CASE EXAMPLE One Sony? Kazuo Hirai's April 2012 appointment as Chief Executive against companies like the American success-story Apple Officer of Sony Corporation would probably have surprised and the Korean high-technology giant Samsung. Despite his younger self. After all, Hirai had started out as Japa- a proud history associated with such brands as the Sony nese translator to the American hip-hop band the Beastie Walkman audio devices or Sony Trinitron televisions, Sony Boys. He had then become a video games designer and was being left far behind. By 2012, Sony's stock price later led Sony's PlayStation business in the USA. How- was less than half it had been five years before, while ever, by the time he finally became CEO at the age of 51. Apple and Samsung were two or three times as valuable Sony was in deep trouble. One of Hirai's first moves was (see Figure 1). to change Sony's organisational structure. The aim was Sony's relative decline has not been for want of trying. to create a more integrated business - 'One Sony'. With In 2003, the company had suffered the so-called 'Sony some adjustments over time, Sony retained this basic shock', when both earnings and stock price had plunged structure to at least until 2016. simultaneously following a weak response to cheaper Asian electronics firms. The company reduced costs by cutting Business background its workforce by nearly 20 per cent. In 2005, Sony had taken the then-revolutionary step of appointing its first Sony's businesses spanned professional electronics such foreigner as CEO, Howard Stringer, a Welsh-American with as semiconductors and medical devices, consumer elec- a background in the music and movie business. Stringer tronics from televisions and mobile phones to computers had announced that he would break down the company's and the Play Station, together with 'content' businesses vertical management system, which he described as a such as movies and music. As such, Sony was pitching set of separate 'silos' with little coherence. He sought 300% 250% Apple 200% 150% 100% 50% Samsung Sony 50% 2008 Apr Jul Oct 2009 Apr Jul Oct 2010 Apr Jul Oct 2011 Apr Jul Oct 2012 Apr Jul Oct Figure 1 Sony's stock price performance relative to Apple and Samsung, 2008-12 Soure Yahoo Finance. For comparison of price changes, all prices standardised to zero in 2008. 465CHAPTER 14 ORGANISING AND STRATEGY to integrate the company's hardware business, based in of 'One Sony'. The old structure had been based on Japan, with its various content businesses, led by music two big groups centred on Japan and predominantly in and movies in the USA. Stringer's slogan had been 'Sony hardware: the Professional, Device and Solutions Group, United'. But Stringer had been neither an engineer nor a responsible for about half of all sales; and the Consumer Japanese speaker. It was reported that many of his diktats Products and Services Group, responsible for another fifth to the Japanese hardware businesses were largely ignored. of sales. Alongside these two major groups were several The financial results for 2011-12 confirmed Stringer's stand-alone businesses mostly based abroad, including failure. Without a striking new product to compare with Music, Pictures (movies) and the Sony-Ericsson joint ven- the original Walkman or Trinitron and still heavily reliant ture in mobile phones (see Figure 2). on an expensive Japanese manufacturing base, Sony's The new structure broke up the big groups, creating sales were down nearly ten per cent while profits were 12 stand-alone businesses in all (see Figure 3). The negative. The 69-year-old Stringer became Company ending of the Sony-Ericsson joint venture in late 2011 Chairman. Hirai, Sony's youngest ever CEO and the sec- allowed the mobile phone business to be brought closer and non-engineer in a row, set to work. to the VAIO and mobile computing business. Sony's medical-related businesses, previously dispersed across New strategy and new structure multiple units but now targeted for rapid growth, were folded into a dedicated medical business unit led by an Hirai insisted that the new Sony would be focused pre- executive at corporate level. The device and semicon- dominantly on five key strategic initiatives. First of all was ductor businesses, including image sensors, became a a strengthening of the core business, by which he meant single business group, Device Solutions. Sony Network digital imaging, games and mobile devices, including Entertainment was strengthened, with all Sony's online phones, tablets and laptops. Second, Hirai committed offerings now included. himself to returning the television business back to prof- Hirai completed his structural changes by reinforcing itability, after eight years of consistent losses. Third, Sony headquarters resources and oversight, with several new would develop faster in emerging markets such as India senior management appointments. The aim was to lever- and South America. The fourth initiative was to acceler age the company's broad portfolio by creating exclusive ate innovation, particularly by integrating product areas. content for Sony's own devices. A single corporate-level Finally, Sony was preparing to realign its business port executive was made responsible for User Experience folio, with divestments expected of non-core businesses ('UX"), Product Strategy and the Creative Platform, (e.g. the legacy chemicals business). charged with strengthening horizontal integration and Hirai supported these strategic initiatives with a new enhancing the experience across Sony's entire product organisational structure, designed to support his concept and network service line-up. The same executive would Professional, Device Consumer Products and Solutions Group and Services Group Entertainment Business Group Sony Network Enter ta Inment Semiconductor Business VAIO and Mobile Business Business Group Communications Jandwog /LOS Device Solutions Business Home Entertainment Professional Solutions sory Music Entertainment d noJE Sony Financial Holdings Sory Picture Entertal ment pun oS pue dujdewi | |evosled dno 5 Sony Ericsson Mobile Sony Corporate: Global Sales and Marketing Platform; Manufacturing, Logistics, Procurement and Central Services Platform; R&D Platform; Common Software Platform; Headquarters Figure 2 Sony's organisational structure, 2011 Source Adapted from www.sony.net. 466ONE SONY? VAIO and Mobile Business Group Sony Music Entertainment Device Solutions Business Business Group Sory Computer Entertal rment Medical Business Unit Digital Imaging Business Group sony Picture Entertainment Home Entertainment and Sound Sony Mobile Communications Professional Solutions Business sony Network Enterta Inment Sony Financial Holdings Group Sony Corporate: Corporate R&D; System and Software Technology Platform; Advanced Device Technology Platform; UX, Product Strategy and Creative Platform; Global Sales and Marketing Platform; Headquarters Figure 3 Sony's organisational structure, 2012 Source Adapted from www.sony.net oversee the mobile businesses, including smartphones, Results did not come quickly, however. In November tablets and PCs (indicated by the box around the two 2012, the Wall Street Journal observed of Sony's new relevant business groups). Digital Imaging and the Pro- organisational chart: 'Far from providing clarity of pur- fessional Solutions likewise came under the oversight of a pose, the diagram should leave investors tearing their hair single corporate-level executive. Hirai himself was to take out. While new Chief Executive Kazuo Hirai shuffles the direct responsibility for the Home Entertainment Busi- deckchairs on board the one-time electronics titan, Sony's ness Group, including the troubled television business, stock is plunging into deep waters.' pledging to give it the majority of his time in the coming Main soures: Wall Street Journal, 2 February 2012; Nikkei Report, 2 months. March 2012; Sany Corporation press release, Tokyo, 27 March 2012, CQ At an investors' meeting in April 2012, Hirai went FD Disclosure, Sony Corporate Strategy Meeting Conference Call for Over. beyond strategic and structural changes: seas Investors - Final, 12 April 2012; Wall Street Journal, 15 November 2012. The other thing is . . . the One SomeOne Management concept. That is really important, because I made sure that as I built my new management team, that everybody in the team is 100 per cent fully committed and also aligned as to what needs to get done and how we're Questions going to get that done. And so we have a lot of discus- sions internally amongst the management team. Once 1 Assess the pros and cons of Hirai's structural we make that decision, then everybody moves in the changes. same direction and we execute with speed. And I think 2 What other initiatives beyond structural change that is another area that is quite different from some of might be necessary in order to create 'One the restructurings or the changes that we have made Sony'? perhaps in the past." 467