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Lessons Learned: Sony Falls from Market Dominance – Loss of Focus Causes Poor Decision Making

By Denise Harrison, Executive Vice President & CO

Strategic Planning Expert

Strategic Planning Expert

For many years Sony dominated the consumer electronics scene: from its ground-breaking Sony Walkman to its Trinitron TVs, Sony innovations in the consumer electronics space were unparalleled.  Now Sony is losing money in its consumer electronics business and is having limited bottom-line success in its entertainment business.

Loss of Focus

From 60,000 feet Sony’s two major business areas entertainment and consumer electronics look like there would be synergies between the businesses.  But when it comes closer to the ground, you find that the high-level synergies are not really the key to success of either business.  What makes a blockbuster hit in the entertainment field is very different from what drives success in the consumer electronics field.  Ideally, they would have been able to leverage the respective set of skills of each unit to differentiate Sony in the market, but, alas, that leverage never emerged.  The entertainment division has had a number of blockbuster entertainment successes – but the success was on the topline and the bottom-line numbers were lackluster when compared to their entertainment business peers.  The consumer electronics business fared far worse – the once market-dominant business is now losing money.  Trying to focus on two businesses with little in common, one often finds that business decisions are made to satisfice: trying to invest so that both do well, but not invest enough so that either one is able to keep its leadership position.

Key Take Away:  When developing your strategy, ensure that your various business units are leveraging a common set of skills/priorities so that you are not trying to spread your investment over unshared and perhaps conflicting goals.

Sony Loses Its Dominance in TVs

Sony’s consumer electronics business long dominated the TV space with its cathode ray tube technology (CRT).  However due to its success in this business, it was slow to move to promoting flat screen technology, even though it was one of the first to develop the LED flat screen.  Instead it wanted to capitalize on its investment in the CRT technology rather than invest in the new technology to meet emerging consumer trends.  By trying to hold onto the old technology and garner as much profit as possible before moving to the new technology, they lost their lead to Samsung, a company who, not held back by a large CRT business, saw an opening to gain market share as Sony lagged behind.

Key Take Away: While an existing business may be extremely profitable, don’t rest on your laurels.  Keep up with market trends and be sure that you are the company that moves business from a profitable core segment rather than one of your competitors stealing your business because you didn’t want to make a change.

Not Capitalizing on New Technology

Not only did Sony not capitalize on its LED technology, but it also did not capitalize on its first-to-the-market status with the e-reader.  Both technologies introduced by Sony were made popular by its competitors.  What happened?  Well, in the one case we know it was holding on to its old CRT business, but what about the e-reader?  Sony made investments in the entertainment side of the business while it let the marketing of these new technologies languish.

Key Take Away: Loss of focus and protecting turf can starve the investment needed to feed the growth of a new technology or product.  Be sure that you are vigilant in assessing how you are investing your resources to be sure you are investing to optimize your total company’s future success.

For more reading how to better develop a strategy to focus on your company’s future potential please read:  Xerox Positions Itself to Succeed in the 21st Century by clicking here.

Denise Harrison is Executive Vice President and COO of the Center for Simplified Strategic Planning, Inc.  She can be reached at  harrison@cssp.com.

© Copyright 2013 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution.