The Exchange

Sony needs to iterate, not innovate, to score a comeback

The Exchange
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Akio Morita, chairman and chief executive officer of the Sony Corp, demonstrates his firm's newest product July 1, 1980, a single unit video camera and casette recorder. The demonstration was held at New York news conference. A firm spokesman said in Tokyo said the new device would revolutionize the home movie industry. (AP photo/Dave pickoff)

Sony (SNE) has had a rocky couple of years. This week the company announced yet another round of job cuts after failing to deliver a turnaround in its money-losing television and PC units.

CEO Kazuo Hirai said Sony will sell off its Vaio PC line and segregate the TV unit, which has lost money for 10 years in a row, into a wholly-owned subsidiary, the easier to spin off later.

Getting out of commodity businesses should help Sony eliminate its losses but won’t solve what’s really ailing the iconic electronics giant. A lot of people seem to think the problem is a failure to innovate but the real problem is a failure to iterate.

That is, there are plenty of radical, breakthrough products emerging from Sony’s idea factory. But there’s precious little apparent effort to give consumers a great experience and make the kind of steady but noticeable improvements Apple (AAPL) rode to riches.

Take Sony’s amazing new QX10 and QX100 line of cameras. A radical rethinking of the digital camera in the age of smartphones, the QX line is all lens and no body. The photographer’s smartphone does much of the work and the QX body can clip on the side to form a more camera-like profile.

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The QX is a super-smart product in an era when smartphones are rapidly obliterating the traditional camera market. Mobile photogs still can’t attain the quality of higher-end cameras for a simple reason – smartphones are too thin to accommodate high quality lens. The QX provides that bulky lens in a portable package that can be stashed away in a coat pocket when not needed.

But reviewers haven’t exactly been taken with the QX cameras. Yahoo’s technology columnist David Pogue slammed the cameras for their horrid software and poorly thought-out feature set.

“The idea is great but the experience on the whole can be kind of frustrating,” he says.

Of course, Apple sometimes introduces groundbreaking products with serious limitations. The first iPhone worked only on slower, second-generation data networks and couldn’t even cut and paste text. But Apple relentlessly improved the phone until it grew into a huge smash hit. Sony needs to do the same – and quickly – to get the QX camera on track.

Poor execution is also going to doom Sony’s latest smartphone, the Xperia Z1, without a smarter approach to marketing. The slick-looking, speedy phone runs Google’s Android software and is one of the only waterproof models on the market. But which market exactly is it on?

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You can buy it for $600 on Sony’s U.S. website but it’s not sold directly on the sites of Verizon (VZ), AT&T (T) or Sprint (S), meaning you can’t get a cheaper, subsidized version for $200. T-Mobile (TMUS), the fourth-ranked network, carries the phone but it doesn’t offer subsidies anymore. As a result, Sony is likely to miss out on the vast U.S. premium phone segment even though it’s pitching one of the best premium phones on the planet.

Building strong products with strong distribution requires much greater investment, notes Steve Beck, founder of management consulting firm cg42. "They really have to get on their front foot with a policy to drive growth, not just stem the tide of erosion," Beck says. Otherwise, Sony might as well slim down to its profitable movie, music and financial services businesses.

Sony’s one major, current hit – the Playstation 4 – provides some obvious lessons for other parts of the company. Sony used less cutting-edge chips inside the PS4 to help price the console $100 cheaper than its major competitor, Microsoft’s (MSFT) Xbox One. It also spent big for a vast television marketing campaign and partnered with third-party game makers to build a solid lineup of compelling content. As a result, the PS4 won the holiday season with 4.2 million sales. Sony worked the details and kept a focus on what customers wanted, not just what its engineers could produce.

When CEO Hirai gets done cutting costs and starts to focus on growth, perhaps he should kick back and play a few hours of "Tomb Raider" or "Need for Speed" to remind him just how to turn an innovative product into an iterative hit.

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