Listen to this article
There were times when last week's gathering of Sony shareholders seemed more like a séance than an annual general meeting. One after the other, dissatisfied shareholders and executives from the podium conjured up the troubled spirits of the company's legendary founders, Akio Morita and Masaru Ibuka.
Sir Howard Stringer, in his inaugural press conference as chief executive, said: “I do not take this job lightly. I am following in the footsteps of great men.”
However, things had clearly gone wrong, he said, and his job was to restore the focus and prestige of the past.
Sir Howard said poor financial results, notably razor-thin margins, stemmed from structural and management problems. He had started to address these by cutting the number of corporate executive officers, the second tier of management, from 15 to seven. More rationalisation would follow, he said.
The Sony organisation was still riddled with silos of the sort he had encountered in the US business he joined eight years ago, he said. Back then, engineers were embarrassed by the film business, Sony would select outside celebrities to promote its products, and the music division regarded itself as entirely separate.
“Those silo walls between business units need to come down,” he said. “I told the 1,000 top managers: ‘We have to be Sony United'.”
That has already improved in the US, where Sony Pictures collaborates with the electronics and music businesses. Under Project USA, the US restructuring plan, $700m of annual savings were delivered.
That strategy is expected to form the blueprint for Project Nippon, an overhaul due to be finalised by autumn.
But Sony is not a company that can cut its way to growth. It has to rebuild top-line revenues in its electronics business, which has been undermined by a lack of focus in research and development and a scatter-gun approach to new product development.
Sir Howard has also recognised that Sony engineers suffered from a damaging “not invented here syndrome”. Ryoji Chubachi, the engineer who was made president last week, said such arrogance explained why Sony sometimes foisted gadgets on to an unreceptive public instead of listening to what customers wanted. “We don't come up with hit products like we did in the past,” he said, alluding to products like the Walkman, introduced some two decades ago under Sony founder Akio Morita. Sir Howard, who admitted he never dreamt of seeing a foreigner leading Sony, said he had been brought in to shake things up. But he played down expectations that he was either a miracle worker or a hatchet man. “I am not an autocrat. I am a collaborator,” he said.
With Mr Chubachi, he has begun to formulate a revitalisation plan. But respect for Sony's traditions and his own lack of knowledge about parts of the business meant he had to tread carefully. “I need to collaborate with engineers and think this through,” he said.
However, the outline of any revitalisation was obvious, he said. It would start with electronics, the division that accounts for 60 per cent of revenue but precious little profit.
Though he would not wield an axe, he expected to accelerate TR 60, a plan to deliver 20,000 job cuts across the organisation by Sony's 60th anniversary next year. “It is a very good start, but incomplete,” he said.
Finally, Sony would think hard about which businesses it wanted to stay in. “The law of raspberry jam says the wider a culture becomes, the thinner it gets,” he said. “A corporation as big as this one has to have priorities. We can't do everything.”
Comparing his task to that of Carlos Ghosn, the French-Brazilian who rescued Nissan Motor from the brink, Sir Howard said that, unlike the carmaker, Sony was in no risk of bankruptcy. That made it harder to convince management “of the urgency of the situation”.
Yet the sense of crisis at Sony is revealed by the fact that it has turned to a foreigner to rescue what was once Japan's most prestigious brand. At this week's AGM, bilingual earphones clamped to his head, Sir Howard was inevitably quizzed by one shareholder about the proficiency of his Japanese.
“I am a foreigner,” he boomed. “I was born in Wales and I live in the US, though these days I live on a plane.” Paying homage to the samurai culture of his hosts, he added: “But first and foremost I am a Sony warrior.”
Sir Howard neglected to mention that the price of failure in the samurai code is self-disembowelment. If he cannot turn things around quickly, it will not be long before calls go up for him to fall on his sword.
Get alerts on Companies when a new story is published