Oticon A/S: Spaghetti Organization and Beyond
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Case Code: BSTR318 Case Length: 23 Pages Period: 1988-2008 Pub Date: 2009 Teaching Note: Not Available |
Price: Rs.400 Organization: Oticon A/S Industry: Hearing aid Countries: Denmark; Global Themes: Organizational Transformation, Organizational Structure, Business Process Reengineering |
Abstract Case Intro 1 Case Intro 2 Excerpts
"Hearing aids are not the core of what this company is about. It's about something more fundamental. It's about the way people perceive work. We give people the freedom to do what they want."
-Lars Kolind, CEO (1988 - 1998), Oticon A/S
"It sounds like the corporate paradise of the future. Workers organize themselves, coalescing around natural leaders and gravitating to the most exciting projects. There are no middle managers, no hierarchies, no fixed assignments.... But some things have clearly changed. Everyone has a boss to whom they report and they no longer have total freedom to choose projects....; A degree of freedom sparks creativity, but workers also crave leadership."
-BusinessWeek, August 20, 2007
Putting People First
In late 2008, Denmark-based Oticon A/S (Oticon), one of the world's foremost developers, manufacturers, and wholesalers of hearing aids, was faced with some tough market conditions worsened by the economic downturn. The holding company, William Demant Holding A/S4 , noted, "[W]e estimate that the global financial crisis and the intensified competition amongst the manufacturers have led to slightly declining average selling prices in the hearing aid industry. In the third quarter, the market was characterized by unfavorable mix shifts in relation to products, distribution channels, and countries."
According to Soren Nielsen (Nielsen), who was appointed as the President (Portfolio: R&D, Marketing, and HR) at Oticon, as part of the new executive board appointed in September 2008, the challenge was to spur further growth in the face of the changing dynamics in the hearing aid market. Around two decades ago, Oticon was faced with a far more drastic situation. One of the world's foremost developers, manufacturers, and wholesalers of hearing aids till the 1970s, its position in the hearing aid industry was severely challenged in the late1980s.
Experts felt that the advent of technologically advanced In-the-Ear (ITE) hearing aids models along with market domination by corporations having large research and development (R&D) facilities and financial strength during this era, were the key factors behind the company's downfall. Oticon failed to understand the consumer's demands at this juncture, and this led to a crisis situation marked by a drastic fall in its sales and a resultant loss of market share.
On August 8, 1991, the company began a process of overall transformation, in an attempt to regain its position in the hearing aid industry. This transformation had its roots in a memo issued by its new Chief Executive Officer (CEO) Lars Kolind (Kolind), on January 1, 1990, titled "Cogitate Incognita". Oticon's radical makeover was lauded in business circles and by management experts. It was said to be a 'novel innovation' in management concept, style, and process and organization structure...
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