Business analysis report

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BEM3060 Managing Entrepreneurially (A, TERM1 2020/1) 024446

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Coursework: Business Analysis Report 1 Submission Deadline: Thu 5th Nov 2020 15:00 Module Convenor: Mr Raphael Dennett

680036630 Marker name: N/A Word count: 1925

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Introduction

“Entrepreneurship is the process of creating something new with value by devoting the necessary

time and effort; assuming the accompanying risks; and receiving the resulting

rewards.”(HISRICH, 2019)

The PlayStation which’ll be analyzed in this report was created by an intrapreneur, Ken Kuturagi.

“Intrapreneurship is the process by which individuals inside organizations pursue opportunities

independent of the resources they currently control”.(HISRICH) In this report how PlayStation

can embrace their innovation to its maximum potential will be explored.

In the 1980s Kuturagi watched his daughter play the Nintendo NES. Upon inspection, he was

underwhelmed by the console especially the sound it produced and hence saw ‘a gap’ in the video

game market. At first, Kuturagi and Sony created sound chips for Nintendo for their new SNES

system and this proved to be a successful venture. Soon both companies decided on making a disc-

based system which was a huge innovation for the time, however mere days before the

announcement Nintendo backstabbed Sony and announced a partnership with Panasonic for the

same. Hurt by the betrayal, Kuturagi decided on making a console himself and created PlayStation.

However, this wasn’t easy sailing as there was a lot of resistance internally, and Kuturagi also

risked his job to ensure the PlayStation’s creation.(CEO Boardroom, 2017)(Swearingen, 2008)

Sony interactive entertainment(SIE) which is Sony’s video game division, comprises of the

PlayStation brand which is the market leader in video game consoles with over 50% market share.

(Yahoo! Finance, 2020) Video game publishing is a cornerstone thanks to the ownership of 15

gaming studious including Naughty Dog(ND) and Santa Monica(SM) which are some of the most

biggest in business. So, to look at the current level of entrepreneurship and innovation at

PlayStation/SIE along with PlayStation these studious must also be looked at. (Sony interactive

entertainment, 2020)(Sony Corporation of America Businesses)(Gough, 2020)

Current level of entrepreneurship

Strengths

Innovation is the output of entrepreneurship. “It’s also the creation, development and

implementation of a new product or service, with the aim of improving efficiency or competitive

advantage.”(Hudson, 2019)

Sony mainly employs engineers and makes almost of all of them work in their stores so that they

can have direct interaction with the customers and come up with the best products possible. This

makes it possible for Sony to out-innovate the competition.(Fortune, 1992)

One of PlayStation’s biggest strengths is their exclusive first party-games which’ve been

overwhelmingly successful like The Last of Us(TLOU) and Uncharted. To make this happen

PlayStation has tried to promote the right culture. One way of setting the right culture is putting

the bottom-up management.

Which is a collaborative approach to management where the whole organization takes part in the

decision making and teams are more autonomous. Managers don’t impose decision like in top-

down approach.(Malsam, 2020) In video game sector creativity is key so the top-down approach

usually doesn’t work for PlayStation and its studios. The bottom-up approach allows workers to

think for themselves and use lateral thinking. As such ND doesn’t have dedicated middle managers

as it is thought they will reduce innovation and creativity. Moreover, Sony also tries to give

creative control of their biggest IP’s like God of war to leaders like Cory Barlog of the studious

like SM without interference which has resulted in good games and sales. (Takahashi, 2020)

(Bankhurst, 2019)

Diversity is “the practice of hiring people from a range of different social and ethnic backgrounds

and of different genders.”(Lexico)The company has a diverse workforce as also proven by

Glassdoor reviews, which has many well-documented benefits such as increased profits, more

creativity and according to SIE’s former head Shawn Layden, "sameness is the death of innovation

and creativity".(Brendan, 2020) Diversity is also important because PlayStation must cater to

demands of gamers worldwide. SIE moved its Headquarters from Tokyo, Japan to Silicon Valley,

USA in a bid to be more diverse. PlayStation HQ has 9% turnover rate which is half of Silicon

Valley. (Mochizuki, 2016)(Sony, 2019)

WEAKNESS

Nevertheless, there are some weaknesses, to be entrepreneurial companies must nurture people.

Though there is a Startup Accelerator program for Sony which is funded in large parts due to the

success of PlayStation there is no specific program for PlayStation.(Bloomberg, 2019) Till 2012,

the company had been aggressively innovating and targeting multiple segments like the home and

portable console. The PS3 released in 2006 was so powerful that the US department of defense

had bought 2200 PS3s to run a supercomputer.(Price, 2009)

To exploit opportunities, calculated risks are must. PlayStation has followed a risk-averse strategy

and innovated less than Xbox and Nintendo in recent years. Nintendo came up with the “WII” in

2006 which was the first console to use motion sensors and recently “Switch” which is a hybrid

console which can be used handheld or docked on tv. Switch has no direct competitor. Whereas

Microsoft has come up with backwards compatibility with old consoles and the “Game-Pass”, a

Netflix like service for games. PsNow is Playstation’s version of Game-Pass but has only 2.2

million subscribers compared to 15 million for Game-Pass.(Rouse, 2011)(Warren, 2020)(Lyles,

2020) (Berry, T., Marcel, B., & Renuka Rana, 2017)(Dennet, 2020)

“Leaders are those who seek opportunity to communicate and mentor others in an effort to clarify

team objectives”.(Brandon, 2018) Whereas managers simply pass instructions. To be innovative

and entrepreneurial companies need to harness the creativity of entire workforce else they’ll

employ a bunch of robots. To achieve this, good leaders who will trust their employees and make

them feel safe and allow risks are required. (Sinek, 2014)(Dennet, 2020)

Even though Playstation tries to use Bottom-up approach there is a disconnect between leaders

and employees as ideas created through Bottom-up aren’t always valued. With the evidence below

it can be deduced that PlayStation is lacking human-centric leaders which is leading to poor

employee morale.

There’ve been reports of poor working conditions at ND and high labour turnover. Veteran staff

like Bruce Straley (director of TLOU) have left the company due to burnout.(Brockway, 2020)

Employees were highly demotivated due to crunch working conditions where they were forced to

work overtime during production of TLOU2. Similarly, at SM many workers have complained

that out-of-the-box thinking and change is not valued. More proof of the same is that PlayStation

has put its full focus on producing single-player games, while online games have been an

afterthought. (Gerblick, 2020) If leaders at PlayStation don’t value out-of-the-box thinking good

employees who can think laterally will leave, leading to innovation and creativity being

stifled.(Beckwith, 2020)(Glassdoor)

The weaknesses identified here is that though PlayStation has the resources to innovate, it’s trying

to play it safe and some of its studious are mismanaging their employees which are leading to them

not fulfilling their potential to innovate.

Barriers

Individual entrepreneurs have many pathways to success. They’re working individually so don’t

have other shareholders to think about, this also makes it easier to persevere. They’ve more

opportunity to disrupt the market as Sony did with PlayStation. Also, they’ve different sources to

raise money like Shark Tank. They also have more room to experiment, fail and learn from it.

(Kassouf, 2019)

Sony is a large company and has shareholders to answer to hence can’t take big “Financial Risks”.

Entrepreneurs learn from their failures, PlayStation being one of Sony’s most profitable brands

can’t afford to lose too much money and so may be unwilling to take risks. Though Nintendo has

been recently successful their urge to innovate led to multiple failures like Virtual-boy and WII-

U. Not only others’ failures but Sony’s own failures with the PS3 whose cell architecture proved

difficult to develop games for and led to loss of market share to Xbox and the PS-vita which didn’t

sell well may have prompted risk-averse strategies.(Flanagan, 2018) (Beausoleil, 2020)

Moreover, to think laterally employees will need time for themselves and a creative environment

and doing so will cost the company money. “TLOU” franchise which was a golden goose for

PlayStation was damaged by its sequel “TLOU2’s”’ polarizing response.(Khollum, 2020) As such,

PlayStation may find it hard to give autonomy of their resources to their employees and leaders.

Even if PlayStation trusts them, they may be reluctant to take risks in an industry where studio

closures are common, PlayStation shutdown evolution studios due to poor sales of

Driveclub.(Kelion, 2016)

Current projections

Currently, PlayStation is the market leader, but they operate in a very competitive industry which

is also one of the few to see a rise in demand due to covid-19. With the current way of working

PlayStation may keep dominance in the short term but their market share is shrinking. The Xbox-

one-X was outselling the PS4-Pro during the end of their lifecycle.(Martin, 2018) Nintendo Switch

is seeing unprecedented demand, especially during lockdowns when it was out-of-stock

worldwide.(Kain, 2020) The future of gaming is believed to be in streaming, and they are currently

losing to Game-Pass.

As stated, its current weaknesses can lead to a demotivated workforce and that will eventually

reflect in less innovation&creativity leading to poor quality products, TLOU2 already failed others

can follow.(Khollum)

Recommendations and Projections

1. It’s a big misconception that entrepreneurs are wired to take more risks and are gamblers

while they are simply able to identify opportunities and are less of gamblers as they don’t

follow but create opportunities. A weakness discussed for Sony was that it was risk-averse.

They must create a culture of taking calculated risks and taking opportunities while also

becoming tolerant to a few failures. (Berry, T., Marcel, B., & Renuka Rana)

They must take risks, identify gaps in the market through data and fill them. PlayStation

has exited the handheld gaming market. Whereas Nintendo has innovated and captured the

market. The PC market is also an afterthought while Xbox is investing heavily through

Game-Pass. If they try and innovate and capture these markets, they could show that

PlayStation is versatile and fulfills all your gaming needs and capture a larger market share.

Also, it will take PlayStation and its employees out of their current comfort zone and they

will’ve to come up with “out-of-the-box solutions” and think laterally. Seth Godin States

“Taking action is necessary to be successful and innovative”. (Godin & Michelini, 2011)

2. Have programs like use 15% of your time to innovate and have quarterly discussions to

discuss and implement these ideas. Kutaragi was a regular employee with ideas and he

made Sony’s most successful brand so empower employees by giving them more

autonomy as also suggested by Pink’s drive theory.(Pink, 2018) A major problem for

PlayStation studios like ND has been crunch time and less recognition which has led to

high labor turnover. The strategy will allow them to be creative, innovative,

entrepreneurial, and motivated while also grant employees the recognition they seek. Also,

this will allow for innovative ideas to tackle competitor innovations like “Game-Pass.”

(Srinivas, 2017)

3. PlayStation needs to use counselling and flexible working for employees as while working

employees can lose track of their social lives and take “Family and Social risk”. To ensure

there are no problems in employee’s social lives and they aren’t eventually demotivated,

unproductive, and un-innovative PlayStation needs to keep these options open. This will

also solve the problems with crunch time and poor working conditions.(Hisrich)

By following recommendations PlayStation will overcome its weaknesses, fulfill its innovative

potential, create quality products, and maintain market dominance.

Conclusion

In conclusion, PlayStation needs to embrace its beginnings of being intrapreneurial and have a

more prominent role in innovating in different sectors and diversifying rather than just focusing

on their home consoles like the PlayStation and its software. They must do more to allow

employees to take risks and innovate. This will allow them not to get complacent and push their

employees to their best while retaining highest market share. 47% of all fortune 500 companies

are expected to die in 10 years. (Fisk, 2020) There are many strategies for PlayStation to follow as

stated above to ensure they reach their full innovation potential and achieving this potential will

ensure company’s long-term survival and continual market dominance.

References

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Reports

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Reviews

Review of "So much potential, yet such a bad work environment" by GlassDoor. Glassdoor.

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management-Reviews-EI_IE117138.0,11_KH12,28_IP2.htm?countryRedirect=true

Online Lecture Material

Dennet R, (2020) Week 1 Content. https://vle.exeter.ac.uk/mod/page/view.php?id=1481314

Dennet R, (2020) Week 2 Content https://vle.exeter.ac.uk/mod/page/view.php?id=1497143

Dennet R, (2020) Week 3 Content https://vle.exeter.ac.uk/course/view.php?id=8987&section=6

Dennet R, (2020) Week 4 Content https://vle.exeter.ac.uk/course/view.php?id=8987&section=7

Videos

Sinek, S. (2014, May 19). Why good leaders make you feel safe | Simon Sinek. YouTube.

https://www.youtube.com/watch?v=lmyZMtPVodo.