I love Sony’s products. The first time I saw Sony Center in Potsdamer Platz, I was amazed by their design capabilities and design outlook. But now I hate what it is trying to do to itself. Its responses and actions these days smack of a deadman swinging in wind. First it moves confidently into content by acquiring Columbia. The it shoots itself by not aggressively monetizing the content. Now it says it will move more of its component production in-house; at the same time, its executives go out and claim that the cyclical nature of electronic components is hurting their pricing power and hence their bottomline.
When it acquired Columbia, it appeared to be a good move since it will now have content to put into all the containers (walkmans, tvs etc.) and through the channels it was building. Now it says that going forward, a larger percentage of the components that go into its various hardware will be made internally. This seems a bit like spitting into the wind to me. It is a given that electronics is getting commoditized; it also a given that electronics is highly cyclical in nature. By bringing more compoenents inhouse, they will only be more vulnerable to price volatility. On one hand they are creating a verticalized, silo-based mentality inside the company by moving more and more components in house. This in turn opens them upto price fluctuations in global markets. Lightweight competitors like Apple, Panasonic or Dell run circles around Sony while it is busy trying to figure out which end is where. On the other hand, their content division is pusing for more open, more collaborative approach to revenue generation. Does anyone see the inherent tension in managing these 2 imperatives within the same organization?
Today, the hard reality is that the hardware or container division of company has become a liability. It is the content that is driving growth and bottomline. Is the tail wagging the dog? Or, more importantly, has the tail become the dog?
At some point Sony has to make a choice whether it will be a content driven company or a container driven company. Unless that choice is articulated and imposed, I fear that Sony will not get it right.
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