committed heavily to PSN as a retail platform. None of these things were cheap, easy decisions, but they were the right ones.

Hirai has been a part of that process all along - a process that might well be a roadmap for how Sony is turned around. It's a process that has brought together all the strings that the company will require in its bow - hardware, software, services - and that's not an easy cultural shift for a firm that was founded by engineers and completely dominated by them until Stringer's appointment.

Of course, the question might fairly be asked, what can Hirai expect to achieve that Stringer could not? For all that Stringer was trumpeted as a reformer, Hirai inherits a company which this week is even deeper in the red than ever before. Plenty in the technology industry see Sony as a ship that's deeply holed under the waterline; it doesn't matter which captain stands on the bridge trying to turn the wheel, this boat is going down.

Hirai must be incredibly aggressive. It's likely that he will look to Apple as a model - ironically, in the same way that the young Steve Jobs looked admiringly to the then-dominant Sony as the model for his upstart computer company.

That pessimistic view may be accurate in the long run, but it underestimates the barriers Stringer has faced in his time in charge. For a start, there's no question but that it's difficult for a British-born executive to walk into the top job at a Japanese company and effect sweeping changes. Without wishing to compare Sony's situation to that of the crisis-stricken Olympus, the utterly disgraceful treatment of Olympus' whistle-blowing former CEO Michael Woodford in recent months is a clear illustration of just how badly wrong things can go for a foreign CEO in a Japanese company.

Stringer deserves credit for successfully navigating around any obstacles which would have brought such conflict out of the boardroom and into the public eye, but I suspect that a great deal of his time as Sony boss was probably spent butting heads with entrenched attitudes. Hirai's management style is reportedly quite Western in its character, but the simple fact of being born and educated in Japan is likely to smooth the path for him.

Besides that, however, there's the simple fact that Hirai actually knows the PlayStation business. Stringer was effusive in his praise for PlayStation, but clearly viewed the whole thing as a black box - questioned about specifics of what was happening with PlayStation, he would suggest that you spoke to Hirai or one of the other senior SCE execs. He could rarely name even the most major first-party franchises on PlayStation, in sharp contrast with his engagement with the firm's music and movie businesses, where he would speak fluently about major releases and franchises.

Given this, what will Hirai do now that the reins of Sony are in his hands? If he wants to actually turn the company around, whatever he does must be incredibly aggressive. It's likely that he will look to Apple as a model - ironically, in the same way that the young Steve Jobs looked admiringly to the then-dominant Sony as the model for his upstart computer company.

At Apple, Jobs created what was called a "halo effect" around the iPod, using the breakthrough success of the music player to boost sales first of computers, then of phones and most recently, of tablet devices. (Today, the iPod is the only declining part of Apple's business - but it hardly cares, since those sales have been cannibalised by the firm's newer product lines, rather than by rivals.) For Sony, a similar "halo effect" could arise from PlayStation - but the pathetically timid integration of PlayStation and PSN into a bare handful of flawed devices which we've seen so far doesn't go remotely far enough, and the PlayStation brand itself needs further investment and improvement if it's to develop a particularly radiant halo.

One thing is certain - even if Hirai is absolutely the man for the job, he doesn't have very much time to get it done. Sony is dead in the water in the now-shrinking music player market. Its market share of televisions is shrinking month by month, and risks utter devastation if rumours of an Apple television turn into a real product that grabs a large share of the high-end TV market - and even if not, Sony abandoned development of next-generation OLED displays only weeks before South Korean rivals showed off 55" OLED screens for the consumer market in early January. In mobile phones and tablets, the company is an also-ran. Ironically, its greatest success in cameras in recent years is that it builds the hugely popular camera that's used in the iPhone 4S.

Beset on all sides, the firm's PlayStation efforts remain the sole bright light in its consumer electronics business. On April 1st, Kazuo Hirai will settle into the president and CEO's chair at Sony for the first time - a significant milestone on the long, strange journey of the company's PlayStation division, but not the end by any means. He'd better not take too long redecorating Sir Howard's old office. There's a very, very large amount of work to do.