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Sony Electronics: A Way Out Of The Death Spiral.

Sony has for several decades been recognized as a leader in innovation and a technology pioneer. Since its creation, market leadership was reached through innovation, the ability to sense hidden consumer needs and create new product categories, visionary leadership, nurturing experimentation, recognizing the importance of branding, and pioneering advantage-first to market leadership. It was able to build unparalleled brand equity and loyalty globally.

But over the past 3-5 years, the company has been slipping as it fails to fight back successfully against a range of followers turned competitors. Today, it is viewed as a technology “has-been”. How could such an iconic brand let that happen?

The Move

Sony embarked itself on a complex and expensive path of excessive and unrelated diversification. Asian businesses tend to expand into conglomerates of diverse and unrelated industries, and Sony is no exception. This type of extreme diversification consumes Sony’s brand resources and diverts the brand focus away from its core. Years of complacency and lack of focus have opened the market in many sectors to younger, more agile players, who took the leadership away from Sony: Samsung and Vizio in televisions, Microsoft and Nintendo in video games, Dell, HP, and Apple in laptops, and Amazon in e-book readers – all of these brands are formidable competitors that are winning in Sony product categories. The combined effect of these attacks is devastating from both a revenue and brand equity standpoint.

The Result

Breaking with its long lasting tradition of consumer-oriented innovation and first-to-market strategy, Sony went trough an innovation shortfall. The most famous example of which being the lack of follow-up to the successful launch of the Walkman (the cassette players may no longer be in production as of October 2010, but the Walkman brand name still lives on the US via a series of mp3 players) in 1979, which resulted in the take over by Apple of the portable music player market. Sony suffered similar types of defeats in a variety of product categories, which significantly dented its brand reputation.

Our Perspective

Sony has also been unable to successfully evolve as the brand for the new masses of the 21st century. This came from Sony’s inability to manage the seemingly contradictory brand strategy requirements of maintaining brand consistency, while allowing constant brand adaptation to the dynamics of markets. In Sony’s case, brand consistency may have been confused with brand complacency, a bi-product of excessive self-confidence.

Sony also lost track of key brand elements around the product itself: design, quality, and price. In the television market for example, Sony’s inability to reposition its pricing strategy cost significant market share to the benefit of rising competitors. Design and quality provided by new players in many cases surpassed those of Sony, and the Sony price premium justification soon vanished.

But what is Sony doing and what should Sony do to revamp its brand dominance? Sony is ready to "reinvent its marketing," say the company's senior executives. "We cannot just rely on the brand to sell products."

As a result, Sony's $5 billion ad budget this year will likely be spent on supporting a smaller number of products more aggressively, rather than try to cover the company's wide spectrum. In effect, they'll spend money only on the products most likely to succeed.

However, revamping its ad budget won't help Sony solve its marketing strategy, branding strategy or quality problems.

Marketing strategy and branding strategy are at the core of Sony’s dismalness. And they should be at the core of its turnaround. First, Sony needs to regain focus on what it does best, and on where it can build the most brand equity. It also needs to elevate branding to the boardroom. In addition, it needs to revamp its departments that have direct impact on consumer perception and brand perception, including research and development, marketing and design. Marketing and branding must be enabled to take the lead of the marketing strategy, at the boardroom level. And most importantly, Sony needs to recover the cool factor through innovation leadership that is relevant to consumers, and market solutions, not products. On the brand strategy side, Sony needs to simplify its brand strategy from a complex multi-level branding system currently used. Sony also needs to move towards “solutions” offering instead of “product” offerings. Consumers are today looking for an integrated experience, such as what Apple has been successfully providing.

On the quality aspect, SmartHouse notes that while Sony previously manufactured its own products, "due to mass sackings, billions in losses and the closure of factories the company has resorted to third party manufacturer companies in Taiwan, China, and Vietnam." Sony's TVs and laptops have faced "several recalls or service bulletins this year due to product failures."

Armed with an improved branding strategy, Sony needs to rethink its communication strategy. Communication needs to be more customer-centric, simplified, and impactful. Sony needs to better sell innovation, competitive advantages, and reconnect emotionally with consumers.

It all starts with Sir Howard Stringer and its c-level team, who need to make the necessary bold moves to implement such a plan and help Sony recover its iconic status.

A final note to address Sony's approach to healthcare, and specifically medical imaging. We recently visited RSNA (Radiology Society of North America) in Chicago and had a chance to learn more about Sony's offering in that product category. Most products seemed to gravitate around printers, which as we all know, is a technology quickly fading out in favor for digital solutions. Another area of strength had been displays, but those were pretty much absent. At this point, one can wonder what Sony's plans are for life science, and how it plans to leverage its impressive technology capabilities in one of the rare markets not affected by the economic crises. Or is that priority falling behind consumer electronics priorities? We hope not. Sony can make a difference in this space, if it puts its mind to it. Any comments Sony? We can't wait...

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