How Successful Companies Have Developed In Competence Commerce Essay

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Successful companies have the competence to develop, deploy and exploit innovative technologies. In the evolving paradigm of the 21st century, an organizational structure that supports and promotes innovation and creativity is vital for success. In today's business environment, most linear processes are easily automated or outsourced. (O. Parr-Rud, Business Intelligence Success Factors, Business Intelligence Network, 2007.

Competitive advantage throughout the technological trajectory can be achieved through the development of nonlinear skills, such as the distinctive design of goods and services, as well as the creative blending of linear processes. Innovation refers to an incremental, radical or revolutionary change in a process or a product, and it is a critical element for growth and progress.

It is vital to iron out problems involved in the management of innovation, and the path of technological development, especially for large firms. There is dynamic interaction between business strategies and the technological competencies of a firm. A clear-cut understanding of the nature of this interaction is indispensable to the profitable execution of the complete innovation process.

All the members of an organization need to be well versed with the characteristics of its innovative technologies, and need to understand the fundamentals involved in managing those innovations. In order to apply strategic management techniques to technology and innovation within a company's framework, its strengths and weaknesses must be comprehensively understood.

Innovators that succeed, apply knowledge and experience to new process and product development, keeping in mind the nature of the innovation. The organisation and management of R&D needs to be aligned with technological changes in the industrial environment, the learning curve of the company, collaborations for innovation, and the role of globalisation.

Company Information: Sony

Launched as Tokyo Telecommunications Engineering Company in 1946, in post-war Japan, the company later became Sony and evolved to be one of Japan's greatest technological and economic accomplishment, a global leader, a pioneer in innovation, and one of the best known brands ever built. Sony is a multinational conglomerate with headquarters in Tokyo, Japan, and is one of the world's largest media consortium with a revenue of US$88.7 billion (as of 2008).


Literature Review

A study conducted by Kumiko Miyazaki based on Japanese and European firms, included Sony as the market leader in audio-visual equipment, TV and devices. This study displayed the high correlation between Sony and Philips, Sharp and Sony in the form of a matrix; reflecting the similarities in business activities of those firms, with respect to Path Dependency and Technological Cumulativeness. Sony's strength lies in optical disks, CCD and epitaxy; and it faces tough competition from Toshiba.

In firms such as Sony, the technological know-how gathered for the development of semiconductor lasers for application in CD players or optical storage; was used to develop other types of lasers. This also led to the opportunity to enter new high value added applications. (Kumiko Miyazaki)

A paper on the evolution of technological capabilities, by Toby E. Stuart and Joel M. Podolny, shows us that the technological position of Sony in the Japanese semiconductor market was the best in 1982, as compared to 1987 or 1992. This is possibly due to the fact that Sony's trajectory of semiconductor operations catered to their consumer electronics business.

Sony's launch of the "Walkman" took the music industry by storm, and this innovation led to Sony's success in the portable electronics market. In a paper by Jens F. Christensen, the original Sony Walkman is "seen as an example of an innovation purely based on functional application since there was no technical uncertainty related to the innovation. (Morita, 1991, Selling to the world: The Sony Walkman story, in: J. Henry and D. Walker (Editors), Managing Innovation (SAGE Publications, London).

As mentioned in Sony's company report (2006), a major focus of R&D investment was the development of technology for consumer electronics applications for Cell (a high-performance processor). The Cell Development Centre was established under a structure that reported directly to the CEO for the development of new applications and products that could exploit Cell's outstanding processing abilities. Sony aims to re-enforce its technological capabilities for CMOS image sensors, with the aim of establishing an industry-leading position similar to CCD's.

According to Akio Morita, chairman and CEO of Sony, "Technological management will be the key to success for companies anywhere in the world in the coming years". At Sony, all top executives and heads of divisions attend a monthly R&D report meeting. (Third Generation R&D - Managing the link to Corporate Strategy).

Through the efficient organization and management of its innovation and R&D, Sony announced a major breakthrough - the ClearVid CMOS Sensor. The new technology boosted the difficult-to-achieve digital camera imaging resolution and sensitivity. In February 2006, Sony also announced the development of CMOS sensors that could output 6.4 megapixels of image data up to 3 times faster than the existing speed.


Technological trajectory and path dependence:

Technological trajectories develop as knowledge builds on knowledge, and companies in different industrial sectors tend to follow different trajectories. Depending on the placement of the firm in the market, it builds and operates its R&D according to the required scale. Some firms build and operate huge R&D laboratories and large-scale manufacturing plants, while some have only 5-10 employees heading the R&D activities. In many cases, firms perform most of their innovative activities within the company (in-house), while the others rely heavily on external partners and outsourcing. Hence, for some firms, the R&D laboratory forms part of the central place for innovation, whereas in other firms it is the design office.

The five major technological trajectories are:

•Scale-intensive (e.g. cars, steel)

•Science-based (e.g. electronics, chemistry, pharmaceuticals)

•Specialized suppliers (e.g. instruments, software)

•Supplier-dominated firms (e.g. agriculture, traditional manufacture)

•Information-intensive (e.g. finance, retailing, publishing, travelling)

The progress and growth of Sony, and its product development within technological paradigms, forms a technological trajectory. The technological trajectory for the final products of a firm depends heavily on its activities, the system infrastructure and the building platform. The innovation process at Sony is path dependent, and its technology builds from one product to another. This is also due to the cumulative nature of technological knowledge. In some cases, Sony couldn't adopt what was best, due to path dependency or avoiding a lock-in to inferior technology (e.g. VHS vs. Betamax).

Figure 1: Technological Trajectory for Sony's CCD (Lecture 4).

The organisation for innovation, and its management differs for firms within the same industrial segment as well (e.g. electronics); and geographical location also impacts activities as different countries have specific national systems. Innovation involves trial, error and learning; and the learning process for Sony tends to be incremental, since major step changes in too many parameters would increase uncertainty and reduce the capacity to learn for its employees. Hence, the learning process for Sony is path dependent. Given the scale of operation for Sony, moving from one path of learning to another can be very costly, and in some cases, even impossible. The emergence of revolutionary technologies opens up new opportunities for a firm to change its paths.

Sony's technological path comprises of science-based activities, as it seeks to compete through the generation of new technologies. This is typical for the electronics, aerospace and pharmaceuticals sectors. Sony's timeline demonstrates the use of new scientific and technological knowledge in order to make better products, solve existing problems etc. This company has successfully exploited technological paradigms and developed an admirably rich technological trajectory, as it has been a market leader for a long time (e.g. semiconductors, software). Sony forms a Superstar in terms of it technological path, as its existence and success is typically based on the exploitation of key inventions (e.g. Instant photography).

The continuous process of efficient improvement, and the adaptation of new techniques aided Sony to carve its niche.

Organisation and management of innovation and R&D:

"Research and Development comprises of creative work undertaken on a systematic basis in order to increase the stock of knowledge, and its use for the derivation of new applications" (OECD's Frascati Manual). The pattern of R&D activity in Technology-based companies like Sony is of high-intensity and concentrated due to its scale and product line. The nature of people involved, wide range of operations, and level of output make the management of R&D a difficult task. In the year 2001, Sony was a part of the top 25 companies that accounted for about one-third of R&D expenditures in the world. The secret to Sony's successful R&D lies in its highly skilled staff, which work independently and are driven by high levels of motivation. Sony manages its substantial internal R&D activities through effective communication between the team, head of departments, and top management. This is the main source for the generation of new knowledge, and is organised in the form of centralised or decentralised departments. Strategic management of R&D is crucial to a firm's success and a loss in focus could lead to the draining of resources.

Figure 2: Types of Innovation

Sony's electronic business is viewed with high-priority within its corporate strategy, and the strengthening of its technology and product R&D capabilities is a major element of its revitalisation and future growth strategies (biz report). In its 2006 Annual Report, Sony had identified three key technological platforms to pave the way forward: home and mobile electronics, semiconductor technologies, value added features and software.

Figure 3: Degrees of Innovation Tranformation.

Through the effective structuring of its R&D activities, Sony aims to strengthen its foothold in the field of home and mobile electronics. It also aims to innovate in the field of large-scale integrated circuits, and the main components supporting HD content which has found a major market globally. In the field of device technologies, this company is focussing on Blu-ray Disc related innovations and also launched the Display Device Development Group in order to accelerate the development of technologies for organic electroluminescent (EL) materials. This is in-line with company's aim to stay ahead in the innovation game and develop next generation displays. In the software realm, Sony has developed capabilities that enhance the interaction between electronics, and providing superior user interfaces.

New Agreements:

Sony has realised that joint development with other firms is essential in order to a) minimise the risk involved in investments into high-end technologies, and b) accelerate the development of products and innovation to keep abreast of the cut-throat competition. Hence, Sony entered into agreements with:

Idemitsu Kosan Co. Ltd. - for the development of Organic EL materials for high-performance, next-generation displays.

IBM Co. and Toshiba Co. - for a five-year joint technology venture for superior semiconductor manufacturing technologies.

Toshiba and NEC Co. - to develop LSI manufacturing processes.

NEC Co. - Optical Disk Drive joint venture to successfully integrate the technologies form both firms.


Sony holds a legacy of innovation and world firsts: the Trinitron Colour Television in 1968, the colour video-cassette in 1971, the Walkman in 1979, the electronic camera in 1981, the floppy disk in 1989, the CD player in 1982, the camcorder in 1983 and the portable Diskman in 1984. The company only rarely lost out in the market e.g. the launch of the Betamax VCR in 1975, which remained pre-eminent to this day. Even though Sony's technology beat VHS to market and was considered superior, VHS emerged as the market winner. In 1994, Sony developed the world's most popular gaming platform the PlayStation, and subsequently released the PS3, which includes the first ever HD capable Blu-Ray technology.

The creation of the technological trajectory can be traced to the time when a pioneer research firm begins its applied R&D, with the aim of producing a new commercial product. Various firms with different technological trajectories and designs occupied the existing technological fields. For instance, Japan's NHK started research in HDTV in 1968 while Sony is reputed to have been the first firm to do applied research in digital photography. (tech dominance). (Roberts, 1991). With the launch of the first transistor-based radio in the market by Texas Instruments, researchers at Sony accelerated their efforts to introduce a "pocketable radio" to the market.

. (Grindley, 1995).

According to Sony, "In the early 1990s, global localization of R&D continued in all product areas. By then Sony had over twenty R&D centers outside Japan. Yet despite the fact that overseas sales accounted for 70% of Sony's consolidated sales, overseas production still amounted to only 30% of the total. R&D localization still had a long way to go. In the 1990s, Sony was still guided by the principles of conducting product R&D close to markets while fully utilizing the technological strengths of each region It also continued to see the need to establish R&D operations abroad in order to minimize the effect of exchange rate fluctuations."

The managerial and organisational structure at Sony is responsible for making it a constant technological innovator in almost all its business segments. New forms of entertainment have evolved, e.g. media sharing and content organisation over different networks. Sony aims to create a new world through 'inspiration' and 'shared experience' in order to reinforce their product and application offerings. This is streamlined with the major innovative developments in the fields of networking and connectivity in the recent past.