Thursday, February 19, 2015

Synergy Not Working For Sony

Synergy, once the buzzword for management, now seems to be a dirty word.  We've watched as companies like Time Warner have separated itself into separate pieces, Time Warner Cable, Time, Inc. and Time Warner (HBO, Turner), because synergy stopped working.  Perhaps it is because as companies got too big, they found it nearly impossible to adapt and change to changing market conditions.  The analogy has always been to ships; big ships need tons of room and time to turn while small ships are much quicker and more nimble.

That same problem has affected Sony and unable to create synergy and growth across its many different business units, they have also chosen to separate its pieces.  According to EE Times, "Sony continues apace in the process of ditching practically all of its electronics business units — PC (gone last year), TV (already a separate company), and audio and video business (scheduled be split off in October)."  What seems to be left is Playstation.  Sony, we won't recognize you anymore.

So what went wrong?  Why did synergy stop working at these companies?  Why can't hardware and software coincide?  Is it safe to say that technology is changing so rapidly and that coupled with typical human nature, preservation over sharing, business units were hard pressed to support each other, worrying instead that they would make themselves obsolete.  I believe that the creation of vertical business units that are rigidly structured to limit movement across these shafts creates an "us against them"mentality that drives destruction instead of cooperation.

The other driver might be the financial markets themselves.  Seeking to drive value for investors, hedge funds and activists pursue spin offs of assets as a means in the short run to unlock the value of business units.  Where synergy once create a 1+ 1 = 3 world, today that formula no longer proves true.  A new management philosophy might be needed to make synergy work better in future business models.