Saturday, November 10, 2012

Sony Mobile: Dialing for Innovation?

Earlier this year Sony took full control over its troubled mobile phone joint venture Sony Ericsson, renaming it Sony Mobile. Taking control is the first step of a turnaround strategy, and the initial moves have already been made. There have been cuts in the workforce, and the old non-smartphones have been cut from the product lineup. Closer integration with the handset business music and gaming assets services has been put into place. Of course, all this just puts Sony on the starting line with any other modern handset maker, and does not create a recipe for winning. If you look at recent breakdowns of worldwide handset markets shares, you will find Sony in the category of - - “Others.” Clearly they have some way to go.

Sony has a long tradition of using design and innovation to fight competitive battles, and their new line of Xperia smartphones shows that the design part is working already. They are neat. But that, too, is so very common these days in mobile phones. How about innovation? Sony has a tradition for that. And, it would be typical of firms that have fallen behind their management’s aspirations for performance to increase the pace of innovation in order to turn the tables on the competition. Much research, including my own, has shown that firms that fall behind prefer to take the risky path of launching many products, and often innovative ones, in order to catch up.

But for Sony Mobile there is the complication that it is the subsidiary of Sony Corp., a conglomerate that has its hands full trying to catch up with competitors across a range of businesses. Will this make it more or less aggressive in its responses? Recent research by Vibha Gaba and John Joseph suggests that it will become less aggressive: While a firm or subsidiary that has low performance will compete more aggressively, being the subsidiary of a conglomerate with low performance leads to more caution. A likely reason is that the corporate owner is less focused on competition in the market place through product launches, and instead starts conserving resources. But that focus on resource conservation undercuts the subsidiaries’ wish to start a comeback from their weak competitive position. So here we have another reason why the multi-business corporation may be a less agile competitor than the single-business corporation: its business-level and corporate-level reactions to low performance are opposite! It is out of synch with itself.

The problem must be especially interesting for Sony Mobile, for two reasons. The first is that Gaba and Joseph did their research on the mobile handset industry, so Sony Ericsson is in the data they analyzed. The second is that one of the newer products in the Xperia smartphone is an agent 007 smartphone. I have not seen the movie, so I am not sure what that phone does. I am slightly scared by the prospect of people around me carrying it. But surely, if Sony Mobile can make the phone for somebody who so regularly flouts M’s rules, Sony Mobile can also find a way to flout Sony Corp’s limitations on how they spend their money.