By Denise Harrison
In 2014, Kazuo Hirai, Sony CEO, sought to rekindle the firm’s creativity. In the 20th century Sony had a market leadership position in several segments of the consumer electronics industry. For example, its Sony Walkman® exemplified Sony’s ability to harness its technical expertise, providing consumers with easy-to-use electronic devices. But by 2014, Sony was struggling. As time had marched on, Sony’s core businesses went from profitable to commoditized products. Sony had not kept up and, instead of focusing on innovation, it focused on low cost product. It lost its competitive edge and its profitability. To rekindle Sony’s creativity, Hirai had to refocus its resources out of the commodity businesses by withdrawing or selling them and then redeploying the resources to where Sony could leverage its technical know-how to differentiate itself in the market.
One of the key areas of focus was the gaming business unit. The PlayStation was one of the leading products in the gaming industry. However, Sony realized that it needed to untether its games from PlayStation so that they could be played on other platforms as well. Streaming the games over the internet and through TVs would allow better access to a wide variety of players and provide the ability for players to play against each other on the internet. In addition, it looked to the PlayStation hardware to provide entertainment, streaming movies, cable TV and music in addition to its games. By not seeing the hardware as the differentiator, it was able to transition the business so that more of it was subscription based.
So, what are the results now that we are in 2017?
Sony recently announced another strong quarter. Last year, while revenue increased 6% in its gaming business, its profits increased 53% due to the transition to a more subscription based model. Both the focus on the gaming segment where Sony had a competitive advantage and the recognition that the internet provided a good way to significantly increase access without significantly raising costs, contributed to the success story.
Now, Sony not only needs to continue reaping the rewards of its market leadership in gaming, it needs to focus on new areas for sources of growth. Two areas where Sony is looking for significant growth and profitability include: image sensors (used in cell phones) and their virtual reality goggles. By continuing to benefit from the focus on gaming, these two new areas will allow Sony to continue its growth in the future. It is important to continue to innovate rather than rest on your laurels as Sony had done at the end of the 20th century.
In summary, a strong strategy forces your team to think about the best way to deploy your resources. It is just as important to decide where you should remove resources as it is to decide where you need more resources. Many teams struggle to take resources away from mature or declining businesses. Does yours? This lack of action causes businesses to stagnate or decline. As you make decisions during your strategic planning process, you should always be asking: What is the highest and best use of the entire range of resources that we have?
Denise Harrison is a senior consultant for the Center for Simplified Strategic Planning, Inc. She can be reached at firstname.lastname@example.org.
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