Strategic Analysis: Sonos

The following is a case study for Sonos, an example of a strategic analysis, or competitive positioning analysis, that yields compelling product strategies for the company should consider.  

Home audio industry

Sonos makes loudspeakers and could simply be positioned within the speaker industry. However, given the company’s mission statement, and the products the company has produced that support this mission, it’s fair to place Sonos in a broader home audio industry, which will serve as the context for this strategic analysis.

Music first, quality first

With its deep penetration into the home, Sonos is now competing with much larger businesses that have broader goals for customers.  Amazon, Google and Samsung are all fighting over the connected home & home theater.  Further, whoever wins the battle for the living room may win the war on the entire home. 

To remain competitive against these global tech giants, Sonos should remain laser-focused on music rather than home or home theater – playing to its strengths as a quality-first and music-first company, and steering away from its weaknesses in its home theater product line.  

Amazon and Google will not compete on sound quality; Amazon is merely offering a voice interface to customers and Google’s strategy appears more focused on delivery over playback. 

To stay competitive against Bose and other leading speaker manufacturers, Sonos must continue its current strategy of skating to where the puck is going, by making big bets on consumer music trends and looking backwards through the value chain to how consumers discover, find and interact with music. 

It's all about the platform

An Environmental Analysis reaffirms Sonos’s current strategy of making big bets on consumer music trends.  If we look more closely at technology trends, however, we see new opportunities for Sonos to gain more from its current platform and customer base, such as: 

  • Invest more into IoT: use sensor inputs from other devices in the home, and act on / adapt to this information
  • Use machine learning to gain insights about how customers use Sonos products
  • Open the platform wider: rather than continuing to invest internal resources to develop connections with and support for all of the streaming services, consider more powerful and more open ways of connecting to other apps and devices – including and beyond music streaming services – using API’s to talk to other products directly.

A Five Forces Analysis on the home audio industry reveals some moderate threats to Sonos, which can be addressed by its (assumed) existing strategies that strengthen the platform:

  • Use lower-priced, entry-level products to get new customers into the Sonos platform.
  • Invest in the platform as a whole, and continue to provide more and more value for the current customer base – this will keep switching costs high, and in turn customer retention and customer lifetime value.

Key capabilities aligned with a niche strategy

Looking at the home audio industry from within the company, we recognize that Sonos has the following key capabilities, as derived from a value chain analysis

  • Collaborative, CX-centric product development
    • Sonos has committed to maintaining multiple offices for their employees; they must continue to invest heavily in a culture of collaboration – both with infrastructure and with best practices to support tight collaboration across multiple locations.    
  • External Partnerships
    • Being agnostic to which music service their customers prefer, Sonos supports them all, and has created a system for new services to sign up to support the platform.  This is a unique capability that Sonos must continue to grow and maintain, and conversely a major risk to the company if they lose support from key partners.
  • Brand
    • Sonos has been investing heavily and effectively in building their brand, and Sonos Studios appears to be a smart investment in establishing Sonos as a global cultural leader.  A key question is – what else can Sonos gain from this unique capability?

How well do Sonos’s key capabilities align with their competitive positioning in the home audio industry?  Sonos is competing on a niche strategy: it is narrowly focused on wireless, multi-room, in-home audio, and the source of their competitive advantage comes from product differentiation rather than cost. 

Sonos would be wise to continue a focused niche strategy and to not also try to compete as a low-cost company, which would defy their strengths and capabilities as outlined above. Sonos’s investment in their brand, and their commitment to quality both feed very well into this niche strategy. 

Bose is the strongest competitor

Looking at three key factors – industry brand quality, price and product scope – of Sonos’s positioning strategy against their competitors in the home audio industry, we see that they have room to operate in their niche strategy that favors brand quality over price/cost.  The Strategy Map points to Bose as their most threatening competitor, given that: 

  • The Bose brand is very strong.
  • Bose can develop and support more products and product lines in the industry.
  • As a larger company with more products, Bose can take advantage of larger economies of scale than Sonos can, which helps them achieve lower price points.

Sonos may continue to stay competitive against Bose by keeping a vigilant focus on the products and product lines that have brought Sonos success.  Since Sonos cannot currently match the breadth of products that Bose can produce, they must instead maintain leading market positions in the products they do develop.  Again, this approach is complemented by their strengths and capabilities. 

Sonos Wi-Fi Headphones

That said, given rising consumer trends in headphone use and new competition from within the industry, Sonos must consider expanding its product vision from a "music out loud” stance into a broader “music at home” stance: Sonos should start making Wi-Fi headphones that also connect to the Sonos platform – this consumer trend is simply too big to ignore.

Full Sonos Strategic Analysis