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Business

Sony gets back to basics with real estate foray

Sony headquarters: The company has built its brand on a philosophy of creating new value for consumers.

TOKYO -- When Sony announced its entry into the real estate business in April this year, the move drew flak from both inside and outside the electronics group. Critics took issue with management's decision to push into a realm so far removed from its core electronics business, in which it is struggling.

     Some employees are rumored to have quit their jobs, disillusioned with what they considered to be an ill-conceived plan.

     Kazuo Nishiyama, the president of Sony Real Estate, which began marketing Aug. 1, says he is aware of all such criticisms.

     "Sony has been introducing new business models to find new ways of benefiting consumers," Nishiyama said. This approach is an integral part of Sony's DNA, the new president says, and he intends to use it to achieve the best customer satisfaction in the property business.

     In the U.S., real estate dealers have to represent either sellers or buyers of property. In Japan, they represent both the buyers and sellers, which can lead to conflicts of interest.  For this reason, it is very difficult for real estate dealers to prioritize one side in negotiations.

Sony Real Estate President Kazuo Nishiyama says he is seeking a model that will breathe new life into old business practices.

     Breaking with this practice, Sony Real Estate adopted a U.S. approach, in which both seller and buyer have their own representatives. The company made another break with Japanese custom: Rather than taking a certain cut of the property's sale price, Sony's commission is based on the amount of work the company puts into the transaction. This helps enhance transparency and reduce commission costs, according to Sony Real Estate.

     Nishiyama says he used to consider himself a backroom "aide-de-camp," but was inspired to take on a leadership role by Sony President and CEO Kazuo Hirai. "In addition to engineers," Hirai reportedly said two years ago, "Mr. Nishiyama and others in management and planning should stand on the front line of delivering work that will impress customers."

     Hirai's wish apparently stemmed from a desire to see all employees take a more active role in the business, rather than just sitting back and getting on with the day-to-day bureaucratic affairs.

Repeating history

At the time, Nishiyama would not have dreamed of initiating a new business himself, as he was already working on restructuring and other new ventures under Hirai. But his boss' words lingered in his mind. Nishiyama's thought turned to real estate.

     Nishiyama was no stranger to real estate: His grandfather worked in the sector. On the Japanese real estate scene, there is a great divide between dealers as "information haves" and consumers as "information have-nots." Nishiyama concluded that this was where Sony could come in to create valuable services for consumers, by utilizing information technology.

     When he broached the idea in January, Hirai was skeptical. "Delivering benefits even in an older line of business is what Sony should be doing," Nishiyama said. Hearing this, Hirai responded: "That is exactly what Sony's DNA is made of," according to a source at Sony.

     Sony in 1979 ventured far outside its mainstay business and entered Japan's life insurance sector, in alliance with U.S. insurer Prudential Financial. It came in for criticism at the time.

     To calm critics, then Chairman Akio Morita said, "If you look at U.S. corporations, using their financial and managerial prowess to diversify into all sorts of fields, you can see Sony is not doing anything unusual."

     Traditionally, insurance sales in Japan were handled largely by women. Sony Life Insurance broke with convention by relying on a phalanx of male consultants it dubbed "life planners."

     The gambit paid off and financial services have grown into a major profit machine for the group, picking up the slack created by the slumping electronics business.

     Sony has in recent years rested on its laurels. It lost sight of consumers' true needs and continued to develop elaborate, high-end products that it believed suited the upscale brand -- but which actually only suited the tastes of staff.

     The company's founding philosophy focused on remaining alert to consumer needs, creating new products that would change their lifestyle and eventually contributing to society at large. This philosophy underpinned Sony's stellar brand.

     As the Internet began playing a bigger part in society and changing the way businesses operated around 2000, Sony remained complacent. "We can do whatever we like in the Internet sector by relying on our powerful Sony brand," one executive said. That brand, however, lost some of its cachet as the group stagnated.

     Detractors may scoff, but Nishiyama is really only trying to take Sony back to the roots of its success.

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