VMS3.info FEATURE ARTICLE
Subject: October 2002 VMS3.info:
Sony Analyzed via the Value Framework
Analyzed via the Value Framework
As conditions change, Sony has to change accordingly, because their conventional strategy won't transcend to the Internet-enabled world.
Sony has been known for creating products that enrich people's lives since it was established in 1946. Sony is a leading manufacturer of audio, video, communications, and information technology products for the consumer and professional markets. Its music, motion pictures, television, computer entertainment, and online businesses make Sony one of the most comprehensive entertainment companies in the world.
Sony's three core sectors today are: Electronics, Games, and Content. As the Broadband age reaches reality, their primary value needs to shift from electronics to network services.
The business world has changed in drastic ways since the early e-business visions have appeared. The promise of the broadband network has encouraged this prompt progression. As conditions change, Sony has to change accordingly, because their conventional strategy won't transcend to the Internet-enabled world. Sony must create a new strategy for their products and services that is designed for the Internet-enabled world. All products and services must be connected seamlessly through the network.
Sony plans on building a platform called the "Ubiquitous Value Network" by 2005. The Ubiquitous Value Network is an environment where PC and non-PC consumer electronics devices are seamlessly connected to each other and to the network, giving users access to any type of content or service, from any global place.
Sony's products are not essential, but hard to live without, which is represented by their original and unique products. Sony brought innovation into people's lives with products, such as transistor radio, Trinitron, Walkman, Handycam, AIBO, and many others. Their Ubiquitous Value Network expands on this tradition for the broadband age.
Breaking away from the classic mold of the electronics industry, Sony's focus has been to create products that entice and surprise the user...
Sony is not just involved in aggregating new technology for consumers, but also in creating new life styles. Breaking away from the classic mold of the electronics industry, Sony's focus has been to create products that entice and surprise the user, apart from serving their function. This unique 'human-approach technology' has enabled Sony's products to stand out as the best in the market.
Well aware of Sony's considerable strengths and its forward-looking attitude, Idei, CEO of Sony Co., developed a clear path for Sony. He aimed to make a computer integrating Audio & Video (AV) and IT technologies that drew on Sony's technological assets. The computer would offer basic functions common to all computers, but add personal entertainment value as a key feature. Only Sony could possibly hope to make a system integrating computer, communications, and AV technology with entertainment content.
Sony drives itself by focusing on the following areas:
These three strengths combine to impact the consumer to an extent that the person's life style itself changes. A good example of this innovation is Sony's Walkman, released in 1979. Commonly perceived as a big technical innovation in 'miniaturization', the Sony Walkman was in-fact a result of thinking out of the box of common market practices. Sony changed lifestyles by bringing music from inside the house to the rest of the world.
Inside the corporation, Sony has implemented a new corporate structure to enable quick internal and external response to change. As Sony turned its attention to the Internet-enabled world, the need for an organizational restructuring became apparent. The new system would be required to respond more rapidly to market changes and facilitate the development of new businesses. Such a change was first introduced in 1994 where the divisional corporate system and its sections were re-born as 10 new divisional companies. Each company has broad authorities from human resources to production. This restructuring also aimed to increase employee awareness of new business direction and culture.
As compared to 'Economies of scale', the strategy of 'Economies of scope' enables the company to target the customer demands and provide a wide variety of products to satisfy the complete customer experience.
The first big measure requires Sony to ascertain the value of each of its businesses. Being a diversified company, Sony needs to prudently select where it should concentrate; increasing its investment in the businesses it wants to keep and diversifying itself from the rest.
Sony's strength is represented by four key words, which are key metrics in the corporate management philosophy for all companies in the Sony Group. These areas of focus are:
The second big measure requires Sony to strengthen and maximize the economic and brand value of its core strength for e-business. Sony's strategy used to be based on 'Economies of scale'. This is the idea of mass production that makes cost-reduction possible and gains customer satisfaction in high cost performance.
However in the Internet-enabled age, Sony has been gradually shifting to the idea of 'Economies of scope'. As compared to 'Economies of scale', the strategy of 'Economies of scope' enables the company to target the customer demands and provide a wide variety of products to satisfy the complete customer experience. Also this enables Sony to unify the knowledge of production in the internal company, (a production facility, a sales route, and investment know-how) to enhance the efficiency of production.
To this end, Sony has formed new independent sector 'NACS (Network Application & Content Services) in order to effectively develop and provide the necessary knowledge and platforms across the ten divisional companies. It is important for NACS to provide a smooth interface with all divisional companies, to develop a new global infrastructure that securely distributes entertaining content and services over the network.
Sony is striving to develop this relationship with other companies in an open network environment that is attractive and beneficial to all parties involved.
To evolve, Sony has the following three challenges:
Sony needs to tackle these challenges to continue its evolution into a truly global company offering total entertainment.
One of the answers to the above three challenges is the development of 'Economies of Network'. Through this, each company shares the economic unit and optimizes mutual strengths, allowing each company to complement its weaknesses with the strength of the other. As a result, a synergistic effect is induced and profits are gained.
Sony is striving to develop this relationship with other companies in an open network environment that is attractive and beneficial to all parties involved. To date, Sony has formed alliances with AOL, IBM, Nokia, RealNetworks, Sun, and Yahoo!. Sony's objective in establishing these collaborative agreements is not simply to enter the e-business market. If Sony was going to sell computers, it was also going to have to restructure its AV business while establishing new marketing and customer service systems to stimulate and improve employee awareness.
By working together with various companies in the IT, telecom, and consumer electronics and contents industries, Sony is taking networked AV/IT strategy to the new level of the 'Ubiquitous Value Network'.
This is the key to Sony's long-term success.
About the Authors:
Mitchell Levy, is President and CEO of ECnow.com (http://ecnow.com), an e-commerce management consulting company helping individuals and corporations transition from the industrial age to the Internet age through strategy, marketing, and off-the-shelf and customized on-line and on-ground training. He is the author of E-Volve-or-Die.com (http://e-volve-or-die.com), author of the Value Framework (http://ecnow.com/value), Executive Producer of VMS3.info (http://VMS3.info), the Founder and Program Consultant of the premier San Jose State E-Commerce Management Certificate Program (http://ecmtraining.com/sjsu), Former Chair of comdex.biz at Comdex Fall, and Chairman of the Pay-per-Performance PR Agency Media Attention Now TM (http://ecnow.com/mediaattention), the on-line learning content production company Transition Learning (http://transitionlearning.com) and the CEO Networking organization CEOnetworking (http://ceonetworking.com). Mitchell was at Sun Microsystems for 9 years, the last 4 of which he managed the e-commerce component of Sun's $3.5 billion supply chain. Mitchell is a popular speaker, lecturing on ECM issues throughout the U.S. and around the world.
Yukako Saito is researcher of Recruit Co. in Japan (www.recruit.co.jp) that provides a strong on-line and off-line matching platform for recruiting, education, real estate, travel, and weddings. Recruit's focus is around 'Lifetime events, offering reliable information to the consumer along with a variety of choices.
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