sony change management case study

How Sony Became The Ultimate Pivoting Success Story

Table of contents.

Today, Sony stands as a behemoth in the global electronics industry being the go-to brand for a vast collection of premium-quality consumer electronic products.

Sony's market share and statistics:

• Sony's annual revenue in 2022 was $81.3 billion
• Number of Sony's employees in 2022: 111,000
• Presence in more than 204 countries
• Sony's market cap is $101.83 billion Feb 2023

But it wasn’t always this way.

Sony’s beginnings trace all the way back to post-World War II in Minato, Tokyo, where it was established as a small shop of radio repairs, that too with a different name. 

Starting its journey with borrowed capital, a windowless workshop, little to no equipment, but a dedicated team, Sony has made its way to the top and currently is one of the biggest players in the electronics world.

Let’s travel back to World War II and understand how it all began.

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$500 Partnership Lays The Foundation Of Sony

It was March of 1945, and the war was in full swing. The crumbling of the axis powers and bombings in Japan brought chaos. Tokyo’s bombing was the last straw that sent the Japanese military into panic mode, and special reinforcements had to be called in.

This brought together two exceptional individuals: Akio Morita, a weapons researcher, and Masaru Ibuka, a navy lieutenant. Little did they know that they would partner together in the future to become co-founders of Sony.

Starting Small

When World War II ended, so did the military careers of Morita and Ibuka. Right after, as Japan went through one of its worst phases of unemployment, the two decided to find employment wherever possible.

Therefore, in 1946, Ibuka began working in a small workshop in Shirokiya departmental store, repairing radios for a living. In October, Ibuka paired with his team to form Tokyo Tsushin Kenkyujo, also called Totsuken, and often shortened to TTK.

Converters & A $500 Partnership

As is the case for any business, Ibuka and his team immediately began to search for a gap in the market. Something that was in demand, could be produced and would begin churning profits for them. This break came in the form of adaptors, or as they were called – converters.

Informational mobility had been almost non-existent during the war. While some radios had become damaged in the chaos, others were disconnected from the shortwave unit to prevent the Japanese public from having access to enemy propaganda by tuning in. Now that the war was over, the Japanese were hungry for information, and Ibuka cashed into this golden business opportunity.

His team created short-wave converters that gave regular radio access to the shortwave unit. This meant people could tune in to any channel they wanted and listen.

As the converters grew in popularity, they made it to the “Blue Pencil” column, where Akio Morita read the article and was impressed by Ibuka’s work. He contacted his former colleague, and the two formed a partnership in May 1946 with $500 of borrowed capital, and the desire to conquer the world of consumer electronics.

It’s All Rice

If you’re thinking that this partnership would be the turning point for TTK and the enterprise will grow to unbelievable heights here on, think again because the journey of Sony is anything but expected.

The first official product of the company was an electric rice cooker – yes, really! And it was a great failure.

The idea for rice, which might sound absurd, came from the aftermath of the war. As money remained scarce, some people purchased the shortwave converter radios for cash while others offered rice. The partners had an idea: they would help consumers cook rice electrically.

Adding aluminum electrodes on the underside of the wooden cookers seemed to do the trick until it began ruining the rice – over or undercooking it.

The first product of the company was officially a failure, generating only $300 in profits on a turnover of less than $7000 in the first year. 

The next product was electrically heated cushions, which also failed miserably, and it seemed, Sony had yet to come up with its great breakthrough.

Key Takeaway 1: Observe and Improvise

The early years for the TTK team were filled with struggles: minimum capital, limited manpower, and a windowless workshop. On top of it, the initial products were failures, one after the other.

For an ordinary start up this would have been the end of the road. But TTK’s improvised strategy meant they were always on the lookout to cash in on new opportunities.

So, even though the rice cooker and cushion had not done well, they represented the company’s ability to understand the needs of the consumer and come up with unique, innovative designs, despite limited resources.

Not only did this approach help them survive, but it also laid the ground for future growth.

The Breakthrough That Placed Sony On The World Map

Thomas Alva Edison, considered America’s greatest inventor, was always open about his failures. He once said,

I have not failed. I’ve just found 10,000 ways that won’t work.

For Ibuka and Morita, the entrepreneurial journey of Sony was similar. There had been a multitude of failed products, one after the other. In fact, Ibuka had almost given up hope on the household appliances market, but Morita convinced him to innovate, create, and conquer.

It seemed then, that rice cookers and heated cushions were simply examples of products that did not work in the Japanese market. They were not failures, but a business’ trial and error to get their breakthrough – which they did in the 1950s in the form of a tape recorder.

Nine Hundred and Ninety-Nine Uses Of The Tape Recorder

After their tried and tested runs of home appliances, the founders decided to move away from the home-appliance market and towards the development of electronic items.

In 1949, a newly imported tape recorder by the Japan Broadcasting Corporation flooded the markets. While tape recorders weren’t a popular item in Japan at the time, Ibuka looked at the product and an idea clicked!

Using their power of innovation, the TTK team made two prototype tape recorders:

• G-Type : Used mainly for industrial purposes, these had a recording time of 60 minutes.
• A-Type : Created for household usage, these had a recording time of 30 minutes.

As the recorders were released in 1950, the demand for G-Type especially spiked as teaching aids. However, it is important to remember that the Japanese market wasn’t too fond of tape recorders back then.

So, what did Ibuka do? Innovate and strategize.

With a military background, Ibuka came across a U.S. military booklet. This was called “Nine Hundred and Ninety-Nine Uses Of The Tape Recorder”. Putting on his thinking cap, he came up with a marketing strategy of converting the booklet into Japanese and spreading it around.

As the Japanese consumer market became aware of the uses of a tape recorder, they flocked to secure their purchase, and soon, the sales were at an all-time high. The conversion of a simple booklet into an effective marketing tool enabled TTK to move out from their small abode, and into a building in Shinagawa. The journey up had begun.

The Transistor Revolution

After learning from the tape recorder experience, Ibuka knew he had to be vigilant of global electronic trends and new products that could have potential as a business opportunity. His observation, once again, proved key when he caught wind of a tiny technology called the “Transistor” in 1952.

Back then, consumer electronics were mostly based on vacuum tubes. Unfortunately, this technology was not only bigger in size, but it also consumed a considerably high amount of power. Consider this:

While a vacuum tube consumed an entire watt of electricity, the transistor merely required a millionth of a watt (precisely 1/1000,000 watt!) to function.

Ibuka immediately recognized the potential of this technology and knew it could pave the way for the future of his company if utilized correctly.

The transistor technology had been produced by Bell Laboratories but was up for licensing and usage by Western Electric. The problem – it had a $25,000 price tag. While this may not seem much today, back then it was worth a whopping 9 million yen , and obtaining the technology made the company go almost bankrupt.

Everything had been put on the line for TTK. But merely capital injection was not enough. The technology had been up and running in the U.S. for years, and so the founders knew they had to elevate their game.

The existing transistor technology had one shortcoming – its low power output. Morita channeled his physics knowledge and came up with an answer. While the Germanium in the transistor itself wasn’t too conducive, adding impurities such as Phosphorus improved its power considerably!

In this way, Japan’s first transistor radio was created and launched in the market in 1955 by the name “TR-55”. This radio was small, portable, and an immediate success.

From The Japanese TTK To The American Sony

Radios were not a new item back then. An American company called Regency Electronics had already launched their transistor radio a few months prior to the TR-55, but Sony’s product was superior in quality and power.

For the company, this opened the doors to the West. Morita and Ibuka traveled to the U.S. to market their transistor radio and expand their consumer base beyond borders. But they faced a roadblock.

The Americans thrived on and purchased according to familiarity, and Tokyo Tsushin Kenkyujo, or its short form Totsuken, simply did not have the charm they liked. Instead, it was difficult to pronounce and seemed alien.

This led to dropping sales – something the founders were afraid of. Therefore, it was decided to change the name of the company to an easier form – Sony.

This came from the Latin word “ Sonus ”, which translates as “sound”. Since the company was dealing in radios, it only seemed befitting to choose a name that conveyed what it stood for. In addition, Sony also relates with “ son ”, a word in Japanese culture that hints at young adults who strive to be innovative and create new things.

Therefore, 1955 was also the year when the company changed its logo to depict the new name – Sony. A new global brand identity placed Sony on the world map, kickstarting its success.

Ket Takeaway 2: Connect With The Customer

Sony’s tape recorder was a fabulous invention, but the Japanese market didn’t have the awareness or demand. Using a simple already-published booklet, the company upgraded their marketing and conveyed to their customers how useful their product was.

Similarly, the TR-55 was an exceptional product. But would not sell in the U.S. due to the company’s difficult name. The founders were agile and changed the name of the company to something that would resonate with the new demographic.

Hence, along with developing useful products, Sony focused its marketing and branding techniques to make its offerings relatable and meaningful for the customer, in turn boosting its sales and outreach.

The Apple Of Its Day – A New Age For Television and Music

A small company can specialize in one product. However, if a business aspires to become a force in the world, history narrates diversification of product portfolio to be key.

Let’s take the example of Panasonic, Apple, Microsoft, or Nestlé. Belonging to a different set of industries, these businesses have become global conglomerates, churning hundreds, thousands, and even millions in revenue by the minute.

What do they all have in common? A diverse range of products.

Morita and Ibuka understood the need for continuous innovation, development, and advancement, paving the next three decades with several meaningful products and collaborations; turning the Made In Japan tag into today’s Made In China .

The Pocket Radio

Hindered distribution channels in the U.S. meant that the TR-55 still did not hit local markets despite the change in name. However, this did initiate a movement of change towards small, portable radios.

Therefore, when Sony released the TR-63, it had hit the bull’s eye!

These radios were advertised to be pocket-friendly, portable, and incredibly handy. As a result, people flocked to the markets and this transistor radio became a breakthrough product. From selling roughly 100,000 units in 1955, the count went up to a whopping sale of 5 million units sales towards the end of 1968.

But do you want to know something shocking?

The unique selling point of the radio was its pocket-friendliness, when in fact, the radio was not able to fit in standard pockets at all! When Sony realized that the radio didn’t fit, they customized the pockets of their sales staff to align to their marketing campaign, this established results and brought in sales.

Elevating The Media Game

It seemed that radios were just the beginning. Soon, the research and development team at Sony was making waves by coming up with unique products.

• TV8-301 : A small, portable transistor television was produced in 1960 that was considerably smaller and handier than the usual, large, vacuum-using televisions back then.
• Sony Trinitron: If there is one old Sony product that you might see today too, it is the Sony Trinitron. A giant leap from the black-and-white media technologies, the Trinitron televisions were bright, colored, high-quality, and truly the first of their kind. While they did require a heavy investment and weren’t launched until 1968, the founders found their risks paid off when this television featuring premium picture quality became an instant hit!

As consumers of foreign markets began to hear the might of Japan’s Number One , Sony’s clientele grew. What began from Japan had now headed towards the West and wasn’t stopping any time soon.

The Era Of Digital Music

Once Sony had made its name in the radio and television industry, it decided to step up its game by making an entrance into the world of music.

For this feat, they chose to indulge in a joint venture with CBS Inc., forming CBS Sony Records. They produced vinyl records and released the first Video Cassette Recorder (VCR) in 1971. As pioneers of such tech, Sony won an Emmy award for its excellent product.

This move was directed by none other than Norio Ohga, the same man who had once worked for Opera and criticized the early tape recorder of Sony. The founders immediately knew they wanted a critical man like him by their side. This man would take Sony into the future by later becoming president and chairman of Sony.

In 1988, Sony bought all the shares of CBS Sony Record to become its sole owner. After multiple collaborations with famed singers like Michael Jackson, it comes as no surprise that today, Sony is the world’s biggest music publisher with revenue reaching as high as $3.2 billion a year.

Let The Format Wars Begin

Sony paired with Matsushita Electric (now known as Panasonic) to create a videocassette format in 1969. But the expensive nature of the product, and therefore lack of sales made them part ways. However, both of them continued to work on their formats.

The result: One of the fiercest format wars ever.

Sony created their format in 1975, called Betamax, a product of supreme quality that could record up to 1 hour. Despite being the best in the market, it suffered at the hands of the VHS, the format developed by Matsushita. The VHS was cheaper and benefitted from the goodwill and massive clientele of Matsushita, generating a much higher turnover.

Yet again, Sony applied its policy of observation and conquest and resorted to creating VHS machines after the stiff competition.

Walk And Listen, Man!

If you’re thinking the decade’s research and development was over, and Sony would continue producing its usual products – think again!

It seems the thinking hats of the Sony team were always at work, even when they weren’t really trying to innovate. For example, the Walkman, a portable stereo cassette player that became one of the most popular players of all time, was actually inspired by Norio Ohga’s desire to listen to music easily as he walked.

The idea clicked immediately: A cassette player that could fit in your pocket, paired with a pair of headphones that had impeccable quality.

Since the headphones had already been in production, the idea took merely 5 months for execution, and on the 1st of July 1979, Sony had released the Walkman, which sold over 385 million units ! As a never-before-seen product, the Walkman was a phenomenal success, despite being priced at $150 !

Later, Sony paired with Philips to create the compact disk and invent the CD player in 1982. ushering in the transition to the era of digital music.

Stepping Into The Film Industry

If you are fond of watching movies, it is impossible to have not come across one spearheaded by the Sony team. This is due to Sony’s diversification in the late ‘80s.

In 1989, Sony bought Columbia Pictures Entertainment for $3.4 billion , a bold move indeed considering the acquisition already had a debt of $1 billion. However, this decision gave Sony access to an extensive library of films and a stronghold in the U.S. entertainment industry and its distribution.

With time, it seems the decision was the right one; the company has rolled out blockbuster movies like the Da Vinci Code, Skyfall, and Spiderman series since then; one after the other.

Key Takeaway 3: Never Stop Innovating

Innovation is key to sustaining success. Sony faced fierce competition from other established companies as well as foreign policies.

However, its main ingredient of success remained its powers of innovation – from the VCR to VHS and the mighty Walkman. The company realized that if one product range or service was doing well enough today, its demand and popularity could soon die down in a competitive and dynamic world.

Therefore, to conduct successful business continuously, it needed to innovate and update its products to stay ahead of the competition.

A Company Of Parallels: Financial Services, Gaming, and Mobiles

By the end of the 1980s, things were going great for Sony. It had expanded to newer markets, had a strong grip on music, and had a research and development (consuming 9% of sales ), that continued to work its magic.

Sony posted record earnings of $384 million in 1990, which was a massive 35% increase from the earlier year. However, like all business cycle booms are followed by slumps, the recession in the early ‘90s produced a considerably challenging environment for Sony.

How the company maneuvered its way through such business scenarios, however, is an entrepreneurial inspiration.

Revolutionizing The World Of Gaming

The company had decided to venture into video gaming by the late ‘80s and availed the help of gaming giant, Nintendo Co. Ltd. in this new endeavor. However, the deal fell through in 1992 when Nintendo backed out, and Sony was left on its own.

Did Sony then back down since gaming was a completely new horizon? Absolutely not! The company continued to work on the production of their first game console, and merely 2 years later, the Sony PlayStation was launched in the Japanese market.

An immediate success, it sold more than 100,000 units on the first day, and roughly 2 million by the end of its first 6 months. The console was released in the U.S. a year later, and the sales tally continued to climb. Sony had revolutionized gaming, and the world was about to find out.

Despite Morita’s passing in 1999, innovation did not stop at Sony, and the PlayStation 2 was released in 2000, becoming one of the biggest hits among gaming consoles. By today, this product has sold nearly 158 million units ; and continues to be headstrong, bringing in newer variations such as the introduction of Virtual Reality. Currently, the PlayStation 5 is on the market, with further editions in the works.

Getting Mobile

Sony’s next step – conquering the mobile market. In 2001, the company joined hands with the mobile division of Ericsson with a 50-50 share. This came to be known as Sony Ericsson.

Their first product, a rounded-designed phone called the T65 was well received by the public. In 2012, the company was bought and renamed Sony Mobile Communications, this time competing in the smartphone industry with Sony Xperia. However, the mobile market perhaps wasn’t the right trajectory for Sony. With decreasing sales and an almost non-existent presence today, while the start of Sony Ericsson was good – the steam died down.

All The Money Lay In Financials

In 2001, Sony made another unexpected move. It created the Sony Bank. The idea to step into the financial market went back to the 1950s , when Morita had visited the U.S. In Chicago, he was surprised to see the magnitude of the Prudential Building and was in awe of how life insurance companies and financial institutes could build similar facilities. There and then he had decided – Sony would venture into banking one day.

Although Morita’s wish came true after his death, the Sony Bank was created as an online bank facilitating deposits, foreign exchange trading, etc., and continues to turn the wheels of revenue for Sony.

The OLED TV

Staying true to their innovative streak, Sony created the world’s first Organic Light-Emitting Diode television in 2007 called the XEL-1 .

Also, one of the thinnest televisions of the time, the OLED TV had supreme picture quality, consumed less energy, and was incredibly lightweight. It was a success, receiving mainly positive reviews and selling all over the globe including Canada, Russia, Australia, Europe, and the U.S.

A few years later, Sony also released its Ultra-High-Definition TVs (4K), with exceptional pixel and picture quality.

Key Takeaway 4: Become A Risk-Taker

Sony’s experience in becoming a conglomerate teaches that diversification gives a mighty push to a business striving towards success. Although Sony began its journey with electronics, it expanded and ventured into gaming, financial markets, mobile phones, the film industry, and beyond. While some decisions may not have been the best, others – such as the PlayStation – were a risk that paid off well.

In fact, it wouldn’t be wrong if one was to say that the PlayStation is keeping Sony afloat today!

Sony Today – The Battle Uphill Continues

Over its journey spanning over seven decades, Sony has faced its fair share of challenges and setbacks - from the rice cooker to Sony Ericsson. However, the company has always been able to fight back and persevere. This is why, even today, it is counted amongst the most successful conglomerates in the world. By continuously reinventing itself to cater to people’s needs, Sony has evolved into a company that drives the world forward.

Sony is on a purpose to “fill the world with emotion, through the power of creativity and technology.” This is evident from its business centered around people to support and connect them.

Navigating The Pandemic

For many businesses, the pandemic proved to be a rather difficult storm to see off. Initially, Sony too had to bear a huge decline in operating profits caused by the COVID disruption.

But soon, the company found a way to not only stay afloat but take their business to the next level. This was mainly backed by their gaming and entertainment industry.

With people staying indoors, they had more free time and looked towards Sony’s trademark products, such as the PlayStation 5 - over 10 million consoles sold till now – online streaming options, and music production.

Thriving On Digital Platforms

Thus, seeing the huge potential in digital entertainment, Sony has shifted its focus from consumer electronics to entertainment and gaming. Plus, with a long-established reputation and platform in these industries, the change is one the company is fully ready to embrace.

Very recently, the company has completed its acquisition of anime-streaming site Crunchyroll for a whopping $1.175 billion . Although the investment seems huge, it provides Sony access to over 120 million customers spread out in around 200+ countries.

That’s not all though. Sony has also struck deals with streaming platform giants Netflix and Disney Plus to offer Spiderman movies and content.

Key Takeaway 5: Prepare Products For The Future

Good companies provide their customers with products for the present. But great companies have the eye to look beyond, understand what the future holds, and ultimately, lead the way in the industry. Therefore, if a business wants to be a growing brand in the future, it must visualize and plan in the present.

Sony knows the world is changing and people are consuming content digitally. With the resources and platforms it has, the company is fully amped to offer its customers online streaming content and transform the gaming industry.

Strategic Takeaways

Growth by numbers.

Here are our key takeaways from Sony’s inspirational, roller-coaster journey, which of course, continues to roll.

Adaptability Enables Growth

With a capital of merely a few hundred dollars and a handful of men on the team, Sony was tight on resources from the start. Then, it continuously encountered obstacles, such as failed products, branding difficulties, and a rolling out pocket radio too big for a pocket. 

But in every situation, Sony did not take a step back. Instead, it adapted to its circumstances and was not afraid to change or take risks. They pivoted their products, marketing strategies, and even brand name, to find a way to move forward.

As a result, slowly but steadily out of a one-room facility to a building, and now – into an industry giant with a multitude of branches.

Create Your Product’s Worth In The Customer’s Mind

Some of Sony’s most successful products were those that struggled initially due to a lack of customer awareness. Hence, the company implemented various marketing strategies to make its product relatable and establish its unique offerings.

The transistor tape recorder wasn’t considered much until the booklet was introduced as a fantastic marketing strategy. The TR-55 was a great invention, but a result-oriented distribution strategy enabled its successor, the TR-63 to become a phenomenal success. The gaming expansion of Sony was difficult with Nintendo’s backout, but with the image they were able to curate, PlayStation outperformed any other Nintendo or Sony product.

Therefore, Sony’s growth depended on creating the best technology or appliance and informing or enticing its customers of the value it added.

Creativity & Innovation Are The Guides To Success

Sony is one company that realizes what its customers want or need before even the customers themselves know it. This powers continuous creativity and innovation. For instance, the Walkman – a portable cassette player – was a unique gadget people hadn’t seen before. Yet, the idea of having a music player in your pocket connected to headphones was something millions resonated with.

Thus, with an innovative approach, Sony captured an audience and made its mark with a product that at the time did not have a close competitor. Throughout their journey, from the CD player to the PlayStation, Sony’s first-of-their-kind products have been a key factor in the company’s success.

You Need To Take Risks To Minimize Risk

The risk-taking ability and drive of a growing company are what sets it apart from the ordinary company. In order to survive and thrive, Sony did not put all its eggs in one basket. It explored various industries, such as gaming, films, and financial services, diversifying their product portfolio so in case they were not doing well in one sector, others were facilitating the company’s growth.

So, while they were taking risks by leaping outwards of their industry, they were also minimizing the risk of becoming over-dependent on specific products or services. Thus, if consumer demands changed, new competitors entered, or there was a major shock in the market, their business did come tumbling down all of a sudden.

Its heavy investments in anime-streaming Crunchyroll and Disney Plus and Netflix show that the company is ready to divert its resources towards what customers will be demanding more increasingly in the future. Thus, a company focused on growth, like Sony, always looks into the future, keeps itself on top of trends, and embraces innovation and technological changes.

Sony Corporation’s Strategy in Context Case Study

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Introduction

Factors that affected yoshida’s decision, internal environment factors.

Sony is a Japan-based international corporation that produces electronics and provides entertainment and financial services. Established in 1946 by Akio Morita and Masaru Ibuka, it succeeded as a part of Sony Groups that also includes Sony Pictures, Sony Music, Sony Interactive Entertainment, et cetera (Green, 2017). While the performance of Sony began in Tokyo, it covers a lot of countries worldwide today due to the opportunities provided by globalization processes. In order to remain competitive, the company forms joint ventures, sells its activities, and restructures the branches and divisions. The chairman, Kaz Hirai, and President and CEO, Kenichiro Yoshida, are the two main people who identify the company’s course of development. The ownership structure consists of institutional holdings allocated to holders, who cannot lead the company, yet Yoshida and Hirai should respond to them about their actions.

This paper will focus on how Yoshida took a new perspective on leading the company and making it successful based on the range of the previous solutions regarding the company’s strategy. This CEO freed Sony from the production of Vaio laptops and returned the corporation to profitability (Inagaki & Barber, 2018). It should be stressed that Yoshida is not a traditional Japanese leader since contrary to all widely accepted strategies, he criticizes the previous management of the company for not adapting Sony to the changing electronics market. In particular, the paper will discuss why such strategies as focus on innovations and content prioritization were declared by Yoshida as the key components of the integral decision. Currently, one may observe the first positive results of the mentioned solution, which are evident through reduced costs and increased interest of customers and partners. More to the point, the stakeholders tend to support this decision due to its consistency with the contemporary market development trends.

The structure of the essay is organized chronologically to follow the factors that contributed to the target solution. First of all, the way Sony was introduced will be examined to understand its initial mission. Second, it seems also essential to determine the external environment factors that promoted the decision of Yoshida, which will be conducted in the context of the stakeholder theory, focusing on the connection with the interested parties and taking their needs and expectations into account. Third, the internal environment will be analyzed based on the constructs of the institutional theory. The social and cultural aspects that played a decisive role in the historical success of the company are to be identified and interpreted. Ultimately, the concluding part will summarise the key points and answer the question of how Sony adopted the identified solution.

Early Steps and the Raise of Sony

Sony created the transistor radio after World War II, which soon was spread across the globe due to its popularity. The leadership of Akio Morita allowed the company to remain ahead of technological progress, and its leaders devoted most of their work to come up with ways to utilize the achievements for the benefit of all people. Inspired by the idea of creating new markets, Sony played the role of a pioneer and occupied the leading position in the sector of consumer electronics (Frynas & Mellahi, 2015). There are few technology companies that have a comparable success story. At this period, the company’s management used about 85 percent of the time to the issues associated with research and development, 10 percent to staff, and only the remaining 5 percent to finance (Frynas & Mellahi, 2015). For Akio Morita, the financial results were the results of hard work on the creation of new products and the formation of new markets. It was believed that in case Sony handled well with its main task, the results will be consistent. Thus, it is clear that the initial developmental course taken by Morita and Ibuka was closely associated with innovations, which were given much less attention in the future years.

External Environment Factors

One of the key persons who affected the target decision was Edward Deming. The prominent Japanese quality control system was introduced by this expert who was not known in his own country until his ideas of quality control had such a huge impact on Sony. The Americans realized the significance of the statements of this scholar but did not treat them with the same seriousness as the Japanese. In fact, the Deming Prize for quality is one of the highest awards that a Japanese company can receive. In the 1950s, Deming persuaded the leaders of the company to concentrate on producing goods faster, better, and cheaper – he promoted the ideas of industrialization (Kar, 2017). In other words, the initiative of the rapid and massive increase in production was declared pivotal. The higher the quality of the product, the fewer maintenance problems will occur. It should be stated that all of the discussed events and actions occurred in the headquarters of Sony – Tokyo, Japan.

The review of the relevant sources shows that such obsession improved quality yet left the leaders of Japanese business with fewer skills to develop and apply innovation in any other field. Over time, Sony tended to pay less attention to the development of industrial products, forgetting the idea to create new markets (Moskowitz, 2016). For example, even though Vaio computers were of exceptional quality, they almost did not use new technologies. When the company had to get involved in severe competition with, HP, Dell, and Lenovo, its success began to depend on the game to reduce the cost/price of the production of computers, but not on the development of new designs. One should point out the fact that Sony has deliberately developed a clearly industrialized strategy focused on the processes and production volumes, instead of trying to create something unique.

In 2012, led by Stringer, Sony has entered into a partnership with Ericsson, subsequently buying it entirely (Noam, 2018). Again, customers did not observe any new technologies or attempts to create a device that stands out from the rivals. Instead, Sony has focused on increasing the volume of production along with the circumvention of the products of Nokia, Motorola, and Samsung with regard to price and functionality (Merrin, 2017). With no consumer or technological advantage, Samsung left Sony with its industrial strategy far behind due to lower costs. This shows that the preference was given to volumes intentionally as a way to maximize profit and saturate the market.

According to the stakeholder theory, a company is not only economic integrity and a tool for making a profit but also an element of the environment in which it operates. Namely, it is a system that influences and is influenced by its environment, including local communities, consumers, suppliers, public organizations, staff, investors, and shareholders (Freeman & Moutchnik, 2013). The first method of the identified theory that is used by Sony is to establish partnerships with stakeholders (Fernando & Lawrence, 2014). An important goal of this method is to build such relationships so that it is more profitable for the stakeholder to act in the interests of the company since in this case it also reaches its own interests. Yoshida considers that Sony should make better use of its user data in order to create content that best suits their preferences (Kodama & Shibata, 2015). This proximity to users is regarded as the way to survive. Therefore, Sony will not close PlayStation Vou, the Internet streaming television service.

In the context of the stakeholder theory, the concept of shared values ​​can be defined as policies and operational practices that enhance the competitiveness of a particular company (Hörisch, Freeman, & Schaltegger, 2014). At the same time, it strives to improve the economic and social conditions of related communities. Creating shared values ​​focuses specifically on situational identification as well as expanding and strengthening the links between social and economic progress (Kodama & Shibata, 2015). Since previously the volume and price reduction were the main goals, innovations lacked necessary attention purposefully as they were not assigned a top priority.

Today, Yoshida attempts to preserve its quality and introduce innovations to build a business around communities of interest arising among gamers, film fans, and music lovers (Figure 1 shows that quality remains essential for Sony). For instance, the largest community is the Sony PlayStation Network. The CEO believes that the data on 80 million players need to be better analyzed in order to create content that best matches the interests of the audience (Thilk, 2018). A recent example of such a hit is the success of the new Spider-Man for the PlayStation 4, which was released on September 7 and for three days sold a record circulation of 3.3 million copies. By approximate calculations, Spider-Verse film collected $30-35 million (Thilk, 2018). Thus, it is evident that the decision to target customers was dictated by the need to better understand what they need and adjust innovations accordingly.

The institutional theory of organizations implies that they are social structures with a certain degree of resilience. There are social, cultural, cognitive, and regulative components of the theory that specify how one or another decision was taken. It should be emphasized that the main insight of the institutional theory refers to imitation as organizations tend to look at their competitors to make solutions instead of practicing a rational approach. Overall, cultural and cognitive explanations are most appropriate to understand Sony’s decision. In consistent with this theory, Yoshida observed other companies and found that such giants as Apple or Google always target innovations and adjustment of their products. Partially, the CEO focused on his decision since the company was lacking for many years.

In 2016, headed by Kazuo Hirai, an ex-CEO, Sony entered the new frontier of competitiveness by launching Blu-Ray technology to the market, its strategy remained the same. First of all, it aimed at finding a way to sell as many devices as possible working in a new format (Pope, 2012). Therefore, the company did not sell Blu-Ray technology to anyone. Similarly, it behaved in the market of audio files by developing its own audio encoding format that was applicable only to devices manufactured by Sony. In the conditions of the information economy, this approach could not suit consumers, and Blu-Ray turned out to be an unprofitable undertaking, uninteresting to the market, and the same fate awaited the now closed series of digital Sony players (Pope, 2012). One may observe such a situation in almost all areas of the company’s business. For example, in the production of televisions, Sony has lost its technological advantage that was achieved due to the launch of Trinitron CRT. In the segment of flat-panel devices, Sony applied its industrial strategy, trying to beat the competition by increasing volumes and reducing costs with predictably dismal results.

The situation started to change before Yoshida – under the leadership of Morita in the 1990s, the development of new products was at the forefront, and the tactics of the industrial age were used to reduce costs. However, Sony executive, Stringer who came to the company in 2009 was trained differently: to implement an industrial strategy. In his perspective, new products and markets occupied a subordinate place. They were convinced that if Sony would have sufficiently high gross figures and would be able to sufficiently reduce costs, sooner or later the victory in the competition would be ensured to it. By 2010, Sony had reached the climax of this strategy, putting the company at the head of a non-Japanese leader (Dhillon & Gupta, 2015). Stringer earned his reputation as the head of Sony’s American subsidiary, who, in perfect agreement with the letter of the industrial strategy, reduced the 30,000-strong staff of the company to 9,000 (Hartung, 2012). For Stringer, Sony’s mainstream development course was neither innovation, nor technology, nor new products and markets.

In Stringer’s version, an industrial strategy meant obsession with cost reduction. While Morita’s management meetings were 85 percent dedicated to innovation and market-based technology, Stringer brought a modern approach to Sony (Velez-Castrillon & Angert, 2015). It should be stressed that Sony’s leadership was driven in strict accordance with MBA success recipes of the 1960s. By focusing on a specific limited range of products to increase production volumes and trying to avoid the costly development of technological innovations in favor of mass production, he strived to achieve the reduction of costs. The increase in the service life of the product and equipment was also dictated by MBA value systems of that time (Velez-Castrillon & Angert, 2015). That is why during Stringer’s short stay at the head of Sony, the company did not create a single new product.

In 2012, when Kazuo Hirai replaced Stringer as the CEO of Sony, the corporation suffered losses for four years in a row. However, competing in costs with countries where labor is cheaper than Japanese, Sony turned out to be daunting, and Forbs called people to sell stocks of Sony, yet it proved to be wrong (Hartung, 2012). Hirai returned Yoshida to Sony and made him a finance director. In 2012–2018, Sony’s shares have risen in price three times, and the corporation has returned to the top ten most expensive companies in Japan. The operating profit for the 2017/18 fiscal year increased 2.5 times to a record 734.9 billion yen ($ 6.72 billion) (Inagaki, 2017). This shows that the decision to employ innovations as the driving force of future actions is effective. In terms of the institutional theory, the previous leaders of the company tried to use traditional and industrial strategies that now seem to be outdated.

As it can be viewed from the provided above analysis, all the actions initiated by Sony leaders were deliberate and planned. The key factors were associated with the social and cultural constructs that specified their actions and beliefs. It is noteworthy that Yoshida’s approach to innovations is caused by his commitment to the Japanese approach to exceptional quality and also by his creative application of the global production culture inspired by new technology (Graph 1 and Graph 2).

A vivid example of the need for internal cooperation is the project of a self-driving car, which is engaged by a group of Sony engineers who previously developed smartphones. Yoshida assures that this project was not started up for the sake of creating a car but to evoke passion in employees and keep talents (Nakamura, 2019). In addition, Sony would like to occupy a niche manufacturer of entertainment systems for cars and supplier of image sensors (Iwato, 2018). The production of the latter sharply increased after the appearance of the trend for smartphones with two cameras.

To conclude, this paper explored the factors that led the current CEO and President of Sony to take the decision that focuses on innovations, content prioritization, and the stop in the production of Vaio computers. Based on the chronologic presentation of the events, it was revealed that the Japanese brand became interested in reducing costs and increasing production volumes while the development of new technologies was not considered important. Even though such an approach was effective for the 20th century, it seems to be outdated today. The mentioned statement identifies the key reason for the target decision that allowed Sony to survive the crisis and become successful again.

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Hörisch, J., Freeman, R. E., & Schaltegger, S. (2014). Applying stakeholder theory in sustainability management: Links, similarities, dissimilarities, and a conceptual framework. Organization & Environment , 27 (4), 328-346.

Inagaki, K. (2017). Sony forecasts its highest profits in 20 years. Financial Times. Web.

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Merrin, S. (2017). The power of positive destruction: How to turn a business idea into a revolution . Hoboken, NJ: John Wiley & Sons.

Moskowitz, S. L. (2016). Advanced materials innovation: Managing global technology in the 21st century . New York, NY: John Wiley & Sons.

Nakamura, Y. (2019). Sony opens up internal startup program to anyone with an idea. Bloomberg . Web.

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Thilk, C. (2018). Sony’s focus on diversity in ‘Spider-Verse’ marketing reanimates Spider-Man. The Hollywood Reporter . Web.

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Change Management in Sony Corporation

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Sony and PRINCE2 Agile® Case Study

• Project management
• Project planning
• Project progress

June 26, 2017  |

  7  min read

This Case Study shows how Sony used PRINCE2 Agile® to manage the development and delivery of enhanced functionality for their file-based workflow programme. The driver behind the project was the need to be more responsive to customers’ demands.

As Sony was already a PRINCE2®-aligned organization and wanted to adopt a Scrum-based agile approach, PRINCE2 Agile was chosen as the project management method.

This case study is also available to read in Japanese (PDF, 754KB) .

Introduction

The organization.

Sony Corporation is a multinational organization with its headquarters in Japan. The business includes consumer and professional electronics, gaming, entertainment, and financial services and is one of the leading manufacturers of electronic products for the consumer and professional markets.

The Media Solutions Department is part of Sony Professional Solutions Europe and delivers broadcast equipment, software and media solutions into organizations across Europe. The Media Solutions Department has three key business areas:

• live production, incorporating studios, outside broadcast vehicles and production facilities
• news, covering newsroom editors, agency newswire systems and playout systems
• content management and archive solutions.

Summary of the project and its outcomes 

This Case Study shows how Sony used PRINCE2 Agile® to manage the development and delivery of enhanced functionality for their file-based work flow programme. The driver behind the project was the need to be more responsive to the Media Solutions Department’s customers’ demands.

The system was built around Sony’s Media Backbone Conductor and Navigator products. An infrastructure with base functionality was delivered in the early phases of the project and Sony wanted to continue the development of the product with enhanced features and services. They identified a requirement for a more flexible way of selecting the next features to be developed that would ensure that the needs were always assessed and prioritized.

What was the problem?

Keeping pace with change .

The initial phases of the project involved a long design period, followed by delivery and then deployment of the software. This was usually three to six months after the requirements had originally been agreed, during which time some had changed.

The need for process and technology transformation was driven by the need to realize the benefits of the true end-to-end file-based operation. It was very important to keep all stakeholders involved and part of the process. This included prioritizing features with the user community, measuring return on investment (ROI) and introducing changes in a controlled manner. Key to the success of this project has been the creation of a culture of continuous improvement.

It was essential to improve the sharing of content and automate some of the processes to free up valuable user time for core production activities.

The proposed solution 

As Sony had identified a need to be able to respond to user requirements faster, they decided to consider an agile-based methodology.

The solution had to ensure that:

• new developments are always relevant to the current business needs
• there is flexibility to reprioritize future software deliveries without the need to raise change requests and seek top management approvals.

Project Governance 

The project followed the PRINCE2 governance structure and had a project board with user, supplier and business representation, see Figure 2.1. The structure illustrates how local role names can be mapped onto the overall PRINCE2 governance framework, retaining customer/business supplier representation. For example, the Director of Technology effectively approved decisions around the backlog and was ultimately responsible for acceptance of the product.

Figure 2.1 Project governance structure

Communications, progress and issue reporting were strongly based on the management by exception principle and PRINCE2 reporting guidance. End stage and highlight reports were still used as communication channels between the project manager and the project board.

Aims and objectives

The major objective for the Media Solutions Department was to reduce project delivery time and reduce project risk by increasing product quality. The aims of this work were to create and adopt a workable agile approach under PRINCE2 and to prove it on a real project.

Sony already had PRINCE2 elements in place and delivery teams familiar with agile development. The approach was to combine the two, using the PRINCE2 Agile approach, to make sure that the strengths of PRINCE2 were not lost in using agile: in particular, the governance, communication and quality management aspects.

The adoption of a PRINCE2 Agile approach has been phased into the organization, partly through training and partly through adoption and implementation of the method.

We started by involving the delivery project managers, but then realized that all the stakeholders across the business needed to be engaged to achieve the desired improvements and flexibility in delivery.

The approach required more user involvement during development than the previous development method, but provided better business value because the solutions solved the business problems of the user stakeholders. Frequent demos took place involving the user stakeholders which encouraged discussion of the product features during development. The user acceptance process was much easier than in previous projects as the users were already familiar with the products and had been involved in their evolution through the project.

The development team used automated tools to support agile activities such as backlog management (Figure 4.1), progress tracking (Figure 4.2, sprint report) and Kanban boards (Figure 4.3).

Figure 4.1 Backlog velocity chart

Figure 4.2 Sprint report

Figure 4.3 Kanban board

The project used the PRINCE2 Agile guidance about contracts to help build agreements with their clients based on throughputs rather than end products alone. Traditional fixed price and scope or time and materials contracts were not suitable, so a new model based on throughput of functionality was established. Developer estimates based on planning poker sessions fed directly into this mechanism, and the customer was directly involved in the sessions to ensure confidence and integrity in the process.

Sony has been a PRINCE2-aligned organization for some time and is used to delivering predominately hardware/software application solutions in a traditional design, build, and commission approach.

We quickly realized the limitations of this process, as our software offerings became more customizable and projects started to exceed a three to six month turnaround. Therefore we needed to look at:

• the end-to-end lifecycle
• how we identify agile-based opportunities, and when agile might not be applicable
• contracts for agile projects
• manage the sprints of specification and delivery
• supporting a continuously evolving live environment through new services, changes in workflows, partners or integrated systems.

One of the key challenges was setting up a commercial and legal framework which supported the scope not being fixed until the start of each sprint, and without the overhead of using the existing change control process. This was addressed by using an agile approach to building agreements based on throughputs.

What was the biggest success factor?

From a Sony prospective, PRINCE2 Agile has enabled us to better manage the changes delivered to the users. The methodology has allowed us to reduce the overheads of change requests/impact assessments and to focus on delivering exactly what is needed and ultimately supporting the acceptance of the delivery and faster release back into the operation.

Benefits already realized

The project has already resulted in reduced delivery costs because of:

• less upfront design
• simpler contracting of projects
• shorter time to completion, roll out
• minimized rework
• reduced administration through the use of automation tools.

All of which have contributed to increased customer satisfaction because of:

• better customer engagement during the project
• better alignment to business needs
• more of the required features being delivered.

Lessons learned

1. Initially we took the decision that going agile would be mainly for project managers involved in product delivery and our in-house development teams. This proved to be far from reality. It is key to involve everyone from account management and sales, bid teams, architects, support, legal and procurement teams, so that the entire lifecycle can be assessed.

2. All parts of the organization need to understand the agile approach, not just the delivery project managers.

3. Sales and bid managers, support managers and engineers, need to agree on how to sell the approach and then support the solution as more features are being developed.

Axelos’ view

Combining the governance strengths of PRINCE2 with the flexibility of agile delivery was the driving force behind AXELOS’ development of PRINCE2 Agile. The Sony experience is a very good example of how the benefits of both PRINCE2 and agile can be brought together to provide a delivery solution that matches the project environment.

As experienced PRINCE2 users, Sony recognize the need for good project governance and have retained the strengths of PRINCE2’s controls but adapted for agile working. Agile was identified as the appropriate delivery approach to improve delivery times and engage with users. The synthesis PRINCE2 and agile has provided a delivery approach that is already realizing benefits.

About the author

Yucel Timur is Head of Project Management for Sony Professional Solutions Europe, with over 15 years’ project delivery experience in the Broadcast and Media Industry. Yucel has built a Project Management group that is delivering a variety of complex projects across Europe. As Sony’s solutions have become more customizable, the Project Management group continues to adapt processes, techniques and skills to improve project delivery and quality. This supports Sony with the objective of always being at the forefront of delivering solutions into the broadcast industry and is leading the way in providing feature rich tools and applications to customers across the globe.

For more information, visit pro.sony.eu

Camilla Brown has 15 years’ experience in software product development and solution delivery in the broadcast and media industry. During the last few years, Camilla has ventured into the world of project management while still holding on to agile software development processes, bringing change to the way Sony delivers some of its professional solutions.

Short Case Study on Change Management

A short case study on change management can be very helpful in learning how to manage change effectively. In today’s business world, change is constantly happening and it can be very difficult to keep up.

Having a solid understanding of change management is essential for any manager or business owner.

A good case study will show you how one company successfully managed a major change and what lessons can be learned from their experience.

By studying short case study on change management, you will gain valuable insights into the importance of planning, communication, and employee involvement when managing change.

You will also learn about the different stages of change and how to overcome resistance to change.

These are all important topics that any manager or business owner should be familiar with. Learning about them through a short case study is an excellent way to gain a better understanding of these concepts.

Here are 05 short case studies on change management that offer you valuable insights on managing change.

1. Adobe- a transformation of HR functions to support strategic change

Many a times external factors lead to changes in organisational structures and culture. This truly happened at Adobe which has 11,000 employees worldwide with 4.5 billion $ yearly revenue.

Acrobat, Flash Player, and Photoshop are among the well-known products of Abode.

Due to new emerging technologies and challenges posed by small competitors Adobe had to stop selling its licensed goods in shrink-wrapped containers in 2011 and switched to offering digital services through the cloud. They gave their customers option of downloading the necessary software for free or subscribing to it every month rather than receiving a CD in a box.

The human resource (HR) function also took on a new role, which meant that employees had to adjust to new working practices. A standard administrative HR function was housed at Adobe’s offices. However, it was less suitable for the cloud-based strategy and performed well when Adobe was selling software items. 

HR changed its role and became more human centric and reduced its office based functions.

The HR personnel did “walk-ins,” to see what assistance they might offer, rather than waiting for calls. With a focus on innovation, change, and personal growth, Adobe employed a sizable percentage of millennials.

Instead of having an annual reviews, staff members can now use the new “check-in” method to assess and define their own growth goals whenever they find it necessary, with quick and continuous feedback. 

Managers might receive constructive criticism from HR through the workshops they conduct. The least number of employees have left since this changed approach of HR.

Why did Adobe’s HR department make this change? Since the company’s goals and culture have changed, HR discovered new ways to operate to support these changes.

2. Intuit – applying 7s framework of change management 

Steve Bennett, a vice president of GE Capital, was appointed CEO of Intuit in 2000. Intuit is a provider of financial software solutions with three products: Quicken, TurboTax, and QuickBooks, which have respective market shares of 73 percent, 81 percent, and 84 percent. 

Despite this market domination, many observers believed Intuit was not making as much money as it could.

Additionally, the business was known for making decisions slowly, which let rivals take advantage of numerous market opportunities. Bennett desired to change everything.

In his first few weeks, he spoke with each of the top 200 executives, visited the majority of Intuit’s offices, and addressed the majority of its 5,000 employees.

He concluded that although employees were enthusiastic about the company’s products, internal processes weren’t given any thought (based on Higgins, 2005).

He followed the famous Mckinsey 7S Model for Change Management to transform the organization. Let’s see what are those changes that he made:

By making acquisitions, he increased the products range for Intuit.

He established a flatter organizational structure and decentralized decision-making, which gave business units more authority and accountability throughout the whole product creation and distribution process.

To accomplish strategic goals, the rewards system was made more aligned to strategic goals.

He emphasized the necessity of a performance-oriented focus and offered a vision for change and also made every effort to sell that vision.

He acknowledged the commitment of staff to Intuit’s products and further strengthened process by emphasizing on quality and efficiency of his team.

Resources were allotted for learning and development, and certain selected managers were recruited from GE in particular skill categories, all to enhance staff capabilities concerning productivity and efficiency.

Superordinate goals:

Bennett’s strategy was “vision-driven” and he communicated that vision to his team regularly to meet the goals.

Bennett’s modifications led to a 40–50% rise in operating profits in 2002 and 2003.

8,000 people worked for Intuit in the United States, Canada, the United Kingdom, India, and other nations in 2014, and the company generated global revenues of nearly $5 billion.

3. Barclays Bank – a change in ways of doing business

The financial services industry suffered heavily during mortgage crisis in 2008. In addition to significant losses, the sector also had to deal with strict and aggressive regulations of their investing activities.

To expand its business, more employees were hired by Barclays Capital under the leadership of its former chief executive, Bob Diamond, who wanted to make it the largest investment bank in the world. 

But Barclays Capital staff was found manipulating the London Inter-Bank Offered Rate (LIBOR) and Barclays was fined £290 million and as a result of this the bank’s chairman, CEO, and COO had to resign.

In an internal review it was found that the mindset of “win at all costs” needed to be changed so a new strategy was necessary due to the reputational damage done by the LIBOR affair and new regulatory restrictions. 

In 2012, Antony Jenkins became new CEO. He made the following changes in 2014, which led to increase of 8% in share price.

Aspirations

The word “Capital” was removed from the firm name, which became just Barclays. To concentrate on the U.S. and UK markets, on Africa, and on a small number of Asian clients, the “world leader” goal was dropped.

Business model

Physical commodities and obscure “derivative” products would no longer be traded by Barclays. It was decided that rather than using its customers’ money, the business would invest its own.

Only thirty percent of the bank’s profits came from investment banking. Instead of concentrating on lending at high risk, the focus was on a smaller range of customers.

In place of an aggressive, short-term growth strategy that rewarded commercial drive and success and fostered a culture of fear of not meeting targets, “customer first,” clarity, and openness took precedence. Investment bankers’ remuneration was also reduced.

Beginning in 2014, branches were shut, and 19,000 jobs were lost over three years, including 7,000 investment banking employees, personnel at high-street firms, and many in New York and London headquarters. £1.7 billion in costs were reduced in 2014.

There was an increase in customers’ online or mobile banking, and increased automation of transactions to lower expenses.  To assist customers in using new computer systems, 30 fully automated branches were established by 2014, replacing the 6,500 cashiers that were lost to this change with “digital eagles” who used iPads.

These changes were made to build an organization that is stronger, more integrated, leaner, and more streamlined, leading to a higher return on equity and better returns for shareholders. This was also done to rebuild the bank’s credibility and win back the trust of its clients.

4. Kodak – a failure to embrace disruptive change

The first digital camera and the first-megapixel camera were both created by Kodak in 1975 and 1986 respectively.

Why then did Kodak declare bankruptcy in 2012? 

When this new technology first came out in 1975, it was expensive and had poor quality of images. Kodak anticipated that it would be at least additional ten years until digital technology started to pose a threat to their long-standing business of camera, film, chemical, and photo-printing paper industries.

Although that prediction came true, Kodak chose to increase the film’s quality through ongoing advances rather than embracing change and working on digital technology.

Kodak continued with old business model and captured market by 90% of the film and 85% of the cameras sold in America in 1976. With $16 billion in annual sales at its peak, Kodak’s profits in 1999 was around $2.5 billion. The brand’s confidence was boosted by this success but there was complete complacency in terms of embracing new technology.

Kodak started experiencing losses in 2011 as revenues dropped to $6.2 billion. 

Fuji, a competitor of Kodak, identified the same threat and decided to transition to digital while making the most money possible from film and creating new commercial ventures, such as cosmetics based on chemicals used in film processing.

Even though both businesses had the same information, they made different judgments, and Kodak was reluctant to respond. And when it started to switch towards digital technology, mobile phones with in-built digital camera had arrived to disrupt digital cameras.

Although Kodak developed the technology, they were unaware of how revolutionary digitalization would prove to be, rendering their long-standing industry obsolete.

You can read here in detail Kodak change management failure case study.

5. Heinz   – a 3G way to make changes

Warren Buffett’s Berkshire Hathaway and the Brazilian private equity business 3G Capital paid $29 billion in 2013 to acquire Heinz, the renowned food manufacturer with $11.6 billion in yearly sales.

The modifications were made right away by the new owners. Eleven of the top twelve executives were replaced, 600 employees were let go, corporate planes were sold, personal offices were eliminated, and executives were required to stay at Holiday Inn hotel rather than the Ritz-Carlton when traveling and substantially longer work hours were anticipated. 

Each employee was given a monthly copy restriction of 200 by micromanagement, and printer usage was recorded. Only 100 business cards were permitted each year for executives.

Numerous Heinz workers spoke of “an insular management style” where only a small inner circle knows what is truly going on.

On the other side, 3G had a youthful team of executives, largely from Brazil, who moved from company to company as instructed across nations and industries. They were loyal to 3G, not Heinz, and were motivated to perform well to earn bonuses or stock options. 

“The 3G way,” a theory that 3G has applied to bring about change in prior acquisitions like Burger King, was the driving reason behind these modifications. Everything was measured, efficiency was paramount, and “nonstrategic costs” were drastically reduced. 

From this vantage point, “lean and mean” prevails, and human capital was not regarded as a crucial element of business success. It was believed that rather than being driven by a feeling of purpose or mission, employees were motivated by the financial gains associated with holding company stock.

Because it had been well-received by the 3G partners, those who might be impacted by a deal frequently saw a “how to” guide published by consultant Bob Fifer as a “must read.”

However, many food industry experts felt that while some of 3G’s prior acquisitions would have been ideal candidates for a program of cost-cutting, Heinz was not the most appropriate choice to “hack and slash.” The company had already undergone several years of improved efficiency and it was already a well-established player in the market.

In summarizing the situation, business journalists Jennifer Reingold and Daniel Roberts predicted that “the experiment now underway will determine whether Heinz will become a newly invigorated embodiment of efficiency—or whether 3G will take the cult of cost-cutting so far that it chokes off Heinz’s ability to innovate and make the products that have made it a market leader for almost a century and a half.” 

Final Words

A short case study on change management can be a helpful tool in learning how to effectively manage change. These case studies will show you how one company successfully managed a major change and what lessons can be learned from their experience. By studying these case studies, you will gain valuable insights into the importance of planning, communication, and employee involvement when managing change. These are all vital elements that must be considered when implementing any type of change within an organization.

About The Author

Tahir Abbas

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Sony Case Study

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BUS602: Marketing Management

Case Study: Sony

This scholarly case study looks at Sony's participation in the video game industry. Sony provides an example of marketing strategy and strategic positioning of its products in a highly competitive global environment. It illustrates the need for industry competitive data analysis, demographic segmentation, product features, product positioning, and the magnitude of marketing decisions faced by multinational companies. 

Sony's Battle for Video Game Supremacy

As Sir Howard Stringer, CEO of Sony Corporation, settled in for his flight back to Japan from New York, a number of pressing issues occupied his mind about Sony's future. At the forefront, Sony's next generation video game console, the PlayStation 3 (PS3), was set to launch worldwide on November 17, 2006, a mere week away. Despite PlayStation 2's (PS2) dominance in the last generation of gaming consoles, Stringer understood that past successes were no guarantee of future success in the intensely competitive game industry.  

Microsoft had launched the first volley in the last console war by releasing the Xbox 360 in the fall of 2005. Within one year, almost 4 million Xbox 360s had been sold worldwide, giving Microsoft a significant head-start in the race for market dominance. Meanwhile, Nintendo, a competitor thought to be dead due to the lackluster sales of its previous console, the Nintendo Gamecube, had generated significant "buzz" around its new entry, the Nintendo Wii (pronounced "we"). Targeting more of a mainstream audience than Sony and Microsoft, the Wii, scheduled to launch just two days after the PS3, posed a serious threat to Sony's market share, particularly due to its $249.99 retail price, half the price of the PS3.  

Stringer also knew that there was much more at stake than winning the console war. The next generation of the DVD market was at stake as well. In addition to being a gaming console, the PS3 was a Blu-Ray disc player. Blu-Ray was a next-generation optical disc format that held more than five times as much information as DVDs and allowed high-definition television (HDTV) owners to watch movies with an unprecedented level of image quality. The PS3 was, in effect, the "Trojanhorse" for the Blu-Ray format. 

Sony found itself in an intense standards war with Toshiba, a well-established Japanese electronics manufacturer, that, in partnership with Microsoft, had developed its own digital video standard, the HD-DVD that retailed for $500. The battle lines were being drawn as companies including HBO, New Line, Intel, and Sanyo aligned themselves with HD-DVD and Fox, Disney, MGM, Lionsgate, Apple, Dell, Pioneer, Panasonic, Philips, HP, and Sharp sided with Blu-Ray. Warner Brothers and Paramount were supporting both formats. 

While winning the digital video format war could prove to be extremely profitable for Sony, the battle would be hard-fought. Sony, meanwhile, had had some disappointments in the past in establishing its own technology formats. In the mid 1970s, it launched the BetaMax, a home videocassette tape recording format which was quickly out-marketed by JVC's VHS format largely due to the fact that VHS tapes held more taping capacity (two hours) compared to Betamax's one hour. In 2003, Sony attempted to establish its own music and movie playing format by introducing the Universal Media Disc (UMD) for its portable gaming device the PlayStation Portable (PSP). Initial PSP units were sold with the UMD version of Spider-Man to highlight the flexibility of the device. But UMD never took hold, in large part due to the lack of UMD titles and the number of other devices that played UMDs.  

Stringer was well aware that replicating the PS2's success would not be easy. The price of the PS3 would be a significant barrier to widespread penetration. At $599, the PS3 could no longer be considered a toy and would not likely be an impulse purchase for the majority of consumers. Although compared to stand-alone Blu-Ray players, which sold for $900-$1,000, the PS3 could be considered a bargain since it could play games as well including some older generation PlayStation games. 

By all accounts, since entering the video game industry in 1994, Sony's ability to capture the attention spans of child and adult gamers had been impressive. However, as technology became more varied and versatile, so did consumer tastes. Stringer knew it was critical that Sony kept consumer appetites both satiated and begging for more.  

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Case Study: Sony’s Business Strategy and It’s Failure

Sony is the combination of two word sonus and sonny. The both words sonus and sonny is a latin word. The literal meaning of sonus is sound and, sonic and sonny is little son. Easy to pronounce and read in any language, the name Sony, which has a lively ring to it, fits comfortably with the spirit of freedom and open-mindedness. Since, Sony is the combination of two word “sonus” and “sonny”, represents a very small group of young people who have the energy and passion towards unlimited creations and innovative ideas. Sony foundation was started in 1946 when Masaru Ibuka and Akio Morita worked together with a small team of obsessive and committed group of employees build “Tokyo Tsushin Kenkyujo” (Totsuko), or “Tokyo Telecommunications Research Institute” (billion dollar global conglomerate). In 1958 the company was formally adopted “Sony Corporation” as its corporate name. The main objective of the company is to design and create innovative products which would benefit the people.

Sony a Marketplace Creator and Leader

After the World War II, Sony became popular after applying applied transistor technology, which was invented by Texas Instruments (TI). The co-founder of the Sony, Akio Morita was always kept looking for technological advancement and for that the company leadership spent countless hours in innovatively thinking about how to apply these advances to improve lives. With such a passion for creating new markets , Sony was an early creator, and dominator, of what we now call “consumer electronics” because of the following reasons as given below:

• Sony improved solid state transistor radios by making good quality sound and also inexpensive to..
• Sony developed the solid state television by replacing tubes to make TVs more reliable, better working and use less energy.
• Sony developed the Triniton television tube, which dramatically improved the quality of color (yes Virginia, once TV was all in black & white) and enticed an entire generation to switch. Sony also expanded the size of Trinitron to make larger sets that better fit larger homes.
• Sony was an early developer of videotape technology, pioneering the market with Betamax before losing a battle with JVC to be the standard (yes Virginia, we once watched movies on tape).
• Sony pioneered the development of camcorders, for the first time turning parents and everyone into home movie creators.
• Sony pioneered the development of independent mobile entertainment by creating the walkman, which allowed for the first time people to take their own recorded music with them, via cassette tapes.
• Sony pioneered the development of compact discs for music, and developed the walkman CD for portable use.
• Sony gave us the play station, which went far beyond Nintendo in creating the products that excited users and made “home gaming” a market.

Very few companies could ever boast a string of such successful products. A report said that in Sony executives spent 85% of their time on technology, products and new applications/markets, 10% on human resource issues and 5% on finance. Mr. Morita said that financial results were just those results of doing a good job developing new products and markets.

The Origin and Impact of “Japan Inc” on Sony

By the middle 1980s, America was panicked over the absolute domination of companies like Sony in product manufacturing. Not only consumer electronics, but also in automobiles, motorcycles, kitchen electronics, steel and a growing number of markets. Politicians referred to Japanese competitors, like the wildly successful Sony, as “Japan Inc.” and discussed how the powerful Japanese Ministry of Trade and Industry (MITI) effectively shuttled resources around to “beat” American manufacturers. Even as rising petroleum costs seemed to cripple U.S. companies, Japanese manufacturers were able to turn innovations (often American) into very successful low-cost products growing sales and profits.

What went Wrong for Sony?

In 1950 W. Edward Deming had convinced Japanese leaders to focus, focus on making things better as well as faster and cheaper. Taking advantage of Japanese post war dependence on foreign capital, and foreign markets, this U.S. citizen directed Japanese industry into an obsession with industrialization as practiced in the 1940s and was credited for creating the rapid massive military equipment build-up that allowed the U.S. to defeat Japan. Unfortunately, this narrow obsession was left Japanese business leaders, by and large, with little skill set for developing and implementing R&D, or innovation, in any other area. As time passed, Sony felt victim to developing products for manufacturing, rather than pioneering new markets.

Sony had ended up in a cost/price/manufacturing war with Dell, HP, Lenovo and others to make cheaper PCs rather than the exciting products. Sony’s evolved a distinctly industrial strategy, focused on manufacturing and volume, rather than trying to develop uniquely new products that were head-and-shoulders better than competitors.

In mobile phones Sony hooked up with, and eventually acquired, Ericsson. Again, no new technology or effort to make a wildly superior mobile device (like Apple did.) Instead Sony sought to build volume in order to manufacture more phones and compete on price/features/functions against Nokia, Motorola and Samsung. Lacking any product or technology advantage, Samsung clobbered Sony’s Industrial strategy with lower cost via non-Japanese manufacturing.

When Sony updated its competition in home movies by introducing Blu-Ray, the strategy was again an industrial one about how to sell Blu-Ray recorders and players. Sony didn’t sell the Blu-Ray software technology in hopes people would use it. Instead it kept Blu-Ray proprietary so only Sony could make and sell Blu-Ray products (hardware). Just as it did in MP3, creating a proprietary version usable only on Sony devices. In an information economy, this approach didn’t fly with consumers, and Blue Ray was a money loser largely irrelevant to the market as was the now-gone Sony MP3 product line.

In the case of televisions, Sony was lost the technological advantage it had with Trinitron cathode ray tubes. In flat screens Sony has applied a predictable, but money losing industrial strategy trying to compete on volume and cost. Up against competitors sourcing from lower cost labor, and capital, Sony was lost over $10 billion over the last 8 years in televisions. Sony hasn’t made a profit in 4 consecutive years, just recently announced it will double its expected loss for this year to$6.4 billion, has only 15% of its capital left as and was only worth 1/4 of its value 10 years ago.

Sony’s Leadership was a Keen Conspirator to the Failed Strategy

Akio Morita was an innovator and new market creator of Sony. But, Mr. Morita lived through WWII, and developed his business approach before Deming. Under Mr. Morita, Sony was used the industrial knowledge Deming and his American peers offered to make Sony’s products highly competitive against older technologies. The products led, with industrial-era tactics used to lower cost.

But after Mr. Morita Sony’s other leaders were trained, like American-minted MBAs, to implement industrial strategies. Their minds put products and new markets, second. First was a commitment to volume and production regardless of the products or the technology. The fundamental belief was that if Sony had enough volume, and cut costs low enough, Sony would eventually succeed without any innovation.

By 2005 Sony reached the pinnacle of this strategic approach by installing a non-Japanese to run the company. Sir Howard Stringer made his fame running Sony’s American business, where he exemplified industrial strategy by cutting 9,000 of 30,000 U.S. jobs (almost one third.).Mr. Stringer, strategy was not about innovation, technology, products or new markets.

Sony’s industrial strategy was cost-cut first, products are less meaningful

Mr. Stringer’s industrial strategy was to be obsessive about costs. Where, Mr. Morita’s meetings were 85% about innovation and market application. Mr. Stringer brought a “modern” MBA approach to the Sony business, where numbers especially financial projections came first. The leadership, and management, at Sony became a model of MBA training post-1960. Focus on a narrow product set to increase volume, avoid costly development of new technologies in favor of seeking high-volume manufacturing of someone else’s technology, reduce product introductions in order to extend product life, tooling amortization and run lengths, and constantly look for new ways to cut costs. Be zealous about cost cutting, and reward it in meetings and with bonuses.

Thus, during his brief tenure in Sony Mr. Stringer will not be known for new products. Rather, he will be remembered for initiating two waves of layoffs in what was historically a lifetime employment company (and country.) And now, in a nod to Chairman Stringer the new CEO at Sony has indicated he will react to ongoing losses by another round of layoffs. This time estimated to be another 10,000 workers, or 6% of employees. The new CEO, Mr. Hirai, trained at the hand of Mr. Stringer, demonstrates as he announces ever greater losses that Sony hopes to somehow save its way to prosperity with an Industrial strategy.

Since Japanese equity laws are very different that the USA. Companies often have much higher debt levels. And companies can even operate with negative equity values which would be technical bankruptcy almost everywhere else. So it is not likely Sony will fill bankruptcy any time soon, if ever.

After 4 years of losses, and entrenched Industrial strategy with MBA-style leadership focused on “numbers” rather than markets, there was no reason to think the trajectory of sales or profits will change any time soon.

As an employee, facing ongoing layoffs why would you wish to work at Sony? A “me too” product strategy with little technical innovation that puts all attention on cost reduction would not be a fun place and offers little promotional growth.

And for suppliers, it was assured that each and every meeting will be about how to lower price — over, and over, and over.

Sony was once a company to watch. It was an innovative leader , which pioneered new markets . Not unlike Apple today. But with its Industrial strategy and MBA numbers- focused leadership it is now time to say, sayonara. Sell Sony, there are more interesting companies to watch and more profitable places to invest.

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Sony announces structure overhaul, name changes, and executive shuffles

Sony Corporation has announced a series of changes to its organisational structure, including changing the company name and switching up its executive team.

The company said effective 1 April 2021, Sony Corporation will be renamed and relaunched as Sony Group Corporation to focus on its role as the headquarters of the Sony Group.

At the same time, Sony Electronics Corporation, which currently operates the company's electronics business and is a function within Sony Corporation, will succeed the Sony Corporation name effective 1 April 2021.

A shareholders' meeting for the proposed name change has been scheduled for June 26.  

"Sony's electronics business will strive to continue to introduce products and services that deliver the pinnacle of reality and real-time to everyone from creators to users, through its sound, video, and communication technologies," Sony said.

"It will also take a long-term perspective to taking on challenges in new business areas such as remote solutions that connect people with people, or people to things remotely, as well as in the medical arena."

In addition, Sony said it is offering to buy up shares of its financial services business Sony Financial Holdings, which it currently has a 65% stake in, with hopes it will become a wholly-owned subsidiary.

"Until now, SFH has maintained its position as a listed subsidiary in light of, among other things, its ability to flexibly procure capital for growth," the company said.

"However, rather than continue to operate the business within certain constraints as a listed subsidiary, Sony has decided to make a tender offer with the aim of making SFH a wholly-owned subsidiary in order to ensure the implementation of optimised strategies for each business, and to drive further group-wide synergies."

To reflect the structural changes, the company said it is also changing up the executive structure where Sony Group's core businesses -- game and network services, music, pictures, and financial services – have each established executive structures for their respective businesses.

As part of that, current executives in leadership roles for each of those businesses will resume the role of executives within their respective businesses from April 2021.

The electronics businesses, including imaging and sensing solutions, will also establish executive structures for each business, Sony said.

Sony added Sony Group Corporation's executive team will be formed from the heads of key group headquarters functions and core Sony Group business companies.

Some specific changes include seeing current president and CEO Kenichiro Yoshida resume the role as chairman; CFO Hiroki Totoki will become executive deputy president; Shigeki Ishizuka, who is officer in charge of electronics products and solutions business, and storage media business, will be appointed to the vice chairman position.

Meanwhile, Michinori Mizuno, Sony executive vice president and Sony Music Entertainment Japan chairman, will retire from June 26. 

In announcing the structure changes, the company also took the opportunity to highlight how it is "carefully reviewing its capital expenditure plans" for its imaging and sensing solutions business.

"Based on its belief that image sensors will be key devices in the AI era, Sony intends to leverage its world-leading stacked CMOS image sensor technology and provide AI sensing solutions that deliver new value across a broad range of applications," it said. 

It added that in light of the impact COVID-19 has had on its electronics  product demand and supply chains , it plans to "engage in initiatives to enhance its structure in response to these changes in its environment", including addressing the need for remote solutions.

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Sony change management analysis & solution, hbr change management solutions, leadership & managing people case study | stefan thomke, atsushi osanai, akiko kanno, case study description.

Sony used to be synonymous with "innovation" and "cool products". The case reveals how the company lost its edge and describes the leadership initiatives to restore its former glory. In 2012, Kazuo (Kaz) Hirai becomes CEO and successfully transforms Sony, including a relentless focus on differentiation through "wow" products instead of chasing scale. How should he organize and manage the company's response to digital opportunities, such as virtual reality, that could affect the company's entire value chain?

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What is Change Management Definition & Process? Why transformation efforts fail? What are the Change Management Issues in Sony case study?

According to John P. Kotter – Change Management efforts are the major initiatives an organization undertakes to either boost productivity, increase product quality, improve the organizational culture, or reverse the present downward spiral that the company is going through. Sooner or later every organization requires change management efforts because without reinventing itself organization tends to lose out in the competitive market environment. The competitors catch up with it in products and service delivery, disruptors take away the lucrative and niche market positioning, or management ends up sitting on its own laurels thus missing out on the new trends, opportunities and developments in the industry.

What are the John P. Kotter - 8 Steps of Change Management?

Eight Steps of Kotter's Change Management Execution are -

• 1. Establish a Sense of Urgency
• 2. Form a Powerful Guiding Coalition
• 3. Create a Vision
• 4. Communicate the Vision
• 5. Empower Others to Act on the Vision
• 6. Plan for and Create Short Term Wins
• 7. Consolidate Improvements and Produce More Change
• 8. Institutionalize New Approaches

Are Change Management efforts easy to implement? What are the challenges in implementing change management processes?

According to authorlist Change management efforts are absolutely essential for the surviving and thriving of the organization but they are also extremely difficult to implement. Some of the biggest obstacles in implementing change efforts are –

• Change efforts are often made by new leaders because they are chosen by board to do so. These leaders often have less trust among the workforce compare to the people with whom they were already working with over the years.
• Change efforts create an environment of uncertainty in the organization that impacts not only the productivity in the organization but also the level of trust in the organization.
• Change management efforts are made when the organization is in dire need and have fewer resources. This creates silos protection mentality within the organization.
• Change efforts are often targeted at making fundamental aspects in the business – operations and culture. Change management disrupts are status quo thus face opposition from both within and outside the organization.
• Change management is often a lengthy, time consuming, and resource consuming process. Managements try to avoid them because they reflect negatively on the short term financial balance sheet of the organization.

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How you can apply Change Management Principles to Sony case study?

Leaders can implement Change Management efforts in the organization by following the “Eight Steps Method of Change Management” by John P. Kotter.

Step 1 - Establish a sense of urgency

What are areas that require urgent change management efforts in the “ Sony “ case study. Some of the areas that require urgent changes are – organizing sales force to meet competitive realities, building new organizational structure to enter new markets or explore new opportunities. The leader needs to convince the managers that the status quo is far more dangerous than the change efforts.

Step 2 - Form a powerful guiding coalition

As mentioned earlier in the paper, most change efforts are undertaken by new management which has far less trust in the bank compare to the people with whom the organization staff has worked for long period of time. New leaders need to tap in the talent of the existing managers and integrate them in the change management efforts . This will for a powerful guiding coalition that not only understands the urgency of the situation but also has the trust of the employees in the organization. If the team able to explain at the grass roots level what went wrong, why organization need change, and what will be the outcomes of the change efforts then there will be a far more positive sentiment about change efforts among the rank and file.

Step 3 - Create a vision

The most critical role of the leader who is leading the change efforts is – creating and communicating a vision that can have a broader buy-in among employees throughout the organization. The vision should not only talk about broader objectives but also about how every little change can add up to the improvement in the overall organization.

Step 4 - Communicating the vision

Leaders need to use every vehicle to communicate the desired outcomes of the change efforts and how each employee impacted by it can contribute to achieve the desired change. Secondly the communication efforts need to answer a simple question for employees – “What it is in for the them”. If the vision doesn’t provide answer to this question then the change efforts are bound to fail because it won’t have buy-in from the required stakeholders of the organization.

Step 5 -Empower other to act on the vision

Once the vision is set and communicated, change management leadership should empower people at every level to take decisions regarding the change efforts. The empowerment should follow two key principles – it shouldn’t be too structured that it takes away improvisation capabilities of the managers who are working on the fronts. Secondly it shouldn’t be too loosely defined that people at the execution level can take it away from the desired vision and objectives.

Sony PESTEL / PEST / STEP & Porter Five Forces Analysis

Step 6 - Plan for and create short term wins

Initially the change efforts will bring more disruption then positive change because it is transforming the status quo. For example new training to increase productivity initially will lead to decrease in level of current productivity because workers are learning new skills and way of doing things. It can demotivate the employees regarding change efforts. To overcome such scenarios the change management leadership should focus on short term wins within the long term transformation. They should carefully craft short term goals, reward employees for achieving short term wins, and provide a comprehensive understanding of how these short term wins fit into the overall vision and objectives of the change management efforts.

Step 7 - Consolidate improvements and produce more change

Short term wins lead to renewed enthusiasm among the employees to implement change efforts. Management should go ahead to put a framework where the improvements made so far are consolidated and more change efforts can be built on the top of the present change efforts.

Step 8 - Institutionalize new approaches

Once the improvements are consolidated, leadership needs to take steps to institutionalize the processes and changes that are made. It needs to stress how the change efforts have delivered success in the desired manner. It should highlight the connection between corporate success and new behaviour. Finally organization management needs to create organizational structure, leadership, and performance plans consistent with the new approach.

Is change management a process or event?

What many leaders and managers at the Sony Kaz fails to recognize is that – Change Management is a deliberate and detail oriented process rather than an event where the management declares that the changes it needs to make in the organization to thrive. Change management not only impact the operational processes of the organization but also the cultural and integral values of the organization.

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