1. OTICON; The Disorganized Organization

2. 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

3. Background
Oticon, Danish company founded in 1904, first hearing instrument company in the world
In 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

4. 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”

5. 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.

6. 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.

7. 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.

8. 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”

9. 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

10. Sustaining & Extending Change
The change started at 8 am on 8 August 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.

11. 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.

12. 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