Sony: death or glory?

Can blue chip giant regain its luster?

he passing from ofce of charismatic founder Akio Moriata still casts a shadow over the Sony Empire. The once sure-footed innovator is not in crisis, but corporate decline and fall can be a slow lingering death. Certainties have gone. An organization that once shrugged off a gallant defeat in video format wars (a superior Sony Betamax system came second to the more prevalent VHS) is beginning to face up to an uncertain future, one in which it cannot be insulated from the pace of competition. The issues currently being faced go to the very soul of the organization. So when its back is increasingly against the wall, what is its self-image, what are its basic instincts about the ght to be fought, and is the stomach there to take the painful decisions needed to thrive in the next era?

Sonys revenues have stagnated and are in decline. Annual revenues of US$68.6 billion for 2004-2005 are 5 percent below the companys own forecast and the lowest for ve years. Sony continues to have the aura of innovator the legend that is the Sony Walkman persists. Yet where are the new innovations to emerge from, or is Sonys ability to innovate blunted? In having a major success with the PlayStation range in the videogame market Sony were a follower, muscling in on a market dened originally by Sega and Nintendo. The turnaround of movie-maker Sony Pictures from case study in decline to reasonable performer has stemmed more from nancial prudence than any other factor.

Can Sony nd a recipe for rejuvenation?

In its search for a new success formula, Sony has made headlines in appointing a UK-born American in Howard Stringer to take over as CEO. It is a highly symbolic appointment that could be signicant in Sonys move away from ethnocentric insularity into global or even transnational player. Time, if Stringer has time, will tell. Fundamental questions need fundamental answers. At this early stage in his tenure Stringer has identied the following challenges:
B

Whether a narrower product range is needed? Sony has in part competed on the breadth of its offer. However, on the downside, has been vulnerable in key market segments whether competing with Dell in the computer sector or a rejuvenated Kodak in digital photography. How can accountability of people across the company be embedded? Expect to see mistakes being punished, including the errors of complacency. What is needed to coordinate efforts across Sonys still deeply entrenched silos? Coordination continues to be a corporate blind spot of major proportions and of serious implications.

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VOL. 22 NO. 4 2006, pp. 14-16, Q Emerald Group Publishing Limited, ISSN 0258-0543

DOI 10.1108/02580540610657263

 The turnaround of movie-maker Sony Pictures from case study in decline to reasonable performer has stemmed more from nancial prudence than any other factor.

With digitalization of content and new communication channels, the convergence envisaged for decades is a fast-moving reality shaking up whole industries and creating new ones from the ashes of the old. The ght, as ever, is over value where to position to maximize value for stakeholders. This is against a background of erce price competition from lower cost competitors.

Can Sony learn and adapt, and should it?

Apple is a company that succeeded in reinventing itself in consumer markets having apparently been pushed to the margins by the powerhouse that is Microsoft. The ground they have occupied with their revolutionary iPod and iTunes businesses have reinvented a business sector bringing together technology and consumer needs with just the sort of air Sony once demonstrated. The music industry matters deeply to Sony. It trails other sectors as a percentage of the companys revenues (electronics is by far the largest), but it is core to the companys sense of identity. To redene the sector as Apple has done would once have been a natural step for them. That this is no longer the case reveals a lack of condence and drift. An American, Phil Wiser, has been appointed to take on the key role of dening Sonys approach to selling music online. In addition to being non-Japanese, Wiser was founder of the digital music software pioneer Liquid Audio. He will report directly to Stringer. Wiser is already well aware that Apple has already written many of the ground rules of the music sector. Sony did very little in response to the music download phenomena beloved of the Napster generation. They were not alone, but for a formerly bold innovator it was a telling moment. Sony Connect has since been created a follower to iTunes in providing legal music and video downloads. Wiser is seeking to ensure that all Sony products and services in this eld are compatible with accepted industry standards and norms set by others, not least Apple. Inter-operability is the concept to be grasped. It is a counter-cultural worldview within Sony and involves changing the behavior of those leading Sonys efdoms. It is in tune with the new CEO, but these are early days. The central question is whether Sony can learn and adapt. A future focus was a core strength of Sony in Moriatas time and can be again. The PlayStation Portable, a multimedia product of the convergence era, plays to Sonys strengths and may enable them to dene a new sector anew. Lessons from the past may be too painful to learn. Introspection may compound past insularity. It is a risk though, a high risk.

Predictions of Sonys demise are premature

British retailer Marks & Spencer have proven that corporate dinosaurs can ght the threat of extinction from focused, agile competitors. They may provide an unlikely role model for Sony. They too lost wars of many fronts suffering variously against the supermarkets, more niched clothing retailers and home furnishing stores. Their backdrop too was of an industry sector in a stage of ux and transition. Their positioning too was and is one of differentiation not cost focus. Like Marks & Spencer, Sony has straddled many sectors. Like Marks & Spencer their eye has been off the ball in many of them. Sonys positioning had been for convergence, owning

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content and technology, yet pulling the pieces together has proved difcult. What they have found instead is patchy performance. A go-it-alone arrogance is being addressed in some areas. In the music sector inter-operability is understood. In the mobile communications sector the joint venture business Sony Ericsson is performing well. Their compartmentalized structure is still against them, and something more radical than coordination would seem to be needed. The impression given too is of a company that remains product- not customer-focused, and one that no longer is rst-to-market many of its successes have stemmed from being second or even third. Product-focus may be a necessity for the industry-dening innovator, but is wholly out-of-place for the mere follower. Sony may yet turn things around without overly radical surgery. Their PlayStation Portable may be the next Walkman for them. The Sony Connect music and video downloading service may yet make sense of their investments in content this is after all a company famous for looking 100 years ahead, so maybe there will be dividends for their patience. So what is Sony? Are they an innovator or a follower? And what are the instincts of Howard Stringer? Is he a surgeon at heart or a gambler?

Comment
This multiple review article is based upon the following papers. Inside the shakeup at Sony by Brent Schendler uses the appointment of Howard Stringer as CEO to provide overview analysis of Sonys challenges and performance. Saving face at Sony by Adam Lashinsky focuses on developments in Sonys music business against the background of the new dominance by Apple in controlling how music is accessed and heard. It highlights effectively how the potential to take a lead was lost by inaction at a key moment of truth. Caught in its own trap: Sony battles to make headway in the networked world by Michiyo Nakamoto provides another overview of performance, highlighting sales performance, the background of price competition in many of Sonys key market sectors, and the inner walls that seem to hold back attempts to succeed a group. Saving Sony before it falls by David Benady covers similar ground to the Schendler and Nakamoto articles, but is particularly strong in pointing to compartmentalization within Sony as a root cause.

Keywords: Innovation, Leadership, Turnarounds, Electrical goods

References
Benady, D. (2005), Saving Sony before it falls, Marketing Week, March 17, pp. 26-9, ISSN 0141-9285. Lashinsky, A. (2005), Saving face at Sony, Fortune, Vol. 151 No. 3, Technology Section, ISSN 0738-5587, pp. 47-50. Nakamoto, M. (2005), Caught in its own trap: Sony battles to make headway in the networked world, Financial Times, January 27, p. 17, ISSN 0307-1766. Schendler, B. (2005), Inside the shakeup at Sony, Fortune, Vol. 151 No. 6, pp. 46-53, ISSN 0738-5587.

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