A Case Study of Sony's Vaio Laptop

Innovation and Location: A Case Study of Sony’s Vaio Laptop

Yasuyuki Motoyama Center for Nanotechnology in Society University of California – Santa Barbara Santa Barbara, CA 93106-2150 [email protected]

Abstract

This article investigates the question of why innovation has been geographically concentrated. Although many past studies of regional institutions, social networks, and tacit knowledge have provided insight into this question, they have done little to probe the engineering and technical aspects of the phenomenon of the place- rootedness of innovation. This study approaches this question through an empirical analysis of innovation at the micro-scale, a case study in the product development of Sony’s Vaio 505 laptop. It uncovers three specific features in the process of innovation: complexity, the interdisciplinary development of technology, and prototyping and testing. Each of these engineering and technical aspects requires the co-location of the engineers and managers of the innovation project.

Keywords: innovation, location, Japanese firms

Introduction It is hard to analyze such a technical aspect of innovating if the main unit of It has been generally understood that analysis is a region. Inevitably, the corporate research and development concept of innovation becomes generic (R&D) activities have been globalized. at such a broadly defined scale. Transnational corporations often Simply put, regions, as an aggregate operate R&D centers at the cross- unit, do not produce innovation, while continental scale: in Europe, North we may observe a number of America, and Asia. Many of them industrial or social innovations within claim that their global R&D network a region. Thus, if someone speaks of synergistically creates new “an innovative region,” the scale and technologies and products. For concept of innovation loses an example, Sony (2004a) explicitly calls explanatory power. In contrast, this for “a global synergy in R&D” with its article will conduct a micro-level case ten operating R&D centers in the study and assess a particular product world, and Canon’s “R&D centers development, specifically how Sony around the world try to develop developed its first stylish laptop, the creative products and solutions for Vaio 505 in the late 1990s. This in- Canon as a whole” (Canon 2006). depth analysis will reveal three features of creating innovation that A close analysis of Sony, are inherently tied to geography, thus conventionally viewed as a highly providing further understanding of the globalized firm, reveals that over 95 relationship between innovation and percent of its R&D not only occurred regions: the complexity, the in Japan, but more specifically in the interdisciplinary development of southern Tokyo region. Moreover, technology, and prototyping and virtually all of its most famous testing. products - the Walkman, Passport video camera, Vaio laptop, AIBO robot, PlayStation game machine, and flat- Studies in Industrial Clusters and panel screen technology - were created Japanese Firms by development teams located in Japan (Aoki, interview, September 21, Industrial Clusters 2004; Arimura 1999). By analyzing the location of patent filing or initial public offerings of high- This article investigates the question tech firms, a number of empirical of why such geographic concentration studies support that innovation occurs of R&D is critical. Past studies to in geographical clusters (for example, answer this question could be grouped Jaffe et al. 1993; Feldman and Florida into three schools of thought: the 1994; Audretsch and Feldman 1996; institutional, social network, and tacit Patton and Kenney 2003; Sonn and knowledge schools. We will review Storper 2007). This section discusses how each school answered the reasons the conclusions those past studies for concentration and assesses their drew for the reasons for such clusters limitations. In essence, little has been and introduces three different schools investigated on the engineering aspect of thought: the institutional, social of making innovation, which has networks, and tacit knowledge schools. crucial connection to a specific location. In sum, these schools all argued that innovation was more likely to occur if

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Source: Based on Sony (2002) and Sony (2004a), author’s calculation.

Figure 1. Sony’s Worldwide Research and Development Centers.

people, firms, and other regional and The second school of thought institutional actors were clustered in concerning innovation and clusters is close proximity to each other. social network theory, primarily descended from the influential First, the institutional perspective embeddedness theory of Granovetter emphasizes the benefits of a localized (1985). This theory analyzes how learning effect among different people exchange information and economic players in a regional argues that communication is socially economy (Storper 1997; Morgan 1997; embedded. In this context, the sources Maskell 2001; Pinch et al. 2003; Lowe, and reliability of communication are 2009). These studies supported as important as the rich information Marshallian positive externalities that typically comes through trusted shared by a pool of labor and the relationships cultivated by mobility of skilled workers, which participants (Hackman & Morris would result in spin-offs (Camagni 1978). At the same time, judgment 1991; Scott 2000; Capello & Faggian criteria were often highly culture and 2005). More importantly, competition context-specific (Lakoff & Johnson and collaboration between co-located 1980) and shared by people in the firms spurred the dissemination of same social group (Coleman 1990). knowledge and the interactive learning process (Porter 1998; This network concept has been applied Antonelli 2006). in an economic context. Empirical studies have found that local-based business networks produced higher

Motoyama 3 entrepreneurship and innovation innovation in the form of goods and levels in northern Italy (Brusco 1982; services would result if firms Piore & Sabel 1984), the Silicon Valley competed and collaborated or if people (Saxenian 1994), and the art and met and shared tacit knowledge. This culture sector in New York (Currid project starts from a hypothesis that 2007). This school of thought the mechanism to create innovation is emphasizes the role of face-to-face substantially more complex, and the interaction as the richest form of complex process has deep geographic communication, necessarily requiring roots. This analysis on the process of co-location among participants innovation is critical because (Storper & Venables 2004). innovation in contemporary society is in good measure an engineering and The third school of thought is the tacit technical matter. If we miss the knowledge theory, based on the work analysis on the technical process, we of Polanyi (1966) and Nonaka and may be missing the fundamental Takeuchi (1995). In an information nature in the making of innovation age of relatively easy access to explicit and its linkage to the location. and codified knowledge, innovation depends on tacit knowledge derived To investigate the specificity of from direct interpersonal contact and innovation and the process of making the dynamic interaction between it, more in-depth examinations can codified and tacit knowledge emerge by focusing on activities of (Malmberg & Maskell 2002). While economic actors. This article focuses codified knowledge can be transmitted on innovations at the concrete micro- in the form of books, academic papers, level and analyzes the product and websites, tacit knowledge does not development activities of a firm. Only travel easily because it is best shared after differentiating which engineer by people with similar norms, codes of was involved in what kind of communication, and routines (Howells innovation can you start to analyze 2002; Gertler 2003; Zook 2004). Thus, the process of generating a specific knowledge and innovation clusters in innovation and understand its specific regions with a shared business connection to geography. culture and especially within the same organization. Innovation at Japanese Firms As we examine the innovation However, the focus of these streams of activities conducted by Sony, we have literature was on how much to keep in mind both the advantages innovation was observed in a given and disadvantages of studying a region, but not on how each innovation Japanese firm. It is advantageous to was made. The three schools measure study Japanese firms because there innovation by proxies, such as the are many successful ones in number of patents, public offerings of innovation-intensive industrial sectors ventures, as mentioned earlier, or, with an engineering orientation, such more broadly, the growth of a regional as machinery, electronics, and high-tech industry as in Silicon Valley computers. Sony is a well-known (Saxenian 1994). Here, the literature player in the electronics and computer rarely specified what was innovated sectors, sectors that provide a good and how this occurred. In other words, sample in exploring the specificity and the past literature has assumed that the process of making innovation.

Motoyama 4 Second, Japanese firms have a high divisions. This insight echoed Fruin’s international presence, and conduct (1992, 1997) findings that there sales, distribution, and manufacturing existed a close interaction between the at the global level. Thus, the production and R&D units. Second, geographic concentration of Nonaka and Takeuchi (1995), and innovation-making activities contrasts Shibata and Takeuchi (2006) argued sharply with the global manufacturing that the strength of Japanese firms and sales operation; this dichotomy came from the organizational practices indicates strategic reasons for such of sharing tacit knowledge and concentration. promoting the dynamic interaction between the tacit and explicit At the same time, what this project knowledge. uncovers could apply only to Japanese firms due to their specific cultural and These studies, however, provided few organizational characteristics. Indeed, indications of how the uniqueness of past studies in business, economics, the innovation system among and political economy have identified Japanese firms shapes the geography several unique features of Japanese of innovation. It is unclear if the close firms. Gerlach (1992) and Lincoln and supplier relationship enforces Gerlach (2004) revealed the stable geographical proximity or whether networks of business relationships, such close relationship allows the including cross-shareholding and distant yet effective coordination supply networks within a keiretsu between networked firms. Similarly, group. Aoki (1988) and Aoki and Dore the close labor-management relations (1994) discussed the aspect of the may suggest the operation of unique labor system in which unions, manufacturing and R&D divisions in often organized at the enterprise level geographic proximity or in distance. In instead of the industry level, and other words, the geographic analysis management have maintained a of the innovation system in Japanese relatively harmonious relationship firms is a vacuum in the past studies. based on the life-time employment and So far, the only implication for seniority-based wage system. geography comes with the concept of the sharing of tacit knowledge, which In addition to these general suggests the face-to-face interaction characteristics of Japanese firms, two between innovators and the proximate groups of studies discussed the unique environment. patterns of Japanese firms related to innovation. First, Fransman (1999 One notable exception in the study of p.159-160) specifically analyzed how geography of innovation by Japanese the labor-management relationship firms came from McCann and Arita affected the innovation system. Under (2002), who reported that the extreme the life-time employment system, secrecy of the semiconductor industry firms assumed that their employees made the location of R&D units and would not quit, and thus it gave firms trial plants unrelated to the regional an incentive to invest in and train cluster of firms often discussed by the employees. It further promoted job economic geography literature. In rotation within the company and other words, firms collaborated based information sharing between the on their strategic alliance, in which marketing, production, and R&D

Motoyama 5 supplier firms were located both product was the Vaio 505 laptop within a region and outside the region. created by Sony. This product provides an appropriate focus for a case study In sum, the literature above suggested for two reasons. First, it was an that the unique behavior of Japanese innovation-intensive product. Its new firms would not necessarily result in features and miniaturization required the geographic concentration of a large set of technological challenges, innovation activities. Therefore, and the development team had to findings from this study may not be overcome them by generating various constrained only to Japanese firms, innovations. In other words, the Vaio while investigating how and how 505 was not a laptop marginally much those findings will apply to non- improving on its predecessors simply Japanese firms requires another set of with a faster processor or larger research. Here, it is important to limit memory. Second, it was a successful the scope of this project: This is product with a significant impact on exploratory research to uncover the the market. The Vaio 505 innovation linkage between the process of was highly regarded because it made innovation making and geography. An Sony one of the major players in the in-depth case study is an effective PC industry in both Japan and the methodology to disentangle such U.S. Before this Vaio model, Sony had relationships. At the same time, this captured only one percent of the project will not aim to generalize market share in laptops (McWilliams findings to all types of innovations by 1997). After its introduction, this Vaio all types of firms. Nor does the project laptop became the top-selling model, intend to argue that the findings and its following models pushed would persist forever. This project Sony’s market share up to second in presents a snapshot of a particular the market, 25.2 percent, falling only industry and a case study of a behind Compaq (CNET News 2001). Japanese firm. Nonetheless, this article can contribute as a first step to This study uses a corporate historical analyze how the engineering and case study approach pioneered by technical aspects of innovation making Hounshell and Smith (1988). There could be tied to geography. were two data sources for the analysis: (1) an archival and document search, and (2) company interviews. The Investigating the Specificity of author started with building an Innovation archive from journalistic reports, business magazines, and corporate Research Design websites discussing the Vaio laptop This article will examine innovation at making. Since Sony is an the “nuts and bolts” level and will use internationally regarded firm, there a case study of specific product were plenty of materials covering development. An analysis at the specific product development processes product development level is and organizational dynamics in detail. advantageous because it is a highly Then, the author conducted semi- visible form of innovation, in contrast structured interviews; the project to less visible innovation in the leader was the best source of manufacturing process or information (Ito, interview, September organizational form. The investigated 24, 2004), while other project members

Motoyama 6 were also informative (Endo, May 7, for Video Audio Integrated Operation 2004; Sakaguchi, July 21, 2004; Aoki, and explains Sony’s ambition to September 21, 2004; Tambata, integrate PCs, telecommunication, September 24, 2004; Iguchi and music, and movies. Sony started to Miyano, December 4, 2004). Both produce its first Vaio series in desktop, sources were critical and MiniTower, and notebook forms in complemented to understanding the July 1997. While it was introduced in-depth process of making the simultaneously in the U.S. and Japan, product. Michael Dell dismissed it as “the invisible invasion” (McWilliams 1997) Sony Before the Vaio 505 despite the fact that Sony spent $20 The Vaio was not the first PC created million on advertising. In sum, the by Sony. The company’s history of PC earlier history of PCs at Sony was production goes back a few decades. repeated failures despite its high Sony first produced a transistor-based ambition. The challenge was calculator, SOBAX, in 1967. It enormous for Sony, and it had to seek eventually pulled out of the calculator different business models to emerge in business due to fierce price the PC market. competition from Sharp and Casio, two other Japanese producers The project leader for the Vaio 505, (Kawaguchi 2003 p.66). In 1982, Sony Susumu Ito, joined Sony in 1982, and collaborated with Panasonic and became involved in the development of introduced the SMC-777, based on the the company’s earlier PCs. As Sony open MSX standard developed by exited the market each time yet Microsoft, a project led by Nobuyuki maintained its ambition to re-enter Idei. A former CEO of Sony, he the market, Sony assigned him to aggressively started the Vaio business continue to work on the development after 1996. Sony had a string of of peripheral devices for PCs. In 1994, failures include the NEWS, a Ito was stationed in Mountain View, workstation, in 1987, the AX in 1988, California, working on the and the IBM-compatible QuarterL in development of mobile terminal 1993 (Sony-EMCS 2005). Despite devices in collaboration with Apple, these failures, Sony stayed in the PC Motorola, and AT&T. At the start of industry by OEM to Dell and Apple in 1996, a Sony executive called him the 1990s. Yet it was a long-standing back to Japan to develop a new PC wish of Sony to produce its own brand with the Sony name (Ito, interview, of PCs. September 24, 2004).

Progress in information technology in The Development of the Vaio Concept the mid-1990s brought another The Vaio project officially started in business opportunity for Sony. October 1996 with six members: Ito, Household consumers in Japan the chief engineer; three electrical started to use PCs not only for engineers; one software engineer; and traditional word processing, but also one designer. 1 Five engineers were for graphics, music, and games. This opened up the possibility of audiovisual use for PCs, and Idei 1 considered this as the company’s next In general, engineers deal with technical matters, while a designer is in charge of the primary market. VAIO is an acronym overall, exterior appearance. However, this

Motoyama 7 affiliated to the Design Division I of they have come to be known but bulky, Sony IT Company (Goda 1999) at unattractive, and semi-portable. Ito Sony’s Shonan Technical Center calculated that there would be a located at Fujisawa, 45 km (28 mi) market for non-office use. The team southwest of its headquarters in developed the design principles of Central Tokyo. They systematically portability and aesthetics that a model reviewed the market feasibility of a was smaller, thinner, lighter, and a potential product in comparison with different color than competing models those of its competitors, especially (Tambata, interview, September 24, Toshiba and IBM, by discussing the 2004). types, prices, and functions of the products already in the market. They Instead of the conventional A4 size tried to find some originality to (236 x 297 mm), they decided to scale position the Sony product, which was down to B5 size (208 x 259 mm), not easy to achieve. The conventional approximately 15 percent smaller. competition strategy in the PC market They figured that scaling down to at that time was the bigger, the better. notebook size would substantially The main issue was the size of the improve the portability of the PC (Ito, memory (Dynamic Random Access interview, September 24, 2004). Ito Memory, DRAM) or the processing proposed a thickness limit of 23 mm, unit (Central Processing Unit, CPU). in contrast to the previously available Sony did not produce its own CPU and 37.6 mm; and a weight limit of 1.35 kg had to rely on Intel. Ito and others had to enhance portability, instead of 2.4 learned that the fastest PC with the kg (Sony 1997). In contrast to the biggest DRAM would be obsolete in normal dark-colored, plastic exterior, just six months (Ito, interview, they decided on a shiny, magnesium September 24, 2004). Additionally, body surrounding all parts of the with fierce competition from Korean laptop (see Figure 2). and Taiwanese DRAM producers, competition over the speed of DRAM This concept of a slim and light laptop would be unprofitable. The discussion came not only from the five engineers went over a month in 1996, and the of the project, but also from a designer, most important idea to come out of the Teiyu Goto, who contributed discussion was the type of concept for substantially in this process of concept the Vaio they should not pursue: A development. Goto, who had been a new PC should not compete on the chief designer for Sony’s PlayStation, basis of the bigger the better (Ito, was positioned at the Creative Center, interview, September 24, 2004). a design unit of Sony located at the headquarters in Shinagawa in central Instead, they searched for other Tokyo. While Ito and Goto had qualities in which they could compete. communicated about the project since Toshiba and IBM produced laptops, late 1996, Goto had to visit the but these were still relatively Technical Center at least once a week expensive, normally $3,000 each or to participate in the discussion (Ito, higher, and marketed mostly for office interview, September 24, 2004). use. And they were not true laptops as Although the concept of a new product could be described in one phrase, division of labor is not rigid, as we will uncover “portable and good-looking,” many in this article. other ideas were incorporated. Thus, it

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Source: Sony (1997).

Figure 2. Sony’s previous laptop,the PCG700 Series (left), and the updated model, the Vaio 505 (right).

was important for Goto to follow what Figure 3). There were always some other concepts were debated and members of the project team in this rejected. For all the project members, room discussing sophistication and knowing the final meeting decision stylishness of the design, use, and was not sufficient, and understanding functions. This discussion had to be the past debates was critical. Then, face-to-face and focused on a prototype. Goto could share the concept more Otherwise, ideas and counter-opinions deeply by going through what exactly could not be clearly discussed or other members meant by “portable” effectively compared. It was almost and “good-looking.” As a result, they impossible to rely solely on oral, non- had to conduct all these design visual communication. discussions at the Technical Center on Communication via telephone was a face-to-face basis. From the early undesirable because it could create stage of the project, Goto suggested confusion (Tambata, interview, that clock frequency of CPU would not September 24, 2004; Endo, interview, be important, and the slimness could May 7, 2004). be the best attraction for consumers (Goda 1999). Information had to be shared by all members in real time. A model design As the team confirmed the concept, from a previous day was obsolete, and they started to convert it into an time for a catch-up meeting would be a actual design. The period from waste. Additionally, people’s ideas January to February 1997 was the would not come out smoothly if any peak of such brainstorming meetings. interruption occurred. For example, if They repeatedly drew designs, created one member had missed a meeting the prototypes made of paper or previous day and started to ask why polystyrene, discussed the results, and how the rest of them came up scratched it all, and started over. They with a different idea, that would designated a special meeting room for require a review of the past this project, where they placed information and delay producing ideas updated designs and prototypes (see for the next step (Tambata, interview, September 24, 2004). Therefore, the

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Source: Sony (2003).

Figure 3. Drawings of laptop design ideas (left)

and the polystyrene prototype (right).

brainstorming exercises required all friendliness in the development involved members to be present all the process of the camcorder, the addition time. During this peak brainstorming of this experienced staff was critical. period for two months, Goto came to This was in contrast to Ito and other the Technical Center almost every day original members, who were dedicated (Ito, interview, September 24, 2004). electrical engineers (Ito, interview, September 24, 2004). They were aware Component Development of that an engineer’s interpretation of As they consolidated the design, the style and functionality could vastly project members started a search for differ from consumer expectations. available components. In February This was an effort by Sony to 1997, the project team added four incorporate as much market-forward more members: two electrical feedback as possible even in the engineers, one mechanical engineer, designing and production phases. This and a new director. While the chief incorporation of different expertise engineer, Susumu Ito, led the Vaio required the formation of a project project previously, the new director team with people of different with experience in managing Sony’s backgrounds and continuous camcorder projects now supervised the interaction among them. project, and Ito could concentrate on the engineering aspect of the Vaio. Sony’s policy was to procure components from its affiliated firms, As the name Vaio states, it integrated but the project team did not hesitate audiovisual (AV) functions into PCs. to procure components from the This integration would include the use market (Ito, interview, September 24, of music and audio files in a digitized 2004). In relationships with suppliers, format (software) as well as the direct they were willing to collaborate and ink to a camcorder (hardware). even to invest. For a modem Recruiting AV-oriented engineers was connection, the team looked for a essential. Moreover, since Sony thinner connecting device. The heavily emphasized the user- conventional size for a modem

Motoyama 10 connector was more than 25 mm These dynamic processes of component square. However, as the thickness of procurement show that relationships the Vaio was set at 23 mm, they had with suppliers were complex. It was to shrink the telecommunication not as simple or static as Sony telling device. The solution proposed by Sony suppliers what to make and suppliers was to eliminate plastics in the providing the specified components. connection for the top and bottom of Instead, the relationships were the rim, and the plastic on the left and dynamic, as Sony and its suppliers right sides would still support the continued to discuss, produce, modify, connection. This component had been and re-evaluate components. Under previously procured from a specialized such circumstances, it was more parts supplier, and now the supplier convenient to use suppliers that were had to make changes in their close to Sony’s Technical Center production line. Accordingly, Sony (Sakaguchi, interview, July 21, 2004). invested approximately $2 million in the supplier, located in the southern One component that the Vaio team Tokyo metropolitan area. adhered to internal procurement was the exterior body, made of magnesium. The collaboration with suppliers It was Sony’s first attempt to produce extended to a complicated level, such material in such a thin shape. involving a potential competitor in the They believed that the style provided industry. The Vaio 505 monitor was a by this skin would be a critical part of liquid crystal display (LCD) supplied the product, and did not want to by market-leading Toshiba, Sony’s outsource its production. However, target competitor in laptops. LCDs after making a prototype, the design were becoming popular in the late team found that the cost of producing 1990s and widely used for laptops. At the exterior was considerably higher that time, the market demand was for than expected. Then, they had to a larger screen size, since a larger one consult immediately for cost feasibility. was easier to see. In contrast, the Vaio Ito rushed to the headquarters in 505 required a smaller size, 10.41 Shinagawa to discuss the subject with inches, in lieu of the conventional 12- the executive board. Eventually, Ito inch or 14-inch size. In addition to size, and the executives agreed that Sony considered it necessary to have a economies of scale would likely solve monitor with higher resolution. Vaio this cost issue. That is, if the Vaio 505 was intended to integrate PCs and were to sell as well as expected, the multimedia, and its expected uses cost per laptop would decrease included watching movies, graphic sufficiently (Aoki, interview, design, and games. The resolution of September 21, 2004). This kind of conventionally available LCDs was not unexpected turnabout in the sufficient, and Sony requested that development project meant that Toshiba develop a new model. Toshiba proximity was essential not only responded, supplying a smaller, yet between engineers but also between higher resolution monitor to its the engineers and the executives at competitor. Toshiba’s lab was located the headquarters. in Kawasaki, only half an hour train ride from Fujisawa, an easy The design and allocation of commuting distance for attending components was not a simple spatial meetings. matter, but required mechanical and

Motoyama 11 other functional coordination. In one small scale of the Vaio. The volume of instance, the arrangement of space taken up by the Vaio 505 had to components required the technique of be reduced to 40-60 percent of the miniature engineering, as well as previous model, which meant the creativity. Most laptops were equipped heating density of many components with a lithium battery, which was a soared inside the laptop. In a PC, the conventional cylindrical shape and 20 heat mainly comes from the CPU. A mm wide. With the new Vaio’s 133 MHz processor could increase the thickness limit of 23 mm, the location temperature by 49 oC. Similarly, a of this battery became a major issue. A large scale integrator (LSI) would laptop must have a keyboard thin increase the temperature by over 50oC enough to be about 5 mm, yet that and the hard disk drive by 12oC would leave less than 18 mm left for (Koyanagawa et al. 2000 p.10). the battery space. The non-keyboard Moreover, the engineering team faced space must be allocated for other key an even bigger challenge as they components of a PC, such as a decided to remove a cooling fan to motherboard with CPU, video slots, make the body lighter and thinner and and the hard disk drive. The Vaio eliminate fan noise for aesthetic team considered requesting reasons. To solve these heat problems, development of a new thin battery they first had to create effective from the Sony’s battery division, aerodynamics. In what Sony called the which was highly competitive in the “progressive cooling system,” they market. However, they realized this carefully designed ventilation holes so development would be substantially that air would be efficiently brought costly in terms of time and budget. into and out of the laptop without a fan. They used a computer simulation Interestingly, the solution came not model to calculate the most optimal from engineers but from the designer. structure of the body. Second, they set Goto proposed that, contrary to the up heat pipes, which were low in conventional wisdom, the battery did conductivity and could transport not need to be located under the main heated air efficiently outside the body. Instead, it could be placed at the machine. While the computer junction of the main body and the simulation was useful, they ultimately monitor. The conjoining part could be had to create a prototype to see how a cylinder shape and could be as thick much heat reduction each as both the main body and monitor arrangement brought (Iguchi, combined. The project leader interview, December 4, 2004). Two immediately accepted the idea, and mechanical designers described, or the Vaio 505 received a distinct complained about this lengthy process cylinder joint at its spine (Figure 4). of designing, prototyping, testing, and redesigning as follows: Another challenge involving the size and product dimensions was the “With a variety of choices in balance between the miniaturization materials for the body, methods and the management of technologies to strengthen body structure, related to thermodynamics and and location of components, it software engineering. A combination was a process of creating a of several types of engineering prototype, abandoning it, and technologies achieved the desired recreating it a few dozen times.

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Source: Sony (2004a).

Figure 4. Backside of the Vaio 505.

Some days, I was feeling that Miniaturization, a specific type of we were finally getting closer to innovation, involved both electrical the optimal body structure and and mechanical engineering as well as device location. However, material science and simulation people [other project members] engineering. It was a trial and error, kept providing me new cut and try process. A change in one information, such as that there component caused snowballing was a better material available, changes in other components. or a request to improve cooling Focusing upon these two mechanic efficiency, and so on. I had to design engineers can allow us to abandon my designing again, observe the complex coordination in again, and again. (Laugh.) I real time. tried to be optimistic and told myself repeatedly that we could Information technology was critical for achieve a better and lighter the design process, but did not always laptop” (Asawa, cited in Sony provide solutions. Human creativity 2004). superseded the efficiency of machines, and higher density came from rule- “Asawa-san [the mechanical breaking. The Vaio team used design leader] and I computer-aided design (CAD), and coordinated all the time. When there were rules that every registered the design of the body changed, component needed a certain space we re-designed the between other components, [mother]board. After the board determined by component suppliers. adjustment, we remade the The suppliers determined this needed body. It was a very close and space based on the standard use of a lengthy coordination” component. In reality, not the entire (Ishikawa, cited in Sony 2004b). space was necessary as suppliers had suggested, and the Vaio engineers redesigned with an intentional overlap

Motoyama 13 in the space. This overlap could reduce the project had stood, what kind of unused space and achieve higher problems they faced, and how they density. However, it required close tried to solve previously but examination and hands-on placement unsuccessfully. Understanding such of every component (Miyano, interview, context in the project was critical, and December 4, 2004). A mechanical the progress report on a regular basis engineer checked that no overlap was needed. would cause any significant problem. It was an extremely tedious and Toward Mass Production lengthy process to go over every one of Preparation for the whole production the 1,100 components of the Vaio, but coordination, including that with ultimately effective. suppliers, would normally take four months for PCs (Komamura, cited in Coordination took place not only Sony-EMCS 2004b). To launch sales in within the project group, but also November, Sony started to bridge between different divisions. From design and mass production in July. April 1997, they started a project Sony outsourced its Vaio production progress meeting every month. This entirely to Sony’s Engineering, meeting invited key persons from six Manufacturing, and Customer Service divisions: design, material, product (EMCS), its wholly-owned subsidiary quality, applied technology, software located in Nagano, three hours application, and production. They met northwest of the headquarters (See in Shinagawa, the corporate the left map on Figure 5). It was headquarters as well as the location of Sony’s strategy to separate corporate four divisions: material, product functions into two organizations: Sony quality, applied technology, and IT Company concentrated on product software application. The production development, marketing and sales, division was located in Nagano, a while Sony EMCS focused on mass three-hour distance from the production and customer services headquarters, but the personnel (Sony-EMCS 2005). commuted to Shinagawa for every meeting. The executives at Shiangawa Sony bridged design and production by did not get involved in this meeting closely coordinating the production directly. However, the project leader engineers from both the factory and made a separate progress report to the design sides. This coordination executives by sending a meeting memo. required sharing of knowledge for both “It was important to continually sides, and Sony facilitated by update the progress to both the exchanging personnel between the executive board and related divisions. technical center and the production We [the design team] of course line. “Prototype making is always communicated with a specific division different from mass production, and on an ad-hoc, as needed basis, but the the job of design engineers at the monthly meeting facilitated our factory is to narrow the gap between coordination process” (Ito, interview, the two. From the production side, on September 24, 2004). Meetings on an average, I made business trips [to the ad-hoc basis when problems arose design division] three times per week” were not sufficient, and continuous (Suyama, cited in Sony-EMCS 2004a). communication was important to set The production engineers from the all involved parties understand where factory side had two missions. First,

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Source: Based on interviews by the author and Sony-EMCS (2005).

Figure 5. Map of Vaio 505 development: Japan (left), and an enlargement of the Tokyo area (right).

as stated, they had to confirm that As more configurations for software what was specified by the design team applications were needed, an would be produced on the production additional 30 software engineers line. Additionally, they had to joined the Vaio team at the core coordinate the production processes, location, Fujisawa. To incorporate the including procurement of specialized audiovisual dimension, the Vaio 505 parts from suppliers. contained graphics, map navigation, sound and multimedia audio programs, The higher level of miniaturization in totaling 33 software programs (Sony the Vaio 505 meant that higher 1997). The software engineers worked precision in locating components on the development, coordination, and required a careful production process. adaptation of various programs. (Ito, This precision was particularly interview, September 24, 2004). important for smaller components. The design engineer had to test the Mass production started in October production line a few times to 1997, a month before the product was carefully confirm that the production introduced to the market. By this line at the factory could produce stage, most of the design and software exactly what the design team wanted engineers at Fujisawa were no longer (Miyano, interview, December 4, 2004). actively involved in the project, and Excluding the design prototypes in the the major players at this time were earlier concept development phase, the production line in Nagano. The the formal pilot production took place Nagano site produced both the Vaio twice: once to test the mold making laptops and the AIBO, a robot dog and the other to test mass production (Sony 2004c). There were 1,550 (Ito, interview, September 24, 2004). employees at this site, and about half

Motoyama 15 of them were estimated to work in the Analysis of the Process of Generating production of various Vaio units. Innovation

There was collaboration with Sony’s This close-up analysis of innovation at overseas R&D labs, from LSI Systems the concrete, micro-level product Lab of San Jose and Telecom Europe development can provide insights into of Brussels. However, their role was how the process of innovation is limited to local adaptation, such as organized and how it is linked to a translations of brochures and labels, specific series of locations. This section and configuration of software synthesizes and discusses three programs. The Vaio team decided that features of the process of generating the model would be universal except innovation based on Sony’s Vaio case: the interface, and the local adaptation complexity, the interdisciplinary required only at the language level. development of technology, and Therefore, there was no extra role prototyping and testing. expected for overseas R&D labs. First, modern product development is The final intrafirm coordination took about managing complexity. The Vaio place between the design team and the 505 laptop consisted of about 1,100 marketing division. Since 1997, Sony components. A new product with new had delegated the marketing function features came with new components, to its subsidiary, Sony Marketing, which could either be produced in- which was in charge of marketing and house, such as the magnesium exterior sales of all Sony products in Japan and the aerodynamic cooling method, (Sony Marketing 2004). Ito, the project or by suppliers, such as the LCD by leader, presented the product concept Toshiba. In either case, it required a and targeted consumers for the Vaio series of changes and innovations. 505 to the marketing staff. Goto, the designer, explained the theme of the Moreover, it was not simply the exterior design. This sharing of number of components, but the product image was critical in order for coordination among them that made the sales staff to establish effective the product development process even sales points. more complex. The Vaio team developed many components After the initial release, the Vaio 505 simultaneously, yet had to make the captured 10 percent of the laptop new laptop function as a system. In market in Japan within two months. such circumstances, the changes to This was a significant share for just components snowballed. The one model, i.e. not by the laptops of mechanical design engineers described the company as a whole. Furthermore, the reconfiguration in the location of it opened up a new market for laptops each component whenever a new in non-office, household use and even material was introduced or changes to in office use for style-conscious people. other components happened. Thus, The ethos of portability and aesthetics this coordination and management was well received in the market. It was a lengthy and complex process. thereafter created a competitive rush as other firms, such as Toshiba, IBM, Second, innovations often took place and Matsushita developed this laptop with an interdisciplinary approach. market with their own style. The best example was when the Vaio

Motoyama 16 team faced limited space for the but a product with a new concept and battery, on its face a matter of a style. The product design in a chemical engineering, and the issue digitized format presented by CAD on was solved by a simple method a computer screen hardly meant proposed by the designer. Additionally, anything because the engineers had to as the Vaio team decided to remove a evaluate what consumers would “feel” cooling fan, an important mechanical if the product was sitting next to them. component, they replaced this function This prototyping did not necessarily by introducing new material from the require the real laptop, but could be field of chemical-physics and by substituted with paper or polystyrene configuring the most optimal models. However, it was critical for all thermodynamics via simulation the core project members to be present technology. This shows that with a prototype to discuss if it was innovation did not necessarily happen “good-looking” or which model was in a single trajectory. In other words, better in what sense. The concept of higher technology was not necessarily portability set the weight limit, but better. An electrical engineering this information of 1.35 kg (roughly 3 problem was not necessarily solved by lbs.) was less relevant compared with gathering together more sophisticated carrying the real-size laptop with real electrical engineers. Solving the weight to check if it was indeed technical challenge was not easy, but portable and desirable. In sum, this could take place in multiple directions. prototyping and testing was a process Therefore, it was the availability, that was space-constrained and interaction, and management of required the physical presence of the several technical fields that shaped product and of the core project the new product. Sony had to manage members. a pool of highly skilled labor in electrical, mechanical, and simulation engineering as well as chemistry and Conclusion physics. This interaction was most effectively possible at close proximity, Through the micro–level case study of so that the engineers and researchers product development, this article has could freely exchange, test, evaluate addressed the critical engineering and their knowledge, and recreate. In technical processes of making addition to the technical side, the innovations that were tightly and development project as a whole inherently linked to a specific incorporated the company’s marketing geography. By focusing on the three division and also the executives. In an features of innovation examined emergency, the understanding and here—complexity, interdisciplinary support from the executive board was development, and prototyping—this critical. Thus, coordination between study has demonstrated that the various divisions of the company was innovation associated with Sony’s Vaio essential. 505 laptop was a messy, lengthy, and unpredictable process. Furthermore, Third, prototyping and testing was the engineering and technical features fundamental for the development of of innovation making were tightly the laptop. Especially with this Vaio located to the specific location. This 505, it was not just a laptop meant to new product was not the creation of function with improved specifications, one engineer who designed it from

Motoyama 17 beginning to end. Rather, nobody discuss the understanding of “good- knew what the final product would be looking,” the project members had to at the beginning, and what was be co-located and they had to develop required was flexibility during the a prototype. That is why tacit project. “Learning by doing” is a knowledge is hard to transfer across concept in organizational studies to distance. encourage the creation of innovation (Young 1991; Irwin & Klenow 1994; Remote communications through Jovanovic & Nyarko 1996). The Vaio information technology, conference development case could more precisely calls, and videoconferencing played be described as “learning only after some role in the development process, making mistakes.” In short, the but they did not become the main product development is not a highly mode of coordination between project rationalized or centralized process, but members. Ito, the project leader, an organic and interacting process. stated, “we shared CAD (Computer With this lengthy, complex Aided Design) in the Intranet, but coordination process, a firm had to that meant little in terms of prepare, ironically, for unplanned development, but sharing the most situations. The best solution was to updated design. When we tried to have human and capital resources in create new ideas, new design, or new proximity, and this was specifically something, we needed to meet and why the colocation mattered. discuss” (Ito, interview, September 24, 2004). Findings from this research can While these findings provide new further supplement such a statement. insight in economic geography, the We have already discussed the results of this study also complement example of the exterior design and the the three schools of thought discussed nuanced meanings of “stylishness.” earlier. The study has observed the Moreover, when the communication agglomeration linkages that exist became iterative, and several people between Sony and its suppliers. Social were involved, remote communication networks and face-to-face technology was not an effective mode communication were important among of communication. Other engineers the development team members when expressed: “It [remote communication] they discussed the meaning of the just does not work” (Tambata, product concept and the stylishness of interview, September 24), or “That’s the most updated model. The process not the way how things work” (Endo, of prototyping and testing can interview, May 7, 2004). The particularly bridge the theory of tacit engineers further pointed out that knowledge with innovation in a something would be missed via remote regional context. The concept of communication technology, which “portable and good-looking” came with changed “the dynamics and richness of a highly specific expectation of what meeting” (Sakaguchi, interview, July was meant by “good-looking.” At the 21, 2004). same time, such understanding was not codifiable and was somewhat For engineers, who had to create the vaguely shared in the project best product, the most critical matter members’ minds from past experience was how effectively they could reach and further elaborated in their the best solution. Whether it was discussions during the project. To possible to have a meeting via remote

Motoyama 18 communication technology was of little relationship between the main concern. It might have been technical center in Tokyo and the technically possible to exchange ideas overseas R&D centers. We have via remote communication technology; already observed that the role played if it would have been inefficient or by Sony’s overseas R&D center in the taking a longer time to reach the Vaio 505’s introduction was highly solution, such communication was not limited to the translation of brochures desirable. To manage the complex and labels. Additionally, the overseas project, engineers chose the most R&D centers of Sony were effective mode of communication, substantially small in scale; each which in this case was the face-to-face center usually had fewer than thirty meeting. In contrast, if the engineers or researchers, sometimes information flow was not needed to be only a few of them, while the main iterative, remote communications technical center had over two could fill in the process in product thousand (Endo, interview, May 7, development, such as to update the 2004; Harryson 1998). Furthermore, latest design or to provide notification with such small scale, each overseas of the conclusion of the previous R&D center was designed to develop meeting. only a specific and narrow technical field, such as the TV-video interface These findings differ from the past system in San Jose, California, a debates about innovation as an software application for CD-ROM in interactive process whose primary Singapore, and broadcasting concern was how innovation occurred equipment and systems in the UK via technology-push, market-pull, or a (Arimura 1999). Other functions mixture of both (Lundvall 1988; provided by the overseas R&D centers Lundvall 1992: Morgan 1997 p.493). included minor local adaptations, such Those studies further discussed the as modifying the electric voltage and interaction among different economic changing colors and designs. Thus, players in a region, such as between there was little overlap and firms, suppliers, and users. However, synergistic collaboration between the these interactions were still seen from main technical center and the the macro-perspective of innovation overseas centers, and the relationship within a region. In contrast, the between them was clearly interacting process found in this hierarchical; the main technical center research was a micro-level aspect initiated the concept and led the major within a product development project. component development, and the Each stage and even each exchange of overseas R&D centers contributed in knowledge was interactive and shaped the peripheral and the last-stage the course of the product and developments. technological development. This study was an in-depth exercise to It is important to consider how this investigate the specificity of particular case of geography of product innovation. While the employed case development is situated among the study is an appropriate methodology global operations of Sony. Although for such analysis, we have to clarify this Vaio development presented only what the case represents. In the past, as one case among a number of Sony Schumpeter (1926, p.66) provided an products, it provides a snapshot of the insight in providing a typology of

Motoyama 19 innovations: (1) a new product, (2) a aspects of innovation-making and the new market, (3) a new method of location. production, and (4) a new organization. While most examples in this micro- The Vaio case represents the new level study were taken from in-house product, more specifically in the R&D- development, the findings can apply to intensive consumer electronics and the broader agglomeration at the computer sector. This article does not metropolitan level. The tight and aim to generalize these findings to complex coordination would be other types of innovations, and further required between firms, and hence, study is needed in the other areas. the proximity would be an enabling factor. Indeed, we observed examples Second, we have to consider what the of inter-firm coordination with Sony case means more broadly. The Toshiba for the monitor and with a objective of this project was to small supplier for the connector of the examine the engineering and technical modem. aspects of innovation making through Sony, a Japanese firm, and not to Lastly, it is important to note how this argue that Japanese firms had specific study framed the concept of a region. geographic patterns of innovations. In The past agglomeration school this sense, this case was an questioned why a specific region, say appropriate sample among the leading Tokyo or Silicon Valley, was important players in the industrial field. for a firm or a collection of firms. In contrast, this study questioned why Third, we additionally need to proximity was important for a firm consider how Sony behaved in and its product development. In this comparison with other Japanese firms. sense, the approach to conceptualize a Comparing Sony to the uniqueness of region was different, while the Japanese firms discussed by the past geographic coverage of both studies literature reveals that Sony did indeed coincided at the same physical space, behave like other Japanese firms. the Tokyo metropolitan region. The Sony had a life-time employment past agglomeration school perceived a system. Although Sony was not region as an organic entity that affiliated with traditional keiretsu, the produced innovations. In contrast, industrial conglomerates, Sony had its this study observed the proximity own networks of firms. Arita and between the development center, the Fujita (2001), and McCann and Arita design center, and the headquarters, (2006) found that Sony was typical of as well as the ‘stickiness’ between other semiconductor firms, like them (Markusen 1996, 2003), and Toshiba, NEC, Mitsubishi, Fujitsu, concluded that a region was a place in Rohm, Oki, and Sanyo, where each which the stakeholders could maintain core firm organized a vertically- the tight and dense coordination integrated network structure. between them. This coordination took Therefore, the findings from this study place on a daily and ad-hoc basis to provide direct implications at least for solve any number of problems that the other Japanese firms. Moreover, stakeholders faced, and they executed despite these limitations in scope, this such coordination within a article can contribute as a first step to metropolitan area. link the engineering and technical

Motoyama 20

Acknowledgments Sakaguchi, Kei. General Manager. Corporate PR Department. The author thanks all interviewees for Corporate Communications. Sony. their time, and Matt Eisler, Beth July 21, 2004. Chapple, and Toddie Downs for their input. All errors are the responsibility Sanakata, Keita. Assistant Manager. of the author. Corporate PR Department. Corporate Communications. Sony. July 21, 2004. List of Interviewees Tambata, Ippei. Designer. HIGP. All interviews took place in Tokyo, Design Center. Sony. September 24, Japan. 2004.

Aoki, Masayoshi. General manager. Toyoda, Mami. Human Resources Corporate Headquarters. Sony. Department 1. Sony. September 20, September 21, 2004. 2003.

Endo, Eishi, Ph.D. Assistant manager. Yokote, Hitomi. Senior Manager. Energy R&D Department. R&D International Public Affairs. Division. Energy Company, Sony. External Relations Department. May 7, 2004. Sony. July 21, 2004.

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