Strategic Plan for Sony Corporation

Strategic Plan for Sony

Sony Corporation is at a crossroads in its evolution today. Having grown the core electronics business to nearly 70% of revenues globally, the company has attained profitability in their core business. It is however facing steep losses in its gaming and financial services business units, and has seen the motion pictures business unit have higher profits due to cost reductions. What is needed is a business plan that embraces the innate ability of Sony to innovate while at the same time forcing consolidation and convergence in key market areas, thereby giving Sony first-mover advantage in core electronics markets. This business plan proposes that Sony seek to become a market consolidator in emerging consumer electronics, digital imaging, and gaming markets. By acting as a catalyst of industry consolidation, Sony will also be able to discover entirely new markets as well. It is within the core business model and culture of Sony to seek differentiation through innovation, and this business plan concentrates on how best to create new markets through a reliance on convergence of imaging, networking, and entertainment content. Creating an ecosystem that will serve as a catalyst for the purchasing of digital content, both in audio and video formats, in addition to the rapid development of personal entertainment devices and convergence-based home electronics products is the foundation of this business plan.

Company Background

Sony Corporation is considered to be one of the most recognized brands in the world, and has established itself as one of the most innovative providers of electronics products globally. The company operates in five business segments including home and personal electronics, games, motion pictures and entertainment, financial services, and a series of other subsidiary businesses. Figure 1, Organizational Concept Chart of Businesses, Sony Corporation graphically illustrates how the company is organized.

Figure 1: Organizational Concept Chart of Businesses, Sony Corporation

Sources: (Sony Investor Relations, 2008) & http://www.sony.net/SonyInfo/CorporateInfo/Data/organization.html

Sony currently operates in 200 countries worldwide, and has a broad base of customers, differentiated by their products and services of interest.

Provide a brief background of this organization including its products, services and customers. B2B Solutions serves the Fortune 1,000 organizations globally who need systems and electronics product integration, in addition to coordinating on enterprise-wide mobile phone deployments. The B2B Solutions group is unique in that it acts as a systems integrator for the many other Sony products commercial and enterprise accounts standardize their entire operations on. There are also small and medium businesses (SMBs) globally who also rely extensively on Sony for their electronics products as a means of attaining higher levels of productivity as well.

In terms of the Sony strategic planning process, founder and CEO Akita Morita continues to take a non-traditional approach. Instead of relying exclusively on published market research or trusting on quantitative data, Mr. Morita has created a process where the engineer or inventor continues to promote their idea throughout the company, selling it to each functional department for approval (Morita, 1987). Using this approach nurtures a very high level of ownership and pride in the process of innovation itself, and it also fuels a very high level of competitiveness as well between engineers. What this process does at a strategic level however is create a more balanced view of the strategic planning process, between the quantitative and qualitative. Sony as a result has a culture that rewards exceptional innovation and creativity in product design, and creates product champions quickly by giving engineers an opportunity to own their projects from start to finish. In many respects this strategic planning process is comparable to those found at Panasonic, which concentrates on getting qualitative feedback from customers, dealers and distributors, and placing more emphasis on these qualitative aspects of their research than relying purely on quantitative research (Johansson, Nonaka, 1987). This strategic planning process also allows for greater consensus and creativity to be nurtured and rewarded as well.

Mission Statement & Vision Statement:

Sony's mission statement captures the passion founder and CEO Akita Morita has for transforming innovation into unique and highly valued experiences for customers. The Sony mission statement reads as follows "To experience the joy of advancing and applying technology for the benefit of the public," (Sony Investor Relations, 2008). The vision of Sony is as follows: "We should always be the pioneers with our products -- out front leading the market. We believe in leading the public with new products rather than asking them what kind of products they want," (Sony Investor Relations, 2008). Both the mission and vision statements of the company are based on a common core value of innovation driving market growth vs. first studying a market and then meticulously defining a new product as a result. This mindset has assisted Sony in escaping from the mindset traps of product line extensions merely delaying the inevitable market consolidation that occurs when a given technology's ability to contribute to alleviating unmet needs is surpassed and competitive differentiation is achieved purely on price and availability instead of value delivered over time (Kalamas, Cleveland, Laroche, Laufer, 2006). This is also the core concept of the blue ocean strategy concept of strategic planning and differentiation that defines new opportunities not as product line extensions but as entirely new markets (Kim, Mauborgne, 2004). A "red ocean" is one that is marked by extremely high levels of price and availability competition, and the "red' of the ocean are symbolic for operating losses over time. Sony's mission and value statements are intended to guide them past the "red" oceans by having them concentrate on create entirely new product generations through innovation over merely relying on price and availability competition.

Internal Analysis & External Analysis:

The internal culture of Sony seeks a unique combination of ownership of innovative new ideas combined with passionate leadership of taking ideas from concept to fruition. The many processes that any engineering or design professional must traverse in fighting to see the vision of their product fulfilled require nothing short of deep, internalized commitment to the objective of seeing their concept become a reality (Morita, 1987). Yet the process is not infallible as witnessed by the many difficulties in achieving the growth potential of Blu-Ray disk technology (Cherry, 2008). The internal changes and challenges to being able to manage the innovation process must be balanced with a pragmatism and dissenting opinions to keep projects tethered down to what is accomplishable with Sony's existing environment. The internal challenges to this is the need to continually battle against merely doing product line extensions that often result in "red" ocean strategies instead of dramatically re-ordering the entire market arena and creating "blue" oceans that serve as the catalyst of entirely new market growth (Kim, Mauborgne, 2004). This internal mindset of leapfrogging entire product generations with exceptional innovation is one that has led to Japanese manufacturers overcoming odds of market entry and success by making innovation a competitive advantage (Cooper, 2000).

External changes and challenges that Sony is facing in its strategic planning process is the development of supply chains that can keep pace with their unique and often rapidly changing requirements for new materials (Sebastiao, Golicic, 2008). There is also the need for creating a series of benchmarks and Key Performance Indicators (KPIs) that will provide advance warning with regard to the viabili9ty of one product relative to another (Song, Parry, 1996). Externally there is also the challenging aspect of creating entirely new integration of new product development and introduction (NPDI) processes and coordinating the many needs in these processes with those of supply chain partners who need to support the next generation of products (Lovell, Saw, Stimson, 2005).

Assessing Sony's ability to do this provides a balanced view of the company's ability to execute on strategic plans to this point. With the successes of their digital imaging products and the continued innovation in the mobile phones industry, Sony has been able to successfully penetrate new markets using their strategic planning process. Yet the significant losses in the Games business unit and the Blu-ray business' lack of growth is also indicative of how critical it is for the strategic planning processes to remain balanced and free of GroupThink (or the tendency to people to agree with each other to just alleviate conflict or for fear of reprisal) within Sony. Simply put, there needs to be processes in place for managing dissention while growing the seven most profitable potential business categories the company has. These include LCD TVs, Digital Imaging, Mobile Phones, PCs, Blu-Ray, Components & Semiconductors, and Games.

SWOT analysis of your plan's focus area(s):

The intent of this section is to define the strategic plan for a 3-year time horizon for Sony, with 3 goals each year with measurable objectives assigned to each. These strategic goals and objectives span the three years and potentially longer as well.

Strategic Planning Objective for the 2010 -- 2013 Timeframe

Sony has for decades considered itself more of a provider of devices, peripherals, cameras and digitally enabled products meant to be used individually. What is missing from the Sony strategic plan is the concept of creating a platform on which they can capitalize on their many ancillary businesses. What Sony needs to do is concentrate on creating a mobile Web-enabled series of devices, supporting services, and segmented digital content in both music-based and video content. In short, Sony needs to create an economic ecosystem that rivals the Apple ecosystem as shown in Figure 2, Apple Digital Content Ecosystem:

Figure 2: Apple Digital Content Ecosystem

Source: (Apple Investor Relations, 2009)

The most critical objective for the three-year planning horizon for Sony is to emulate the model shown in Figure 2 and apply entirely new series of metrics to how they evaluate integration and cross-model compatibility of their entire product line. The strategic objective for the coming three years has to be centered on creating a scalable ecosystem that can deliver a continual stream of revenues through the licensing of digital music and video content in addition to the introduction of entirely new devices into this ecosystem that have not yet been invented yet. The strategic objective is to create a scalable, profitable and easily modifiable economic ecosystem that can deliver exceptional revenue opportunities for Sony over the next three years and beyond.

Goals for 2011

To create a cross-compatibility framework to evaluate existing products that needs to be integrated into the Sony ecosystem.

Determine the percentage of products that meet cross-compatibility guidelines as defined as part of this process.

Percentage of products to be discounted as they are too dated in terms of technology to integrate into the ecosystem.

Cross-connectivity matrix for new products used as a decision point of launching the new product or not.

To define integration technologies that are both over wired Internet connections and over WiFi.

To define a Sony-specific TCP/IP protocol that can unify all products' to allow for uploading and downloading of content from any device, anywhere using WiFi or wired Internet connections.

To measure the baseline of performance for existing devices that has WiFi connections and measure their levels of compatibility with other Sony products on a network.

To define corrective action and preventative action strategies for alleviating bottlenecks on networks by measuring the percentage of traffic that does not reach the intended device.

To re-vamp the distribution channel strategy to concentrate on an ecosystem-based selling strategy.

To measure and audit the resellers for their ability to deliver value in this new framework.

To gain a forecast from the top resellers as to their ability to sell additional products and services based on this framework.

To create a benchmark to evaluate distribution and retailer experience and the variation in best practices vs. worst practices in working with the proposed Sony ecosystem framework.

Goals for 2012

To align the digital content that Sony owns so it is highly compatible with the proposed Sony ecosystem.

To measure the performance of Apple MP4 files relative to mainstream MP3 files in the Sony ecosystem, in addition to comparing the performance of consumer-generated digital media.

To measure the velocity of transactions that can occur and scale for the Sony ecosystem over time.

To test security for the entire ecosystem and measure the relative level of redundancy built into the system; define auditing approaches for ensuring a high level of security over time.

To create pilot ecosystems for specific products in key geographies to test the systems' performance.

Define country- and region-specific benchmarks for the ecosystems for specific first-generation products to be included in its structure.

Define and measure the performance of supply chain integration technologies as they relate to coordinating with integration and cross-compatibility to ensure suppliers are creating standards and products that align with the needs of the Sony ecosystem.

Measure the level of failure rates and complete failure analysis of the ecosystem across the sustainability, stability, security and profitability standpoints.

To define supply chain objectives for the revised Sony ecosystem and measure performance to a common set of benchmarks with suppliers.

Create a pilot Collaborative Planning Forecasting and Replenishment (CPFR) system to measure the level of inventory velocity that is attainable using a single order hob to support the Sony ecosystem proposed.

To define metrics of performance for measuring the NPDI process mentioned earlier in this plan as it relates to the development of new product collaboration and coordination on product introductions.

Goals for 2013

To launch the Sony ecosystem and evaluate its global launch according to customer satisfaction metrics and contributions to long-term customer loyalty.

To create a voice of the customer program and customer advisory council to measure overall customer satisfaction with the new ecosystem over time.

To create an internal portal that allows Sony management to view these metrics over time and chart them on their own laptops.

To correlate customer satisfaction with profitability by product within the framework of the Sony ecosystem as proposed.

To create an ancillary service for supply chain coordination and consultation based on the experiences in creating the Sony ecosystem with partners.

To define shared risk targets for supply chain performance including the Perfect order levels of performance for the supply chain in shipping the right product at the right time, to the right location.

To create a build-to-order strategy for coordinating with suppliers and distributors to ensure a high level of responsiveness and accuracy in reporting across the distribution network.

To define a supply chain scorecard that will allow for the development of incentives Sony can deliver to suppliers for exceptional performance.

To measure the effectiveness of the online applications on the Sony ecosystem portals to ensure they are staying in alignment with the unmet needs of customers.

To define the key performance indicators for application performance of portal-based applications for each specific area of the company's core distribution strategies.