Idei, Nobuyuki 1937–

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Nobuyuki Idei
1937–

Chairman, group chief executive officer and representative corporate executive officer, Sony Corporation

Nationality: Japanese.

Born: November 22, 1937, in Tokyo, Japan.

Education: Waseda University, BA, 1960.

Family: Father was international economics professor at Waseda University; married Teruyo; children: one.

Career: Sony Corporation, 1960–1962, invoice preparer; 1964–1968, manager, Sony's Swiss operations; 1968–1972, established and led Sony France S.A.; 1972–1979, manager, Europe Section, International Division; 1979–1988, general manager in Japan, Audio Division, Audio Group; 1988–1990, senior general manager, Home Video Group; 1990–1994, senior general manager, Advertising & Marketing Communication Strategy Group, and director, Design Center; 1994–1995, senior general manager, Creative Communication Division, and managing director, Sony Corporation; 1995–1998, representative director and chief operating officer; 1995–2000, president; 1998–1999, co-chief executive officer; 1999–2003, chief executive officer; 2000–, chairman; 2003–, group chief executive officer.

Awards: Officier dans l'ordre national de la Légion d'honneur from the president of the French Republic, 1998; Fortune magazine Asia's Man of the Year (for 1997), 1998.

Address: Sony Corporation, 6-7-35 Kitashinagawa, Shinagawa-ku, Tokyo 141-0001, Japan; http://www.sony.net.

■ Nobuyuki Idei was an intellectual gifted at improvising. He was a true man of the world; fluent in English and French, he talked easily with foreigners and was comfortable with their customs. Indeed, his years in Europe left him with preferences for French cuisine and Italian suits. He was beset by curiosity and therefore forever studying, and his inquisitive nature led him to try to create technology that would allow people to study any aspect of the world quickly and simply. His was a global outlook.

MAKING CONNECTIONS

While attending Waseda University, Idei first focused on photography, but at his father's urging he shifted his major to economics. Among young Idei's schoolmates was the daughter of Masaru Ibuka, cofounder of Sony. Upon graduation in March 1960, he got a job interview at Sony through her intervention.

Idei was hired at Sony, but all he did was prepare invoices for international customers, so after 18 months he left the company to attend the London School of Economics. Because of his poor English skills, he struggled in his classes, but a professor took a liking to him and persuaded him to try l'Institut des hautes études internationales in Geneva, Switzerland. At first Idei's French skills were poor, too, but through determined studying he mastered both French and English. In 1963 he left l'Institut without completing his PhD.

Sony rehired Idei to work in Switzerland; the company was expanding its presence in Europe in the 1960s in the drive to become a global corporation. Idei was sent to Paris to establish Sony France S.A. when he was only 31 years old; during this period he developed his ability to work with people from disparate cultures, and he established his talent for solving problems and creating new businesses. Sony seized significant market share of the European television market, especially when the Trinitron model came out in the late 1960s. In 1972, as Sony's enterprises expanded in Europe, Idei was appointed manager of the Europe Section of the International Division of Sony, responsible for Sony's operations on that continent.

WALKMAN

After 17 years in Europe, Idei was brought back to Japan in February 1979 to become the general manager of Sony's Audio Division. Sony executives believed that his marketing expertise, developed while creating new enterprises in Europe, would be put to good use in the marketing of a new Sony gadget, the Walkman. The Walkman name emphasized its easy portability; it became a global hit and was responsible for bringing in billions of dollars over its lifetime. Even in the 2000s, with portable audio compact disc (CD) players available, the old Walkman tape cassette player remained the portable music player of choice in most nonindustrial nations.

In addition to his work on the cassette player, Idei led the development of the audio CD player. In the late 1960s Sony had invested in American recording companies. The corporation's large holdings of the rights to music by the likes of Simon and Garfunkel, a famous singing duo of the time, gave it an advantage in the marketing of devices to play their music. People who wanted to listen to one of Sony's recordings had to purchase CDs made by Sony to play on CD players made by Sony. Rival recording companies adopted the Sony CD standards in order to sell to the same customers Sony was reaching. Ever since 1982, when Sony introduced its players, every CD manufactured brings Sony five cents in royalty payments.

In 1985 Idei worked on the introduction of another high-stakes gamble, the Sony eight-millimeter camcorder. This device made it easy to make home movies anywhere and was the ancestor of handheld videotape and videodisc recorders. In April 1988 Idei was made senior general manager of Sony's Home Video Group.

CHANGES AND SURPRISES

In June 1989 Idei was named to Sony's board of directors. That year Akio Morita, cofounder of Sony, engineered the purchase from Coca-Cola of the Columbia and Tri-Star motion picture studios for $3.4 billion, while assuming $1.2 billion of the studios' debt. He was looking to the future, when perhaps Sony's holding rights to motion pictures would be as important to new innovations as holding rights to music had been for the Walkman. The president of the Sony Corporation of America, Mickey Schulhof, was put in charge of Sony Pictures; he hired the producers Jon Peters and Peter Gruber to run the company, buying out their production company for $700 million. Increasingly ill from heart disease, Morita retired soon after the completion of the deal.

Idei was made senior general manager of Sony's Advertising and Marketing Communication Strategy Group in July 1990. He began promoting Sony's brand image at home and abroad, linking it with technological innovations and identifying it with high quality products. In 1992 Sony and Philips NV of the Netherlands formed an alliance to design digital videodiscs (DVDs), a format similar to CDs but much more densely packed with data. In 1992 one of Sony's rivals, Toshiba, formed an alliance with Time Warner to cooperate on their own version of DVDs. That year Sony's sales shrank by 6.5 percent as Japan's strong yen made Japanese products more expensive overseas, resulting in dropping international sales.

Despite the harbinger of fewer sales, Sony was complacent about its lead in developing the DVD and let the opportunity to set the standard for this format slip away. Toshiba and Time Warner developed double-sided DVDs that they called SDs for "super density." Running DVD development for Sony was Minoru Morio, heir apparent to the president, Norio Ohga. By November 1994 Sony developed a semitransparent layer in addition to the main layer that doubled the amount of data that could fit on one side of a DVD. In April 1994 Ohga reorganized Sony's intricate corporate structure into eight internal companies, and Idei was made senior general manager of Sony's Creative Communication Division. By then Ohga was thinking about retiring from the presidency, and Idei kept coming to his mind as a possible successor.

In June 1994 Idei advanced to managing director of Sony, ranking him fifteenth among Sony's top executives. In November Ohga put Idei in charge of promoting Sony's DVD format; billions of dollars in future royalties were at stake. To Sony's misfortune, the strong Sony Pictures operation it had hoped for had not been built. Sony's stock peaked at $63.25 in November 1994 and then plummeted into the low 40s when the company announced that it was taking a loss of $3.2 billion dollars on its motion picture division. Alan Levine was hired to replace Peters and Gruber.

When Sony announced its DVD format on December 19, 1994, calling it MMCD for "multimedia compact disc," the technology was already in trouble because potential partners were lining up behind Toshiba's and Time Warner's format. While Toshiba and Time Warner emphasized only the DVD's capacity for playing motion pictures, Idei chose to emphasize how the DVD could be a full multimedia format, at home in motion picture players, personal computers, and video game consoles. On January 24, 1995, Toshiba and Time Warner announced their new DVD technology. Though the DVD was more limited than Sony's version, the rival companies had taken the time to line up a formidable array of support from motion picture distributors and video equipment manufacturers. In September Idei and Sony capitulated and accepted the Toshiba and Time Warner format as their own.

PRESIDENT

On January 24, 1995, Ohga privately told Idei that he was his choice to become Sony's next president; in December the retired Morita approved of Idei's selection. Idei had the advantage over his rivals of being truly cosmopolitan, at ease with foreign businesspeople as well as Japanese ones. He spoke fluent English, which rival Morio did not, making him an attractive leader for consolidating and making profitable Sony's businesses in the United States. Furthermore, Idei had worked in almost every aspect of Sony's enterprises during his career. His marketing skills seemed very desirable in a period when Sony's sales were slipping.

On March 22, 1995, Idei was introduced to the world as Sony's next president. Observers were surprised because he had been considered too far down the management ladder to be eligible for such a position in a company that valued seniority. In April he became president and COO of Sony Corporation, while Ohga became CEO and chairman.

Despite having had to accept a rival DVD format, Idei was aggressively positioning Sony to take advantage of new technology. Before he officially became president, he began negotiating with the chip company Intel's chairman, Andrew S. Grove, to create a new computer, to be designed by Sony and manufactured by Intel. Sony and Intel announced their long-term partnership in November. Idei dubbed his engineers the Digital Dream Kids, emphasizing that they were to invent technology that would make people's dreams come true. In Fortune he envisioned a cohesive technology that would unite "computers and consumer electronics and communications and entertainment" (June 12, 1995). The new computer was named the VAIO.

A rebellious Sony engineer, Ken Kutaragi, had been developing his ideas for a video game console since 1988, when he was frustrated by the poor graphics of his Nintendo game machine. In Idei he found an ideal corporate leader who was accepting of his breaking corporate rules while he pressed forward on designing what became the PlayStation. Another bright spot was Sony's production of professional video equipment, of which Sony had 80 percent, or about $800 million, of the world market. Even so, the year ended on a down note. In December Idei fired Mickey Schulhof and replaced him as head of American operations with Howard Stringer.

Throughout 1996 Idei stubbornly insisted that Sony Pictures was not for sale. He fired most of the executives and hired John Calley to run the studio. In January 1996 Idei began restructuring Sony, hoping to streamline its operations to make it more cost-effective. He reorganized Sony's eight units into 10 and appointed a president for each unit, hoping to speed up decision making and make Sony quicker to respond to changes in the marketplace. Each president was given the freedom to run his unit as he saw fit. Five of the presidents were young, the first of Idei's attempts to break the hold of seniority on the promotion of managers.

In 1996 So-net, Sony's Internet service, was launched and grew to be Japan's third-largest service provider. So-net was part of Idei's plan to create homes with instant access to information and communications through the Internet. It featured the electronic Sony credit card, which could be used to shop online at 250 retail sites.

Sony grossed $50 billion and netted $1.2 billion in 1997, defying an ailing Japanese economy. A Harris poll named Sony the most respected brand name in America. Idei publicly wore a Men in Black T-shirt to tout the motion picture that inaugurated a series of profitable years for Sony Pictures, which brought in over $1 billion in the first nine months of 1997. In May Idei moved to take firmer control of Sony by reorganizing the board of directors, reducing its membership from 38 to 10, with three of the 10 from outside the company. He wanted American-style corporate governance, with the board responsible to the company's shareholders, rather than as it had been to the company's managers. Further, he tried to replace pay based on seniority with pay based on performance, a radical departure from traditional Japanese corporate practice.

Idei believed that communication and information technologies were converging, creating an opportunity for Sony to position itself strongly for the 21st century. He envisioned wireless homes, businesses, and marketplaces, where people could access the Internet without telephone lines or cables. Idei implemented this vision through a dizzying series of partnerships and new products. Sony and Qualcomm of San Diego, California, united to manufacture cell phones for this future. In April 1997 Microsoft bought WebTV Networks, which used Sony hardware. In May Sony, Rupert Murdoch's News Corporation, Fuji Television Network, and Softbank (owner of Ziff-Davis) started JskyB, a satellite television company with 150 channels. This venture represented a step toward access to information without wires. In September Sony, Philips, Hewlett-Packard, and Ricoh created a new format for rewritable DVDs.

For his role in changing how Sony did business, Idei was the first recipient of Fortune magazine's Asia's Man of the Year award in 1998. In May he added co-chief executive officer to his titles. That March Sony had grossed $56.3 billion and netted $4.3 billion for the fiscal year. Yet, during 1997, income from Sony's electronics units, which represented 70 percent of the company's business, dropped 59 percent. Meanwhile, managers were resisting Idei's efforts to modernize the company.

CHIEF EXECUTIVE OFFICER

In March 1999 Idei announced that Sony would close 20 percent of its factories and cut 17,000 jobs by 2003. Over the opposition of senior management, he planned to cut headquarters staff from 2,500 to several hundred. By 2003 the number of factories shrank from 70 to 55. The fiscal year gross was $50 billion, with a net of $2.8 billion. The positive showing was partly the result of the PlayStation. Although this product comprised only 15 percent of Sony's total sales, it accounted for 40 percent of the profits.

Idei replaced Ohga as CEO in 1999, although Ohga remained chairman. Deciding his previous reorganization had not gone far enough, Idei introduced sweeping changes to Sony's corporate structure, trying to make the company more efficient in a period when Japan's economy was deflating. He pulled Sony's 12 electronics businesses into five units: Home Network, Personal IT Network, Communications System Solutions Network, Core Technology & Network, and Sony Computer Entertainment. Each unit was supposed to determine for itself where to put its resources. Following this realignment a series of strategic events catapulted Sony stock upward. The movie producer George Lucas announced that his next Star Wars motion picture would be shot using Sony digital equipment. Sony purchased controlling interest in SkyPerfecTV, the leading satellite broadcaster in Japan, and by November, Sony's stock had doubled in value in one year.

On January 24, 2000, Sony stock was $275 per share, five times what it had been when Idei became president, yet for the fiscal year ending March 31, 2000, Sony grossed $49 billion, down 5.5 percent from the previous year, and netted $1.6 billion, down 20 percent from the previous year. Even so, Sony's value was $110 billion. Idei became chairman of the board in May and promoted Kunitake Ando of the VAIO enterprise to replace him as president. He made Terushisa Tokunaka, Sony's chief financial officer, corporate vice president. He hoped to be able to focus on production strategy and on building more partnerships, while Ando and Tokunaka focused on day-to-day management. Idei spent much of the year evaluating factories with an eye to shutting down those that were not making money.

In March 2000 Sony introduced the PlayStation 2 in Japan. It incorporated many of Idei's ideas for creating a unified home electronics environment, including the capacity to play motion picture as well as game DVDs. Idei was already at work on even grander ideas for the PlayStation 3, planned for release in 2005. Sony established a $100 million fund to support start-ups for promising technology companies.

During 2001 Sony spent $670 million to eliminate unprofitable businesses, shutting down 13 factories. However, the company had three recalls of malfunctioning cell phones, costing $110 million. By March 2002 Sony had lost $364 million in six months. Sony's revenues had dropped 40 percent for the fiscal year, but not all of the news was bad. Sony Pictures was one of the company's big money makers, with such hits as Spider-Man. During 2001 and 2002, 50 million PlayStation 2s were sold, with Sony's video games accounting for 50 percent of 2002's profits. In further efforts to streamline Sony, Idei blended 12 factories into a single unit to save overhead on purchasing supplies and to reduce duplication of efforts. From October to December 2002, fortunes improved, and Sony netted $1.02 billion.

Sony recorded a $1 billion quarterly loss in April 2003. The event was called "Sony shock" and served as an excuse for Idei to overcome resistance within the company to making painful changes. He was faulted by investment analysts for not being aggressive enough in closing down outmoded factories and for allowing Sony's core business, electronics, to drop from a 10 percent margin in 1993 to 1 percent. Idei fired Sony Music's leader, Tommy Motola, for not cooperating on organizational changes, and replaced him with Andrew Lack, perhaps indicating to other managers who continued to resist change what they could expect from him.

In 2003 Sony released a stylishly sleek, glistening box that stood on its side. Within was an aerial and the electronics needed to bind every electronic device in the house wirelessly and give access to satellite television and information services, allow broadband access to the Internet, and provide Internet telephone services. A parent tired of listening to a child's booming upstairs stereo could lower the volume from a downstairs living room. Idei put forth his concept of four portals for consumers: mobile telephone, personal computer, PlayStation game console, and television.

Idei announced in October 2003 that Sony would cut 20,000 jobs, including 7,000 in Japan, and that he would send assembly work to countries with low wages. He devised the concept of Qualia, which he said would be the goal for Sony's new inventions. Qualia represented comfort; he envisioned future consumers wanting more than utility from their products, but beauty as well. It was a positive view of a future in which technology would be able to meet the fundamental needs of humanity, and human beings would be able to focus on intellectual and spiritual needs.

By August 11, 2003, Sony's worth had shrunk to $61 billion, with Idei receiving most of the blame for the precipitous loss in value. Yet on the same day Fortune named Idei the second most powerful business leader outside of the United States. Sony was still a colossus. It partnered with IBM to create a new computer chip to power PlayStation 3 and computers, investing $4.5 billion in the project. Sony united with Samsung to create a new flat-panel liquid crystal display (LCD) television. Sony's Digital Creatures Laboratory forged ahead in developing robots for the home. The online world of Everquest drew a huge audience to Sony's Internet projects. Idei gave Kutaragimore responsibility, trying to harness his rebelliousness to help reform management practices.

In January 2004 BusinessWeek online named Idei one of the world's worst managers, but for the fiscal year ending March 31, 2004, Sony grossed $72 billion. Idei's vision of the corporation of the 21st century was still a work in progress.

See also entry on Sony Corporation in International Directory of Company Histories.