OTICON;
The Disorganized Organization
Learning Objectives
Understand how real life organizations
develop and implement strategy
Describe how organizations can
reinvent themselves
Discuss the traps that organizations can
fall into when seeking to bring about
strategic change
Background
Oticon, Danish company founded in 1904, first
hearing instrument company in the world
In 1970-1980 world’s number one manufacturer
of ‘behind the ear’ hearing aids.
In 1987, Oticon lost half of its equity.
The basic problem :
Very traditional
Departmentalized
Slow moving company
Start To Change
Began to change with the appointment of Lars
Kolind as President in 1988.
He change situation with pared the company
down, cut staff and increased efficiency and
reduce the price of hearing aid by 20%.
In 1990, Oticon made a profit of some 16
million Pound.
He had been searching for a sustainable
competitive advantage for Oticon : “I looked
at technology, audiology”
The Vision
Kolind realized that the industry totally
technology-focused and the main trust was to
make hearing aids smaller.
He believed Oticon was not in the hearing aid
business per se; the were in the business of
‘making people smile’
New mission statement :
To help people with hearing difficulties to live
life as they wish, with the hearing they have.
To achieve this statement requires a knowledge
of people’s lifestyle and how it affects them.
Oticon have to move from technological
to a knowledge-based service business.
They had to build a learning organization.
Kolind began by redefining himself as
CEO, instead of seeing himself as the
captain, he saw himself as the naval
architect who designs it.
The Strategy
Kolind new disorganized organization would be
founded on 4 principles:
1. Departments and job title would disappear
2. Job will be redesigned into fluid and unique
combinations of functions to suit each
employee’s needs and capabilities
3. All vestiges of the formal offices would be
eradicated and replaced by open space
4. Informal, face to face dialogue would
replace memos etc.
Therefore, Oticon got rid of departments, other
managerial and supervisory positions.
Company realized to success the change, there
were 2 elements it needed to get right :
1. Direction
They need to have a clear direction which
everyone understood and believed in. This
achieve by discussed and debated the new
strategy for the company.
2. Human values
The were summed up at one sentences :
“we build this company on the assumption
that we only employ adults, and everything
we do will rest on that assumption”
Implementing Strategy
Oticon now operates on a project basis.
It’s employee job to find something useful to
do-either by starting a project or by joining one
Communication is the center of this new
approach. Partly facilitated by computer.
New “structureless” structure is the workplace.
Requires everyone to have access to and be
able to use a computer.
Kolind anticipated resistance and sought by
involving staff in planning the transformation of
the company
Sustaining & Extending
Change
1.
2.
3.
4.
The change started at 8 am on 8 August 1991.
At the beginning, all was chaos. It took
months before everyone understood their new
roles.
However by 1994, the result were impressive :
15 new product had been launced
New product lead time had been halved
The company’s sale were growing at
20%/annum
Market share increased from 8 % in 1990 to
12 % in 1993.
In 1995 Oticon launced the world’s first
digital hearing aids, the DigiFocus.
Oticon developed partnership-style
arrangements with both its component
suppliers and the 5000 or so hearing
care centers.
In 1998, after 10 years as President,
Lars Kolind decided it was time to move
on. His leaving was very amicable.
Summary
Oticon success appears in 7 factors :
1. Changing the rules of the game
2. Moving to a project type structure which fits
the strategy and vision of the business
3. Creating a whole hearted commitment form
everyone to working co-operatively and
proactively
4. Creating a learning organizations
5. Leadership
6. Consistent vision
7. Societal values