Sony: What went wrong (and is still going wrong)

Sony on Tuesday outlined its restructuring plans amid a downturn in consumer electronics, bloated inventory and weak demand for its products. The larger question is whether Sony will ever get its unwieldy management structure right.

First, the headlines. Sony is restructuring to boost profitability. As part of that move, Sony plans to eliminate 8,000 electronics jobs–out of 160,000. That sum equates to roughly 5 percent. If you toss in subcontractors Sony is cutting 16,000 positions. Sony’s goal is to revamp manufacturing sites–closing two in France–and save 100 billion yen by the fiscal year ending March 31, 2010.

But like a lot of Sony’s moves the company is taking half-steps.

J.P. Morgan analyst Yoshiharu Izumi sums it up in a research note:

We are slightly disappointed because 1) although the measures are scheduled to cut costs by  yen 100bn, this will not emerge before FY2010, which appears too slow, 2) the order of priorities is not clear (we had hoped for measures focusing on cutting losses at the TV business) and 3) the announcement consisted only of press release, with no briefing.

Simply put, Sony’s restructuring isn’t likely to fix much. Sony is still too bloated, still too hard to navigate and still dictated by fiefdoms and units that don’t add up. Sir Howard Stringer was brought in to save Sony, but you can only turn the electronics giant so fast. For every victory (Blu-ray) there’s a defeat (Walkman, Playstation 3 launch vs. Wii).

Exhibit A: This Knowledge@Wharton story details Sony’s miscues–a foray into the music business, DRM stumbles and the obsession with being vertically integrated. The article–penned in 2005 shortly after Stringer took over as CEO–could be run today and no one would know the difference.

Folks ask how a leader like Sony can be lapped by smaller companies like Apple. The answer is simple: Sony is too damn big. If Sony wants to get anyone’s attention it should break itself into a bunch of little Sonys. Games, entertainment and consumer electronics need to be distinct businesses split off from the mother ship. I’m beginning to wonder if corporate America needs some sort of mandatory split up once a company reaches a certain size. Think term limits for corporate bloat.

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