February 6, 2014
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News out today confirms that Sony has indeed sold off its Vaio PC arm, ending 17 years in the personal computer business. And that CEO Kazuo Hirai has also decided to separate the TV division into a standalone unit in order to better heal it. Although he insists for now that Sony has no plans to sell that division, it would be foolish of the company not to consider any good offers. If there are any.
Because really, who would want that business? It has lost nearly $8 billion in the last 10 years and has been rapidly losing share to Samsung and LG and is about to get attacked by Chinese TV makers eager to have more influence in the US and other Western markets. I saw a very impressive offering from Hisense, TCL, and Haier at this year’s CES and expect them to make inroads against the more expensive panels from Sony, Panasonic, and Sharp, all of which have struggled to keep up.
Did this have to be Sony’s fate? Absolutely not.
Sony saw the future as early as 2005 when it released the PSP, but chose not to enter it. Even in the years that followed, Sony continued to show that it could apply its engineering talent to stay ahead of the market. In my personal graveyard of Sony devices, I have two that provide ample evidence of this. The first is the Sony MYLO, a clever acronym meaning MY Life Online, which was intended as a mobile phone without an actual phone, to give parents a way to offer their teens all the trappings of social technology: a touch screen, Skype, a built-in camera, rudimentary apps, in essence everything that would later become a backbone of the smartphone. Sony built it while the iPhone was still a new, untested gadget!
Also in my stack is one of several Sony eReaders I own, this one in an elegant leather case, with a touch screen with edge lighting for reading in the dark. Little known fact, Sony’s first eInk eReader came out a full year before Amazon’s first Kindle. Yet Sony was unable to capitalize on its launch and dominate the category. The reason Sony failed to seize the future is systemic: The company only wants to make money on devices, believing that engineering drives revenue. It doesn't look beyond the device to the total experience the device provides, building a digital customer relationship to support it. One reason it doesn't is that Sony is so divided a company that even though it has all the assets to be a total entertainment provider for the consumer – it’s a movie studio, games console maker, TV producer, mobile company, home devices company – none of those divisions work together to build a single experience for the user the way other companies are learning to do – including even non-device companies like Yahoo! and Facebook.
Yet I come to praise Sony, not to bury it, or at least to ask everyone to hold back the shovels for a bit. Because Sony is still sitting on some amazing engineering talent, which, if paired with the kind of consumer focus that Samsung has, could turn the company around. In their shoes, I would lead with the successful PS4, quickly positioning it as a more general-purpose home entertainment center. Add a PS4 Lite, a set-top box for distributing music, video, and home movies around the home and to mobile devices. Support people’s use of Android and Apple phones and tablets, but make sure they realize that it’s Sony that is delivering the total entertainment experience on those devices. Then quickly extend that digital relationship into adjacent experiences, such as getting into home sensors and management, probably by buying a few companies that are already there. Start with door locks, one of the hottest digital home devices selling right now. These may not sound like Sony strengths, but this is the direction you end up taking a company like Sony once you understand that you have to build an ongoing relationship with the customer, not just impress with engineering prowess.
This digital customer relationship is something I talk about in my research, including in my most recent Forrester report, called Start To Build Your Ultimate Customer Relationship. Relationship is about to be everything to companies in every industry, but consumer electronics firms are especially vulnerable because if they fail to make this shift, they will end up selling millions of sleek devices that consumers populate with somebody else’s smart experiences. It's not too late to prevent this. Sony could still be a contender because the economics of digital disruption allow anyone to enter and compete, whether a startup like Pebble or Dropcam or a long-established business like Audi or, yes, Sony.
James McQuivey, Ph.D. is a vice-president and principal analyst at Forrester Research and the author of the book Digital Disruption.