Thursday, April 19, 2012

The trouble with Sony

The New York Times recently carried an article on the dilemmas facing the Sony Corporation. It reported losses of $6.4 billion, double an earlier forecast and the fourth year in a row of red ink. The Times reporter, Hiroko Tabuchi, suggests that one dilemma, perhaps a fatal flaw, is the independence of its divisions. Sony’s great promise was and is to become an integrated media company wedding content -- films, music and games-- to technology --disks, televisions and game consoles. But as Tabuchi suggests, “Sony remains dominated by proud territorial engineers who often shun cooperation.” One result was a delay in developing the PlayStation 3 console, as well as its slow start in supporting online games. As a result Nintendo and Microsoft have stolen market share from Sony.

One question is what drives this territoriality? We could see it as one result of what business theorists call the “M form,” or the multidivisional corporation. In the M form, corporate divisions are allowed considerable independence to make money in their own markets. The merits of this arrangement is that division executives are not distracted by competing demands on their time and attention. They function more nearly as what business researchers call, “pure plays,” in which a simple and singular value proposition drives all decisions. The engineers are called upon to produce the best hardware, the entertainment executives to match users’ passions and interests with works of imagination. Integrating the two risks undermining each side’s work.

But in thinking about integrating content and technology one wonders if the challenge of collaboration might be considered a cultural as well as a structural issue. After all wedding content and hardware means integrating across the differences that separate “mind” and "matter." In a famous article Professor Deborah Dougherty of the Rutgers business school suggested that different professionals live in different “thought worlds.” The engineer is focused on the world of objects, while writers, composers, film makers, game designers, and those who package and market their output, live in the world of subjects. The presenting question for the former is, “Can I make it functional,” while for the latter it is, “Can I make it meaningful?” Reading Steve Wozniak's autobiography- his technical genius when married to Steve Jobs’ marketing genius created Apple – one can see how a person's singular focus on the world of gadgets can lead to, or at least permit, emotional immaturity, an inability to understand the mind of the other.

One conception for bridging cultural differences is to promote intercultural understanding. But the very case of Apple suggests something different. While Apple did not create content, it married hardware design to a conception of the user and his or her experience. Indeed, in Jobs’ worldview, understanding experience was a problem in aesthetics. The key to success here may not have been in the intercultural understanding of professionals from different thought worlds, but instead the dominating role that Jobs played in forcing the two cultures together. Jobs frightened people and the threat he represented forced them to work together. Far fetched? Perhaps not, since as we know, a nation can set aside its racial and ethnic divisions when facing a common enemy.

Consider as well the case of Nintendo. It is in fact a pure play company focused singularly on the integration of hardware and software This is one reason it has been able to produce and sell its game console more cheaply than Sony’s PlayStation. But a pure play company, unprotected by hedges in other investments or markets, faces the prospect of both great rewards but also great failure. The compromises in a multidivisional firm that may reduce profits, nonetheless also increase the likelihood of survival.  In this sense we can say that Nintendo executives and engineers feel the threat of failure more keenly, and this shared sense of danger helps people overcome the very differences that their respective thought worlds produce. In other words, cultural differences are bridged in the presence of constraint, when freedom is limited; or as a colleague of mine once said, “When you have the freedom of no choice.”

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