Back in the mid-to-late eighties, I advised several potential investors that they should avoid an investment into a company called Hampshire Instruments for mostly technical reasons, even though it had become a media darling. One of them, Bob Graham, replied that he felt the technical limitations were minor compared to the real problem: the management. I was surprised and wanted to know how he had come to such a dramatic conclusion. He stated that every corporate problem is ultimately a management or leadership issue. If it isn’t, a company is in trouble because they are not leading. If they are not leading, they have given up control of their destiny to market forces. Then they might as well give up because someone else will figure out how to take control of the market and take it away from them.
Hampshire knew well about the market issues with their product, an x-ray lithography tool, but did little to address them other than pour in more resources. It was like the failed frontal assaults in the early parts of the American Civil War and World War I. The rifled barrel and the machine gun made these tactics obsolete. But do you blame the weapons? Or the leaders that sent thousands in to die, because they were unwilling to change their mind and find a solution. Solutions were eventually found by other generals, and they were the ones hailed as great leaders. Bob Graham was a master in figuring out how to sell customers things they did not want, but did need. He was smart enough to know customers did not need x-ray lithography and chose to invest in other areas.
Sony is a more recent example of failed leadership. They virtually invented personal electronics, first with the TR-63 transistor radio in 1957 and then with the Walkman® in 1979. I got one of those transistor radios for my sixth birthday and loved it. People didn’t just buy Sony, they loved Sony. But once Akio Morita left the helm of the company, Sony began a long process of squandering what was once global dominance in home electronics. They missed the notebook PC. But entering late, they came up with the Vaio – a super light and stylish version. Instead of capitalizing on this, they extended the brand across all Sony PCs, diluting the message. I absolutely loved my ultra-small Vaio TR3A. It did everything you needed to do for business and was as small and light as a book, not just a notebook. Why did Sony have to dilute the Vaio brand by putting it on a desktop? Now it’s meaningless and Apple has started to walk away with their market with its own MacBook Air. You can bet Apple won’t but the Air brand on a desktop.
What about MP3 players, which were introduced in 1998? When these first came to market, a legal storm of content issues blew in. Sony was at the eye of this storm, owning the technical, distribution, and content needed to pull it off. How could they miss it? They essentially let their lawyers provide the company’s vision. Being in the business prevention department, legal did their jobs well, as Sony never executed on the MP3 player with a new Walkman™, until it was too late.
The world had to wait five years, until 2003 for Apple to put it all together with the iPod and iTunes. Steve Jobs approached the problem not as a legal or player issue. He approached it from a user needs angle. Users needed portable music and would pay for it provided there was a decent business model. So Steve’s tactical move was to solve the content issue with a new business model: iTunes.
At the end of the day, it’s all about leadership, which starts with vision, leads to management, and ends with execution. What made Akio Morita so great was that he had vision and knew how to execute on it. What makes Steve Jobs so great is that he has vision and knows how to execute on it. Sony has had vision down in the ranks and an ability to execute on it. The Vaio proves this. If they ever get this back at the top, they will be unbeatable again.
