Economy & Tech
Sony Group's New Resurgence Strategy Aims to Fill the World with Wonder
Sony Group unveiled its business strategy under a new management structure, charting a course toward regrowth to continue spreading wonder through innovation.
Sony Group initiated a dual leadership structure in April 2023, appointing Kenichiro Yoshida as Chairman and Hiroki Totoki as President. Chairman Yoshida also serves as CEO, overseeing the overall corporate strategy, while President Totoki assumes the role of COO and CFO, responsible for the execution and finance of individual businesses. In 2021, the company changed its name from Sony to Sony Group.
Sony Group's business ventures have continued to expand, with consolidated sales exceeding ¥11 trillion JPY ($31.2 billion USD) in FY 2022.
Currently, Sony Group is driving further growth by actively investing in image sensors (semiconductors) for cameras. The company also has an extensive intellectual property portfolio derived from its thriving businesses in music, movies, and video games. Sony is also focusing on the rapidly growing entertainment market in India.
Structural Reforms Under President Kazuo Hirai
Sony, once a leading electronics manufacturer in Japan, faced challenges in the early 2000s due to a structural recession. Under the leadership of former President Kazuo Hirai in 2012, the company embarked on aggressive structural reforms, including divesting from unprofitable businesses and narrowing down its areas of focus. These measures have significantly improved Sony's financial condition.
When analyzing Sony's operating profits across various business segments, FY 2002 saw uneven profitability, with certain segments recording losses. However, in FY 2022, all six business segments of Sony Group attained profits without significant disparities.
In FY 2022, Sony's consumer electronics, which was its core business in FY 2002, was overtaken by stronger segments. These include game and network services (G&NS), entertainment technology and services (ET&S), and imaging and sensing solutions (I&SS) for smartphones and digital cameras.
In 1979, Sony entered the financial industry and diversified its business. This move was inspired by founder Akio Morita's visit to the United States, where he witnessed the power of financial institutions. Despite initial challenges, Sony expanded its operations into sectors such as insurance and banking, establishing a stable revenue base that supported the company during the structural recession.
At the Corporate Strategy Meeting held on May 18, Sony Group revealed its intention to reduce its stake in its financial arm for a partial spinoff in the next two to three years. That means the newly listed company will raise cash independently.
Filling the World with Wonder
According to CEO Yoshida, Sony's strategic vision is to fill the world with "kando" (emotion) through the synergy of creativity and technology. The Japanese word "kando" encapsulates a sense of wonder, excitement, and awe.
Since 2019, when CEO Yoshida was Sony's president, he has emphasized the importance of being driven by purpose (or reason for being). And the concept of "kando" has been at the core of Sony's purpose.
From its inception, Sony has delighted customers with innovative products that evoke a sense of wonder. Now, Sony aspires to be a trusted and preferred brand among content creators of music, movies, and games.
Creators evoke wonder through the software they design, while Sony Group offers the necessary technology and hardware to bring their creations to life. Through these collaborations, Sony is able to explore the market from both hardware and software perspectives.
Furthermore, Sony Group's digital cinema cameras and virtual CG systems have revolutionized the Hollywood film industry. Online streaming services have also transformed the revenue landscape for Sony in the music and movie sectors, opening up new economic opportunities.
Sony's virtual reality (VR) and artificial intelligence (AI) technologies also hold immense potential in a wide variety of fields. For instance, these technologies are being applied in the electric vehicles (EVs) being jointly developed by Sony and Honda.
CEO Yoshida aims to propel Sony's resurgence by continuing to invest in the creation of new "kando" experiences.
The Founding of Sony
Sony was founded in 1946 as Tokyo Tsushin Kogyo with a focus on repairing and modifying radios. From the start, it embraced a spirit of challenge with a commitment to take on tasks that others avoided. Dealing with small transistor radios and tape recorders, "sound" would always be at the core of Sony's identity.
In 1957, the company changed its name to Sony and expanded beyond sound-related products to include innovations in the visual realm, such as color televisions and videotapes.
Sony's excellence in technology and quality earned recognition, leading to its full-scale entry into the broadcasting business in the 1970s. The development of the image sensor, the "electronic eye" of broadcasting cameras, marked the beginning of Sony's semiconductor business.
Sony's consumer products stood out not only for their unparalleled performance, functionality, and compactness but also for their innovative design. In fact, Sony products had a profound impact on Apple's founder Steve Jobs.
New Technology and Further Growth
During the 20th century, Sony's acquisition of record companies and film studios laid the foundation for its music and movie business. This diversification, coupled with its financial ventures, played a significant role in Sony's sustained growth over the years.
But Sony's consumer electronics division, which had been the company's core strength, fell into structural recession as the industry became increasingly borderless due to the shift to digital technology. Fortunately, the diversified sectors nurtured through earlier expansions helped offset the decline and supported the company's overall performance.
President Totoki explains, "We will review our business portfolio flexibly and continue investing for further growth."
Profits generated by businesses that are currently thriving will be channeled into new areas to drive future growth. These include semiconductors, electric vehicles, medical services, and space technology such as cameras for small satellites.
Despite an improved financial standing, Sony remains vigilant, acutely aware of the presence of global rivals. The journey of Sony Group's resurgence to "fill the world with wonder" has only just begun.
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(Read the article in Japanese.)
Author: Hidemitsu Kaito
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