The Future of Sony

Stan Glasgow

A Conversation with Stan Glasgow

Sony has been a strong supporter of and key business partner to the Rady School since its inception. We thought it fitting, then, to interview Stan Glasgow, president and COO of Sony Electronics, not only for his commitment to the Rady School, but also because the innovation and entrepreneurial spirit at Sony complements the values espoused by the Rady School. In our interview, Stan discussed the industry, future innovations and how Sony is changing its strategy in response to the current economic situation. Stan’s perspective reflects his 30 years of experience working globally in a range of consumer electronics positions. Currently, he oversees the Japanese electronics giant’s sales of TVs, music players, high-definition film-making equipment, Vaio computers and other gear.

Sony recently announced its first annual loss since 1995 for fiscal year 2008. How are the current market conditions and slowdown in consumer spending changing Sony’s strategy?

There are a lot of issues involved, but above all, we have seen a drop in global demand. Many of Sony’s products are Yen-denominated, and currency fluctuations have been a big issue for us. However, we also see the need to restructure, create a lower cost structure, reduce investments and prioritize investments. We will develop a new way of operating by being more selective of the investments we make; when times are tough, it forces you to reconsider and prioritize. We recognize that we cannot create demand consumers are simply not spending right now because they are scared of losing their jobs. We cannot influence this, but we plan to be more selective in what we promote given the current market conditions.

Sony CEO, Howard Stringer, recently spoke about transitioning into a service-oriented company. What does this mean exactly?

Sony makes a lot of products and, over the past years, has bought a lot of content companies, including Sony Pictures and BMG. The key is going to be getting content seamlessly through all the products and delivering it to the consumer. Sony is well positioned to do this because we have the content and the products, an advantage that few other companies have. Howard was talking about the service layer that ties everything together; our vision is for every music device, cell phone, camera and PC to be networked and to recognize one other in order to transmit information. For example, when you walk into a room with your camera, the pictures are automatically uploaded to your television. We see every product being able to talk to any other product.

Would these products talk to other Sony products or also other companies’ products?

Both. Of course, we would rather customers have all Sony products, but we are designing them to communicate with any manufacturer's products. Almost all companies except Apple, which maintains their proprietary standard, are adopting open standards. Apple has always had a loyal following, and Steve Jobs has done a fantastic job in optimizing the integrated system. Sony, too, pursued this strategy 10 to 15 years ago, but now we have decided that the only way for us to go is to give consumers a choice. They are more educated and are demanding openness. You can see with Blu-Ray that we made a conscious choice to keep it open and get support of other partners. That's the key to how Blu-Ray won against other high-definition formats.

Can you talk about how you create revolution in an industry? For example, what were the keys to winning with Blu-Ray, and how did this affect the entire ecosystem?

It was a natural progression that only one high-definition format would prevail, because it is too costly for the studios to make movies in more than one format. We recognized that the key to succeeding here was getting support of the major studios and retailers. At the time, we had 150 partners, now it's up to 180. The only exceptions were Microsoft and Toshiba didn't have enough partners and tried to do it more on their own. And, we had some technical advantages like storage capacity and speed that we designed with a long life cycle in mind, knowing that this new high-definition format needed to last and be able to play legacy systems in order to get people to adopt it. Finally, PlayStation was key to our strategy for increasing penetration quickly. There were millions of consoles in the market, and the combination of Blu-Ray and PlayStation drove faster adoption.

Sony has traditionally struggled in bringing together its multiple divisions. How is Sony transitioning the multiple brands and divisions into a more cohesive, unified company?

Collaboration has been a key pillar for Howard to unite Sony, and he understands the importance of working across divisions. Some of it happens naturally, for example between Sony Pictures and Sony Electronics — we have a very close relationship. Other times, organizational changes drive collaboration, like creating a single unified consumer group. Actually, the first success was Blu-Ray, which really forced all areas to work together — Pictures, PlayStation and Electronics.

How is the proliferation of new media influencing Sony’s strategy?

Sony is fully embracing it. We have conducted a thorough investigation of possibilities and are using internal and external blogs for communication, and we allow consumers to write reviews directly on the Web site — both good and bad. We are also embracing internal social networking. We find that this brings more creativity into decision making and innovation into product development. The customers help here too — they use our products every day in ways that we don’t expect, so we get valuable insights from them. We are also looking to grassroots marketing for some areas. For example, we think that much wider adoption of digital SLR cameras will be driven by a community of non-traditional users, like soccer moms who want to take better action shots. This is not going to be communicated through traditional retail channels, but rather through communication between specific core groups.

What areas in the electronics industry excite you? What are the hottest new areas?

We are really excited about our TV lineup, which ranges from high-end LED-based televisions to affordable televisions at retailers like Wal-Mart. One product that I am really excited about is our EcoTV, which takes advantage of every possible way to save energy, both in the manufacturing process and in usage. One of the largest consumers of energy is standby power, accounting for 3 percent of all energy usage in the U.S. If we could better manage this, we would eliminate the need for new power plants. EcoTV reduces demand for electricity by managing power consumption, for example, sensing when the room is empty and going to sleep. We also see a lot of potential in the professional cinema area, where we are incorporating multiple technologies to create a custom package. We see a huge potential in the Reader, an electronic book that reduces the need to print documents. Our headphone line has some exciting new innovations, like wireless capabilities and a complete integrated package where the MP3 player is integrated into the headphones. We also see huge potential with the Vaio P, which is a lifestyle PC, a product that is easy to carry around, but offers a full operating system.

Sony seems to be making a transition to retail, opening several Sony stores. What are some of the new challenges, and how are you addressing them?

We have 45 stores in the U.S. and some in Europe. These bring us closer to the customer and help to educate our customers. We think it is very important to our strategy to provide an additional channel to market and create new ways to listen to our customers. It takes a different strategy to become a retailer, and we need to learn how to manage this well. Initially, there was some concern over channel conflict, but our retailers recognize that it actually drives more business for them. We've found that where we put in a SonyStyle store, sales at retailers in the vicinity go up dramatically, because we are not discounting at our stores and customers will often go to buy through other retailers. Additionally, our few stores are not much threat to a retailer like Best Buy that operates thousands of locations.

Your career in consumer electronics spans 30 years. What do you think lies in store for this industry?

There are no doubt going to be incredible opportunities as the country and world innovate in technology. It doesn’t have to follow Moore’s Law. There are interesting advances taking place in all areas and in ways we don’t even expect, both on the manufacturing side and on the finished product side. Sony is spending a huge amount on research and development to drive future innovations. There is going to be a totally different range of products, and not just in the U.S. We see a lot of potential in BRIC (Brazil, Russia, India and China), and we started focusing on them several years ago knowing that these markets will explode. There are over 1.3 billion people in China, compared to 300 million in the U.S. This could potentially dwarf U.S. purchasing power, and we are making a lot of effort to be well-positioned when it takes off.

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