07th Feb 2012

Leadership change at Sony

Last week Sony Corp warned investors it’s expecting a net loss of $2.9 billion for the year to March. Amazingly, the electronics giant posted a $2.1 billion dollar net loss for October-December, usually a big quarter because of holiday sales. Reasons include a strong yen (which continues to hurt Japanese exports), European chaos and a flood in Thailand that broke supply chains.

Sony’s long-term problems are even more serious – the company has now been in the red for four years running. Though it was once considered an innovative leader, producing the Walkman in the 1980s and the Playstation in the 1990s, Sony became over the past decade a casualty of the intense dynamism in the electronics market, withering away while rivals like Apple and Samsung got fatter and fatter.

So what went wrong? Leaving aside its chronically unprofitable TV business, what happened, in a word, is convergence. Sony is strong in areas – digital cameras, music players and handheld gaming – that are being squeezed by new generation mobile phones and tablets.

Howard Stringer, the Welshman who has struggled with these difficulties as CEO for the past eight years, is set to hand over to his successor Kazuo Hirai on April 1. Hirai ran Playstation, one of the company’s past triumphs (though as the lion’s share of profits in the gaming industry are generated by software, Sony can’t rely on the device as a source of future growth) and the hope is that he’ll be the guy to revitalise this ailing corporation.

Time is of the essence. Hirai needs to make great strides in a short time if he is to convince investors and the market that Sony’s fortunes are going to change – the stakes are high. It is absolutely essential that he hits the ground running. Hirai’s first 100 days as CEO will be a significant indication of how he will fare in the long term – and Sony will be relying on him to deliver.

It takes a great leader to turn a struggling company around. Hirai will need considerable vision and courage. Though he starts his new job on April Fool’s Day, he won’t have time to fool around!

Hilda Goold

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