This past week, investor services firm Moody's lowered their rating of Sony Electronics to "one-point above junk status". How does this happen to a company that, according to reports, returned in Q2 "an operating profit of $388 million, in comparison to a $20 million loss in the same quarter within FY2011"? Aren't they on their way back?
The answer may well be that cost cutting has improved the financial picture, but they still face product irrelevance due to the power of Convergence, as I wrote about last year. Here's an updated version of the chart in that article, with Amazon and the S&P 500 added:
Sony is a superb company, often used as an industry benchmark. They manufacture and sell a dazzling array of high-quality electronics for a broad range of consumers. The problem is that they have become less interesting, in my view, because they are unconnected to something larger. They are point solutions in a world now dominated by platforms like Apple and Amazon that quickly & easily deliver all your interests and needs in a unified way.
Sony's homepage today features several of their products with "007" logos. Apple's homepage just shows their latest product. It's traditional marketing vs. using convergence to drive demand at a fraction of the (marketing) cost. The last Sony product I purchased was a clock-radio that has an iPhone dock. Years ago complementary products were typically sold cheaply, and directly, via catalogs. Has Sony, one of the most innovative and excellent companies the world has ever known, now been restricted to the same value proposition once dominated by the Sharper Image?
Another once shining brand that has missed the mark on convergence is Blackberry. In a recent article speculating that RIM's new Blackberry 10 might be DOA, Pacific Crest Securities analyst James Faucette comments that "BlackBerry 10 will have no complementary devices, which we believe are critical to broadening the ecosystem footprint."
I believe that I'm a typical consumer, and I feel this shift acutely. Recently I analyzed my credit card spending over the last five years. What I found is that I had spent about the same on electronics, computers, gadgets and content (movies, books, music). More notably, my spending, which had been spread amongst some fifty different vendors in the first few years, has recently been directed primarily to three vendors: Apple, Amazon and ... Newbury Comics, which is right next to a location my family visits at least 1x per week. (Note that a convenient retail location is still not enough to beat convergence. I regularly shop in airports, and I always go to bookstores to browse. I occasionally do buy a book, because the FAA won't allow iPads during take-off and landing. But for the most part when I see a book I want, I buy it from Amazon using the airport WiFi.)
Convergence is not just for consumer electronics players. It can be done in the enterprise. Attivio recently helped a leading investment bank implement a search-driven customer experience management system that integrated more than 50 separate applications. The result has been a 2/3rds productivity improvement, which translates into more activity and thus more revenue and profits.
Big Data is strongly associated with "volume", for many reasons. But that is clearly not the whole story. It's more a phenomenon of using vastly more data in business decision making. This tech/business disconnect is the motivation for many brilliant people to question the notion or dismiss it as "BS". In my view, Big Data is actually more about Variety - processing and integrating information from many different kinds of sources so you have a more complete picture for your data-driven decisions.
You can do the same thing in your enterprise, and ensure your customers, employees, partners and competitors stay interested in your products and services.
The alternative could well be junk bond status.