Sony was once a company to watch. Under Akio Morita, the company kept looking for advances in technology–and hence was able to create new markets and dominate “consumer electronics”. Stories about Sony management meetings revealed a company where executives spent 85% of their time on technology, products and new applications/markets, 10% on human resource issues and 5% on finance.
So what went wrong for Sony?
Well, the basic reason was: Prioritizing production efficiency over innovation.
W. Edward Deming in 1950s Japan institutionalized manufacturing quality and optimization. He convinced Japanese leaders to focus, focus, focus on making things better, faster and cheaper. Unfortunately, this narrow obsession left Japanese business leaders, by and large, with little skill set for innovation, in any other area. So, Sony started putting its mind more on production volumes and costs, instead of on developing new products.2