If I Was the CEO of Sony...

...I'd do things very differently. That said, what would I do, and how and why would I do it? How would I deal with the pummeling my premier gaming product, the PS3, is taking from the low-cost yet commercially successful likes of the Nintendo Wii? In less than a year the gaming industry has been turned upside down, leaving Sony with a big bump on its head. One of the great thinkers around issues of innovation, Clay Christensen, took a crack at answering this question in a recent story carried on Forbes.com. He took a clinical look at Sony's plight, the impact of massive and rapid disruption of the gaming industry on its prospects and evaluated different ways the company could respond to the competitive onslaught:

So, assuming Sony is able to fully internalize the importance of Nintendo’s disruption, what should the company do now? One option would be to not respond at all. One pundit noted that any response by Sony would only validate Nintendo’s approach, which could end up helping Nintendo. While the risk of validation is real, our belief is that ignoring Nintendo’s approach would be a mistake.

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Assuming Sony chooses to respond, it has three options. The seemingly simplest option is to just come up with a copy-cat version of Nintendo’s controller that works with one of Sony’s existing consoles.

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The second option is to repurpose Sony’s “legacy” product (PlayStation 2) into a me-too version of the Wii. To do this, Sony would develop a new controller, lower the price of the PlayStation 2, and try to get game developers to create motion-based games for the platform.

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The final option is for Sony to try to “disrupt the disruptor.” Instead of following a me-too strategy, Sony could seek to truly develop a category-changing project. While this approach would take more time and require greater investment, it has the most long-term potential—if Sony can figure out a different measure of performance on which to compete in the video game market. For example, perhaps the company could take another run at the handheld market, where there still seems to be substantial room for growth.

So what will Sony do? Rumors indicate that it is planning on following the first approach, sticking a new, motion-sensitive controller onto an existing console. Our perspective is that this is the worst of the three options. Instead, we’d recommend that Sony follow the second option to buy time while simultaneously undertaking efforts to develop an entirely new way to play in the video-game market. The key to success is realizing that the market is still replete with nonconsumption. Nintendo has shown one way to appeal to the non-gamers, but Sony could find others.

It isn’t easy for a company that has been thumped by a disruptor to respond. Trying to force-fit the disruptor’s new approach onto an existing business runs the risk of creating a disappointing product that further illustrates the novelty of the disruptor’s solution. Companies in the middle of a disruptive wave need to think about how they can disrupt the disruptor and find a new way to redefine the space. While this approach seems to carry the most risk, if done correctly, it actually has the greatest chance of real success.

Taken in a vacuum, I tend to agree with Mr. Christensen's recommendations. The problem I have with them, however, is that they require a healthy and functional corporate culture and a modicum of strategic vision, neither of which Sony had demonstrated in recent years. I don't see how you can answer the question Mr. Christensen so deftly answered without asking the following question: if my prescription is correct strategically, can they really execute upon it organizationally? Because for all the common sense inherent in Mr. Christensen's story, I think it is pretty much a red herring since I can't see a way current Sony management and the existing Sony organization can pull it off.

Let's say for the moment that Sony decides to take Mr. Christensen's advice (despite indications to the contrary). In order to execute it will need to have hardware and software working closely together, and doing so in a way it has never done before. In fact, I'd posit that software development and usability should drive hardware design, not the other way around, which is traditionally the way it is done at Sony. Given that there are really no new players (meaning fresh blood from the outside, bringing new ideas, new energy and new ways of getting stuff done) in key roles since the debacle called PS3 occurred, why should anyone have confidence that Sony can magically transform itself into a flexible, customer-focused, software-driven organization? Answer: they shouldn't.

So before I would begin even thinking about answering the question "What should Sony do next with respect to its gaming strategy?", I'd want to answer the question "How can Sony re-shape its organization, culture and product development approach in order to be more flexible, customer-centric and innovative in a rapidly-shifting market?" Because without a good answer to the latter, you might as well take the former, write it on a piece of paper, crumple it into a ball and toss it in the garbage can. Because that is all the value good strategy is worth in the absence of good culture.

 

Comments

[Yaser Anwar]

"How can Sony re-shape its organization, culture and product development approach in order to be more flexible, customer-centric and innovative in a rapidly-shifting market?"

Its about time their CEO got fired. Without change at the top, the question you asked is not possible.

Do you think all this started partly because of the culture clash in the first place- from Japanese CEO to him? Not to be racist of course; but Japanese companies have a way of running things, and do you think the possibility of a new Japanese CEO from Nintendo or so could rectify some of Sony's problems?

I guess by hiring the right people you mean going after them from a) AAPL, b) Nintendo, c) EA (maybe even Konami?)- companies that truly think out of the box (IMO).