Research and development activities are crucial for companies to bring about growth and secure market positions, especially in fast developing and competitive environment of today. Even though companies from within electronics industry do not lead the global R&D expenses ranking (car makers do), IT and electronics belong to leading spenders. Japanese Sony corporation recognizing R&D as a major tool of business growth, belongs to worlds biggest R&D spenders. In my report I will refer to objectives of Sony R&D strategies and related numbers determining company’s R&D performance.
I will look into organization and management of R&D, especially in Japanese firms, and reflect Sony’s approach in this regard. I will refer to Sony’s strategic cooperation with other companies to conduct R&D efforts and focus on more general feedback on forms of cooperation and their possible positive and negative effects. Organization and management of R&D Technological development and innovation serves for improving performance of companies, especially in developed markets of today.
Diminished growth potential thru approaching new geographical markets pushes firms to rediscover the existing markets with more sophisticated products, seek and fulfill yet undiscovered needs of customers, aim for higher productivity and efficiency of company processes. However, most of R&D efforts require relatively large investment and involve high level of risk. Sunk costs are typical produce of many projects stopped at early stages. Such conditions predetermine large and medium size companies to show the highest (in-house) R&D performance.
Sony, an electronics, entertainment and technology company, focuses their R&D on range of technologies, that support existing products and also such that may potentially create new markets in the future. R&D at Sony is objected to encourage the current trends in electronics: Increase the value carried by technologies in forms of multimedia, their storage and sharing over data networks. Sony aims to make 90% of product categories network enabled and wireless capable by 2010 (Sony factbook, 2007) while concentrating on high quality home and mobile imaging.
Many of the development projects are conducted in-house but number of projects are done in various types of cooperation with other companies. I will refer to collaboration in R&D in other part of my work. R&D performance in numbers The R&D expenditures of Sony grew at rates between 2%-18% a year in 1996-2006 period, followed by 2% drop in 2007. R&D expenditures as %-age of sales grew from 5. 2% to 7. 1% over the same period (6. 1% in 2007) (Sony factbook, 2007). Sales saw growth of 30% over the 10 years. Observing these trends Sony appears to accommodate a strategy of growing R&D expenditures as percentage of sales.
Electronics division receives most of the finances, under 20% favors the entertainment segment. (Sony factbook 2007) Sony holds an offensive strategy in R&D (Sato, 2000), aiming to be ahead of competitors and innovative intensively. Akio Morita, the company founder, expressed this strategy “Make the best products and customers will follow your lead”. Such approach is in contrast with other Japanese electronics companies as ‘Panasonic (defensive R&D strategy), or Sanyo (imitative R&D strategy)’ (Sato, 2000).
I consider Sony to possess rather Darwinian perspective in their strategy, operating in a fast changing environment where technologies advance rapidly. Recently, strategically company shifted towards classical perspective of innovation strategy, aiming to establish strong position by effectively bringing advanced technological concepts to the market and create strong domains in multiple technologies, though, losing focus of disruptive technologies. Nature of R&D portfolio
Sony, in its earlier days, had been actively introducing radical innovations to the market (e. g. walkman) (‘1950-1980 sony introduced 12 disruptive technologies’) (Christensen, 2008). Technology push approach was characteristic for their strategy. ‘As a policy, they didn’t do market research – if market didn’t exist, they believed, it couldn’t be analyzed’ (Christensen, 2008). Focus on radical innovation has been softened in recent years after Mr. Morita retired and more conventional approach in marketing and R&D has prevailed.
R&D and innovation is strategically important, but incremental and sustaining rather than radical and disruptive technologies are characteristic to firm’s innovative performance. Proper balance of R&D projects portfolio investing in further development of current technologies (less risky though essential in competitive battle) and future technologies whose potential to win or lose a customer may be blur for now, is essential for any company that aims for sustaining leading position in its industry. The future scope has lost in favor of current, softening the highly competitive character of Sony before.