Can Sony Reinvent Itself?

Bruce Rayner, Contributing Editor, Enterprise Efficiency OEM | 4/13/2012 | 35 comments

Bruce Rayner
Japan’s major corporations will be reporting their 2012 fiscal results in the next few weeks, and the word on the street is that it’s not going to be pretty, especially for the top electronics OEMs. As a preview, Sony and Sharp both warned earlier this week that their losses for the year, which ended March 31, will exceed previous projections. On Thursday, Sony’s CFO said the company’s loss will total $6.5 billion, the worst in company history and more than double its previous estimate of $2.9 billion.

A couple of months ago, I blogged about the sorry state of Sony, Nintendo, NEC, and others after they reported massive losses for the quarter that ended December 31. All were hit hard by the Thai flooding in 2011 that disrupted the supply of key components, and a strong Yen that makes Japanese products more expensive in foreign markets has eroded overseas earnings. The Yen is currently at a near record high against the US dollar.

In recent years, Japan’s electronics sector seems to have lost its technological edge to foreign innovators such as Apple and Samsung and a slew of up-and-coming competitors from China. Adding to their business challenges is the general malaise the country is feeling as it deals with the aftermath of the March 11, 2011 earthquake and tsunami and the Fukushima nuclear disaster. There’s a dark cloud hovering over the country.

The question now is: What steps will these former electronics powerhouses take to turn their fortunes around? Whatever they are, they better be bold.

Sony’s new CEO Kuzio Hiria provided a glimpse Thursday into the company’s plans to return to profitability. Hiria took the helm from Howard Springer, Sony’s first (and perhaps last) foreign CEO, earlier this month. “The time for Sony to change is now,” he said at a news conference.

But rather than laying out a bold and visionary plan for a reinvention of the company, Hiria spoke mainly of tactics. This included a focus on three existing businesses -- smartphones and tablets, cameras and camcorders, and games -- and a move away from the company’s unprofitable TV business. In addition, he announced plans to invest in medical equipment and cut 10,000 jobs.

In recent years, Sony lost its lead in TVs to Korea’s Samsung, which invested heavily in state-of-the-art mass production of flat-panel screens to become the dominant player in the market. Sony capitulated and entered into a joint venture with the Korean powerhouse to manufacture LCD screens but ended up pulling the plug late last year as the plant was not competitive.

Now Sony is banking on the Xperia smartphone to bring it back to life. Hiria said the Xperia will be the new hub of a networked environment that connects to a host of Sony devices, including the Sony PlayStation, and provides access to Sony’s vast inventory of music, video, and game content.

That’s a tall order as Sony is currently an also-ran in the smartphone market and faces a crowded field of financially strong, highly innovative competitors including top-ranked Apple and Samsung, not to mention a slew of Chinese companies that are looking to capture a piece of the low-end smartphone market. It’s going to be an uphill battle, for sure.

Of course, Hiria’s announcement was just the first salvo aimed at calming the markets and laying out the long-term plan for bringing the company back to life. If it’s to succeed, Sony -- and indeed, all the other major Japanese electronics OEMs -- needs to deliver products that will wow the world, game-changers on par with the Walkman of the 1980s. They all need to reinvent themselves. And that’s a tall order.

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keveend   Can Sony Reinvent Itself?   4/20/2012 1:45:48 PM
Re: interesting
I know that this is off topic but is the number 4 thing superstitious? What do you mean by "quite unlucky if you ask me?"
catalyst   Can Sony Reinvent Itself?   4/17/2012 7:23:01 PM
Re: Beta vs VHS?
@David Wagner:

That said, in those comparisons above, my TV is a Samsung and my game console is an Xbox, so maybe you're on to something.

The only thing Sony in my home is the KV-34XBR910 and an even older Walkman. Even to this day this 34-inch CRT TV has the best video quality compared to the very best LCDs and plasmas.
catalyst   Can Sony Reinvent Itself?   4/17/2012 7:17:49 PM
Re: Beta vs VHS?
@LuFu:

Still, the brand SONY carries a lot of residue value that gives them a buffer and some time to recapture their panache.

I agree. The value the Sony brand carries is residual. ;-)
catalyst   Can Sony Reinvent Itself?   4/17/2012 7:16:29 PM
Re: interesting
@keveend:

Is there any particular reason why number 4 is unlucky?

The number 4 is the same pronunciation as the Chinese character for death or "to die". Quite unlucky if you ask me.
LuFu   Can Sony Reinvent Itself?   4/17/2012 12:28:14 PM
Re: Beta vs VHS?
@catalyst - Can't disagree heartily about the state of SONY's product quality, mix, and innovation. Part of their problem stems from their business diversification in trying to develop content (Playstation gaming, music, movies/Columbia), telecom, hardware, computers, retail stores, and a bunch of low margin consumer electronic products. They definitely lost their edge. It didn't happen overnight but over time.

I'm also not optimistic about Hirai's plans to turn the company around, more uninspiring rhetoric from a beaten down company rather than a passion call charged with confidence. Still, the brand SONY carries a lot of residue value that gives them a buffer and some time to recapture their panache. Other companies have done it - Apple, IBM, GM, Xerox, Yahoo...wait a minute, those last two aren't good examples. Good luck Sony.
David Wagner   Can Sony Reinvent Itself?   4/17/2012 11:36:14 AM
Re: Beta vs VHS?
I don't know catalyst. In consumer products like TVs people usually think of either Samsung or Sony. In video games it is Xbox or Sony. Granted, they've struggled in the computer market and that colors our perceptions here, but I think they still have a strong brand in the consumer market.

That said, in those comparisons above, my TV is a Samsung and my game console is an Xbox, so maybe you're on to somehting.
keveend   Can Sony Reinvent Itself?   4/17/2012 8:59:52 AM
Re: Can Sony Reinvent Itself?
Plus like the article said, Sony products are quite expensive in foreign markets. I remember I was expecting to buy some electronic goods from Singapore when I went there last year. Sony bravia televisions are a lot expensive than other brands like Samsung, Philips, Panasonic etc. This discourages their customers. No wonder Sony is coming down.
keveend   Can Sony Reinvent Itself?   4/17/2012 7:55:32 AM
Re: interesting
Yes. I have noticed that too. Is there any particular reason why number 4 is unlucky? Is it only prevalent in Asian countries? While I was in Malaysia, I noticed that instead of number 4 in the elevator, number 3A was there. I was wondering why?
catalyst   Can Sony Reinvent Itself?   4/17/2012 12:06:50 AM
Re: Beta vs VHS?

LuFu:

True, it's the power of the brand that gives them any chance.

To me the Sony brand stands for very little: overpriced, low-quality, overly technical. Sony still manages to manufacture a few gems here and there, but it is the company's complete lack of expertise in software, UI/UX, etc. that make those incredible hardware boxes difficult to use, prone to failures, and expensive.

The question for them is identifying their next wave while dealing with the burden of residue products while fighting off competition from Korea and China companies.

This sounds to me there's an assumption that Sony is still at the top with Korean and Chinese companies clawing their way up. If that's true, that is no longer true. Korea's Samsung has already beaten Sony and it is Samsung that will be fighting off competition from Japan and China.

I do want Sony to reinvent itself, but I don't think the measures announced by Hirai is enough. And the focus is still hardware and not on the total experience.

catalyst   Can Sony Reinvent Itself?   4/16/2012 11:55:23 PM
Re: interesting
@batye:


maybe PS4 will bring luck to Sony :)

Unfortunately the number 4 is an unlucky number... maybe PS5. :-)


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