{"id":6479,"date":"2018-02-01T17:41:22","date_gmt":"2018-02-01T22:41:22","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-digit\/submission\/sony-from-disruptor-to-disrupted\/"},"modified":"2018-02-01T17:41:22","modified_gmt":"2018-02-01T22:41:22","slug":"sony-from-disruptor-to-disrupted","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-digit\/submission\/sony-from-disruptor-to-disrupted\/","title":{"rendered":"SONY: from disruptor to disrupted"},"content":{"rendered":"

How does a company highlighted at the 性视界 Business School as a preeminent example of disruptive innovation become a loser?\u00a0 Clay Christensen, in his 2003 book The Innovator\u2019s Solution<\/em>, chronicles how Sony disrupted both the radio and television business beginning in the 1950\u2019s \u2013 an example still used today in the school\u2019s wildly popular Building and Sustaining Successful Enterprises (BSSE) course.[1]<\/a>\u00a0 So how did Sony, once riding the technology disruption wave, find itself on the verge of wipeout?<\/p>\n

Is Sony really a loser?<\/em><\/strong>\u00a0 While the casual observer will recognize Sony\u2019s failing brand power in music and consumer electronics, they can point to the company\u2019s relatively stable stock price, ADR: $47.94 (up from the high teens in 2012), and respectable annual revenue ($68.35 Billion in 2017).[2]<\/a>\u00a0 This passing glance would hardly indicate Sony is down and out, but a second, more detailed, look in time reveals a company that has missed huge opportunities and now finds itself dwarfed by once negligible competitors; Sony\u2019s market cap is now 1\/9th<\/sup> of Samsung and 1\/30th<\/sup> of Apple.[3]<\/a>\u00a0 Furthermore, over the last decade, Sony\u2019s market share across almost every business unit has continued to erode (Figure A), with revenue declining (Figure B) and profits (Figure C) in crisis.\u00a0 In short, Sony may still be in the race, but winning is not in the realm of possibility in the short term.<\/p>\n

Figure A.\u00a0 Sony Revenue by Business Segment (FY 2012-2017)<\/strong><\/p>\n

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[4]<\/a><\/p>\n

Figure B.\u00a0 Sony Revenue (FY 2008-2017)<\/strong><\/p>\n

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[5]<\/a><\/p>\n

Figure C.\u00a0 Sony Net Income (FY 2008-2017)<\/strong><\/p>\n

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[6]<\/a><\/p>\n

(Note: The scope of the following analysis will be limited to the consumer electronics business (excluding gaming) and will not address business units such as music and financial services).<\/em><\/p>\n

Why is Sony losing?<\/em><\/strong>\u00a0 Those of us who grew up in the 1980\u2019s and 1990\u2019s will remember Sony and its former glory, a name once \u201csynonymous with cutting-edge technology, sophistication, and desirability.\u201d[7]<\/a>\u00a0 Today, a simple Google search for: \u201cwhy did sony fail\u201d will overwhelm a user with 1,730,000 opinions as to why Sony is no longer the innovative, industry leading powerhouse it once was.[8]<\/a>\u00a0 The 性视界 Business Review\u2019s Sohrab Vossoughi attributes Sony\u2019s fall from grace to its failure to \u201cemphasize the delivery of powerful and resonant user experiences\u201d while Hiroko Tabuchi of the New York Times highlights the \u201cdisastrous infighting\u201d that plagued the company\u2019s entrance into digital music players, flat panel televisions, and mobile phones.[9]<\/a> [10]<\/a><\/p>\n

One chapter of the Sony decline story was written by the company\u2019s failure to adjust its business model, in particular, how it creates value.\u00a0 As technological innovations accelerate and industries change, companies should reevaluate their strategy or face possible extinction.\u00a0 This lesson is exemplified by the classic disruption story of Kodak: Kodak continued to see itself as a camera film company and eventually went bankrupt, while its rival, FujiFilm, reinvented itself as an imaging technology business, supported by a pivot into the medical imaging market.[11]<\/a><\/p>\n

Similar to Kodak, Sony did not reevaluate its strategy in the midst of technological change.\u00a0 Since the 1950\u2019s, when Sony began its disruption of the consumer electronics industry, Sony remained focused on hardware, building extensive R&D capabilities that delivered popular sustaining innovations such as the Sony Discman and the Sony Trinitron television (Figure D).[12]<\/a><\/p>\n

Figure D.\u00a0 Remember these? Sony Discman (left) and Sony Trinitron Television (right).<\/strong><\/p>\n

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[13]<\/a><\/p>\n

Sony\u2019s successes from the 1950\u2019s through the 1990\u2019s led it to overemphasize its hardware business and in early 2000\u2019s, while Sony remained focused on innovating and selling hardware, consumer electronics became increasingly commoditized for several reasons.\u00a0 The first reason was the entry of low cost manufacturers from South Korea and China that were able to deliver lesser quality electronics at lower cost.[14]<\/a>\u00a0 Second, the industry began to shift from hardware to software to create a better user experience.[15]<\/a>\u00a0 For example, it was no longer enough for Sony to manufacture the next smaller, lighter, MP3 version of its famed Walkman line.\u00a0 The first iPod, was more than just a digital music player \u2013 it was a new experience that was hardware, software, community, and social identity.\u00a0 Sony failed to recognize this fact and was late to take advantage of this and other opportunities.\u00a0 In contrast, other companies, such as IBM, the trailblazer of the consumer PC market in the 1980\u2019s, identified this shift to software and the commoditization of hardware.\u00a0 IBM made a conscious decision to change how it created value for consumers and in 2005, IBM sold its PC business to Lenovo to double down on software and services.[16]<\/a><\/p>\n

Overall, Sony failed to reassess how it created value which hindered its ability to make the shift from hardware to software.\u00a0 The underlying reasons for Sony\u2019s inability to make this transition are much less clear, but the resulting impact cannot be denied.\u00a0 Going forward, Sony should take note of its successful gaming platform and the value it has created for users via a software and networking driven experience as a potential model for preventing its own extinction.<\/p>\n

 <\/p>\n

[1]<\/a> Christensen, Clay. \u201cWho Are Our Best Customers,\u201d excerpted from The Innovators Solution: Creating and Sustaining Successful Growth<\/em> (Boston, MA: 性视界 Business School Publishing Corporation), 4.<\/p>\n

[2]<\/a> https:\/\/finance.yahoo.com\/quote\/SNE\/<\/p>\n

[3]<\/a> http:\/\/www.nytimes.com\/2012\/04\/15\/technology\/how-sony-fell-behind-in-the-tech-parade.html<\/p>\n

[4]<\/a> https:\/\/www.statista.com\/statistics\/297533\/sony-sales-worldwide-by-business-segment\/<\/p>\n

[5]<\/a> https:\/\/www.statista.com\/statistics\/279269\/total-revenue-of-sony-since-2008\/<\/p>\n

[6]<\/a> https:\/\/www.statista.com\/statistics\/279271\/net-income-of-sony-since-2008\/<\/p>\n

[7]<\/a> https:\/\/hbr.org\/2012\/04\/strategy-context-and-the-decli<\/p>\n

[8]<\/a> https:\/\/www.google.com\/search?q=why+did+sony+fail&ie=utf-8&oe=utf-8&client=firefox-b-1-ab<\/p>\n

[9]<\/a> http:\/\/www.nytimes.com\/2012\/04\/15\/technology\/how-sony-fell-behind-in-the-tech-parade.html<\/p>\n

[10]<\/a> https:\/\/hbr.org\/2012\/04\/strategy-context-and-the-decli<\/p>\n

[11]<\/a> https:\/\/www.economist.com\/blogs\/schumpeter\/2012\/01\/how-fujifilm-survived<\/p>\n

[12]<\/a> http:\/\/www.thewolfhall.com\/sony-shifts-focus-hardware-software-services-masako-kuwahara\/<\/p>\n

[13]<\/a> https:\/\/www.ebay.com\/p\/Sony-Trinitron-KV-20FV10-20-CRT-Television\/48211242<\/p>\n

[14]<\/a> http:\/\/www.nytimes.com\/2012\/04\/15\/technology\/how-sony-fell-behind-in-the-tech-parade.html<\/p>\n

[15]<\/a> http:\/\/www.nytimes.com\/2012\/04\/15\/technology\/how-sony-fell-behind-in-the-tech-parade.html<\/p>\n

[16]<\/a> https:\/\/www.pcmag.com\/article2\/0,2817,2483557,00.asp<\/p>\n

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