[OUTLOOK]The lesson from the fall of Sony

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[OUTLOOK]The lesson from the fall of Sony

Sony is a distinguished Japanese electronics product brand. It can be selected as the pride of Japanese corporations along with Toyota for the automobile industry. Sony has selected an American as its new chairman and group chief executive officer in an effort to find a breakthrough in management. Former Chairman Nobuyuki Idei, the mastermind behind the popular Playstation game machine, is backing off now to make way for Howard Stringer, former chief executive of Sony in America.
Sony was formed after World War II and had the dreams and hopes of becoming the first class corporation in the world. The success stories of its founding partners, a brilliant technician named Masaru Ibuka and a master manager named Akio Morita, have already become legends in the world of business management.
Sony was thought of as an ideal model of a professional management system. In fact, former Chairman Idei kept a transparent management structure and played a leading role in bringing in American corporate systems such as introducing an outside director system. And he was proud of his ways too. It is only ironic that these outside directors are the ones who led the restructuring of Sony’s management. Driving out a chief executive from the board of directors is something rarely seen in Japan’s corporate world. This new custom is a cause for great shock to business executives.
Sony has been falling behind its competitors in its main business lines for the past few years. The digital technology field, which was the foundation of Sony, has had major setbacks and even large deficits. They failed to come up with hit products, formerly one of Sony’s strong points. Former Chairman Idei put all his energy into the fusion of electronics and the contents business, but soon found Sony ceding home ground to competitors.
Rumors of Sony’s management crisis started to spread a long time ago. However the managers stubbornly denied them. They said that Sony had always leaped forward whenever it confronted a crisis, and that this was just a labor pain for the next leap. Nevertheless, the cold market left the company suffering from continuous poor results, and its share prices plummeted. In the end, management restructuring was decided as an emergency prescription. As soon as the announcement was made, share prices started to rise a little.
Chairman Idei displayed great activities as a representative business executive of Japan. As an international businessman, he also acted as an outside director for GM Motors and Nestle in the United States, and was also the chairman of the Japanese Information Technology Strategy Committee. He regularly attended international conferences such as the World Economic Forum in Davos and published an essay book that became very famous. However, the poor results of Sony made it inevitable for him to face dishonorable retirement. The business outcome of a company speaks for the evaluation of a corporate chief executive.
The new chief executive of Sony speaks no Japanese and will work in the United States. It could be said that Sony was in such a desperate situation as to pick someone with these conditions. Toyota is normally brought up in comparison to Sony. Toyota has no interest in trendy U.S. management ideas. It holds on to the Japanese-style management that works in the Japanese culture and does not even have outside directors. It also stubbornly maintains a lifetime employment system. It even refuses to discard the owner system. The fourth generation descendent of the founder, a Toyota family member, is preparing to be the next chief executive.
Chairman Hiroshi Okuda of Toyota does not follow trends and stresses substance instead. He put foremost emphasis on car manufacturing, Toyota’s main business line, and put all energy into making cars ahead of their time. It is in sharp contrast with Sony, which neglected making good products because it was busy paying attention to software fields such as movies and contents.
The substance management of Toyota recently started to shine. It has continuously produced top-brand cars such as Lexus and pushed Ford aside to take the second place in the world rankings. There are even predictions that if things continue to go this way, Toyota will beat GM to stand on top as number one in the world.
Sony, which paid attention to the trend of the times and the American management system, and Toyota, which stuck to Japanese ways and put all energy into the main business line, show contrasting results of success and failure.
No matter how good a corporate governance and professional management system are provided, a company is bound to get in trouble if something goes wrong with the management strategy or chief executive. It seems that people do not understand this in Korea yet. We are too mindful of outward transparency and the appearance of businesses.
Sony placing a foreigner as the new chief executive is a kind of shock therapy. It is because of the expectation that only a foreign chief executive can make the decision to save Sony, as a foreigner, Carlos Ghosn, revived Nissan Motor Co. with a bold structure reform.
It is a decision that hurts the Japanese pride, but it is an inevitable reality. Can we really sit back and say that what happened to Sony is just someone else’s story? If we continue to put emphasis on outward appearances and slip away from our main business line, the same could happen in Korea.

* The writer is a columnist who writes for the JoongAng Ilbo. Translation by the JoongAng Daily staff.

by Choi Woo-suk
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