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: Departments and job title would disappear Job will be redesigned into fluid and unique combinations of functions to suit each employee’s needs and capabilities All vestiges of the formal offices would be eradicated and replaced by open space 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 : 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. 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 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 : Changing the rules of the game Moving to a project type structure which fits the strategy and vision of the business Creating a whole hearted commitment form everyone to working co-operatively and proactively Creating a learning organizations Leadership Consistent vision Societal values