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Ohga was instrumental in making changes to Sony's corporate structure. As he watched Sony grow, Ohga believed that all Sony managers should follow strict budgetary controls. Until that time, Sony had not rigorously enforced budgetary controls, but had grown thanks to the determination of founders Ibuka and Morita who boasted unique management styles and great technological ideas. However, as times changed, Sony could no longer follow such a management approach if it was to truly become a top-ranking company.
Ohga said, "When setting out on a voyage, it is necessary to have a chart to show the way. In business, a budget is a company's chart. Before setting out on its voyage, the company sets its goals and estimates both costs and benefits."
"In Sony's case, failure to establish a proper budget could mean that sales stagnate at 1 trillion yen," added Ohga, who decided to split the company into a number of smaller organizations. Each organization would prepare its own budget. The prevailing attitude at the time emphasized finished products and technology. Despite this, each chart would have to include targets relating to such areas as manufacturing and marketing, which until then had received only scant attention.
In May 1983, a business group system was introduced. This system was conceived by Ohga and drawn up by Ken Iwaki, then head of Corporate Planning. Under the system, Sony would create a number of "mini companies," or business groups, that would conduct operations in a defined business area. Sony would then give the head of that group the responsibility and authority for all its operations, from manufacturing to sales. Product marketing, which had been considered solely the responsibility of the centralized sales and marketing departments, now became the group's responsibility as well. The new business groups were also expected to maximize profits within the limitations of their responsibilities, and to maintain their own P&L statements and balance sheets.
Sony was not the first Japanese company to introduce such a business group system. But Sony's system was unique in that the groups were responsible for both domestic and overseas sales. Such a consolidated approach had never been tried before. Sony's product divisions had previously taken the view that if they produced and delivered the required quantities on schedule, then they were meeting their responsibilities.
Aiming to heighten awareness among the new business groups, Ohga said, "Even if Sony makes a profit by manufacturing and shipping products to sales companies, if these companies cannot sell our products and subsequently become unprofitable, it means that Sony's efforts are useless. We must ensure that our production process is efficient, while remaining conscious of the final destination of our products. For this reason, we must reach the right balance between manufacturing and sales." Additionally, Ohga was of the opinion that a group head must make every effort to maximize the consolidated net sales of his group, keeping in touch with both Japanese and international market trends.
As part of his restructuring plan, Ohga changed the role of Sony's two deputy presidents. Masaaki Morita, who was head of the consumer products business, was put in charge of overseeing global production and marketing activities. Masahiko Morizono, who was head of the industrial products business, was given the role of overseeing development, technology, and product planning throughout the company.
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Sony's JumboTron attracts attention at the 1985 World Science Expo held in Tsukuba. |
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Sony had often been referred to as a developer of new products as a result of its strong emphasis on improving technology and product planning. However, Sony now made a fresh start, aiming to become a truly top-ranking company that maintained an appropriate balance between sales and production.
Ohga wanted Sony to become such a company in every aspect of its business, including product development, planning, design, manufacturing, sales and customer service. In October 1982, immediately following his appointment as president, he established a Production Technology Group that united the production technology and device groups into one.
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