Sony's board is contemplating breaking up the company. The agitator for this change is billionaire Daniel Loeb, whose Third Point hedge fund owns less than 10% of the Japanese tech giant but exerts massive influence. Loeb asserts that the structure of Sony is stifling its share price and has found an ally in progressive Japanese Prime Minister Shinzo Abe. Loeb wants Sony to spin off its Entertainment/Content arm and Music label, file a separate IPO for those assets and refocus the core business on its consumer technology offering.
In the global context it is tough to argue with the proposal. Sony’s days as the driving force of consumer electronics behind brands like Walkman, Discman and Playstation have been eclipsed not just by Apple but by Samsung and LG. Loeb, with this move, is suggesting that focus has been the issue, not just the aggressiveness of the competition. He asserts that Sony has been pulled in so many different directions that its core business has lost its luster. It used to be that putting your CEO in an ad was the sure sign that a company was in trouble, but as I previously commented about Pfizer’s Starbursting and Blackberry, it appears that the new early warning sign has become pressure to “get back to doing what you do best."
Sony currently resides at number 40 on Interbrand’s Best Global Brands list but now sits a full 31 spots behind its more recent rival, Samsung in 9th place, while its share price has declined by 85 percent in the past 13 years. Despite the beautiful ads that surrounded its Bravia TV launches, the company has failed to fully replace its iconic brands of the 90s with new versions that can conquer today's even more competitive environment.
Sony’s brand has always been far more present in the consumer space, they created so many iconic, mainstream habits in tech (portability for instance) and gaming. The conversations at CES, SXSW, CTIA etc have been around gamification and bringing social tools and thinking to more parts of people’s working lives. Sony’s Make. Believe approach suggests that this is a focus for them as well but they need to be far more open and progressive in how they pursue partnerships and OEM relationships or else Microsoft, with Xbox, will move even further ahead because of how embedded Microsoft is in the workplace.
The Loeb proposal also highlights that it's time for Sony to rethink the practice of creating captive, proprietary technologies (Blu-ray for instance) that try to usher consumers into a single brand relationship. Consumers have balked at committing to a single provider for all their needs; even Apple has seen teething troubles in driving into the TV market. It's increasingly becoming a world where 'best partner,' 'most compatible' and 'most consumer-oriented' wins, and Sony risks becoming the odd man out if it doesn't integrate not only with consumers' lives but the technology that surrounds them.
Loeb's move could serve as a catalyst and spark to re-instill that fire into Sony that made it once so transformative in the world of modern consumer technology. To really rebound the company must understand consumers better than anyone else, be more open to partnerships than anyone else, be more creative than anyone else and be nimbler and less distracted than anyone else. This move addresses the last of these needs, the rest will come next. This pivot seems small on paper, but it's seismic for brands like Sony that risk marginalization if they don’t embrace change before they are steamrolled by it.
To make this happen Sony executives must mix "outrospection" with their current introspection. The questions they will ask themselves are both “how is our structure holding us back ” and, “what does the consumer’s life look like and how do I play a meaningful role in it”; not necessarily in that order. Loeb understands this distinction and though his motives will be questioned, the methods he suggests are a step in the right direction.
Hugh Tallents is a Senior Director of Strategy at Interbrand New York