Competitive Intelligence

Sony Shakeup: Sacking Idei, Appoints Welshman Successor

One of these things is not like the other...

The picture above presents a much happier collection of Sony execs as Idei (second from right) today gave way to a somewhat surprising Western successor in Sir Howard Stringer (guess who...) as the Japanese company's next Chairman and CEO.

In an emergency board meeting, Sony's current CEO, Nobuyuki Idei, stepped down a year earlier than his planned retirement (next year is Sony's 60th birthday) after a series of setbacks for the company and a general lagging performance in the consumer electronics business. The new CEO, Howard Stringer, who was once a producer at CBS News and is currently the head of Sony Corporation of America, is considered an unorthodox choice because he doesn't have an engineering background nor can he speak Japanese.

It seems Stringer's rise to the top and Sony's quest for reinvention have intersected at a point where the former television news journalist, who revived Sony's struggling music and movie businesses, takes the helm of a company badly in need of competitive differentiation as continued lost ground to stalwart rivals ranging from Chinese and South Korean electronics companies as well as rebounding American competitors like Apple damages Sony's long term ability to compete in an increasingly commoditized global consumer electronics market place.

NYTimes.com has a good summing-up:

It is also a recognition of the turnaround in Sony's entertainment businesses, which are among the most profitable parts of the company, riding blockbuster movies like "Spider-Man." And it underscores the changes that are sweeping Japan, once ascendant in the world economy, but suffering through a decade of little or no growth.

In a statement issued from Sony's Tokyo headquarters, Sir Howard hinted at future efforts to integrate the entertainment and electronics focuses of the company. "We look forward to joining our twin pillars of engineering and technology with our commanding presence in entertainment and content creation to deliver the most advanced devices and forms of entertainment to the consumer," Sir Howard said.

Sir Howard, a charismatic 63-year-old who does not speak Japanese, was born in Cardiff, Wales, and is an American citizen who splits his time between New York and his family's home in London. Before joining Sony in 1997, he worked for 30 years as a journalist, at CBS, at one point as a producer for Dan Rather at CBS, and ultimately went on to run that network.

Sir Howard was knighted by Queen Elizabeth in 1999 and has become known for being a likeable consensus builder, comfortable negotiating with both Hollywood divas as well as eccentric engineers and managers in Japan.

"Forgive the awful pun, but he has kind of oriented himself to his Japanese colleagues," said Peter G. Peterson, chairman and co-founder of The Blackstone Group and a former board member at Sony who helped recruit Sir Howard to the company. "It's a great achievement. They trust him. He's a harmonizer."

Mr. Idei, 67, was the first nonengineer to run Sony, and his departure will come two years into his three-year plan to overhaul the company. During his 10-year tenure, Mr. Idei used his background in marketing to reshape Sony into a more media-focused company.

Sir Howard, of course, is hardly an engineer himself. But in recent years he has taken an increasing interest in Sony's electronics business, particularly in areas that relate to music and movies. Sir Howard, who is also vice chairman of Sony's board, has tried to break through the bureaucratic logjams that have kept Sony - the company that invented the Walkman - from competing effectively against Apple's iPod, the dominant digital music player. And he has taken a key role in negotiating with other Hollywood studios to get support for the new Blu-Ray disk format, which Sony supports.

More recently, Sir Howard has been increasingly outspoken within Sony that the company has to break down its balkanized structure in order to move much more quickly in the marketplace. In a provocative speech to Sony managers in January he declared that "the business of Sony has become management not product design."

Sir Howard joins a small club of foreign executives who have taken the helm of major Japanese companies. This includes Carlos Ghosn of Nissan and Rolf Eckrodt, a German who led a failed effort to turn around Mitsubishi Motors.

Sir Howard does not keep a home in Tokyo, but he is expected to spend more time in Japan, a Sony executive said.

Still, he has shown that he can build bridges to all sides of that company.

"Howard is the ultimate diplomat," said Vic Pacor, the former head of Sony's television and home audio division in the United States. "He is even handed and will bring the kind of stability that the company needs," said Mr. Pacor, who is now president of D&M Holdings, a Japanese-American electronics company.

Allowing a foreigner to take over the reins of Sony would be one of the boldest moves a Japanese company could make. Most Japanese boards and executive ranks are filled with lifetime employees who win those spots more through their loyalty than through their creativity.

Yet in appointing a foreigner to its top spot, Sony's management appears to be completing a course originally set out in the 1950's by its co-founder, Akio Morita.

He recognized then that Sony had the potential to become a global powerhouse if it not only sold products overseas, but incorporated foreign thinking in its products, its brand and even its management.

We'll see whether Stringer can sharpen Sony's pencil enough to be competitive again - change can't hurt, after the Idei era, maneuvering a global powerhouse like Sony is no mean feat.

- Arik