Bang_&_Olufsen_Strategy

Word Count-1842 INTRODUCTION Bang & Olufsen is a Danish company, which was founded in 1925 in Struer, Denmark. It is renowned for manufacturing wide and distinctive range of quality audio, video and multimedia products. The company has proved to be an epitome of success in Innovation, due to its consistency and courage to question the ordinary in search of surprising and long lasting experiences. It is one of the oldest manufacturers of home entertainment in the world and its products are seen as synonymous with good design of technology based products. Bang & Olufsen is possibly the only manufacturer that produces audio and video products under one roof, and this gives the company a huge advantage in the area of audio and video integration. The company has won innumerable design awards and its products appear in the industrial design collections of museums all over the world. It employs over 2000 staff members in research and development, manufacturing and marketing divisions,and had a turnover of DKK 2.762 million(370 million Euro) in the financial year(2009-10). (Bang & Olufsen, 2012a, Experian, 2010) HISTORICAL BACKGROUND The Company's flight of growth took off soon after it started in 1925, with significant innovations and use of unusual components. Bang & Olufsen's first slogan: “B & O- the Danish hallmark of Quality”, was justified by brilliant breakthroughs in innovation of technology, which soon helped the company to build a solid reputation in the market. In 1960's , the company followed strategic reorientation that emphasized on style and design with technical quality. Its distinctive products and marketing strategies led to securing global customers in the high end and style-conscious segment. In the seventies the company faced competition from Japanese manufacturers, which made them rethink, realise and reposition it's identity in customers minds to describe “the Company's goals and personality”. This resulted in the convergence on a set of principles which characterised Bang & Olufsen. The principles were Authenticity, Auto visuality, Credibility, Domesticity, Essentiality, Individuality and Inventiveness, these were known as Seven Corporate Identity Components. In early 90's B & O was positioned to be a luxury brand, then the company had to rethink it's communication policy and product range, to reestablish the image of the company. There was a sense of urgency to renew their organisational identity, after that the company has seen a series of highs and lows till date. (Ravasi and Schultz, 2000) Organisation and Management of Innovation at Bang & Olufsen Radical or Semi-radical Innovation' In the quest of innovating consistently, Bang & Olufsen clearly were perceived to be the leaders in radical innovation with the adoption of design driven policy. On careful observation of developments at B&O, it is seen that they actually follow semi-radical innovation and not exactly radical innovation. This can be observed because company has not altered its business model for many years and has developed technology in its manufacturing process. (Parikh, 2009) Management of Innovation: Structure The company has always been recognised for it's significant innovations in technology and use of unusual components. It has been immensely successful in developing distinctive product range. Innovation management process at Bang & Olufsen is focused on striking a balance between incremental and radical innovation. Bang & Olufsen has a structured approach to innovation management. It is proved from the theory of Takeuchi and Nonaka1986) that speed and flexibility in product development is very important. At B&O the innovation policy followed is design driven, so the product development lay in the hands of the designers and this leads to its product cycle being very slow, which makes it vulnerable to the dynamics of the fast paced market conditions. The product development lacks speed and flexibility as can be seen when B&O took five years to launch it's product(CD player Beosound9000). It is following a traditional linear approach to innovation and product development, which restricts learning through trial and error method which has led to status quo. (Parikh, 2009) Management of Innovation: Design Driven Bang & Olufsen's innovation policy is mostly design driven, it believes in hiring best designers on contract basis. The management then strives to facilitate the designers requirements and shows immense trust on them. The designers almost enjoy a 'veto' in the product development, but in order to make informed decisions relating to innovation strategy and product portfolio, the management is in a position to exert the required influence on all matters. In the discussion of design driven innovation, it is important to consider Roberto Verganti(2006) and his theory that design driven innovation is the approach for the future. David Lewis the chief designer at B&O also has similar ideology as of Roberto Verganti(2006) and follows that every individual is a customer, and feels that why should one ask others when he can provide the solution himself. According to Verganti, functionality is more important than aesthetics from the users point of view. Davila, et al(2006) argues that sharing of knowledge both inside and outside the organisation is the basis of network creation and product development, which will help in striking a balance between radical and incremental innovation. B&O is currently following a approach close to being a closed approach to innovation where they create, develop and use their own ideas except that it hires designers from outside sources, which may lead to excessive reliance of company's future on the hands of the designers. (Parikh, 2009) Research and Development at Bang & Olufsen “Courage to constantly question the ordinary in search of surprising, long lasting experiences” This is the ultimate motto of B&O for the future, ever since the company started in 1925, the main aim has been to develop innovative and original products that creates a noticeable difference. Almost all the research and development work at B&O is carried out in Struer, the town where it all started. Bang & Olufsen have been pioneers in developing and coming up with unique designs each and every time, and this has been possible by the everlasting efforts of its engineers and designers. (BEOWORLD, 2007) “As far as sound goes, we have no religion and no preconceptions, only an open mind and ear”. -Gert Kudahl Munch(B&O Acoustics) The philosophy at B&O has always been to reproduce sound as authentically as possible. They have developed a two-pronged strategy deploying not only physical as well also perpetual testing. “When we develop a speaker concept, we use objective measurements and perceptual listening tests. The trick is to make those two things map onto one another and make perfect sense - then we've got the perfect speaker," comments Senior Research and Development Manager Frank Bastrup Jørgesen. Physical tests are carried out in the cube, which is the largest privately owned electro-acoustic measuring facility in the world. Apart from physical measurements human ear is given the opportunity to judge the final quality of the sound. There is a listening panel which is formed with employees of B&O, who undergo tests to ascertain their hearing abilities in order to identify errors in sound and critically and impartially analyse the sound quality. In this way, the company aims to constantly challenge the limits of technology, and develop their knowledge of the perception of sound even further. (Bang & Olufsen, 2012c) Strategic Alliances and Collaborations at Bang & Olufsen “The greatest change in corporate culture and in the way business is conducted may be the accelerating growth of relationships based not on ownership but partnerships, joint ventures , minority investments cementing a joint marketing agreement or an agreement to do joint research alliance of all sorts”. -Peter F. Drucker Strategic alliance can be referred as co-operative agreements in which two or more separate organisations team up in order to share reciprocal inputs while maintaining their own corporate identities. Strategic alliances and collaborations are becoming essential day by day because of several reasons and they are:- • To reduce the cost of technological development or market entry. • To reduce the risk of development or market entry. • To achieve scale of economies in production. • To promote shared learning. (Tidd et al., 2005) Throughout the years B&O have cooperated with several different international firms regarding product development. Most of these partnerships have been successful. One example is the Pininfarina designer car Enjoy, where B&O supplied the sound equipment. In the early 1990’s, B&O and the Swedish mobile manufacturer Ericsson agreed to collaborate on developing a new mobile phone. The result of this project was a mobile phone, which both partners felt was to expensive to survive on the market, so they decided to dropped the plan to launch it. Bang & Olufsen in the last few decades has entered into very important agreements and collaborations with companies(Fejerskov et al., 2005). The major agreements in which Bang & Olufsen entered can be seen as follows:- • B&O commercially collaborated with technofoundries(which creates and develops products based on leisure, entertainment and productivity) in Europe for the installation of interactive TV solutions for high end hotels. (Ehotelier, 2004) • B&O Medicon a subsidiary of B&O entered into a three year collaboration with one of the largest pharmaceuticals companies to provide safe and easy inhalation of drugs for patients suffering from asthma and chronic obstructive pulmonary disease. (Ministry of foreign affairs of Denmark, 2007) • Bang & Olufsen announced a new partnership with British automaker Aston Martin to "revolutionize the luxury automotive sector."  B&O, most known for their expensive, sleek, and stylish stereos, speakers, and televisions, incorporated their products in Aston Martin models. (WorldCarFans, 2007) • Zaya, a UAE based boutique real state developer has signed a partnership agreement with B&O to provide customised multimedia product package for NURAI, the luxury island off the coast of Abu Dhabi. (Bang & Olufsen, 2012d) • B&O entered into alliance with Korean company Samsung to develop a mobile phone called Serene which was launched in 2005 designed by B&O, was termed as the “purest relationship between function and form”. (Fejerskov et al., 2005) Recently Bang & Olufsen has signed a chip technology co-operation agreement with intel. This will help B&O access the latest silicon process technologies and will “enable B&O to stay at technological forefront in the future and increase the efficiency at B&O product development.” said B&O Chief Executive Kalle Hvidt Nielson. (Cnet, 2011) CONCLUSIONS AND RECOMMENDATIONS Bang & Olufsen has been a long success story as they have been the pioneers of semi radical and radical innovations. It has earned itself a very strong global reputation of high quality design innovations and durable, high quality products. The company is in the process of streamlining its process of innovation management and striving hard to get it's balance of radical and incremental innovation. According to President & CEO Karl Kristian Hvidt Nielsen, currently B&O will increase it's focus on developing and manufacturing it's trademark, cutting edge audio and video products. It will also initiate a retrenchment programme which will cut 300 jobs, it will lay off 165 people to start a cost saving programme aimed at returning to profitability in next few quarters. (Bang & Olufsen, 2012b) There is lot of scope for improvement in the way company manages its innovation and product development. The management could look at deeper involvement with innovation and implementation of it's innovation strategies, while the designers could be made to act as guides and providers of vision for the products and not as representatives of the end-users. References BANG & OLUFSEN. 2012a. About us [Online]. Available: http://www.bang-olufsen.com/about-us [Accessed 10th January 2012. BANG & OLUFSEN. 2012b. Bang & Olufsen sharpens focus on R&D and sales [Online]. Available: http://www.bang-olufsen.com/page.asp'id=614 [Accessed 12th January 2012. BANG & OLUFSEN. 2012c. A Sound Philosophy [Online]. Available: http://www.bang-olufsen.com/a-sound-philosophy [Accessed 9th January 2012. BANG & OLUFSEN. 2012d. Zaya Partnership [Online]. Available: http://www.bang-olufsen.com/zaya [Accessed 15th January 2012. BEOWORLD. 2007. Bang & Olufsen Research & Development [Online]. Available: http://www.beoworld.org/article_view.asp'id=28 [Accessed 11th January 2012. CNET. 2011. Bang & Olufsen deal with Intel [Online]. Available: http://www.cnet.com/8301-32254_1-20027771-283.html 13th January 2012]. EHOTELIER. 2004. Bang & Olufsen In & Out [Online]. Available: http://ehotelier.com/hospitality-news/item.php'id=A2380_0_11_0_M [Accessed 15th January 2012. EXPERIAN. 2010. Case Study-Bang and Olufsen [Online]. Available: http://www.experian.co.uk/assets/business-strategies/brochures/case study-Bang & Olufsen.pdf [Accessed 11th January 2012. FEJERSKOV, M., HART, A., KELLY, S. & MEYN, S. 2005. Bang & Olufsen and Samsung:Early Supplier Involment [Online]. Available: http://www.traha.de/files/print/bang_olufsen_and_samsung_early_supplier_involvement.pdf [Accessed 10th January 2012. MINISTRY OF FOREIGN AFFAIRS OF DENMARK. 2007. Bang & Olufsen Medicon [Online]. Available: http://www.investindk.com/News-and-events/News/2009/Bang--Olufsen-Medicon-enters-milestone-collaboration-agreement [Accessed 14th January 2012. PARIKH, B. 2009. Bang & Olufsen:Design Driven Innovation [Online]. Available: http://www.scribd.com/doc/15173097/Managing-InnovationBang-and-Olufsen [Accessed 10th January 2012. RAVASI, D. & SCHULTZ, M. 2000. Organizational culture and identity at Bang & Olufsen [Online]. Available: http://majkenschultz.com/articles/06-lerpold-chap06_(Ravasi_%26_Schultz).pdf [Accessed 10th January 2012. TIDD, J., BESSANT, J. & PAVITT, K. 2005. Managing Innovation. WORLDCARFANS. 2007. Aston Martin Teams with Bang & Olufsen [Online]. Available: http://www.worldcarfans.com/10712112897/aston-martin-teams-with-bang--olufsen [Accessed 13th January 2012.