In February 2009, Stringer became Head of Sony‘s electronics business and remained the company‘s President. This brought in a new control structure at Sony, which was expected to be operationally convenient and to unite the different silos that existed in the organization. While restructuring Sony, a lot of young blood had been infused into the top management of the company. This was also viewed as a move to break the Japanese tradition of seniority in favor of performance. On the new reorganization, Stringer said, ―This reorganization is designed to transform Sony into a more innovative, integrated, and agile global company with its next generation of leadership firmly in place.‖21
Through its new restructuring efforts, Sony planned to gain a substantial position in the networked electronics market, and a new group – Networked Products and Services Group – was created especially for that purpose, concentrating on products like the PlayStation and the Vaio personal computers. Analysts were of the view that the networked products and services group had a tough task ahead — it had to create digital services that would tie all Sony‘s products together. Some industry experts were of the view that the reorganization would result in sustained profitability and a cohesive corporate culture. It was also expected to result in nimbleness in the organization and in making it ready to face the new-age rivals. The creation of cross company units in the areas of logistics and software was also seen by analysts as an effort to bring down the silos in the company. Stringer, however, tried to bring in coordination and was largely successful in bundling the Blu-ray22 version of Spiderman III with Sony‘s PlayStation 3.
George Bailey, an executive from IBM, was roped in as the first Chief Transformation Officer of
Sony in May 2009. He assumed the post of Senior Vice President, Corporate Executive, and Chief
Transformation Officer, effective from June 01, 2009. His main responsibility was to accelerate the transformation of Sony into a leading provider of networked products, content, and services.
Bailey was expected to work closely with different cross-functional teams, business groups, and the top management of Sony.
Sony also planned to reduce the number of suppliers from 2,500 to around 1,200, after taking into consideration those who provided the best deals. The reorganization efforts received a positive response from analysts and industry experts. Nobuo Kurahashi (Kurahashi) of Mizuho Investors
Securities23 in Tokyo, said, ―It‘s a positive sign of how Sony is frantically moving forward toward change, including structural changes especially in its TV and other electronics businesses.
However, some analysts wondered why Sony had promoted Kaz Hirai, CEO of Sony Computer
Entertainment, whose division was responsible for considerable losses. Some analysts did not see anything positive in Stringer assuming additional responsibility and wondered how it would benefit the company. Kurahashi said, ―It‘s uncertain if Stringer can now do what he hasn‘t been able to do as a CEO.‖25
Stringer in several instances mentioned that the silo culture was Sony‘s main weakness. Many analysts saw the reorganization as Stringer‘s efforts to break down these silos. Stringer said, ―Have
I broken down all the silo walls? No. Are they very strong and very thick? Yes. But we‘ve broken down a lot of them. Our goal is to continue to do that.‖ 26
In May 2009, Sony announced its first annual loss in 14 years. It reported a loss of ¥ 98.9 billion.
Annual sales fell by 12.9% as compared to the previous year. It announced that for the year 2009-
10, the loss could be higher at ¥ 120 billion. The company attributed the fall to the sluggish demand for televisions and cameras in the wake of the recession.
Analysts believed that Sony needed to invest in cutting edge technologies in video games and television, as these businesses accounted for a quarter of its revenues. However, the economic downturn and stiff price competition made success even harder to attain. According to Yasuo
Nakane of Deutsche Securities, ―But it‘s hard to imagine that translating into improved earnings soon. The key question is whether manufacturing, design, and development, procurement and marketing…can all be improved within a short time frame.‖
Industry analysts opined that while Sony had announced several restructuring exercises in the recent past, none of them had been able to deliver sustainable positive results. They felt that while the reorganization plan of 2009 sounded promising, it was effective execution that would be the key. According to Mike McGuire, analyst at Gartner, ―The execution is going to have to be pretty powerful. Sony is still a fairly powerful brand, but it‘s not like everybody can forget the past.
They‘ve got to overcome that by performing in the market. Apple‘s advantage is that it created a seamless user experience. That‘s also within Sony‘s grasp. Sony has the assets to do that. The software is the open question.‖ 32