There are basically two kinds of technology companies

September 7th, 2008 - 12:10:05 PM:

Very often Sony is criticized for using technology that is sometimes different from what the competition uses. In discussions like these, it doesn't take long before Sony is pictured as an evil empire. This is my take on this.

There are basically two kinds of technology companies. The first kind invents and develops new technology, either when there is no existing standard, or when existing standards are deemed inadequate. Some of this new technology is adopted by the industry and becomes an industry standard, and sometimes even a formal standard. But not all of the new technology is successful and may not find widespread use. So there's a risk for these companies to invest money in a technology that in the end may fail. But when it turns out to be successful, there's the incentive of becoming market leader. As a rule of thumb, if you are first on the market, you can grab 60% of the market short- to mid-term, and you can keep 40% market share long-term. Furthermore, you can get a large share of the market when the prices and profits are still high, before the technology becomes a commodity product and prices fall.

The other kind of companies does not take the risk to develop their own technology. They wait until one standard is established and has spread throughout the industry. Then they jump on the bandwagon and release their own products using established technology. These companies do not risk money lost in development, but they also never have the chance to become market leader.

So when one company has created many failed standards in the past, you will find – when looking closer – it also often has created many successful standards. This is just a sign that the company is active developing new standards. It's pushing technology rather than just following it.

Sony is one of the former companies. Many people dwell on their failed or not so successful technologies, like Minidisc, Betamax etc., but overlook their successful technologies, like Walkman, Compact Disc, Trinitron and – as it looks now – Blu-ray. Also many people like to dismiss their standards as “proprietary”, while overlooking that competing standards are just as proprietary, meaning that they are not an official standard or were only made an official standard after the fact. For example, many like to call Memory Stick “proprietary” and SD Card “standard”. This is simply wrong. SD Card was an invention of SanDisk and Infineon and was developed “into the blue” just like all the other flash memory formats. By the way, SD Card is also another example that a dominating standard is not necessarily better technology. Just look at how MMC and SD are unnecessarily incompatible, and why it was necessary to change the standard – incompatible, of course – to support cards larger than 4 GB. It's similar with CompactFlash, an invention of SanDisk, based on PCMCIA (later called PC-Card), which is again based on IDE. Lots of proprietary technology there.

In the end, most of these discussions boil down to brand wars. Technology is bad when it's invented by Sony, and it's good when invented by someone else. This does not help anybody.

Very often Sony is criticized for using technology that is sometimes different from what the competition uses. In discussions like these, it doesn't take long before Sony is pictured as an evil empire. This is my take on this.