Why Sony is repeating strategic mistakes with the PS3

http://www.wired.com/wired/archive/14.09/sony.html
This is a very interesting Wired article which raises real concerns that with the PS3 Sony is not only betting the whole company’s future on it, but also making the same strategic mistakes it made in the past.
The thing that triggered the notion of Sony repeating strategic mistakes in my mind was the section about the PS3’s revolutionary Core processor. Although its performance is a step change ahead of the one in Microsoft’s X-Box 360, until games developers can work out a way to make best use of it the PS3 gaming experience won’t be noticeably better than that of its rivals, despite the console being sold at a premium price. Which brings us back to the adage that pricing is transparent, but value is opaque.
Sony’s problem is they’ve been here before — with Betamax. It was sold at a premium price (compared to VHS machines) as it was technically better, but its value was opaque to domestic consumers (only professional users could perceive the higher quality and continued to use the format for broadcast-quality news cameras for many years).
Sony also failed to build the network effects the VHS alliance managed by ensuring there was content support for it through availability of Hollywood movies to rent in VHS. Sony later tried to make up for this by buying Columbia Studios (interestingly, recently criticised as a mistake by recently retired Sony boss Nobuyuki Idei).
Now with PS3 Sony’s trying not to make the same mistakes by ensuring content from Columbia and other studios for the Blu-ray high-definition discs the PS3 will launch, getting games made by major independent firms and building a wider network of firms supporting Blu-ray.
But the Wired article importantly points out that Sony is dangerously ignoring the “fun quotient” in the control mechanism, unlike Ninentdo’s Wii console — which uses a gyroscopic wand to let you control by waving your arms around.
So why is Sony making the same mistake again? The answer can easily be seen in its organisational culture, which is an engineer-ruled product-centred one because (as the article says) it was founded by engineers who wanted to make technically great things rather than marketing men who wanted to meet known human needs.
This culture (typically introvert and not very socially-oriented) has also, I believe, led to the tendency not to see networking for shared gaming over the Web as important (a senior figure admits they see it as an extra, rather than a core feature for the PS3 — unlike Microsoft with the X-Box).
Unless and until Sony can change its culture to get its engineers to ask people what they need and want before they go off to develop products, it will be condemned to make the same mistakes again and again.

Peter Day – more great work

Peter Day is one of the few journalists who, if I come across something by them by chance, I have to sit up and take notice (the others include the BBC’s John Simpson, Evan Davis, Mark Urban and Charles Wheeler).
Why? Because they are all experts in their fields and each can take a deep and insightful analysis of a subject and make it fascinating and entertaining or informative, or both.
Aside from doing the excellent Radio 4 business programme In Business, Peter Day writes an occasional column on BBC News Online called Work In Progress about business issues. The following article is typical of his great work and a valuable lesson on the importance of managing consumers’ expectations.
Enjoy!
http://news.bbc.co.uk/go/pr/fr/-/1/hi/business/4702995.stm

Brand perception management - a key corporate competence

http://media.guardian.co.uk/marketingandpr/comment/0,,1545579,00.html
I read this article and immediately thought of companies like Innocent Drinks, Nokia and Starbucks — who are not only good at being good (ethical) but also good at managing the perception of their brand by customers and potential customers.
Innocent is very open about its ethically-driven mission statement and lives that through its donation of 10% of its profits to projects in the countries from which it sources its fruit and its annual free festival, Fruitstock. It's cheeky, fun, brand personality comes through in the silly jokes on its packaging, adverts, e-mail newsletter and website.
Nokia, being more corporate, manages things through its marketing and CSR (corporate social responsibility) activities, including its participation in a brilliantly honest and transparent (but also hilarious at points) BBC4 Storyville documentary about its CSR audit of the Chinese manufacturer of its phone chargers - http://www.bbc.co.uk/bbcfour/documentaries/storyville/made-in-china.shtml
Just by doing the film they showed how much they really mean all that stuff - it wasn't just tick-the-box for them.
Ditto Starbucks, whose approach to CSR has been deliberately low-key. While they do Fairtrade-like programmes to ethically source all their coffee and a lot more besides (http://www.starbucks.com/aboutus/csr.asp ), they don't make a big thing about it in their marketing activities, perhaps for fear of being accused of being a big Janusian American corporation by the anti-globalisation folks, even though Starbucks can prove everything they claim.
So much of their perception comes down to the other stuff they do in their marketing and the actual experience itself, which inclues the whole thing about making it "The Third Place" in your life (with everything instore, including the muzac, carefully planned to match the brand - don't forget Mr Starbucks, Howard Schultz, is a marketing man!) and by selling cool music through its Hear Music label.
So where is this going to?
I believe some customers and potential customers assess their potential for a relationship with a brand based on their existing perception of it - functionally and ethically. How much price plays a part depends on how ethically-motivated they are.But the more transparent they're seen to be, the more trustworthy they're perceived to be and the greater is their opportunity to start a new brand relationship with that ethical consumer.And that's why managing the perception of your brand is a key corporate competence in the 21st Century.

Why do we hate Wal-Mart and love Innocent?

It's a simple enough question - why do ethical-thinking folks (and that, IMHO, should be all of us) hate market-dominating firms like Wal-Mart and Tesco but love Innocent, even though its share of the UK smoothie market went from 37% to 61% between last year and this?
Well it clearly isn't about their "ownership" of their market spaces - Tesco and Wal-Mart are just as dominant and have just as much market power in their areas.
So why is Wal-Mart seen as "The Beast from Bentonville" and Tesco "The Creature from Cheshunt" (my own phrase!)?
The simple answer is their perceived behaviour — how they're seen to use the market power they've gained through success with customers.
Do any decent Internet news search and you'll find scores of stories coming up about how Wal-Mart and Tesco are said to be Janusian (two-faced) in being nice to customers and promoting themselves as helpful and friendly in their advertising to them (c.f. Tesco's long-standing "Every little helps" slogan and use of the voices of well-loved celebrities in their UK TV ads) while at the same time being horrid to their suppliers (see countless examples of Tesco being accused of forcing down prices paid to farmers and demanding payments from suppliers just to stock their products, supposedly to cover the costs of in-store promotions) and staff (see the long-standing stories surrounding Wal-Mart's use of low-paid, sometimes illegal, immigrant staff supplied by agencies).
So why are we bothered? My view is that, from our own personal experience, we hate bullies, particularly disingenuous ones who pretend to be nice while actually being nasty. Like the "Things It Took Me 50 Years To Learn" item - "If someone is nice to you and nasty to the waiter, they're not a nice person."
But, as I suggested, not everyone is bothered. Some folk don't care about how Tesco behaves to its suppliers - they just want it to give them the lowest prices and best service. Who cares how they come about?
But as the number of ethically-motivated consumers grow, perceived behaviour will become an increasingly important part of corporate strategy as a source of competitive advantage and differentiation for long-term market leaders.
P.S. Note from my little black Ideas notebook - "1/3/04 - Ethical is the new organic." I may not have published it then, but it's increasingly proving to be true.

I'm back!

Well it's been way too long since I last posted, but I'm coming back!
All to do with the heavy weight of family commitments, but that's more under control now.
And while I've been offline blogging-wise I've been taking notes about business issues which have caught my interest and made me think.
So expect the results here soon.

Let customers lead your organisation to success

http://www.economist.com/surveys/displaystory.cfm?story_id=E1_PSRVTGG
The rise of customer power means that to be successful in an increasingly competitive globalised world you have to listen to what customers want.
Look at the Innocent Drinks newsletter ( http://www.innocentdrinks.typepad.com/ ) in which they regularly ask those customers who've liked their product enough to join the mailing list to vote (in their thousands) for what they want next!
A link takes you to a voting site, where you answer questions on your preferences and which of several possible new products you'd like most. And then they do what the customers want. Simple, but brilliant, as they're guaranteed to be doing what customers want most — because that's what they asked for! That's as close to a guarantee of success for a new product launch as you're going to get.
They are, in my view, the leading runner in a new type of organisation - the "customer-led organisation", or CLO.
Tesco, arguably, could be part of this group too, as they're the biggest database marketer in the world and use their Clubcard loyalty card data to find out what we're wanting and offering us discount vouchers for items we actually buy.
The antithesis of the CLO are firms like the mobile phone makers who are relentlessly product-centred — adding new features customers haven't asked for.
Why? Partly because they believe new technology and features will give them competitive advantage (maybe to early adopters, but not to most of the rest of us) but also because network operators want to recoup their licence fees by charging us for using whizzy new features like videocalling on 3G or mobile TV.
The problem is, most of us didn't ask for it, so we won't use it! A survey showed most people don't use extra features for their own sake — only things which fit in with their existing lives.
But why would you ignore/fail to consult customers?
I reckon it can often be linked to the kind of “father knows best” paternalistic culture seen in top management of organisations, as those at the top feel their years of experience getting there best qualify them to judge what’s wanted. The trouble is their mindsets are all too often worlds apart from those of customers who are not like them – perhaps young and/or female. How can they really know what they want or need?
It would be interesting to see if there’s a correlation between the age of top managers and their organisation’s user/customer centricity.
But this kind of product-centredness can also be an industry paradigm into which they become engendered – look at how product-centred most newspapers are, especially compared to magazines – which have been created and altered based on market research findings for many years.
A curiously long-term successful company which has been famously largely product-centred is Sony.
The philosophy of product development created by its founders was that customers can’t tell you what to make because they don’t know what you’re capable of making. The result was decades of being product-centred with the belief that if only the customer could be educated, he or she would be what the engineers had created.
Despite this Sony has thrived, but had to offset the cost of the expensive innovations (like MiniDisc and DAT) which failed to big mass market hits from the ones which have met genuine existing mass needs (CD, Walkman, Trinitron colour tubes).
In more recent years, though, I suspect Sony has shifted more towards listening to what customers want rather than trying to educate them to want what they’ve made.
The former is the way of the CLO — and the only way to do efficient, and ultimately successful, product development. It’s the definition of marketing — ask people what they want and give it to them! Simple, but all too often ignored.