Strategy, Context, and the Decline of Sony

I got the below article forwarded to me.... worth the read

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Strategy, Context, and the Decline of Sony

Sometimes it's useful to be reminded that a great strategy is only great in context. From the early 1980s and into the 90s, Sony's was great. The unrivaled master of the consumer electronics world, its name was synonymous with cutting-edge technology, sophistication, and desirability. People had a collective vision back then of a thrilling yet humane future, and Sony's hyper-capable, slightly fussy gadgets were its clearest expression. It was much more than just the Walkman and the Trinitron—everything the company made was of impeccable quality, satisfying to hold and intricately detailed in its functionality. That last statement is still true today, but everything else has changed. Sony still makes exquisite products, but fewer and fewer people get excited about them.

The strategy address recently delivered by the corporation's new CEO, Kazuo Hirai, earned press coverage that verged on mocking, with The Wall Street Journal notingthat the brand's "once-sterling cachet has deteriorated," and The New York Timesgoing further, placing Sony in "a fight for its life," and accusing it of "an astonishing lack of ideas." Both observations are correct, but they only hint at the underlying question: why is the strategy that once served Sony so well now failing so badly? It's not as if its cameras now take fuzzy pictures or its boom boxes fall apart after three months. And the market for consumer electronics is larger than it's ever been. The Timesarticle rightly observes that Sony's current product line is crowded and confusing, but offering customers a wide array of choices was fundamental to Sony's success in the past. What changed?

Part of the shift is technological. Apple's iPhone—the product often described as getting everything right that Sony got wrong—only comes in one current model and two colors, yet it's tremendously customizable. With so much of the experience coming from the software, not the hardware, consumers aren't using a product designed for them; it was designed by them. This is an especially powerful offering because it replaces the single moment of instant gratification—buying the perfect camera, TV, or phone—with dozens of such moments. Every time they install an app or download a song, users are getting a customized experience with an emotional impact on par with the one-time purchase of a product. This suggests a more fundamental explanation: consumers today care more about the experience, but Sony is still focused on the product. It's gotten trapped by its own past success. In the early 80s, simply delivering technology in a usable form was still the biggest challenge, and Sony got it right before anyone else. It had an astonishing ability to find the next technical hurdle—a brighter TV, a smaller tape player, an integrated camcorder—and leap over it with grace, before its competitors even thought to try. In an industrial, product-oriented economy, this was enough.

Every year saw new products with unprecedented capabilities. As long as it could do something new, we didn't seem to care what kind of experience we had using it. Plowing through 70-page manuals and fussing with Dolby II and Metal/Non-Metal switches was just part of the deal. In the experience economy, these expectations are reversed. Technology is a given, and the question of "what are the specs?" has been replaced by "what is it like to use?" Sony's expertise at making the next great thing has been matched by companies like Samsung and LG, and soon enough, they'll all be caught by increasingly sophisticated Chinese manufacturers. Without modifying its business model, Sony has been left behind by a world that's changed its relationship with technology. What's tragic is that Sony still has all the resources to execute well on a new strategy. Its engineering capabilities are impeccable, its R&D resources are highly developed, and it has massive amounts of high-quality media.

The success of thePlaystation shows its ability to deliver a good experience through an integrated ecosystem of products and content. But the Playstation is now just another platform struggling to keep up with innovative alternatives like the Wii, Xbox, and Kinect, and it's been years since Sony's other divisions unveiled a real game changer. What's missing is the strategic vision to emphasize the delivery of powerful and resonant user experiences. Mr. Hirai acknowledged several times the need for the company to change, but the goals he stated were still hardware focused: sell this many smartphones, that many camcorders. The user is still missing in this equation, as is a sense of what Sony stands for, and what its vision is for an integrated experience. For Sony, it may be too late. For other brands, there may still be room for change. Every industry has its Sony, still trying to get ahead by solving a problem that's already been solved. But every industry also has its Virgin Atlantic, its IKEA, or its Procter & Gamble: the major player that continues to innovate. Even Microsoft has shown signs of sensitivity to user experience in its latest mobile operating system. There's nothing magic about innovation, just as there's nothing magic about technology. Both are hard work, but as Sony has shown, all the hard work in the world won't matter if you're working toward a strategy that was framed for an another era.