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.

Focus.

I visited a startup in Silicon Valley a couple of months ago; for purposes of confidentiality I won't name them. They're executing a business plan that calls for them to develop an online eCommerce service, client software and a new hardware platform. They started from scratch on all of it, and their goal is to get to market about a year after the company was first conceived. They're well funded, but they're obviously not generating any ongoing revenue, and they're still in stealth mode.

The single most important thing that a startup has to do is to focus. There's never enough money, time or resources. The three things that this startup is trying to do--Internet services, client software and hardware--would be big challenges for three startups, but they're trying to do it all themselves.

The irony is that they don't have to do everything they're trying to do. There are plenty of software clients out there that do what they need, or they could contract out for the client's development. The hardware segment they're focusing on is one of the most active and rapidly evolving areas in consumer electronics. There are (or certainly will be by the time they launch) tons of platforms that they could support, but they've deliberately chosen to build their own hardware platform. They could focus on their eCommerce service, which is going to be a big enough challenge in itself.

By trying to do everything themselves, they're scattering their resources and dramatically increasing the risk of failure. Also, by staying in stealth mode for so long, they're running the risk of coming to market with a poor product/market fit. They think that staying in stealth mode will protect them from competitors, but competitors don't need them to understand what the market needs.

The single most important thing that a startup must do is focus. Focusing helps you to conserve resources, pivot more adroitly, and leverage external partners and technologies. It decreases the potential points of failure. The company I just described is one of those "fat startups"; being fat has enabled it to unnecessarily scatter its efforts.