Sony VS Apple: Lessons for Corporate Entrepreneurship and Innovation
Apple unveiled the “Digital Hub Strategy” in January 2001. Jobs said 'We are living in a new digital lifestyle with an explosion of digital devices. It's huge enough for anyone. And we believe the PC, or more importantly, the Mac can become the digital hub of our new emerging digital lifestyle, with the ability to add tremendous value to other digital devices.' About 10 months later, in November 2001, Sony also unveiled their strategy for the digital era, 'Ubiquitous Value Network.' Ando, COO of Sony, said 'The Ubiquitous Value Network concept is one where devices and products can seamlessly access the network and connect with each other at any time, from any place. As the broadband network society reaches a sophisticated form by the year 2005, we will establish a hardware platform where users will connect with each other and with Sony, creating a completely new lifestyle.'
Although the method of expression is different, Apple and Sony had the same dream and goal. They wanted to make all devices and content freely connected. This was the way they predicted the future of the world about 18 years ago, and now the two are in a completely different state.
In 2001, Sony produced their own music and movie content, and all electronic devices like TV, PC, game machine, and cell phone. Apple, on the other hand, was a company that had nothing. Although its brand value was high, its market share was too low. Computer products, Mac OS and some applications were all about Apple had. For this reason, Jobs had to elaborate on why Mac Computer could become a digital hub at the time, but Ando's speech was clear in its own words that it would connect Sony's possessions.
Industry Trends and Response of Apple and Sony
That was a time when changes were taking place from analog to digital. The strategies that Apple and Sony announced were also dreams of all companies. The importance of the platform emerged and it was a time when they expected it to reinforce their competence.
When Apple announced its digital hub strategy, iTunes was the only product Apple introduced. But iTunes got off to a good start. This is because the iPod came out with iTunes and the music store was opened. Also, a sense of crisis that cell phones will replace iPods led Apple to the mobile phone market. Apple wanted to create a ‘network’ with their products. Systematic approach characterized: They develop ‘design sense’ and set the goal of ‘design simple’. They are noteworthy for what they do not contain. An example of the first result is iPod. It highlighted simplification and easy-to-adopt. And they also used a locked platform, this can be a trigger to the customer feel high expectations of them. Follow this, iPhone, iPad, iPod family (users) sharing the same platform and it helps feel more comfortable. Apple keeps their ideas under tight security when it comes to a new product which increases the follower need more.
Sony's response to industry trends was similar with Apple's in the beginning. Ando, COO of Sony, said that Sony aims to build a powerful, new hardware platform where both PC and non-PC consumer electronics devices will be seamlessly connected, leading to new forms of consumer enjoyment. He said that Sony's strengths in intuitive human interface development and digital technologies will be further enhanced with the interconnection of products that generate a variety of new consumer services and business opportunities. Sony demonstrated this new concept through network-compatible TVs, a prototype wristwatch terminal, and the 'FEEL' (preliminary name) user-interface technology that allows devices to recognize each other as they come into proximity. Sony believes that to make the Ubiquitous Value Network a reality, an open platform environment - comprising hardware, content, and applications from diverse sectors - is essential. During the keynote, Sony announced agreements with AOL Time Warner and Nokia as initial steps in creating this open, broadband network environment. Top executives from Sony and AOL Time Warner announced that in an effort to build an open broadband environment they will work to develop easy-to-use home gateway technologies and an open Internet browser compatible with networked consumer electronic products. There was also an announcement that Sony and Nokia will work to develop open middleware and service platforms that will allow mobile handsets and other electronic devices to connect and easily share content.
Through the rapid development of an open Ubiquitous Value Network, Ando said that Sony intends to expand the network business sector as a whole. Sony's future scenario was like this. All devices are connected to the Internet and storage media, and digital TVs and game consoles are controlled by hubs.
Content is freely moved through the Internet and storage media, and services such as home networking and remote control are also performed on this platform. In particular, memory cards and next-generation DVDs were considered battlegrounds for Sony, which experienced a standard war of video and CD-ROM. It has also started developing cells, which is a semiconductor with multi-core, in order to control a variety of devices from the center. However, the prediction was wrong. With the development of the Internet and the digitalization of contents, the importance of storage media was greatly reduced, and even when cell semiconductors were completed, there was no connection between devices. With things unclear to do with the device connection, consumers were not very interested in connecting the device. The storage medium is behind the times, but cell semiconductors went ahead too much. Sony and Apple had put forward strategies and futures that looked similar. But the results were different.
Sony and Apple’s Attitudes to Competitors
Sony’s major threat is about their competitors. Matsushita Electronic Industrial Company is the world’s largest consumer electronics maker. Panasonic, Quasar, and JVC are included in this company. These brands’ names are recognizable and its products are sold worldwide. The other major competitor is Koninklijke Philips Electronics N.V., the world’s largest consumer electronics maker after Matsushita and Sony. Norelco, Magnavox, and Philips are included in this brand. Both companies sell products such as TVs, VCRs, CD and DVD Players, and cellular phones. After Panasonic was the first to sell an HDTV rear projection in the United States. This is a 34- inch direct view television that uses a cathode ray tube to display programming and resembles a traditional television set. The only exception is its price. Sony followed Panasonic in creating this product as well, although problems and threats with it existed. One threat about this product is that it was difficult to figure out how to get the HDTV signals to new, expensive digital television sets. While many consumers got their signals from a television set-top box, first-generation HDTV sets do not yet have a way to receive a digital signal from those boxes. The federal government called on the consumer electronics and cable industries to ensure the transition from analog to digital technology. Getting these two industries to link up, however, is not easy. The issue is how to connect cable set-top boxes to digital televisions and receive the type of high-quality images that the technology affords. This is a threat to Sony because consumers will not be very willing to buy their product because, although it is high-tech, it brings problems with it. The extra money paid for this product is not worth the problems, from the perspective of the consumers.
Sony is also competing with Samsung Electronics in all areas except semiconductors. However, it was overtaken by Samsung Electronics in the TV market in 2002. The Walkman, Sony's cash cow, struggled with a market share of less than 10 percent in the MP3 market, losing to Apple's iPod. Sony's another cash cow, the Play-Station series, gave Nintendo DS and Nintendo Wii the No. 1 market share. In the DSLR camera business, it was able to grab only a one-digit market share by losing to Canon and Nikon. Sony-Ericsson, which merged with Ericsson for its mobile phone business, is no different.
Unlike Sony's struggles with competitors since 2001, Apple has grown much more by surviving competition with competitors. There are many competitors of Apple, such as Samsung, Xiaomi, Toshiba, Acer, Dell, Asus, Microsoft, Lenovo, and Sony. Apple’s main competitor in the smartphone category is Samsung. Other direct Apple rivals are Huawei, HTC, Google, and LG. In tablets’ market, even though the tablet market is declining, Apple is still an absolute leader in it with over 20% market share. Samsung’s Galaxy Tabs are the main direct rivals to Apple’s iPads, with over 15% market share. In the personal computers market, Apple’s position in the personal computer (PC) market isn’t as strong as in the smartphones or tablets markets. The company only captured 7.1% market share in the second quarter of 2016. Even if Apple lags behind its competitors in terms of price or performance, the reason why consumers are looking for Apple's products is because of Apple's unique product differentiation. Apple built well their own ‘ecosystem.’ Their products’ simplicity in design and use also played a part in such success. They are also open-minded when building an ‘Apple ecosystem’ and come up with products in consideration of integration with other companies. This is what sets it apart from Sony, which has shown closeness.
Sony’s initiatives
As recently as the mid-1990s, Sony was the best electronics company. It was a time when Sony's products were dominating the global market. But the trend of the times was changing from analog to digital. At the time, Sony;s CEO, Edei, thought digital technology would dominate the home appliance and entertainment industries in the coming era. In 1995, Edei announced its 'Digital Dream Kids' strategy. In addition to this strategy, the ‘ubiquitous value network’ strategy and ‘digital hub’ strategy are evaluated as a strategy that accurately predicts the future. Edei embodied its Digital Dream Kids strategy through a three-stage strategy, with the first stage “connect”, the second stage “synergy” and the third stage “Hub.” However, the plan ended in the first stage. The company thought that linking Sony products to each other would naturally increase its share of low-selling products when consumers bought the popular Sony products, but the results were different. Sony insisted on an independent format to create a Sony network when connecting products together. Sony TV, for example, could only connect Sony's multimedia devices, while Sony's multimedia devices could only be connected between Sony products. Because it used its own format, it had to buy Sony's products to use Sony's contents. At the time, Sony was technically the top company and had confidence in its products. Sony thought it would be able to capture consumers within Sony because it had innovative products and various content. However, this closed Sony’s attitude resulted in isolating Sony from the electronics market and consumers gradually became less attracted to Sony products. As a result, even though it is almost impossible to predict future technology changes, Edei tried to prepare for them in detail by planning one by one and was too far ahead of the future to judge the coming technology trends, which is why Sony failed in the digital era’s electronics industry. Although it has expanded its financial business and invested heavily in future network businesses such as Internet business, it has not been able to incorporate IT technology, which is an advantage that Sony had, and it has tried to connect each business unit to a network but lacks specifics, leading to a situation in which each business unit operates separately. Finally, the company, which was on a roll with its best sales in 1998, faced a crisis in 2003 when its share price, called Sony Shock, plunged. It tried to find a new premium brand to regain its crumbling credibility and brand value, but the result was a disastrous failure. After all, Edei has a good strategy and ideas for the future but is regarded as the CEO who forced his business to expand without creating the capacity and synergy he had, leading to Sony's failure.
He took responsibility for the 2005 slump and handed over the position of CEO to Howard. It was Sony's first foreign CEO, but he ignored the technology and expanded its contents business to accelerate Sony's fall. The company recorded its best-ever sales in 2007 due to the performance of the contents industry and the recovery of some electronic parts, but within a year, it also experienced the worst crisis ever due to the global financial crisis in 2008. The last remaining Sony technology, which had been maintained during the crisis due to a large reduction in research personnel, has been eliminated. While Jobs sold all kinds of products and encroached on the market with market-conscious marketing to potential consumers who took Apple products, Sony remained static, believing in the before's success, with smart consumers willing to buy their own great products. Sony, which had taken a closed-door attitude to achieve everything within Sony, was hampered by the strategy, and Apple took a new leap forward through an open strategy.
If Sony had come up with a mobile phone that operates on a similar operating system to Play station, Sony would have opened its software development kit and opened its app store, which might have become a good rival for the iPhone. But the next product on the Play Station was a PSP, just a game console. There are two reasons why Sony was unable to make a leap into the wider market. It is possible that the game division, which contains the PlayStation, has not seen the potential of markets other than games. It may have given up on the game because it did not meet the characteristics of the mobile phone business and the game business, such as the restriction of functions as a game machine. The second is the possibility that the Play Station-based mobile phone may have been designed inside Sony, but failed due to people’s differences within Sony. There must have been a lot of conflict within Sony to turn the PSP into a mobile phone. Apple, on the other hand, was free from such problems. Apple could see all the device markets with unbiased eyes, and there was no dispersion of execution caused by internal noise. This organizational advantage may have been attributed to the backdrop of Apple's relentless move to the music and mobile phone markets, creating added value.
Sony created a 'technical connection,' but Apple captured consumers' hearts by creating a 'experience of connection' which won the game. People began to turn away from Sony, which had the best power when their closeness caused inconvenience. Apple, however, started with a software called iTunes and continues to complement its features for 10 years, showing the essence of connectivity between devices. All of Apple's content is available via iTunes, and all of Apple's devices are linked around iTunes. Sony tried to make artificial connections by their power but failed. Apple, however, gave chances to consumers and made them complete the picture of the connection. Apple's real platform was Apple's consumers, not hardware or software. This is what Sony missed and what caused Sony to fall.
