Sony vs Apple: A Lesson in Scenario Planning

Scenario planning is “the process of visualizing what future conditions or events are probable, what their consequences or effects would be, and how to respond to, or benefit from them,” (Saulsgiver, 2021). Forecasting also utilizes a mixed of quantitative and qualitative methods to help make a prediction, but include expert opinions such as Delphi, surveys, time series analysis, trend extrapolation such as growth curves and life cycle scenarios, and many more (Nigatu, 2018). Of the two methods, forecasting usually more accurately predicts the more profitable path forward for businesses because it factors in trends in technology, politics, etc. that could also impact the bottom line. Throughout history, there have been numerous companies that succeeded in using forecast and scenario planning to help them adapt and stay relevant, and there have also been many that failed due to unsuccessful planning.

Even though cassette player technology existed back in the 1960’s, consumers preferred using vinyl records for their listening pleasure (mkhernandez, 2019). In 1979, the Walkman was introduced to the Japanese market and contained a portable, light-weight cassette player, with a dual headphone jack. Surprisingly these devices quickly sold out for $150 each. These were considered the golden days for Sony Walkman, as they commanded 50% of the market, selling over 200 million devices over 30 years (mkhernandez, 2019). As it always does, technology advanced, and in 1990 CDs and MP3 players were created. These new technologies provided better quality listening, lasted longer than cassettes that tended to degrade over time, and quickly became more popular to music lovers. Sony quickly adapted and released a new CD version of the Walkman in 1998 (mkhernandez, 2019). Some would say that this where the Walkman stopped adapting and competing with growing, and future trends.

In 2001, there wasn’t a real method of creating or legally downloading your own music mix. Up until this point, albums had to be purchased from the record store, or illegally recorded. Steve Jobs saw this problem, and introduced the Apple iPod (mkhernandez, 2019). The Apple iPod held up to 5GB of storage, sold for $399 each, and seamlessly integrated with iTunes Music Management software. ITunes allowed quick and efficient music download speeds, and for only $0.99 users could legally download their own music and make their own playlists. Apple claimed 48% of the market in 2008, taking over the market that the Walkman once claimed. Failure to see the trends in technology and failure to forecast accordingly, Sony’s Walkman line came to an end in 2010 (Franzen, 2014).

Helping to make the change from mp3 to iPod easier, iTunes allowed for legal download of countless songs\albums, and Apple received 10% commission on each purchase (Adner, 2012). The acceptance of the iPod technology was assisted by its seamless integration into the music storefront. By 2009, more than 8 billion songs were downloaded, generating more than $800 million in revenue for Apple. See the below example of Sony Walkman’s scenario planning factors, taken from (mkhernandez, 2019).

This is a proper example of how Sony Walkman only relied on forecast planning and failed to see the trends in technology that ultimately drove it into non-existence (mkhernandez, 2019). This example however, shows how when scenario planning is properly used, a new comer can make a big, lasting impact to the market. Apple was able to successfully use scenario planning to enter and quickly take over the market.

References

Adner, R. (2012). From Walkman to iPod: What music tech teaches us about innovation. The Atlantic. Retrieved from http://www.theatlantic.com/business/archive/2012/03/from-walkman-to-ipod-what-music-tech-teaches-us-about-innovation/253158/

Apple (n.d.). Apple home page. Retrieved form http://www.apple.com/

Ali , R., & Luther, D. (2020, May 14). Scenario planning: Strategy, steps and practical examples. NetSuite. Retrieved October 28, 2021, from https://www.netsuite.com/portal/business-benchmark-brainyard/industries/articles/cfo-central/scenario-planning.shtml#:~:text=In%20the%20context%20of%20a,how%20your%20organization%20will%20respond.

Franzen, C. (2014). The history of the Walkman: 35 years of iconic music players. The Verge. http://www.theverge.com/2014/7/1/5861062/sony-walkman-at-35

mkhernandez, A. (2019, July 29). The Sony Walkman: Scenario-type planning. Dr. Michael K Hernandez. Retrieved October 28, 2021, from https://mkhernandez.wordpress.com/2018/02/24/sony-didnt-use-proper-scenario-type-planning-on-the-walkman/.

Nigatu, B. (2018, February 2). Home. Reckoned Force. Retrieved October 12, 2021, from https://blog.reckonedforce.com/scenario-planning-versus-traditional-forecasting/. 

Saulsgiver, W. (2021, October 5). Scenario planning versus forecasting. Schultz Financial Group Inc. Retrieved October 12, 2021, from https://sfginc.com/scenario-planning-versus-forecasting/.