Brainfood: Behind The Spin

THE DILEMMA

by
Last Updated: 31 Aug 2010

It's 1980 and Sony unleashes its chunky Walkman on an American public in the grips of disco fever. After a slow start, Sony scores a massive hit with the world's first portable music listening device. By 1989, more than 50 million Walkmans had flown out of its factories and the Sony brand became synonymous with market-creating innovation. But fast-forward to 2005 and Sony has lost its crown. In September, the group said it faced an operating loss of Y20 billion (£100 million) for the financial year - its first such deficit for a decade.

THE SPIN

Sony's first non-Japanese CEO, Welshman Sir Howard Stringer (a former CBS producer), took command earlier this year after the failure of predecessor Nobuyuki Idei's 2003 turnaround plan. In September, Stringer announced a restructure involving 10,000 job losses, a reorganisation of Sony's operating businesses and a focus on champion products. 'We need to focus aggressively on being the number one consumer electronics and entertainment company on the planet,' he said. 'We must be like the Russians defending Moscow against Napoleon, ready to scorch the earth to stay ahead of the invaders. We must be Sony United and fight like the Sony Warriors we are.'

THE STRAIGHT TALK

Sony has been running to catch up with the market. Apple's iPod, Samsung's flatscreen TVs and cheap Korean digital cameras continue to push Sony out of its core consumer electronics market. Macquarie Securities analyst Hideki Watanabe told the FT: 'It has not been able to meet market needs with its products.' This problem is partly Sony's silo culture, where business units are run separately, discouraging agility, cross-fertilisation and anticipation of consumer needs. Stringer is tackling this, giving engineers the space to produce the kind of ideas others are having - like the iPod (of which he has said: 'I'd rather walk the streets of Tokyo naked than wear one').

THE VERDICT

Will Sony be able to turn a profit in time for its 60th birthday party next year? First, it must recapture the innovation it was known for. There is hope. Its PlayStation 3, due out next spring, ushers in Sony's supercomputing Cell technology. It is also investing in Blu-ray Disc, the next-generation DVD technology. But it will take a while for the Japanese icon to recover.

As with the Russians in Napoleon's 1812 campaign, a strategic retreat is necessary for ultimate victory.

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