New CEO should restore `ideal factory' tradition.

Sony Corp., with its status as a peerless consumer electronics brand in jeopardy, has announced a major reshuffle of top executives, including the retirement of Nobuyuki Idei, the incumbent chairman and chief executive, from the board.

Idei was once lionized as one of the brightest business leaders in Japan. He personified the new ideal of a CEO and served as chairman of the advisory council that mapped out the government's IT strategy.

What has happened to Sony? The shake-up represents an almost unprecedented management reorganization by a Japanese company. Idei, who will be replaced by a foreigner, will be among seven of the eight inside directors who will leave the board.

In 2003, Sony adopted the U.S.-style corporate governance system based on management committees. Under the system, introduced through a revision in the Commercial Code, management tasks, like audits and appointing directors, are carried out by independent committees comprising directors, most of whom come from outside the company.

Unlike the traditional Japanese board, which is dominated by insiders usually loyal to the top executive, the new system can inject transparency and sensibility to social trends into management, some analysts say.

Idei said that he and President Kunitake Ando had made the strategic decision.

This radical personnel change, in which Idei, who has been Sony's public face for 10 years, will be replaced by Welsh-born American Howard Stringer who was in charge of the company's overseas operations, suggests the new system to evaluate the management team's performance is working well.

The decision also indicates the seriousness of Sony's trouble. Sony's huge losses for the January-March quarter of 2003 caused the ``Sony Shock,'' which triggered a steep decline of the entire stock market. For the current fiscal year as well, the company has revised down its original forecasts for both consolidated sales and operating profit.

A number of reasons have put Sony in such a bind. First of all, the company has been plagued by a lack of new, drop-dead products, such as Walkman, which revolutionized the music-listening culture among young people, and the Trinitron cathode-ray tube, which was the cutting-edge technology of the day.

For large flat-panel TVs like liquid-crystal displays or plasma TVs, now the principal revenue sources for many electronics companies, Sony opted to procure key components from other makers. This strategic blunder has prevented Sony from developing these products with the unique feel beloved by Sony loyalists and forced the company to compete with rivals by cutting prices.

The company's compartmentalized structure, a typical symptom of bureaucratic inefficiency at a large company, has led to a product pipeline bulging with many similar gadgets.

Idei once voiced strong confidence for a spectacular Sony comeback, pointing out that the company's history had been marked by dire warnings about a shattered image that emerged every 10 years. But he has failed to restore the brilliant aura that once surrounded the Sony brand.

The attention-grabbing management reshuffle alone cannot turn around the ailing giant. What Sony needs more than anything else are new products with huge consumer appeal. For that, the company must lift the morale of employees in charge of developing products.

Sony's founding statement, written 59 years ago, calls for the creation of an ``ideal factory'' with a free, vigorous and cheerful atmosphere that enables serious engineers to develop their skills and abilities to their full potential. The new management team's primary mission is to revive the firm's great manufacturing tradition to underpin its brand power, which has been developed for more than half a century.

It was only several years ago that Sony's brilliant performance stood in stark contrast with the stagnation of its archrival, Matsushita Electric Industrial Co. In this era of free transborder competition, winners and losers can switch positions overnight. Sony's management reshuffle is testimony to the harsh business environment.

--The Asahi Shimbun, March 8(IHT/Asahi: March 9,2005)