Crossroads

At the intersection of technology, finance and the Pacific Rim.

Sunday, June 11, 2006

Business Tips

Howard Stringer is the new CEO at Sony and is in charge of their turn around. He was interviewed by the WSJ's Walt Mossberg. Note the importance of controlling the software--it is the means by which you control the customer experience. Here are some excerpts which further expound on the theme of our course:

Mr. Mossberg: Consumer electronics in his [Jobs's] mind can be thought of as software in a box, and that has not been your strength. You've been primarily a hardware company. What have you done about this problem?

Mr. Stringer: I spent a lot of my first year pushing on software. Now, Sony makes 3,000 stand-alone products and 50,000 SKUs, so part of our problem is we're this giant department store, ostensibly an analog department store, cranking out all these things that the world wants but for which we don't always get credit in the stock market. We actually have a lot of brilliant software engineers, but they create embedded software. We have had a great problem with application software. We never did it, as you know, with a digital Walkman, which we didn't even release here because we actually didn't want to give it to you.

Mr. Mossberg: Oh, thanks.

Mr. Stringer: We gave it to the rest of the world and retailers were very upset with it. It was a beautiful product, a purple device, wonderful-looking information on it. Very elegant in software and the two doormen in my building think it's absolutely great. But it's limited because we didn't sit down and have a systematic plan to build applications across the software-development program or software platform and furthermore, it's a weakness of Sony's ... Why am I confessing?

Mr. Mossberg: Good, keep it coming.

Mr. Stringer: We didn't bring software engineers into the product development at the beginning. The engineers would begin the product and then software would come after the fact. And that's because in a company that has jobs for life, the older people are at the top and the younger software engineers, of which there are many, are on the bottom, pushing up. So there's a kind of a generation gap, which we've worked really hard to eliminate in the last four months. We're going to transform Sony quite radically in the next 12 months.

Mr. Mossberg: Let's talk about the Sony Reader, which is a new and quite different e-book device. ... This is not just a device. You have to pull off something sort of akin to iPod and iTunes with this, where you have a device people like, at a price they will pay, and very good software on the computer to handle it and then a good service with a lot of content where the DRM [digital rights management] isn't too intrusive.

Mr. Stringer: You're right, that's a lot of pieces to put [together], that sort of end-to-end model that Gates was saying no one wants, but everyone does, actually. I've put my name on this damn thing. I'm a reader. I know that's an odd phenomenon these days, but I carry books all around the world, so when I saw this I fell in love with this device. The fact that you can store 80 books on this and more on the memory stick, the fact that its battery life is seven-and-a-half thousand pages, which means about 25 books. ... The publishers love this ... Dan Brown [author of "The Da Vinci Code"] endorsed this at the Consumer Electronics

Mossberg: You are in so many businesses that clearly you have a wide variety of competitors.
Does Samsung [Electronics Co.] rank as a particularly important competitor?

Mr. Stringer: Samsung is a first rate company and they have a wealth of revenue coming from other areas. But I think in the high-definition world, which is clearly our strategy for this year, we have still an advantage. Blu-ray is part of the high-definition strategy and then we have the 4K projector [called SXRD], which we're demonstrating in California this week. We have the digital camera, which we make with Panavision. We have high-definition Bravia [TVs], high-definition rear projectors, and we have a high-definition camcorder which is the world's best selling camera. So our strategy is sort of circling the globe with high definition -- we think we're poised for the high-definition miracle.
Sony is a target for everybody. We have more competitors than you've had hot dinners. ... The truth is, one of the things I did ... was eliminate some of those SKU's because it's exhausting trying to win on every front. Every engineer loves his own product, so if you have an electronic toothbrush with a camera, we would give the same amount of marketing to that as everything else. After awhile the company sinks, exhausted, to its knees. Well, we've changed that.

2 Comments:

Blogger LeftBack said...

For me, the real test of the Sony Reader will be how it “feels” on the eyes. Maybe it’s just me, but reading a computer screen for over half an hour is like peeling a bucket of onions. I’m guilty of making hardcopies of lengthy articles just to spare my eyes. Don’t get me wrong, as an avid reader I like the concept of having 80 pocketbooks in one, but not if it means they make my eyes water. Sony’s success with this product will come down to its paper-like legibility as advertised on its site.

At one point in the article Mr. Mossberg noted that the Reader is akin to iPod and iTunes in that you have “a device people like, at a price they will pay, and very good software on the computer to handle it and then a good service with a lot of content where the DRM isn’t too intrusive.” To this Mr. Stringer responded that the device Mr. Mossberg alluded to is: “that sort of end-to-end model that Gates was saying no one wants, but everyone does, actually.” On this point I’d have to agree with Mossberg: of course Gates would claim that people don’t want an end-to-end model. MS is, and has always been predominantly a software company. Hardware really isn’t their thing in the same way it has been for IBM, Apple and Sony, companies that have long histories of developing embedded software. This is why I think Sony’s XBOX will ultimately lose out to PS3. Sony is presently developing a consumer electronics platform for the Cell chip that will integrate the PS3, your TV, your stereo, set top boxes, and so on, into a multifunctional entertainment system. XBOX, as a stand-alone system, won’t be able to compete, and one of the reasons for this, I think, is MS’s lack of hardware expertise.

On the sales/marketing front, Sony is testing an innovative new method for selling electronic devices in shopping malls: vending machines! “Only credit and debit cards will be accepted. To ensure that a customer gets what he or she pays for, remote sensors will confirm that the product has been retrieved by the kiosk’s robotic arm and removed from the tray before the credit card is charged. If the customer forgets to remove the item, the tray will close after a set time.” The idea behind the machines is to “meld the simplicity of online buying with the immediate gratification of a store purchase… Sony will consider the kiosk experiment a success only if it increases sales, rather than cannibalizing them from nearby retailers.”

3:17 PM  
Blogger Jinwoo IM said...

Hmm. This article reminds me of WINTEL, a kind of vertical integration. I totally agree on the idea of Kevin because I'm also experiencing similarly whenever reading articles.
I'm not sure whether the strategy of Mr. Stringer will be successful, but I think condensing Sony's resources is really important and necessary.

9:09 AM  

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