Sony Ericsson was formed in 2001, with the aim of combining the Ericsson technological capabilities with the marketing and product capabilities of Sony after both companies had experienced a period of disappointing sales. Although the joint venture never properly leveraged on these combined capabilities, this however was not the core reason that Sony Ericsson failed as a company.Even before the Sony Ericsson was formed, both Ericsson and Sony were both more than capable of "continuous innovation" which essentially is that they were getting better at minimising phone sizes (from the size of bricks in the mid nineties down to a size in which they would fit in your pocket) and at improving levels of technology performance in almost all of the phones technological components over time. This continued within the joint venture.
Sony Ericsson had huge engineering pride and its focus was basically to launch phones with the highest technical specification possible (on each individual component) within the cost brackets of their high, medium and low level priced products, with the unspoken assumption that only increased performance is required by consumers.
Now Corporate Culture essentially describes firstly "what a company does" and secondly "how a company collectively thinks", both of which are interrelated, in that they strongly influence each other. The result is a company that cannot change either of these two aspects, unless previously architected to do so, which Sony Ericsson was not.
What the mobile phone market wanted !
On formation of the venture, phones still had a lot to be desired as regards their technological performance generally, which up until about 2007 was the most important attributes of improvement of phones desired in the market. Between 2002 and 2007 this culture of focusing on contineously improving technological performance proved fruitful and Sony Ericsson was rewarded with increased sales.
I realise that I am aggregating all the components here, the performance of some were a lot more mature than the performance of others.
But from 2008 onwards, the technology level of performance of the components having now essentially having satisfied consumer needs in the market. What became more important was simplicity of use, beauty and design and fulfilling the more emotional and cultural needs of the users.
What Sony Ericsson was producing !
I mentioned earlier that corporate culture does not change. Sony Ericsson continued on its trajectory of pushing the limit on producing phones with an ever increasing technology performance of its components. The problem is that high spec components are dramatically more expensive than their more mass produced lower spec counterparts, while they were essentially no longer adding any value to the phone users in the market and since the market would not pay a higher price, Sony Ericsson was not reaping the rewards of their own technology standards. Essentially this removed all profit potential for Sony Ericsson in the market, while not all their competitors did the same.The thing about corporate culture is that you don't stop doing and thinking what you have always done and thought.
Sony Ericsson in essence completely missed the point of what the dynamically changing market wanted.
Meanwhile what did Apple do ?
Of course we cannot solely blame or congratulate Apple (depending on your biases) for destroying the joint venture, but what Apple did was recognise and/or instigate (again depending on your view point) the change in consumer needs in the evolving mobile phone market.
Weeks after Steve Jobs had returned to the front seat at Apple, he made a speech.
Apple Confidential - Steve Jobs on "Think Different" - Internal Meeting Sept. 23, 1997
At about 4:20 in the video, Jobs states that Apple will no longer focus on the technological attributes of their products, what he refers to as "the mips and megahertz's" and "speeds and feeds". Apple will instead focus on other kinds of value, although he never says what this is exactly.
Apple stopped focusing on technology performance and changed the rules of play in the phone market and won. Apple has had up to 70% share of the combined profits from the whole phone market, while Sony Ericsson mainly losses since 2008 have been negative. This to me is the earliest recording of the turning point and the beginning of the end of Sony Ericsson (and Nokia, Siemens, Motorola and RIM), which occurred five years before the Sony Ericsson joint venture was even formed.
The Sony Ericsson story is a classic case of "Disruptive Innovation". Sony Ericsson followed the tell tail pattern of removing the lower market segment less profitable products from the market, and focusing on higher end products over time.
Apple Confidential - Steve Jobs on "Think Different" - Internal Meeting Sept. 23, 1997
At about 4:20 in the video, Jobs states that Apple will no longer focus on the technological attributes of their products, what he refers to as "the mips and megahertz's" and "speeds and feeds". Apple will instead focus on other kinds of value, although he never says what this is exactly.
Apple stopped focusing on technology performance and changed the rules of play in the phone market and won. Apple has had up to 70% share of the combined profits from the whole phone market, while Sony Ericsson mainly losses since 2008 have been negative. This to me is the earliest recording of the turning point and the beginning of the end of Sony Ericsson (and Nokia, Siemens, Motorola and RIM), which occurred five years before the Sony Ericsson joint venture was even formed.
The Sony Ericsson story is a classic case of "Disruptive Innovation". Sony Ericsson followed the tell tail pattern of removing the lower market segment less profitable products from the market, and focusing on higher end products over time.
Sony Ericsson then went through several repetitive cycles of layoffs and downsizing, until Ericsson wisely pulled out of the joint venture in early 2012.
At some later date, when the timing is right, I may continue this story on Sony Mobile.
Hugh Anthony
