|
|
| |
BOOK
REVIEW
Sony's uncertain
prospects
Business the Sony
Way: Secrets of the World's Most Innovative Electronics
Giant by Shu Shin Luh
Review by
Gary LaMoshi
 Despite a seven-fold increase in
profits to 115.5 billion yen (US$964 million) for the
business year ended March 31, Sony's shares in Tokyo and
New York fell more than 15 percent in late April.
Investors focused on a loss of 111 billion yen in the
final quarter, indicative of the transition under way at
the electronics giant.
With that loss came a
forecast of significantly lower profits in the current
year - which will suffer from comparison with
Spiderman numbers from 2002 - and a $10 billion
cost cutting plan. Despite Sony's positioning as a
cutting edge technology company, investors are rightly
skeptical about its future.
Business the Sony
Way doesn't sugarcoat the company's uncertain
prospects, even though the paperback belongs to a series
that's previously revealed the "secrets" of business
stars from Richard Branson to Amazon.com. Veteran
business reporter Shu Shin Luh intelligently describes
how Sony turned "Made in Japan" from a term of derision
into a sign of quality in the 1950s and 60s. Looking
ahead, though, what worked to make Sony great isn't
necessarily part of the strategy for keeping it great.
Shu's highlights of how founders Masaru Ibuka
and Akio Morita built Tokyo Tsushin Kogyo (or Totsuko)
from a radio repair shop founded in 1946 into the
"world's most reputable consumer electronics company"
that is "neither wholly Japanese nor entirely Western"
surely warm hearts at Sony's public relations
department. Ibuka was the master engineer. Morita was
the marketing and management genius. In addition to
those skills, each co-founder used links to Japan's
prewar and wartime establishment to supplement seed
capital of less than $1,000.
In Japan's postwar
rubble, Ibuka and Morita moved into territory occupied
by established but discredited and devastated
electronics firms. They combined their contacts and the
notion of employees as family with some very un-Japanese
ideas, including a corporate structure that encouraged
bottom up innovation. PlayStation, currently Sony's most
profitable division, is the latest example of a single
employee spearheading a radical corporate turn. The
Trinitron color television and the Walkman are other
examples of how Sony's open culture gave rise to
blockbuster products.
Ibuka and Morita revolted
against the stodgy conventions of Japanese business in
other ways. Aspiring opera singer Norio Ohga wrote
critical letters to Sony about its first product, the
tape recorder. That won him a position in the company
even while he pursued his performing ambitions; he
became Sony's third chairman. More prosaically, Sony
challenged the traditional supply chain and sought to
control distribution of its products in Japan and
overseas to foster an image of quality.
Sony
thought of itself as an international company long
before it had the size or success typically associated
multinationals. Beyond its Wall Street firsts for a
Japanese company, Sony focused on overseas markets
early, realizing that foreign consumers in general and
those throngs of wealthy ones in the victorious United
States in particular presented key growth opportunities.
Sony's international outlook sent Morita and other
executives on overseas assignments and led to Westerners
joining Sony's board of directors, another first for a
Japanese company.
Ever innovative, Sony has
always eschewed product-trend research. Its designers
and managers contend that by the time a trend emerges
through research, it's too late to develop a product for
it (at least for Sony). Yet Sony's understanding of
consumer behavior and preferences has been a major
strength over the decades. When Sony introduced the
transistor radio to the United States in 1957 after its
rousing success in Japan, US industry analysts scoffed:
in a big country with big houses, who needs little
radios? But, as with the Walkman and its ancestor the
tape recorder, Sony invented a product filling a need
consumers didn't realize they had.
That
understanding of consumers may have failed the company
with the Betamax video-recording system, but it has made
Sony a successful latecomer with VAIO personal computers
(PCs), PlayStation, and Clie personal digital assistants
(PDAs). It even gave Sony the chutzpah to start
making mobile phones.
Paradoxically, Shu notes,
Sony joined the parade in low-margin PCs, PDAs and
phones because it wants to move beyond electronics
manufacturing. Current chairman Noboyuki Idei is known
as the Digital Dream Kid (Ibuka was the Transistor Kid
and Morita was the Walkman Kid). Shu, like many
investors, is obviously uncomfortable with Idei's vision
for reinventing Sony. She deserves credit for
effectively conveying her doubts. But, unlike mere
investors, Shu can't just sell the stock; she needs to
sell readers on the reasons Idei's dream inspires so
much skepticism.
The digital dream vision - as
Shu lays it out from Sony's diagram - envisages
leveraging content holdings Sony Music (the former CBS
Records) and Sony Pictures (the former Columbia
Pictures) to create value chains (Sony eschews the word
"synergy") through its digital platforms. Hence, Sony
needed to create its own PC, PDA and phone to link users
into the value chain.
Shu and the stock market
wonder whether Sony can reinvent itself far from its
manufacturing roots for this task. Efforts to integrate
the company into a dream team haven't been promising,
especially since PlayStation godfather Ken Kutaragi and
his Sony Computer Entertainment group rest uneasily in
the new corporate flow chart. Moreover, outsiders can't
help recalling Sony's $2.7 billion Columbia writedown in
1994. AOL Time Warner in the United States and Vivendi
Universal overseas have failed to find synergies to make
their various media holdings greater than (or even equal
to) the sums of the parts. So far the best Sony can
offer is a Spiderman movie promoting a Spiderman
phone, a breakthrough considering that previous Sony
films regularly featured Nokia phones, Samsung
televisions and Compaq computers.
Those obvious
questions, though valid, miss far bigger issues for
Sony. At the most basic level, Shu accepts Idei's
contention that Sony must diversify beyond its
electronics manufacturing roots for the 21st century.
Yet for 57 years, Sony has been finding or inventing new
consumer needs to satisfy with its electronic offerings.
PlayStation and, before that, the VAIO computer indicate
that the company hasn't lost its core competency. By
contrast, no Sony group that emerged from Idei's digital
dream has made a dime.
Shu also seemingly buys
into the company line that the Betamax loss taught Sony
the importance of controlling content. If Sony owned the
rights to popular movies, that argument goes, then the
company could have created demand for its playback
system by releasing those movies only in Beta. That
interesting, if ignoble, idea sounds all the more
appealing when you've got properties like
Spiderman and Michael Jackson in your stable.
However, no stable can ever be big enough to
hold every horse anyone could ever want. While it may be
Idei's vision to have Sony profit at each step of the
value chain, what happens to owners of Toshiba computers
who want to see the latest Sony Pictures release? Will
the gate swing open only for those with Sony equipment?
The Betamax debacle, and its flip side - the
victory of the Sony-Philips compact-disc (CD) standard -
should have taught Sony the value of standardized open
systems. If everyone could have used the same tape and
chosen whether to watch it in VHS or Betamax, perhaps
Beta would have won. But forcing choices mandates losers
and winners.
As digital opportunities arise,
Sony should be positioned to take advantage of them on
all fronts, no matter who made the phone they're
downloading the song on to. The winners will be the
companies that find ways to satisfy consumers best.
That's something Sony has been doing for more than half
a century without a digital dream. Furthermore, that
success is built on values Sony now dismisses, such as
employment security and the freedom to make mistakes.
In Business the Sony Way Shu sounds a
timely alarm. But the book doesn't tell Sony or its
investors why they need to stir from a digital dream
that's all wet.
Business the Sony Way:
Secrets of the World's Most Innovative Electronics
Giant by Shu Shin Luh, John Wiley & Sons, 2003.
ISBN: 0-470-82097-7. Price: US$17.95, 200 pages
(paperback).
(Copyright 2003 Asia Times Online
Co, Ltd. All rights reserved. Please contact content@atimes.com for
information on our sales and syndication policies.)
|
| |
|
|
 |
|
| |
|
|
|
| |
|
|
|
|
|
