One Sony? Kazuo Hirai’s April 2012 appointment as Chief Executive Officer of Sony Corporation would probably have surprised his younger self. After all, Hirai had started out as Japanese translator to the American hip-hop band the Beastie Boys. He had then become a video games designer and later led Sony’s PlayStation business in the USA. However, by the time he finally became CEO at the age of 51, Sony was in deep trouble. One of Hirai’s first moves was to change Sony’s organisational structure. The aim was to create a more integrated business – ‘One Sony’. Business background Sony’s businesses spanned professional electronics such as semiconductors and medical devices, consumer electronics from televisions and mobile phones to computers and the PlayStation, together with ‘content’ businesses such as movies and music. As such, Sony was pitching against companies like the American success-story Apple and the Korean high-technology giant Samsung. Despite a proud history associated with such brands as the Sony Walkman audio devices or Sony Trinitron televisions, Sony was being left far behind. By 2012, Sony’s stock price was less than half it had been five years before, while Apple and Samsung were two or three times as valuable (see Figure 1 ). Sony’s relative decline has not been for want of trying. In 2003, the company had suffered the so-called ‘Sony shock’, when both earnings and stock price had plunged simultaneously following a weak response to cheaper Asian electronics firms. The company reduced costs by cutting its workforce by nearly 20 per cent. In 2005, Sony had taken the then-revolutionary step of appointing its first foreigner as CEO, Howard Stringer, a WelshAmerican with a background in the music and movie business. Stringer had announced that he would break down the company’s vertical management system, which he described as a set of separate ‘silos’ with little coherence. He sought to integrate the company’s hardware Figure 1 Sony’s stock price performance relative to Apple and Samsung, 2008–12 Source: Yahoo Finance. For comparison of price changes, all prices standardised to zero in 2008.462 CHAPTER 13 ORGANISING FOR SUCCESS business, based in Japan, with its various content businesses, led by music and movies in the USA. Stringer’s slogan had been ‘Sony United’. But Stringer had been neither an engineer nor a Japanese speaker. It was reported that many of his diktats to the Japanese hardware businesses were largely ignored. The financial results for 2011–12 confirmed Stringer’s failure. Without a striking new product to compare with the original Walkman or Trinitron and still heavily reliant on an expensive Japanese manufacturing base, Sony’s sales were down nearly 10 per cent while profits were negative. The 69-year-old Stringer became Company Chairman. Hirai, Sony’s youngest ever CEO and the second non-engineer in a row, set to work. New strategy and new structure Hirai insisted that the new Sony would be focused predominantly on five key strategic initiatives. First of all was a strengthening of the core business, by which he meant digital imaging, games and mobile devices, including phones, tablets and laptops. Second, Hirai committed himself to returning the television business back to profitability, after eight years of consistent losses. Third, Sony would develop faster in emerging markets such as India and South America. The fourth initiative was to accelerate innovation, particularly by integrating product areas. Finally, Sony was preparing to realign its business portfolio, with divestments expected of non-core businesses (e.g. the legacy chemicals business). Hirai supported these strategic initiatives with a new organisational structure, designed to support his concept of ‘One Sony’. The old structure had been based on two big groups centred on Japan and predominantly in hardware: the Professional, Device and Solutions Group, responsible for about half of all sales; and the Consumer Products and Services Group, responsible for another fifth of sales. Alongside these two major groups were several standalone businesses mostly based abroad, including Music, Pictures (movies) and the Sony–Ericsson joint venture in mobile phones (see Figure 2 ). The new structure broke up the big groups, creating 12 standalone businesses in all (see Figure 3 ). The ending of the Sony–Ericsson joint venture in late 2011 allowed the mobile phone business to be brought closer to the VAIO and mobile computing business. Sony’s medical-related businesses, previously dispersed across multiple units but now targeted for rapid growth, were folded into a dedicated medical business unit led by an executive at corporate level. The device and semiconductor businesses, including image sensors, became a single Source: Adapted from www.sony.net Figure 2 Sony’s organisational structure, 2011ONE SONY? 463 Figure 3 Sony’s organisational structure, 2012 Source: Adapted from www.sony.net Questions 1 Assess the pros and cons of Hirai’s structural changes. 2 What other initiatives beyond structural change might be necessary in order to create ‘One Sony’? business group, Device Solutions. Sony Network Entertainment was strengthened, with all Sony’s online offerings now included. Hirai completed his structural changes by reinforcing headquarters resources and oversight, with several new senior management appointments. The aim was to leverage the company’s broad portfolio by creating exclusive content for Sony’s own devices. A single corporate-level executive was made responsible for User Experience (’UX’), Product Strategy and the Creative Platform, charged with strengthening horizontal integration and enhancing the experience across Sony’s entire product and network service line-up. The same executive would oversee the mobile businesses, including smart phones, tablets and PCs (indicated by the box around the two relevant business groups). Digital Imaging and the Professional Solutions likewise came under the oversight of a single corporate-level executive. Hirai himself was to take direct responsibility for the Home Entertainment Business Group, including the troubled television business, pledging to give it the majority of his time in the coming months. At an investors’ meeting in April 2012, Hirai went beyond strategic and structural changes: ‘The other thing is . . . the One Sony/One 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 going to get that done. And so we have a lot of discussions internally amongst the management team. Once we make that decision, then everybody moves in the same direction and we execute with speed. And I think that is another area that is quite different from some of the restructurings or the changes that we have made perhaps in the past.’ Results did not come quickly, however. In November 2012, the Wall Street Journal observed of Sony’s new organisational chart: ‘Far from providing clarity of purpose, the diagram should leave investors tearing their hair out. While new Chief Executive Kazuo Hirai shuffles the deckchairs on board the one-time electronics titan, Sony’s stock is plunging into deep waters.’ Main sources: Wall Street Journal, 2 February 2012; Nikkei Report, 2 March 2012; Sony Corporation press release, Tokyo, 27 March 2012; CQ FD Disclosure, Sony Corporate Strategy Meeting Conference Call for Overseas Investors – Final, 12 April 2012; Wall Street Journal, 15 November 2012. Suggested video clip: Networkworld: New Sony CEO has big plans for company turnaround. https://www.youtube.com/watch?v=jBxWZS4-rR8 .