Restructuring Of Bang&Olufsen(B&O)

Through Quality Initiatives

Vicky K Anand
Yogesh Kumar
INTRODUCTION
In 1925,when Peter Bang and Sevend Olufsen,two bright young engineers in quest of the
perfect radio formed Bang & Olufsen(B&O). Company is known today as one of the most
innovative consumer electric and lifestyle provider with products ranging from audio
systems,television, loudspeakers, and telephones.
In 2008 the company suffered a carastrophic blow when its six month eaarnings results
revealed a full year pretax loss of $126M o;f 37%year-on-year sales drop.

PROBLEM IDENTIFICATION
Impact of IPod:

IPod extended market to a virtual space, where great design meant great software
and network based interaction.
Change in the technology in electronic market lead to new demands.
Different from B&Os traditional expertise.
Deciding right amount of change was difficult.
Subsequent drop of share value by $52 to $8.50

COMPETITION: Asian Market

Competition from Asian manufacturers forced many Danish players to close.
Fake products were being manufactured in china.
B&O survived by allying with architects and designers.
Focusing on its idea, design behind its product, and by emphasizing high quality.
Competition together brought weak product demand.
Near Death experience- bought back 25% stakes from Phillips.
Company laid of one quarter of its employees and launched a new distribution
strategy.
Company to sell products through B&O retail outfits.

Methodology of Restructuring of B&O

1) Business Model Change

a) Value proposition:-since inception B&O focused on providing creative designs

based in observations of socio cultural aspects. The products were aesthetically
pleasing but also essentially functional and easy to use.
 b) Supply Chain:- B&O sells its products in more than 60vountries through 11
National sales companies, all of which are 100% owned by B&O, and through a
network ;of independent agents throughout the world.

The shop were redesigned as exclusive B1concept stores and independent shop in
shop concept stores which dedicated a significant portion of retail floor to B&O
products.

c) Target Customers:- The emphasis was on premium customer segments like

business and arts professionals who had appreciated arts and valued perfection.

2) Technology Model Change

a) Product And Service Offerings:- B&O products had always been based on
cutting edge technology and never seen before design.

b) Process Technology:- Process standardization, radical design.

c) Enabling Technology:- company felt a decline in its technology dominace

especially in integrating software and networking capacities in its products. The
concept of Idealabs was introduced to cater to this gap and provide flexibility in
the business.

Value Proposition
Idea Lab was created in the early 2004.
Fusion of mechanical inventions with new digital technologies.
New graphical user interfaces, new ways of interacting in cyberspace.
Finding concepts in untapped and uncontested markets.
Making things more convenient and personal.
Integrate Idea Lab innovations to the traditional process.

The Following Observations Come Forth At B&O:-

1. Leadership on innovation strategy and portfolio decisions.
2. Integrating innovation in organisational culture.
3. Aligning the amount and type of innovation.
4. Managing the natural tension between creativity and value capture.
5. Neutralisation if organisational antibodies.
6. Establishing a network between external and internal environment.
7. Creating the right metrics and rewarding people for innovation.
8. Managing innovations: From concept to theory to practice.
9. Establishing the right organisational structure integration and orientation in NPD
(new product development).
10. Establishing the right organisational structure,design,and climate.
11. Establishing GO/kill decisions early on in the project.
12. Timing product launches.
13. Employing a multistage, disciplined new product process-a stage-gate process.