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Technology transfer - lesson from Sony's success

| Updated: March 16, 2020 21:51:30

Technology transfer - lesson from Sony's success

Sony is not as well-known as Apple to the youths of the 21st century, but Sony used to be recognised as innovation wonder for the most part of the 2nd half of the 20th century. In war-devastated Japan, Sony was born just after the World War II. Although Japan is not known to be the inventor of basic technology, Sony prospered in creating innovation successes stories out of emerging technology cores. Sony single-handedly changed the image of 'Made in Japan' from cheap imitation to high quality innovation.

In its journey to creating a remarkable success story, Sony relied on technology transfer through licensing from American companies. But, did Sony triumph just by replicating licensed technology? How did Sony succeed to cause disruption to American iconic innovation companies like RCA or Kodak by licensing technology from America? How did Sony overcome the limitation of distance and lack of close cooperation with inventors to outperform American firms in American market? It appears that Sony's journey of creating the astonishingly wining story out of licensed technology has many valuable lessons for us.       

Upon giving up the war-time research job with Imperial Navy, in 1945, Masaru Ibuka founded a radio repair shop in the bombed Shirokiya Department Store in Tokyo. Just after one year, Akio Morita, a fellow wartime researcher, chose to join him. With funding from Morita's father, the duo co-founded Tokyo Telecommunications Engineering Corporation, which became known as Sony Corporation in 1958. Unlike other radio repair men, both of them had sound university education in Science, Physics and Mathematics. Due to their background in science education and wartime research, they became intrigued with the news of the Nobel Prize winning invention of Transistor at the Bell laboratories in the USA in 1947. Unlike others, they envisioned the emergence of a new wave of innovation in electronics out of transistor. It's worth mentioning that this transistor technology has been the underlying technology core driving the information and communication technology age. In 1954, under the leadership of Masaru Ibuka, Sony secured the licence of production and further improvement of transistor technology from Bell Labs. Due to weak financial position of Sony and Japan as a whole, Sony had to take special permission to pay $50,000 licensing fees.

Like many other great technologies, transistor in those early days was in primitive form--bulky, noisy, and highly fragile--and also expensive to manufacture. Signal amplified by transistor used to be of very low power and highly noisy. What to innovate out of it was a great challenge for Mr. Morita and Mr. Ibuka. In those days, the military used to be the major customer for electronics. But, due to the post-war settlement condition, Sony being a Japanese company was not allowed to pursue innovation for the purpose of defence market, leaving consumer electronics as the only option. Instead of pursuing the mission of imitating mainstream consumer electronic products like large-sized radio or TV produced by American companies like RCA or GE, Sony preferred to pursue disruptive innovation. As opposed to targeting existing family customers of RCA or GE, Sony embarked on innovating pocket radio out of the licensed transistor technology targeting the American college students. These college students found Sony's radio a better alternative to cabinet top vacuumed tube-based ones producing high quality sound, as they were portable for enjoying music in neighbourhood hangouts.  Sony, however, did not stop with the success of producing and selling pocket radios. It embarked on the journey of improving the underlying transistor technology, making the radio better as well as cheaper. Among several others, Leo Esaki joined Sony's R&D team for pursuing relentless journey of perfecting the transistor technology, licensed from Bell.

In course of time, Sony's transistor radio became better alternative to the incumbent vacuumed tube-based radios, both in quality and cost. Sony also leveraged this technology advancement to succeed in TVs, audio as well as video recorders, and also in innovating Walkman. The journey of perfecting licensed technology led to Sony's success of causing disruption to radio as well as TV making business of American giants like RCA, and GE. Moreover, scientific discoveries driving technology progress made in the relentless journey of refinement of transistor for making radios and TVs better as well as cheaper also brought Nobel Prize to Sony's R&D team member Leo Esaka in 1973.

There is another such example in Sony's history. In 1960s, Sony's management was observing the progress of electronic image sensor technology leading to the invention of charge coupled device (CCD). Like in the past, Sony licensed electronic image sensor technology producing 8x8 noisy images from Bell laboratory in 1970. Sony kept refining it over a period of 15 years leading to the innovation of portable video camera - camcorder. This innovation journey caused disruption to the film-based imaging industry, making American icon Kodak bankrupt. Here are some important lessons from Sony's such triumphs from technology transfer.

VISION OF SEEING THROUGH THE FOG: Like transistor and CCD, every technology having high underlying potential invariably begins the journey in primitive form, showing faint possibility. Despite having disruptive potential, often such technologies at the initial stage do not support innovations causing substitution effect to incumbent ones. As a result, managers of incumbent firms having successful innovation around previous technology core faces innovation dilemma-as observed by Prof. Clayton Christenson. Business acumen complemented with deep science and technology insights often becomes indispensable requirement to succeed to spot and nurture such potential. Unlike managers of American firms like RCA or Kodak, Sony's two founders had this invaluable capacity.

TECHNOLOGY ASSIMILATION AND REFINEMENT: Replication of licensed technology alone does not support the creation of successes. It's about the capacity of technology recipient for assimilation and continued refinement, which is vital to create the success out of transferred technology. Due to the absence of this capability, technology-transfer-led industrial development agenda of developing countries invariably failed in the past, and runs the risk of facing similar propect in the future.

PRODUCT FOCUS: Although one of the Sony's R&D team members, Leo Esaki, won Nobel Prize for the work of advancing transistor technology, Sony did not sponsor that research for the sake of scientific discovery and technology invention to be followed by commercial innovations. Rather, the reality was other way around. To pursue the mission of offering better radio at lower cost, Sony was pursuing relentless journey of transistor technology refinement, out of scientific discoveries leading to technology inventions and innovation of better performing, less costly transistor. 

PURSUING WELL-CRAFTED STRATEGY: Mr. Murita and Mr. Ibuka also pursued a smart strategy, which has been researched and theorised by Prof. Clayton as the theory of Disruptive innovation. In the absence of this strategy, it would have been impossible for Sony to create such success out of licensed technology, causing even disruption to the iconic firms of the technology providing countries.

Sony's success from technology transfer appears to offer highly valuable lessons to interpret the past failures of many developing countries' initiatives in developing industrial economy-either for import substitution and/or export. Lesson should be drawn in crafting the journey of acquiring technology competence, often through licensing, in building sustainable as well as innovation-centric industrial economy.

M Rokonuzzaman PhD is an academic and researcher on technology, innovation and policy.



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