Sony reported a net loss in 6 of the 7 years between 2009 and 2015. At last, Sony experienced strong gains and net profits for 2016 and 2017. The years of loss are attributed to long-term restructuring efforts aimed at reducing redundancies and focusing on the most profitable product lines.
Redundancies became a major cost to the company due to “silos” that divided the many businesses. Many of these silos were created by separating workers according to the type of work that they performed. In Sony’s past, one of the biggest problems originated from separating hardware engineers from software developers. This strategy worked very well for a long time as Sony developed hardware, like the Sony Walkman, that was smaller and lighter than that offered by its competitors. However, significant environmental changes required better integration between the hardware engineers and software developers. Specifically, consumers began to want their various electronic devices to “talk to one another” and be easier to use than ever before. Hardware engineers and software developers needed to collaborate—something that Sony’s “silo” approach had inadvertently discouraged.
Sony grew and developed an incredibly complex organizational structure. Entertainment units were split by geographic regions and operated completely independently of one another. Consumer electronics divisions each had their own marketing departments that often competed for the same customer. These complex structures did allow Sony to finish producing the most advanced gaming system in the world, the PlayStation. However, Sony’s annual losses highlighted the company’s growing need to synergize its movie, game, music, and consumer electronics divisions.
Sony termed its most recent restructuring efforts the “One Sony” plan. This multi-year restructuring effort sought to consolidate the management of a company with many separated divisions. In the past, conglomerates like Sony allowed its many businesses to operate independently, such as the battery division treated as its own organization and the gaming division treated as a completely separate organization. Much like the separation of software engineers from hardware engineers in Sony’s past, the company has found that it had little control over strategies and was unable to benefit from economies of scale.
Many global conglomerates have a highly diversified structure of “silo” businesses, but the trend appears to be toward more consolidation. PepsiCo recently adopted a similar strategy in announcing its “Power of One” strategy to bring together its food and beverage businesses. The cost savings in efficiency and focus are compelling, projected at up to $1 billion in annual savings.
1. Sony used a silo approach to their organizational structure. Explain the difference between a simple structure and a bureaucratic structure.
2. Define each of the bureaucratic structures and explain the structure SONY used.
3. SONY’s structure created Silos. Explain the benefits and costs to silos in an organization.
4. Define the elements of organizational structure. Which element did SONY use to gain control over the decision-making and strategies of the different divisions? Explain your answer.
a. Work specialization
b. Chain of command
c. Span of control
5. Explain how SONY’s structure prior to re-organization would have effected your job performance and commitment to SONY. Would your performance/commitment have changed after the restructure, why/why not?