Back in March, 2015 I wrote an article on the company that I saw as the biggest transformation failure in the last 20 years: Sony Corp. At the time, the company was suffering from a combination of competition from Chinese and Korean electronics products that made the “premium” Sony devices less popular, and poor performance in its Sony Pictures and Sony Music groups.
Since then, however, Sony has undertaken an impressive transformation, with strong revenue growth and a stock price that had more than tripled in recent years before taking a slight tumble in recent months.
So, how did they do it? And what can be learned from their return to relevance? Here are three keys to their turnaround that can provide useful lessons for other legacy companies.
Dominate a few categories rather than lose across the board
While Sony had once tried to win across the wide consumer electronics playing field, Kaz Hirai, their CEO from 2012 though 2018, backed off of the crowded market for branded TVs, music players and other gear and focused on three key markets:
- Digital Imaging
This focus has generally born fruit for Sony. In the imaging space, for example, it is estimated that half of the world’s smartphones now contain Sony sensors. While this may not be as sexy or brand-building as the days when everyone needed to have a Walkman or a WEGA TV, Sony is positioned as a key contributor in a growing market segment.
Gaming has been Sony’s biggest revenue-producing segment in recent years, with the PlayStation division in particular posting record profits in 2018.
Mobile is the only one of the three focus segments that has not yet been a big winner for Sony, as their Xperia phones have struggled to penetrate the market. Sony is hopeful that the coming 5G wireless data standard, with its higher data rates and lower latency, will turn their fortunes around, but that remains to be seen.
B2B is a nice place to be
Few are aware how successful Sony’s turnaround has been because so much of their transformation has taken place by building components as an OEM supplier for other companies’ products. In addition to the image sensors mentioned above, Sony has a growing semiconductor business that is taking advantage of increased penetration in emerging markets such as factory/vehicle automation and 3D sensing. The market for the 3D sensors that will drive drones, self-driving cars and factory and warehouse robots alone will expand to well over $4 billion by 2022 and Sony is well positioned to take a strong share of this market.
Delight the customer – KANDO
Sony’s most recent focus has been on what it calls KANDO – moving people emotionally, or, as they call it, “getting closer to people.” They do this through their artists and stars in the Music and Movie verticals, and are increasingly focused on branded services, networks and platforms, the best examples being Playstation Network (PSN) which has over 80 million active users.
How you can learn from Sony
Your business may not have Mariah Carey, Paul Simon, or Spider-Man on your payroll, but that doesn’t mean that you can’t follow Sony’s lead in other ways. For example:
- Are there particular market segments or categories you could focus on, to the exclusion of others that are lower-performing?
- Have you investigated selling your products or services via other companies (white label or co-brand)?
- Could it be worthwhile to double down on customer focus?
- Are there networks or platforms you could create or be a part of?
Most of all, take guidance from Sony and be bold. Transformations are often about making tough choices and abandoning traditional markets. What you choose not to do can be just as important as what you choose to pursue. Not too many companies are willing to completely pivot their business, but Sony has transformed themselves from a struggling consumer electronics provider to a thriving entertainment firm with a strong consumer businesses and an equally strong business as an OEM components supplier, embedding Sony parts into some of the fastest growing spaces around.
dPrism clients have taken similar leaps. As an example, we recently helped a client turn a collection of yearly publications into a digital monthly subscription service that has outstripped its legacy revenue base in less than a year, with much higher margins and retention rates.
We’d love to help you explore any of these avenues. Please let me know if you’d like to discuss.