Belajar dari pengalaman pahit memanglah tidak mengenakkan. Tapi itu sangat dibutuhkan untuk bangkit dan maju agar tidak terjatuh pada kesalahan yang sama atau belajar dari kesalahan orang lain.
Siapa tidak kenal dengan SONY. Pastilah sering kita dengar terutama kedigdayaannya dalam beberapa dekade belakangan ini. Tapi, karena fokus yang salah, sehingga saat ini SONY jauh ketinggalan dengan produsen-produsen elektronik lain seperti Samsung, Apple, Dell, dll. Mungkin ini bisa kita jadi pelajaran berharga bagi kita.
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Sayonara Sony: How Industrial,
MBA-Style Leadership Killed a Once Great Company
Who can forget what a great company
Sony was, and the enormous
impact it had on our lives? With its heritage, it is hard to believe that Sony hasn’t made a
profit in 4 consecutive years, just recently announced
it will double its expected loss for this year to $6.4
billion, has only 15% of its capital left as equity (debt/equity ration
of 5.67x) and is only worth 1/4 of its value 10 years ago!
Sony was once a marketplace
creator, and leader
After World War II Sony was the
company that took transistor technology invented by Texas
Instruments (TI) and made the popular, soon to become ubiquitous,
transistor radio. Under co-founder Akio Morita Sony kept looking for advances
in technology, and company leadership spent countless hours innovatively
thinking about how to apply these advances to improve lives. With a passion for
creating new markets, Sony was an early creator, and dominator, of what we now
call “consumer electronics:”
· Sony improved solid state transistor radios until they surpassed
the quality of tubes, making good quality sound available very reliably, and
inexpensively
· Sony developed the solid state television, replacing tubes to
make TVs more reliable, better working and use less energy
· Sony developed the Triniton television tube, which dramatically
improved the quality of color (yes Virginia, once TV was all in black &
white) and enticed an entire generation to switch. Sony also expanded the size
of Trinitron to make larger sets that better fit larger homes
· Sony was an early developer of videotape technology, pioneering
the market with Betamax before losing a battle with JVC to be the standard (yes
Virginia, we once watched movies on tape)
· Sony pioneered the development of camcorders, for the first time
turning parents – and everyone – into home movie creators
· Sony pioneered the development of independent mobile
entertainment by creating the Walkman, which allowed – for the first time –
people to take their own recorded music with them, via cassette tapes
· Sony pioneered the development of compact discs for music, and
developed the Walkman CD for portable use
· Sony gave us the Playstation, which went far beyond Nintendo in creating the
products that excited users and made “home gaming” a market.
Very few companies could ever boast
a string of such successful products. Stories about Sony management meetings
revealed a company where executives spent 85% of their time on technology,
products and new applications/markets, 10% on human resource issues and 5% on
finance. To Mr. Morita financial results were just that – results – of doing a
good job developing new products and markets. If Sony did the first part right,
the results would be good. And they were.
The origin, and impact, of “Japan,
Inc” on Sony
By the middle 1980s, America was
panicked over the absolute domination of companies like Sony in product
manufacturing. Not only consumer electronics, but automobiles, motorcycles,
kitchen electronics, steel and a growing number of markets. Politicians
referred to Japanese competitors, like the wildly successful Sony, as “Japan
Inc.” – and discussed how the powerful Japanese Ministry of Trade and Industry
(MITI) effectively shuttled resources around to “beat” American manufacturers.
Even as rising petroleum costs seemed to cripple U.S. companies, Japanese
manufacturers were able to turn innovations (often American) into very
successful low-cost products growing sales and profits.
So what went wrong for Sony?
Firstly was the national obsession
with industrial economics. W. Edward Deming in 1950s Japan institutionalized
manufacturing quality and optimization. Using a combination of process
improvements and arithmetic, Deming convinced Japanese leaders to focus, focus,
focus on making things better, faster and cheaper. Taking advantage of Japanese
post war dependence on foreign capital, and foreign markets, this U.S. citizen
directed Japanese industry into an obsession with industrialization as
practiced in the 1940s — and was credited for creating the rapid massive
military equipment build-up that allowed the U.S. to defeat Japan.
Unfortunately, this narrow
obsession left Japanese business leaders, by and large, with little skill set
for developing and implementing R&D, or innovation, in any other area. As
time passed, Sony fell
victim to developing products for manufacturing, rather than pioneering new
markets.
The Vaio, as good as it was, had
little technology for which Sony could take credit. Sony ended up in a
cost/price/manufacturing war with Dell, HP, Lenovo and
others to make cheap PCs – rather than exciting products. Sony’s evolved a
distinctly Industrial strategy, focused on manufacturing and volume, rather
than trying to develop uniquely new products that were head-and-shoulders
better than competitors.
In mobile phones Sony hooked up
with, and eventually acquired, Ericsson. Again, no new
technology or effort to make a wildly superior mobile device (like
Apple did.) Instead Sony sought to build volume in order to manufacture more
phones and compete on price/features/functions against Nokia, Motorola and
Samsung. Lacking any product or technology advantage, Samsung clobbered Sony’s
Industrial strategy with lower cost via non-Japanese manufacturing.
When Sony updated its competition
in home movies by introducing Blu-Ray, the strategy was again an Industrial one
– about how to sell Blu-Ray recorders and players. Sony didn’t sell the Blu-Ray
software technology in hopes people would use it. Instead it kept Blu-Ray
proprietary so only Sony could make and sell Blu-Ray products (hardware). Just
as it did in MP3, creating a proprietary version usable only on Sony devices.
In an information economy, this approach didn’t fly with consumers, and Blue
Ray was a money loser largely irrelevant to the market – as is the now-gone
Sony MP3 product line.
We see this across practically all
the Sony businesses. In televisions, for example, Sony has lost the
technological advantage it had with Trinitron cathode ray tubes. In flat
screens Sony has applied a predictable, but money losing Industrial strategy
trying to compete on volume and cost. Up against competitors sourcing from
lower cost labor, and capital, countries Sony has now
lost over $10B over the last 8 years in televisions. Yet,
Sony won’t give up and intends to stay with its Industrial strategy even as it
loses more money.
Sony’s Leadership was a willing
conspirator to the failed strategy
Why did Sony’s management go along
with this? As mentioned, Akio Morita was an innovator and new market creator.
But, Mr. Morita lived through WWII, and developed his business approach before
Deming. Under Mr. Morita, Sony used the industrial knowledge Deming and his
American peers offered to make Sony’s products highly competitive against older
technologies. The products led, with industrial-era tactics used to
lower cost.
But after Mr. Morita Sony’s other
leaders were trained, like American-minted MBAs, to implement Industrial
strategies. Their minds put products, and new markets, second. First was a
commitment to volume and production – regardless of the products or the
technology. The fundamental belief was that if Sony had enough volume, and cut
costs low enough, Sony would eventually succeed. Without any innovation.
By 2005 Sony reached the pinnacle
of this strategic approach by installing a non-Japanese to run the company. Sir
Howard Stringer made his fame running Sony’s American business, where he
exemplified Industrial strategy by cutting 9,000 of 30,000 U.S. jobs (almost a
full third.) To Mr. Stringer, strategy was not about innovation, technology,
products or new markets.
Sony’s Industrial Strategy was
cost-cut first, products are less meaningful
Mr. Stringer’s Industrial strategy
was to be obsessive about costs. Where Mr. Morita’s meetings were 85% about
innovation and market application, Mr. Stringer brought a “modern” MBA approach
to the Sony business, where numbers – especially financial projections – came
first. The leadership, and management, at Sony became a model of MBA training
post-1960. Focus on a narrow product set to increase volume, eschew costly
development of new technologies in favor of seeking high-volume manufacturing
of someone else’s technology, reduce product introductions in order to extend
product life, tooling amortization and run lengths, and constantly look for new
ways to cut costs. Be zealous about cost cutting, and reward it in meetings and
with bonuses.
Thus, during his brief tenure
running Sony Mr. Stringer will not be known for new products. Rather, he will
be remembered for initiating 2 waves of layoffs in what was historically a
lifetime employment company (and country.) And now, in a nod to Chairman
Stringer the new CEO at Sony has indicated he will react to ongoing losses by –
you guessed it – another round of
layoffs. This time estimated to be another 10,000 workers, or 6% of
employees. The new CEO, Mr. Hirai, trained at the hand of Mr. Stringer, demonstrates
as he announces ever greater losses that Sony hopes to – somehow – save its way
to prosperity with an Industrial strategy.
Sony may not go bankrupt – but
avoid it
Japanese equity laws are very
different that the USA. Companies often have much higher debt levels. And
companies can even operate with negative equity values – which would be
technical bankruptcy almost everywhere else. So it is not likely Sony will fill
bankruptcy any time soon, if ever.
But should you invest in Sony?
After 4 years of losses, and entrenched Industrial strategy with MBA-style
leadership focused on “numbers” rather than markets, there is no reason to
think the trajectory of sales or profits will change any time soon.
As an employee, facing ongoing
layoffs why would you wish to work at Sony? A “me too” product strategy with
little technical innovation that puts all attention on cost reduction would not
be a fun place. And offers little promotional growth.
And for suppliers, it is assured
that each and every meeting will be about how to lower price – over, and over,
and over.
Every company today can learn from
the Sony experience
Sony was once a company to watch.
It was an innovative leader, that pioneered new markets. Not unlike Apple
today. But with its Industrial strategy and MBA numbers- focused leadership it
is now time to say, sayonara. Sell Sony, there are more interesting companies
to watch and more profitable places to invest.
http://www.forbes.com/sites/adamhartung/2012/04/20/sayonara-sony-how-industrial-mba-style-leadership-killed-once-great-company/1/