Last week I wrote a piece on why Sony should have never brought out Blu-Ray in the first place. Many people at Sony, some of them very powerful, have lost their jobs over this, and Sony appears to be getting ready to move to the technology that may take the place of all DVDs.
If I'm correct, there are really only two likely outcomes: HD-DVD wins or both lose. If this had been determined at the start, Sony could have likely saved a lot of red ink. Now the problem for them is, I don't see how they get out of this.
Time is clearly not unlimited; yet another format came to market this week that actually looks rather good.
Three Possible Outcomes:
For some reason this reminds me of the second Star Trek movie, The Wrath of Khan, where Kirk, when faced with an unwinnable situation, cheats. Sony needs to find its Captain Kirk, but until then here is how I see the outcomes:
Continue to Fight: HD-DVD has a price advantage and has eliminated much of the content disadvantage it had a few weeks ago. Toshiba remains financially strong (arguably stronger than Sony), and is showing no inclination to give up. Cost to Sony continues in the billions, risk to its CEO is probably close to 80 percent, HD-DVD doesn't win but neither does Blu-Ray.
Give up and Walk Away: PlayStation3 is effectively dead; it would have to carry too much cost and conversion back to DVD or HD-DVD would be painful at best. They'd need to cycle fast to PS4, run the risk of alienating their installed game base -- pissed off wouldn't begin to describe the folks who supported them in this fight. While it is possible this could be done elegantly, I don't see that path and put the risk to their CEO at 90 percent.
Quietly Stop Funding Blu-Ray: This may be the path Sony is actually on, as it doesn't seem to be matching the money Toshiba has put on the table. However, the fact that Toshiba is, reportedly, willing to fund their effort may result in a similar outcome to path #2 in that shortly, unless someone moves the other way, people should start taking about Sony basically abandoning the platform. As I write this, there is heavy speculation that Warner is going to follow Paramount and DreamWorks. If it weren't for Toshiba, this would be the safest path for the CEO, but with Toshiba aggressive, I wouldn't bet on it.
Do the Analysis First
This is not a happy place to be for Sony, and its choices are all ugly. My point isn't to get you to buy one format over the other, but to avoid putting yourself in the same position with either a technology you build or one you buy.
The best advice is to follow the analysis into a decision, not force the analysis to fit a decision that has already been made. I think, had Sony actually looked at how much risk it was taking, took that against its horrid history at establishing standards (yet another failed last month), and done a financial analysis as to whether Toshiba was likely to fold, it would have concluded that the possible benefits did not overcome the probable costs of doing Blu-Ray.
A good competitive analyst would likely have concluded and been able to argue both what was needed to succeed in this space and the cost of failure which, in hindsight, was unacceptable. To succeed, it needed a $200 product with sufficient volume in time for the scheduled PS3 launch, even if they had to subsidize it. That would have assured the PS3's success. Sony couldn't afford the subsidy and it couldn't get the product ready in time. Putting the PS3 business at major risk should have never even been an option.
What I think happened, and Sony is hardly alone in this, is it got too excited about its own technology and didn't step back and honestly assess the decision before it made it. Now it's in a world of hurt.
So, when faced with a major technology decision, make sure the analysis has been done before the decision is reached. Avoid like the plague the tendency to go with your gut and then ask for after-the-fact analysis to support a decision already made because, in that instance, the analysis will actually lock you into the poorly reached decision.
If you look at the incredibly personal and negative comments from my first piece, imagine people saying or thinking similar things about executives or fellow employees in your place of business. If you've been around awhile, you've seen what similar behavior can do to an organization or working group and why it should be discouraged.
Passion for one's job, company, and products is both important and powerful, but letting that passion get in the way of good decisions and good working relationships is not. If you do detailed analysis before a decision is made, you'll be vastly less likely to be in the position Sony is in. The number of failed projects I've seen because the firm simply did not properly assess either the cost of success or failure is huge. If you don't understand both, you can't make a good decision.
The lesson here isn't that Sony shouldn't have done Blu-Ray; it is that it mistakenly chose to do it at a funding and staffing level that wasn't adequate for success. Whether we are talking a military action like Iraq or business, approaching a decision this way can clearly be catastrophic.
Before you make a decision, ask yourself whether you truly know what it will take to assure success and whether you can afford that cost. The cost of failure should almost always be unacceptable.