Monday, March 29, 2010

Sony: What were once strengths are now weaknesses

In the late 1980s, I worked for Toshiba and traveled frequently to Japan. The Japanese electronics brands that we know in the U.S. look considerably different in Japan. One big difference is that they were in lots of (sometimes bizarre) businesses. In those days, Sony offered financial services. It sold real estate and ran an Internet service provider. It ran a travel agency. Every big Japanese electronics firm was diversified in ways that would cause you to do a double-take to make sure you had read that sign correctly. Panasonic refrigerators? Check. Hitachi air conditioners? Check.

Today's New York Times has an article on Sony's pursuit of a ..."Bold Success to Match Its Scale." The article starts with a description of a new Sony store in Nagoya, Japan that's largely a clone of the Apple Store design, then talks about how Sony's new 3D HDTVs and partnership with Google are evidence of a comeback. However, it's Sony's very scale that's at the core of many of its problems.

As the article points out, the Sony store is a spin on Apple's successful model (although it can also be said that Apple took its inspiration from the Sony Style stores that started in Apple's backyard in San Francisco.) Sony is already somewhat late to 3D; Samsung and LG are already shipping 3D HDTVs, and Panasonic will be showing its $20,000 3D camcorder at NAB in a couple of weeks. It's building a Sony Online Store that's basically iTunes several years late. The Sony/Google/Intel initiative is following the same course that Apple took a few years ago with Apple TV. Sony's new Playstation Move controller looks like a Wiimote with a dollop of ice cream on top.

The fact is that Sony is in a raft of markets but leads in very few. It's still the leader in broadcast and digital cinematography cameras and camcorders, but that's not a huge market. It lost its lead in consumer HDTV to Samsung and in audio players to Apple. It similarly lost its lead in game consoles to Nintendo and Microsoft, and has never been able to push Nintendo out of the top position in portable consoles. It gave up its early lead in eBook readers to Amazon. It's an also-ran in portable computers and mobile phones. Sony's strong in audio recordings and motion pictures, but it's not the market leader in either business.

My belief is that Sony is trying to do too much. The companies that are really successful focus on a limited number of markets, technologies and opportunities. No company could do everything that Sony does and do it well.

It's time for Sony's top management to start thinking about splitting the company up, not for financial benefits, but to better compete in the segments that it chooses. Sony could divest some of the smaller businesses and focus on the areas of greatest potential. It could give the operating units more autonomy and allow them to make decisions that are best for their business, not necessarily best for the strategic interests of some other Sony division.

Apple succeeds through obsessive focus. Samsung is dominant in a few critical markets, such as HDTV and memory. Research in Motion only does BlackBerry smartphones, and it does them very well. By trying to do too much, Sony is almost guaranteeing that it's going to fail at many things. The company has to develop the discipline necessary to focus on a few opportunities, rather than to grab at every opportunity.
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