Thursday, November 25, 2010

Alas, poor Stringer: Regime change underway at Sony?

Bloomberg News reported earlier today that Sony is seeking a new President. Sir Howard Stringer, who currently is Chairman, CEO and President of the company, is relinquishing the President position, and the primary candidates are senior executives at Sony who came out of the Engineering organization. According to Bloomberg, the new President will most likely succeed Stringer in running the company.

Few people would look at Howard Stringer's reign at Sony as being successful. In the almost 5 1/2 years since Stringer took over, Sony's stock has declined 25%, while the overall Nikkei 225 average fell half as much. Sony has lost market leadership in almost every major product segment that it once dominated: Apple took over the portable audio player business, Samsung took over in televisions, and Nintendo regained its market leadership in videogame consoles. Sony, which was once the company that others copied, found itself copying its competitors in order to survive; the Playstation Move is a slightly-improved copy of Nintendo's Wiimote, and Sony's digital camera business has had to copy Canon. Sony's prosumer and professional camcorder businesses are copying Panasonic's designs. For all of Stringer's boasting about Sony's leadership in 3D, both Samsung and Panasonic delivered 3D HDTVs before Sony, and Panasonic is shipping 3D digital cameras and camcorders before Sony.

To understand why Stringer was brought to Sony, you need to understand events starting in the late 1970s. In the so-called "Betamax" case, members of the Motion Picture Association of America went to court to block sales of Sony's Betamax home videocassette recorders, on the grounds that they would facilitate content theft. Losing the case would have not only forced Sony to withdraw its Betamax recorders from the U.S. market--it would have crippled future product opportunities. Sony won the case in the U.S. Supreme Court in 1984, but the company realized that it had to become a major player in the media business in order to insure a reliable supply of content for its devices.

To get into the movie business, Sony acquired Columbia Pictures from Coca-Cola in 1989. In addition, Sony had long been partners with CBS Records in the Japanese market, but in 1987, Sony acquired CBS' worldwide music business, and then Bertelsmann's music business in 2008. These moves made Sony one of the world's largest motion picture and music companies, as well as a major player in U.S. television syndication.

Howard Stringer joined Sony after a 30-year career at CBS (one of the four major commercial broadcast television networks in the U.S.,) where he spent most of his career in the News division before running the entire company for seven years, followed by a two-year stretch at an ill-fated joint venture called Tele-TV. Stringer was appointed President of Sony Corporation of America in 1997, made a corporate board member a year later, and was appointed Chairman and CEO of Sony Corporation in Japan in 2005. Four years later, he took over the President position as well. Sony's goal in bringing Stringer to Sony's corporate offices was to try to strategically unite the company's electronics and media businesses.

Stringer came to Sony with two strikes against him: First, he was a gaikokujin (foreigner), which is a problem with any Japanese company, and second, he had no engineering background or experience, which was a huge problem at Sony, a very engineering-driven company. Sony's board was perhaps hoping that Stringer would be to the company what Carlos Ghosn was to Nissan Motors. Ghosn, the Brazilian-born engineer who was at the time in charge of engineering at Renault, was sent to run Nissan by Renault (Nissan's largest shareholder) to try to rescue the company. Not only did Ghosn turn Nissan around, he became a Japanese folk hero in the process.

Ghosn moved to Japan, learned how to speak fluent Japanese, and communicated with the Nissan team with the universal language of engineering. He adapted to the organization and culture, and gained the respect of both his team at Nissan and all of Japan. Stringer, on the other hand, has no engineering background, and it's unclear if he understands consumer electronics any better now than he did the day that he joined Sony. He never learned Japanese, kept his primary office in New York City and his family in London.

It may have been unrealistic for Sony to put the expectations on Stringer that it did, but it also should have seen the problems well before it did. Without a respected manager running the company, individual divisions within Sony went in their own directions. Stringer took over the President position in 2009 to try to pull the company back together, both strategically and tactically. He was largely successful, but has been unable to provide any long-term strategic blueprint to the company's engineers. As a result, Sony is largely "rowing in circles" rather than pursuing a strategic plan to regain market leadership.

Americans who know Howard Stringer speak very positively about him, and he's well-liked in the media industry. Stringer wasn't a bad manager, but he was the wrong person for the job. Had he understood Sony's culture or Japanese culture better, he might have demurred at taking the Chairman and CEO positions. The good news is that, while Sony may never recover leadership in all the markets that it once dominated, it still has a very strong engineering organization that's capable of developing great products. It just needs someone running the company who can tell it what those great products should be.
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