Will Howard Stringer Save Sony? [WSJ commentary]
By PETER SKARZYNSKI and LLOYD SWITZER
March 9, 2005; Page A20
The real news behind the new CEO of Sony isn't the fact of the gaijin Howard Stringer in the corporate suite. Instead, the change reflects a "perfect storm" that had already been blowing, one that has altered the consumer electronics and media businesses in fundamental ways. Even Sony must change, or be swept away.
The good news is that Sony has selected an executive who brings both a fresh perspective and the experience of seeing the worst of the storm, having righted the ship as president of Sony USA. Only two years ago, pundits were predicting the collapse of the entire music industry and forecasting that movies would follow suit. Freeloading music pirates, shifting consumer needs, ubiquitous broadband connections and resistance to change by the entertainment industry would cause these industries to go the way of the dodo. Yet Sir Howard not only survived, he thrived by dramatically improving the performance of Sony Pictures Entertainment, including arranging a deal to buy the famed MGM movie studio and shaking up Sony Music. Now, he faces five significant challenges in restoring Sony's luster:
• Firstly, media is now being created, distributed and consumed in fundamentally different ways. Inexpensive digital cameras, advanced mobile phones, digital music players, broadband Internet, phenomenal desktop computing power and editing tools have made everyone on the planet a movie producer, a published musician or writer -- even a journalist. At the same time, the movie business parallels the pharma industry where the risk of relying on a few blockbuster drugs is apparent.
• Secondly, Sir Howard has to work against the ingrained culture at Sony that separates product and hardware engineering from the content and entertainment business. Ken Kutaragi's runaway success with PlayStation demonstrates that consumers require a rich entertainment experience provided by both the right platform and the right content. Sir Howard will have to use all of his diplomacy to resolve longstanding tensions between Sony content creators, who want to control distribution, and electronics designers, who want consumers to choose how and where they watch or listen to digital media. And of course, there is the issue of centralized Japanese management style. But Carlos Ghosn has succeeded in turning around Nissan, and Toyota continues to grow by decentralizing decision making while taking a kaizen culture to plants around the world -- perhaps the best model is a melding of Japanese and Western management.
• Thirdly, Sir Howard must successfully leverage a global portfolio of entertainment assets, consumer electronics and a strong retail distribution channel. If any company should have led the emergence of digital music, it was Sony: They own music rights, have the skills to design and cost-effectively build music players, and understand distribution. If any company should have led the rapid penetration of flat-panel and high-definition televisions, it was Sony: Again, they have the right technology and manufacturing prowess, significant movie and TV assets, and an established brand second to none in their industry. Yet in both markets, they have no advantage over competitors.
Sir Howard now has the opportunity to return Sony to its place as one of the world's leading innovators. Initially, Sony has to develop a strong point of view on how the convergence of entertainment and consumer electronics will unfold. Companies that innovate and lead markets in new directions consistently develop foresight into changing customer needs, and rapidly experiment in order to validate that foresight. Famously, Steve Jobs at Apple thought he was too late when the iPod and iTunes were first conceived, but then realized that no one had put all of the pieces together.
• Fourthly, open innovation at Sony to outsiders. A go-it-alone approach to cornering markets through proprietary standards won't work anymore. Sony, the company that invented the Walkman, has had abysmal sales of digital music players because they only supported a proprietary format. Across Sony's global network of suppliers, channel partners and individual consumers, there lies hidden a wealth of ideas and expertise that can be tapped. Take a page from the playbook of P&G's A.G. Lafley, who early on in his tenure set a goal of sourcing at least 20% of innovations from outside the company. Heresy at Sony. Nonsense, Sir Howard.
• Finally, Sony needs focus. There are likely too many initiatives across the company as Sony tries to compete on many fronts. Note how successful HP has been trying to be all things to all people! Learn from GE's Jeff Immelt, who radically reduced R&D projects by insisting that each effort demonstrate clear "line of sight" to a customer need.
All this sound easy? No. But remember, few outside Sony thought Sir Howard could profitably capture the fickle attention of music lovers. Now he leads the only company on the planet which aims to be a leader in hardware and entertainment content, as well as the software to enable next-generation personalized entertainment. Five years from now, if one looks favorably on his leadership, only a few business-world anthropologists will speak to his success in combining Japanese and Western management styles. No, if successful, his real triumph will have been in keeping one of the most valuable brands and companies from irrelevance -- and for making Sony an industry leader again.
Mr. Skarzynski is CEO, and Mr. Switzer a director, at Strategos.
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