It’s a consumer electronics giant with a reputation for design, founded by a perfectionist leader with a reputation for being a micromanager.
Its best known product is a portable music player that revolutionised how people listen to their favourite songs but its products covered a range of categories including smartphones, computers, wearables and television. While video games were always an afterthought, more people choose its products to play games than Nintendo.
Yes, the company I just described is Apple – but it’s also Sony. In fact, along with Polaroid founder Edwin Land, one of Steve Jobs’ main role models in business was Sony co-founder Akio Morita. Jobs even urged his engineers to design the iPhone as if it were a Sony product.
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In recent years, there have been countless business articles advising you to model your company on Jobs and Apple. The problem is that many of these same points also apply to Sony.
So why is it that while Apple recently posted a massive $US18 billion ($A22.6 billion) quarterly profit – the largest quarterly profit of any listed company in history – Sony has been losing money?
It wasn’t just the iPod that hurt Sony
The typical answer is that, following its release in 2001, Apple’s iPod overtook Sony’s Walkman. The assumption here is that Sony was late to the digital music player market.
In fact, Sony was one of the pioneers of the portable digital music market. Its first move into the market came in 1992, nearly a decade ahead of Apple.
Sony’s MiniDisc system compressed digital audio into a format similar to MP3, allowed you to connect a microphone and record audio directly to the player, and had swappable re-recordable discs. Unlike CDs, you could split, reorder and record tracks without a burner. Unlike cassettes, it was all digital and you could easily skip tracks.
In short, being late to the party was not the issue for Sony.
As a general rule of thumb, the makers of consumer electronics equipment don’t lose too much sleep over how customers obtain their content. The likes of Samsung, LG and Panasonic want to make it as easy as possible to watch your copy of season three of Breaking Bad on their TVs, regardless of how you obtained it.
Content companies have a very different point of view. They generally want their content locked down with digital rights management (DRM) technologies they hope will prevent it being viewed by people who haven’t obtained it lawfully, even if this is less convenient for the consumer.
The problem for Sony is that it is both a content company (through Sony Pictures and Sony Records) as well as a consumer electronics maker. This has led it to lock down its devices with DRM far more than its rivals, making them less user friendly.
Proprietary products that aren’t interoperable
Over the years, Sony has created many of its own media formats. While some (such as the CD and BluRay) have gone on to become industry standards, many others were proprietary formats that competed with the rest of the consumer electronics industry.
Aside from MiniDisc, the list of Sony proprietary formats includes UMD, Video8, DAT, TransferJet, S/PDIF, Memory Stick, Super Audio CD, Cell Processors and, who could forget, Betamax. Many of these formats sank without a trace.
The biggest problem was not just that they wouldn’t work with devices from other companies. Often, they didn’t even work with all of Sony’s own devices. So, for example, there was no guarantee that your new Sony Vaio laptop would have a S/PDIF for your Sony microphone or a disk drive for your MiniDisc player.
Many different ecosystems
What about third party developers who purchased a new Sony device and wanted to create a new piece of software for it?
Consider this scene from the ‘90s. Sony’s Clie PDAs ran Palm OS. Its Vaio series of computers ran Windows. Sony Ericsson mobile phones ran Symbian. Sony PlayStation had its own software format. There was a computer add-on that ran Linux. Linux also powered its Mylo portable internet device. Meanwhile, its NEWS workstations ran Unix.
In other words, Sony’s portfolio of devices didn’t share the same platform, meaning programs created for one device wouldn’t work on the rest.
The root cause of this issue? Each division of Sony worked as its own product silo. Collaboration across the company was limited, and therefore its products often didn’t work together as well as they should.
Lessons for your business
It’s easy to assume the secret to Apple’s success comes down to just design. However, if this were the case, Sony would still be a market leader.
Instead, the key lesson is to avoid having conflicting objectives (as Sony has with content and devices) that lead to compromise, while making sure there’s effective collaboration across different parts of your business, ensuring your product line works well together.