By Denise Harrison, Senior Consultant
Sony exemplifies how a company must continually refocus its resources in order to optimize its future potential. An earlier article: Know When to Hold ‘em and When to Fold ‘em – Knowing when to get out of a core business is key to being successful in the future discussed how Sony was exiting and de-emphasizing some of its core business to focus on areas with higher potential. As the strategy is evolving, we see that Sony is continuing to re-focus its resources to regain growth and profitability by broadening its gaming division to focus on entertainment. It will be adding complementary services and changing its focus on Sony-only hardware to becoming hardware indifferent.
How to expand the successful Game Business Unit?
- What is a complementary service to the gaming division? If one thinks broadly about home entertainment, one not only thinks of games, but also TV, in particular, internet TV. Sony has already successfully partnered with Viacom to distribute 20 Viacom channels, including Nickelodeon and MTV over the internet for TV viewing. Presumably using a “gaming” channel, Sony would stream games over the TV.
- In addition to streaming TV, Sony intends to stream its games to smart phones and tablets. By taking this step, Sony is emulating IBM when it moved from being a computer hardware provider to an information systems provider. When IBM made its move, it had to become indifferent to the hardware that their customers were using. This was a difficult step for IBM to take. It will be a difficult step for Sony, also. Its PlayStation 4 is the industry leader and may become the standard game console similar to the way VHS beat out Betamax technology. By learning from the Betamax experience, the PlayStation 4 has made it easy for companies to design games for this console. Still, to take the next step, Sony must become indifferent to the hardware if it wants to dominate the game streaming business.
It is difficult for a company to re-invent itself. Sony has already taken many steps to re-focus its resources, but many more will be needed for a successful turn-around story.
Is your company struggling to develop a clear focus on what will enhance its future potential? Are you bogged down trying to revive legacy businesses that have slim margins when the market is valuing more recent products and service offerings? There are several strategies that are effective in addressing legacy businesses:
- Maintain: Continue to maintain your market share while investing in new areas of the business. This strategy is used when the legacy business is still healthy.
- Contract: Get out of the products/services/customers that are no longer profitable, but continue in the areas that have a good return. This will shrink your core, but keep the areas that are profitable while you build in the new, more attractive business segments.
- Milk/Harvest: Gently coax resources out of the business; no new investment and use the cash generated to invest in the new areas.
- Withdraw: Get out of the legacy business altogether, and truly focus your resources on the new areas. A good example of this strategy was recently executed by GE when it sold its Major Appliance division to Electrolux. (See article: GE Spins off Major Appliance Division – What Can a Small Company Learn from this Divestiture?
What is right for your company?
A thorough strategic review of your business using a structured process will enable your senior management team to select the right strategy to optimize your company’s future potential.
If you would like to learn more about how a structured process would work for your firm please contact me: Denise Harrison; 910-763-5194 or firstname.lastname@example.org.
For more information on how to take your strategic planning to the next level please listen to our webinar: Why Isn’t My Strategic Planning Working?
Denise Harrison is a senior consultant for the Center for Simplified Strategic Planning, Inc. She can be reached at email@example.com.
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