According to the Concise Oxford English Dictionary, the word “innovate” means to change something established by introducing new methods, ideas or products. I shall mainly focus on technological innovation at the firm level. I would like to go into the details of one of the most innovative companies in the world today: Sony.

Sony Corporation began in the chaos of Japan at the end of World War II. Its first quarters were a small corner room of a burnt-out department in Tokyo’s Ginza district. Masaru Ibuka, the founder of this company, brought along a few young engineers to start some sort of electronics enterprise. His earlier company had supplied vacuum tube mould meters and other instruments to the war effort and Ibuka felt an obligation to provide continued work for his people.

In his own words: “We started with a basic concept that we had to do something that no other company had done before”. From these inauspicious beginnings sprang one of the world’s most innovative companies, with worldwide sales in fiscal 2006 of $63.9 billion (£32.2 billion).

Let us try to understand what factors contributed to Sony’s huge success as an innovative company. First of all, “close to the need”. In the early postwar period, Ibuka produced products with a very distinct, obvious need. These products did not need a complex marketing or distribution system.

“An inventor’s outlook.” This is explained by a quotation from Ibuka. “To do the job better than anybody else. To do something unique.” This attitude helped the company to avoid existing competition from established companies.

In 1952 Ibuka went to the United States to explore a possible market for his tape recorder — the first major product of the company. While he was there, a US friend told him that Western Electric was ready to license its transistor patent. Ibuka investigated but when he heard the price was $25,000, he left the US knowing the price was too much.

He was convinced the transistor would revolutionise electronics, though no one was able to say when and how. With his young engineers in mind, he revived their euphoria with a new project: the transistor radio. The next point was the clarity of its founding concept — combining mechanical and electrical skills to produce unique products for new applications. This clear and broad concept attracted people and provided cohesion to their activities.

In the beginning Ibuka and Akio Morita provided balanced leadership. Ibuka was a technical genius. Morita had exper-tise in the area of marketing and administration. Flexibility: Sony had a “trial and error” approach. In spite of the fact that the experience base of the young team was small, we must keep in mind that Ibuka had already enough experience. He was 37 years old when he started this company.

Let us now look at Sony’s innovation system when it had grown into a larger organisation. The first factor that seems to be important is that Sony kept its innovative teams small. This helped in achieving better and faster communication within the teams, several of which were initially led by Ibuka himself. The next factor was its long time horizon. Sony was established to be an ideal factory: free, dynamic and pleasant, where technical personnel of sincere motivation can exercise their technological skills to the highest levels. Another point which was emphasised in its purposes of incorporation was the reconstruction of Japan. The Japanese are very proud of their nation and, after the devastation in the war, a very important goal was to see how the country could get back its past glory.

The next point is the application of the advanced technology developed during the war. The broad vision of Sony helped attract talented people and keep them motivated. The practice of undertaking several parallel projects towards a new innovation helped in creating alternatives from which managers could choose. It increased the probability that one of the approaches would work.

Most research-based industrial organisations face the problem of technology transfer from R&D to engineering and manufacturing, and finally to sales. In the development of new products, Sony ensured that people from manufacturing participated on the development team. They rotated engineers into the marketplace, into production and other aspects of operations. This helped in technology transfer, which was facilitated because of the broad perspective of the engineers.

The next points I would like to emphasise are persistence and the practice of hands-on management. Both Ibuka and Morita, the two founding leaders, visited the R&D labs and dealt with technologies and were supportive of the activities undertaken by the R&D engineers. This helped them to understand the technologies which were basically the core of their company.

A few other factors which are important in explaining Sony’s success: Sony’s top management sets key targets. Ibuka is able to set a few key and stimulating targets for development and gives others the freedom to work out more specific goals and solutions. This helps to keep the motivation level of the engineers very high.

An important factor in Sony’s culture is the acceptance of failure. However, they would not allow people to make the same mistake again and again. Recruitment and placement of engineers and executives in Sony is given considerable importance. Ibuka and Morita looked for talent and not someone to fill a job.

We have seen that innovation is a key determinant of economic development. Sony brought out the differences between the success factors in the early and later phases of its evolution. The success of Sony may be very well explained by mapping the various factors in terms of the McKinsey’s 7-S framework that brings out the coherence between the seven Ss. That is: shared values, strategy, structure, systems, staff, style and skills, at different periods of time.

Specialist in the world of change

— Professor Shekhar Chaudhuri is the director of the Indian Institute of Management (IIM) in Calcutta

— He specialises in strategic management, management of technology and innovation and international management in business policy

— Graduated in 1972 with a degree in mechanical engineering, but moved into business after joining a management doctoral course at IIM Ahmedabad

— Became director of IIM Calcutta in November 2002 Pioneered work in the field of management of technology in the early 1980s

— Co-authored Entry Strategies and Growth in Foreign Markets

— Was offered a Senior Fulbright Fellowship at Berkeley in 1988

— Led Indian part of research sponsored by the World Bank on institutional priorities for industrial technological development in early 1990s

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