Two decades ago, Sony was king of global electronics until Apple came along and almost beat it to death. In this opinion piece, speaker, social researcher and author, Michael McQueen (pictured below), takes a look at the brand’s spectacular demise and its surprising resurrection…
The name ‘Sony’ was once synonymous with innovation. Back in the 1980s and 1990s, the Japanese electronics powerhouse was responsible for producing wonders such as the Trinitron, the Walkman, the world’s first CD player, the 3.5-inch floppy disk, and the first PlayStation and Blu-ray player. Although Sony looked the outward picture of business success in the late 1990s, storm clouds of trouble were already brewing behind the scenes.
One of the key challenges was that as Sony had grown, the company had become fragmented to the point where their technologies and new products were not compatible with each other. None of the departments was able to agree on a single product approach, communicate with each other to swap ideas, or agree on a joint strategy.
By the mid 2000s, Apple had well and truly taken Sony’s mantle of innovation and leadership in the world’s music device market. But Sony was also being buffeted by headwinds on other sides too. Sony’s profitability was slipping fast and the company was losing its dominant grip on the world’s television market, having failed to anticipate the rise of flat-screen TVs.
Although Sony’s PlayStation range continued to flourish, it was a rare bright spot in what was quickly becoming a nightmare scenario. Between 2005 and 2012, Sony’s share price sank from $38 to $18 a share. In comparison, both Apple’s and Samsung’s share prices more than doubled over the same time period.
In non-financial terms, too, the mid to late 2000s were devastating for Sony. In 2002, for instance, Sony had been well ahead of Samsung in the Forbes list of the world’s largest 2000 companies. By 2005, however, these roles had been reversed, with Sony slipping to 123rd, while Samsung jumped to 62nd. By 2012, Samsung had risen to number 12 on the list, but Sony was now 477.
Despite this dramatic tailspin, denial was rampant at Sony in the mid 2000s. Although it was plainly obvious that the Japanese electronics giant was losing its competitive edge, Sony’s leadership chose to live in the past, repeatedly pointing to old sales figures and assuming that its current products would automatically reach the same levels its previous successful lines had.
As Sony entered 2013, things were looking grim. The company had suffered four consecutive years of losses and finished the previous year $6.4 billion in the red. Adding insult to injury, the company’s credit rating was dramatically downgraded.
In many ways, Sony typifies many of the dynamics seen in other one-time giants of innovation like Microsoft and Nokia. The dangers that bureaucracy, complexity and complacency pose to any business or brand cannot be overstated.
But there is light on the horizon for Sony.
In April 2012 new Sony CEO Kazuo Hirai identified that the company’s number one problem was its lack of speed in responding to marketplace events. To address this, Hirai got out his pruning shears. His first step was to end Sony’s decade-long marriage with Swedish mobile phone company Ericsson. Next to go were any Sony-owned non-core companies, including a chemical-products business and a unit that specialised in producing small and midsized LCD displays. Hirai also trimmed Sony’s global workforce by roughly 10 000 employees and streamlined manufacturing processes so that Sony’s TV business expenses were slashed by half. Even Sony’s profitable music-publishing arm looks likely to be sold off, with company leadership suggesting it no longer meshes with Sony’s other businesses.
Speaking of his resolve to revitalize Sony, Kazuo Hirai proclaimed, ‘There is no time but now for Sony to change. We can’t turn away from making painful decisions.’
Early indications are that Sony is getting it’s mojo back and in a big way. The company’s net profit in the second quarter of 2015 nearly tripled, reaching $685 million. Only time will tell, but early indications are that Sony may well be a powerful example of how businesses and brands lose momentum – and how to turn things around when this happens.
Michael McQueen is a bestselling author and multi award-winning business strategist. His most recent book Momentum: How to Build it, Keep it, or Get it Back (Wiley), is a must-read guide to achieving breakthrough growth, unstoppable vitality and sustained success. It is available in all good bookstores and online at www.MichaelMcQueen.net