INTRAPRENEURSHIP Case Study of the Sony Corporation’s PlayStation by Intrapreneur (Corporate Entrepreneur) Ken Kutaragi

INTRAPRENEURSHIP Case Study of the Sony Corporation’s PlayStation
by Super Intrapreneur (Corporate Entrepreneur)Ken Kutaragi

This is an article about an Intrapreneurial (corporate entrepreneurial) creation of the Sony PlayStation by persistent and driven intrapreneur Ken Kutaragi, who’s international Intrapreneurial Success story has now become one of the most celebrated in business history.

Intrapreneurship has been successfully utilized by corporations, partnerships, and non-profit firms in the US, Europe, Asia, and Africa. The underlying concept and idea of Intrapreneurship or Corporate Entrepreneurship had been present in corporations in the United States, Japan, and all around the world, for many decades, even before the term was used in the mid 1980’s in the mainstream media.

Howard Edward Haller’s (now a Ph.D.) Master's Thesis was published in 1982. Haller’s Thesis was the first academic case study of Intrapreneurship. This, inside the firm, research focused on the “super mini computer” manufacturer PR1ME Computer’s successful Intrapreneurship adventure from 1977 to 1980. The intrapreneurial success of PR1ME Leasing helped the small growing OTC listed parent corporation (PR1ME Computer Inc.) to grow rapidly with strong sales and profits. This growth resulted in PR1ME Computer Inc. becoming listed on the New York Stock Exchange within four short years after launching the very successful Intrapreneurship adventure, PR1ME Leasing.

The terms and basic concepts of “intrapreneur” or “Intrapreneurship” have existed and been effectively utilized in corporations for decades before the popular media put Intrapreneurship in mainstream media. On February 4, 1985 TIME Magazine’s article, “Here come the Intrapreneurs” discussed the Intrapreneurial spirit including the creation of Apple, and Saturn within General Motors, as well as Intrapreneurship ventures at AT&T, Data General, DuPont, and Texas Instruments.
Steve Jobs, Apple's Chairman then and now, used the word "intrapreneurship" in a Newsweek magazine article, September 30, 1985, in which Chairman Job’s shared: “The Macintosh team was what is commonly known as intrapreneurship-only a few years before the term was coined - a group of people going in essence back to the garage, but in a large company.”

Now for the history and successful creation and launch of the Sony PlayStation.
Ken Kutaragi, who was educated as an electrical engineer, joined Sony Corporation in Japan in 1975, at the age of 25. Ken Kutaragi was working in the sound labs at Sony Corporation when he bought his young daughter a Nintendo game console.Ken observed his daughter playing with the new Nintendo game but he was displeased with the quality of the sound of the Nintendo game. Because of his training and experience in electronics Ken concluded that a digital chip, dedicated solely to sound, would significantly improve the quality of the Nintendo gaming system.
Because the Sony Corporation was not involved in computer games, Ken Kutaragi negotiated to keep his job at Sony, while working as an outside consultant (entrepreneur) for Nintendo on their computer gaming devices. Ken developed the “SPC7000” for the next generation of Nintendo games/machines.

After Ken’s success as a consultant to Nintendo the senior executives at Sony Corporation threatened to fire him after they discovered his sideline project with Nintendo. Fortunately for Ken, he had the strong support of Norio Ohga, the then Chief Executive Officer of Sony Corporation. Chairman Ohga personally recognized the value of Ken’s creativity, entrepreneurial spirit, and innovation, so he encouraged Kutaragi’s efforts.

Then with the Sony Corporation CEO’s support (and begrudgingly the rest of Sony’s senior management’s blessing) Kutaragi continued to work as a part-time consultant to Nintendo. Ken successfully developed a CD-ROM-based system for Nintendo.
Then in a life changing twist of fate Nintendo elected not to go forward with the CD-ROM system. Ken Kutaragi saw the market and business opportunity of computer gaming systems for Sony. With his Intrapreneurial spirit, Ken pressed hard to convince the Sony Corporation to enter the electronic gaming business. While most of Sony’s senior management did not consider Ken’s computer gaming device more than a toy and not worthwhile for Sony, Chairman Ohga took a major chance and backed Kutaragi’s plan.

Ken was persistent and he went on to lead the effort to help Sony develop its own gaming system, which became the blockbuster product success “PlayStation”. Ken Kutaragi has been often been referred to as “The Father of the PlayStation,” was well as all related Sony products, including Sony PlayStation 2, Sony PlayStation Portable, and the current Sony PlayStation 3.

Ken Kutaragi has the heart and sole of an Intrapreneur or Corporate Entrepreneur. He fought against corporate “nea sayers” within Sony’s management ranks and Ken literally laid his job on the line at Sony to press for the creation of the computer gaming product within Sony. Ken is created with saying, “I wanted to prove that even regular company employees said no, [and] especially regular company employees could build a venture of this scale with superb technology, superb concepts, and superb colleagues.”

Sony’s "System G" 3-D technology, aka Sony PlayStation, was released in 1994. It immediately outsold Nintendo's Super NES to quickly become the world's top home-gaming platform. Ken’s group within Sony did not rest on its significant laurels, Kutaragi and Sony took another major financial gamble on PlayStation 2. Sony backed Ken’s corporate entrepreneurial (Intrapreneurial) venture by investing $2.5 billion into the PlayStation start-up, and has gone on to build over 70% of the home-video-game-console international market share.

Sony’s PlayStation product line has become the leading video-game platform. The financial payback to Sony has been astronomical. At of the end 1997, Sony’s PlayStation annual sales had grown to $7 Billion, in only first four years of the PlayStation product line existence. Ken’s Intrapreneurial (or corporate entrepreneurial) success has been called one of the greatest new business creations and launches in business history. Since the 1994 PlayStation’s launch, this new Sony product line outperformed both the Sega Enterprises and Nintendo gaming machines.

The Sony PlayStation has taken the clear market share of game consoles, with PlayStation sales of more than 70 million units in the late 1990’s. At that time, one in four United States households owned a Sony PlayStation product. The financial success of the Sony PlayStation was so impressive that by 1998, the PlayStation was providing 40 percent of Sony Corporation's operating profits. The strong profits from the Sony PlayStation line still accounts for about one quarter of the overall Sony Corporation's profits.

Kutaragi was soon rewarded for his significant success as an intrapreneur within Sony. Ken was promoted to be the Chairman and Chief Executive Officer of Sony Computer Entertainment (SCEI), the video game division of Sony Corporation. As Chairman and CEO, Kutaragi built Sony Computer Entertainment group into a major profit center for the Sony Corporation.

In late 1996, Ken was replaced as President of Sony Computer Entertainment and was promoted to Chairman of Sony Computer Entertainment. That was only a temporary situation as Ken retired from that position in 1997 and became the honorary Chairman of SCEI.