Innovation and New Ventures: What ambie Earphones Teach Us About Craftsmanship

summary: "As remote work and online lessons have become more common due to COVID-19, the demand for audio devices such as earphones has expanded alongside the increased use of online conferencing platforms like Zoom.". According to research conducted by Fuji Chimera Research Institute, the growth of wireless earphone products such as AirPods and Beats has been particularly remarkable, and the global market for wireless earphones and headphones was expected to grow to 311 million units in 2020, a 148% increase from the previous year, and is projected to reach 776 million units by 2026 ¹.

In the future, the use cases for these devices are expected to diversify, particularly with integration into smartphones and connected cars. Additionally, the demand for IoT and wearable devices beyond audio equipment is anticipated to increase. In such a growing market, we are confident that this product will be a key component for the future. In such a growing market, this article introduces the product outline, founding history, and product strategy of "ambie," which is attracting attention for its unique value proposition of "listening while listening" without covering the ears.

What is "ambie", earphones that do not block your ears and allow you to listen while listening?

ambie was created by Ryota Mihara, an engineer at Sony Video & Sound (now president of ambie, Inc.). While advances in sound quality and battery technology have increased the number of situations in which earphones are used for extended periods of time, the issues and needs of users have gradually changed, as they sometimes have trouble noticing calls and sounds from their surroundings, or feel fatigue from the noise cancellation function. Safety concerns about the act of plugging ears with earphones/headphones during fitness and transportation have been an issue of debate since the 1980s, when the Walkman was first introduced.

In response to this issue, ambie was developed as earphones that do not block the ears and allow users to listen while listening. The earbuds are worn in the hollow of the ear like an ear cuff, making them easy to put on and remove even when wearing a mask or glasses, and unlike bone conduction type earphones, the sound is physically emitted from the voice unit. By leveraging specialized acoustic technology developed through years of research at Sony, ambie provides a 'listening while listening' experience that minimizes sound leakage and reduces ear strain.

The design of the ambie is also carefully crafted based on the concept of "adding background music to your life. The rounded shape of the hardware and the wide range of color variations are the hallmarks of the product, which is widely supported by both new gadget enthusiasts and fashion-conscious people. When the first product was launched in 2017, bone-conduction earphones were the mainstream when it came to earphones that do not block the ears, and the new user experience and simple product proposed by ambie became a hot topic among digital natives in the earphone market, where many products had multiple functions, and the initial production lot was sold out in 4 days. The initial production lot sold out in four days².

In 2018, the company launched its wireless-enabled product, which ran out of stock within three weeks³ amidst a number of competing products such as AirPods. Then in 2021, the company steadily expanded its product lineup, including the launch of its current flagship product, the fully wireless model AM-TW01, which was its goal from the beginning. At that time, music streaming services such as Spotify and Apple Music were becoming increasingly popular, especially among the digital native generation, and the hardware trend was changing from wireless speakers to small hands-free earphones. It can be said that this market entry strategy was based on an accurate grasp of such backgrounds as the following.

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Open innovation with Sony's acoustic technology

As mentioned above, although ambie was originally started as an internal Sony project, the operating company was established as a joint venture between WiL, a major venture capital firm, and Sony. Since its inception, product planning, development, and sales have been carried out primarily by the WiL business support team, with Mr. Mihara, the founder and head of product development, and others on loan from Sony. This is the second joint venture between Sony and WiL, following the 'Qrio Lock' smart lock. In 2017, it was uncommon for a company to be spun off into a joint venture, making ambie a newly established open innovation company, complete with a transfer system and work rules inherited from Sony. ambie is an open innovation-oriented company that has been newly created, including the transfer system and work rules.

The ambie's product development is not necessarily technology-driven, despite its sophisticated technology, but rather it is a minimum viable product (MVP) to accurately grasp consumer needs. The approach is typical of startups in that they launch their first products as MVPs (Minimum Viable Products) in order to accurately identify consumer needs. On the other hand, Sony's uncompromising persistence, including the creation of more than 100 prototypes in the early stages of product development, is typical of a startup. In developing the fully wireless model, Sony has actively utilized the resources of a traditional large company by following Sony's structural design methods and various technologies, and it may be said that this is one of the best solutions for creating new innovative products from a major corporate group^{4 ^4}.

WiL, which is also a co-founder, is a venture capital company in which major Japanese companies participate as LPs (Limited Partners), and it is a fund with strengths not only in providing startup launch know-how and funding, but also in providing value-up support and human resource recruitment support through its network of major companies. It is a fund with strengths in providing not only startup know-how and funding, but also value-up support and human resource recruitment support by leveraging its network of major companies. This is an example of how Sony was able to create a product that has its roots in Sony's world-class audio technology and has the potential to compete with Sony's existing products in the future through collaboration with a venture capital firm. We expect to see an increase in the number of large companies establishing new businesses and spin-out ventures under similar schemes in the future.

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"Pointed" brand marketing for lifestyle propositions

There are many interesting points from the ambie launch story, not only in terms of product development, but also in terms of brand marketing, but we will mainly mention the following three points.

1. simple product experience and feature set.

The initial ambie was a wired product with a very simple functionality that allowed users to play and stop music, etc. However, the new experience of "listening while listening" and the emphasis on the product design resonated with the digital native generation, and orders flooded in immediately after sales without any special promotion. Despite the lack of special promotion, the product received an overwhelming number of orders immediately after launch, leading to a temporary suspension of pre-orders. As a result, the product caught the attention of famous Youtubers and influencers, and was introduced on Hikakin's YouTube channel (HikakinTV), which boasts one of the top-ranked channels in Japan, and has been viewed 3.3 million times as of the end of July 2022^{5 ^5}. Of course, it depends on the strength of the product and the concept, but if the value proposition is clear, as is the case with ambie, it is easy to generate a chain of empathy through social networking sites, etc., and it is possible to greatly increase the scale of online sales, especially through the company's own e-commerce site.

2. Sales channel selection with emphasis on lifestyle proposals.

ambie's initial sales channels are not electronics mass retailers, but rather its own e-commerce site and lifestyle stores. The reason for not choosing electronics mass retailers, which are usually the main sales channel for Sony products, was to focus on the ease of communicating the new concept proposed by ambie. For this reason, we initially expanded our sales channels to lifestyle select stores such as BEAMS, Longharman, and Tsutaya. Collaborations with Beams and Tsutaya, such as the production and sale of special/limited edition models, have also been realized, and these products have been well received, selling out in advance. As a result of our commitment to storytelling from the early stages of sales, as mentioned above, the product has become a hot topic on social networking sites, and we have been able to increase awareness of the "ear-covering" product genre. Through this process, the company is now expanding its sales channels to consumer electronics mass merchandisers and major e-commerce malls.

3. Partnerships and new use case proposals.

We are also working to create new use cases for earphones by leveraging the unique experience and technology of "not blocking the ears". We are working with Niantech, a company that has been in the news for its development of Pokemon Go, and are challenging the use of ambie products in AR games, etc. While there are concerns about the safety of AR/VR games and tools due to visual limitations, the "ear-covering" ambie allows users to hear external sounds naturally, and to use them with goggles and other devices. In addition to AR/VR, we are also working to provide an experience where users can enjoy watching sports while listening to live commentary at stadiums in the B-League basketball and J-League soccer leagues, etc. We are expanding the range of applications in the entertainment field. It is also a product that is expected to create new use cases not only in the entertainment field but also in various scenes of daily life and in business.

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How major companies are expected to create new businesses

In many cases, it is difficult for major companies to proceed with the development of new technologies and products with a sense of speed due to the high hurdles in terms of expected sales growth and complicated discussions on how to segregate their products from existing sales channels and products. The "innovation dilemma" advocated by Clayton Christensen is a problem that is constantly occurring in the field, and although there are some cases of joint ventures being considered and implemented, there are still few precedents that can serve as a reference. On the other hand, the recent increase in the number of venture capital firms with deep knowledge of open innovation, such as WiL, and the rise of start-ups specializing in the enterprise domain, have made it possible for businesses and services that would have been difficult to launch within a major corporate group alone to be realized with different teams, partnerships, and incentive schemes. The environment is improving for launching businesses and services that might be challenging within a major corporate group, through different teams, partnerships, and incentive structures. We hope that this article will be of some help to those who are struggling with product development and go-to-market strategies that utilize new technologies within major corporate groups, and that it will assist you in organizing your arguments and formulating tentative plans.