A less innovative Sony will face trouble in many fronts

A less innovative Sony will face trouble in many fronts
By Larry Chang 4/22/2013
On February 20th this year, Sony had a sales show for its newest PS 4, but only Dual Shock 4 handle bar and touch plate were available for the public to review. As for the console, it was an” invisible item” (no show).

It was the newest model came to the market since 2006 PS 3 first on sale. The new machine can shorten the down load time for movies and games, can streamline through internet so that players can watch other players how they are playing, and do short messages on their screens. At the same time, players can download the games to their PS Vita.

These new features can also be integrated into mobile phones or pad platforms. However, it only plays on Sony system (PS4) which costs $400-500 and meanwhile game cards cost $40 to $50. It is similar to Xbox and Wii U, but all three used to be so called” Giant Three” are encountering the same problem in Today’s game market. People can get a lot of free games through mobile and internet platforms.

Almost one year ago, Mr. Kazuo Hirai was appointed as Sony’s CEO and he announced that “The time for Sony to change is now”. A year later all we saw was an “invisible” PS4. Compared with a new product show sponsored by Samsung, which was staged at one of the New York City icons, the Radio City Music Hall, to unveil its Galaxy S4, Sony’s looks pale and lack of imagination.

After the World War II, Sony was one of the earliest radio manufacturing companies which adopted semi-conductors to replace bulky vacuum tubes for making radios. It was very successful in U.S. and world markets. Later, its Trinitron TV was even more popular and outsold U.S. TV giants, like Zenith, RCA, and Motorola in the high end and high quality markets. When Sony produced Walkman music player, there was no competition and allowed Sony to monopolize the market at least twenty some years until MP3 and iPod were introduced. Even it was a late comer, PlayStation, the computer game system, became so popular that posted a major threat to Saga DS and Nintendo. It eventually squeezed out Saga and almost Nintendo as well. Then it positioned itself as one of the three giants in the game industry along with Microsoft Xbox and Nintendo Wii. However, the advantage of electronic game business has shifted toward internet and mobile games. The environment is entirely different now,
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which is beyond the big three’s control.

The biggest mistake Sony ever made as quoted in one of New York Times’ articles
was it missed out the opportunity of transforming itself into digital format in its products. Since the passing of Mr. Akio Morita 14 years ago, Sony’s late founder, for some reasons, Sony has lost its leadership in terms of innovation and new invention of marketable technologies. Being one of the best known brands in the world with many successful consumer products and having well placed sales networks all over the world, yet Sony failed to keep up with the competitors in marketing new products. Like Motorola and Nokia, it was defeated by its own successes. Therefore, there is no way Sony can match the latest competitors such as Apple and Samsung.

Teamed with Ericsson, back in early 2000’s, Sony had produced series 9 first generation of smart phones, which had many advanced features consumers liked. Due to poor marketing and lack of sales leadership, Sony let the early advances fall into a limbo, which gave Steve Jobs a chance to introduce iPhone as the only “smart phone” on the horizon. It was after Apple had overtaken Sony’s position as #1 portable music device company. In boxing, it is called one-two punch.

Sony’s another top product was Trinitron TV, a high end and superb quality
model. Even though the price was steep, it didn’t hurt its marketability. It was on the best selling list of televisions for more than twenty years until the new LED and other
flat-panel screens came to markets. Sony initially stuck with its Trinitron model and was slow to catch up with the trend. By the time it produced the new ones with 2-3 times higher price tag, Sony has lost its momentums. Yet, Mr. Hirai maintained in his inaugural speech: TV is a core product of his company and declared that “It is part of Sony’s DNA”.

Sony also made a mistake by producing too many models for its products, for example, there were more than 30 types of Sony TV. Some of them were competing with one another to the point of cancelling each other’s effort off within the group. Like many electronic consumer products companies in Japan, Sony seems running out ideas and let innovation pass it by.

Mr. Akio Morita in his time was probably one of the best known Japanese business leaders around. His fluency in English and broad international business experiences propelled him into the circle of elites in business world. And because his
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communication and sales talent, Mr. Morita helped Sony become one of top brands
which gave Sony the advantage to extend into music and film industries.

At the peak of Sony business successes, operations went beyond electronics hardware. Sony bought Columbia Films and MGM later, so that it represents one quarter of Hollywood’s Big Eight. At the same time Sony expanded its music title business and became one of largest music companies and biggest rivalry to Warner Brothers in Movie and Music productions in America. But it was no smooth sails for the Japanese executives who were ill prepared to get into software business, let alone the highly competitive entertainment industry.

Not for long the board of the Company had to change its top management in order to face all the challenges, including the problem of engineering vs. sales departments. There were many “Silos”, as NYT called it, within the Company that prevented the cooperation among the “semi-independent” departments. Thus, the sign of a crumbling empire was so obvious that a drastic move was deemed as inevitable. Howard Stringer, the head of Sony’s American operations, was appointed to CEO of Sony, Inc. and moved the headquarters to New York from Tokyo; both were unprecedented in Sony’s as well as Japan’s business history. Mr. Stringer was brought in to achieve two goals: to revamp Sony’s innovation capability and dismantle as many as” Silos”, so that better coordination and products can be expected. That was 8 years ago. Even though there were some successes that can be claimed, but it is not enough to turn around Sony’s fate. Since 2008 Sony has posted losses in huge amount and there is no relief in sight.

Furthermore, Japan as a nation has fallen into economy stagnation ( Paul Krugman called it “growth recession”) and there is no GDP growth for more than twenty years.
Its manufacturing power is declining rapidly primarily due to lack of innovation and invention. So it is not just Sony’s problem. Japan also suffers instability of its government operation, social disorientation, and “off-track” foreign policies. To make situation worse, a small number of political leaders try to reclaim Japan’s past glory as an aggressive empire by promoting extreme nationalism. Prime Minister Mr. Abe is one of them, whose remarks and policies even become uncomfortable with American government and social leadership. All these will create a hostile environment to an export oriented economy. A big enterprise like Sony can, of course, not escape the negative impact.

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