Atanu BhattacharyyaTerm Paper: Innovation Management CBS-FTMBA 2008-09
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In 1925, when Peter Bang and Svend Olufsen, two bright young engineers in quest of the perfectradio formed Bang & Olufsen (B&O), little did they realize that they were creating history? Thecompany is known today as one of the most innovative consumer electronic and lifestyle provider with products ranging from audio systems, television, loudspeakers, and telephones.The company has been able to differentiate its products from other giant competitors and had prospered by targeting consumers who appreciate the finer aspects of art and technology. Butdespite phases of dynamic product innovation the company is slowly facing the pressure in theexternal market. Perhaps its days of dominance has ended. In 2008 the company suffered acatastrophic blow when its six-month earnings results revealed a full-year pretax loss of $126
or 37% year-on-year sales drop. Subsequent drop of share value by 30% only fuelled the dramawith the dismissal of one of its most successful and long standing trusted CEO TorbenBallegaard Sørensen.
What could possibly have gone wrong in a company which inspired many and never failed tosatisfy its premium customer with a spring board of new products? Something was surely amissat B&O or perhaps something radical changed the way the industry functioned. The shift in theexternal market place first began when Apple iPod, a critically acclaimed product coupled withthe online Tunes music service, showed that it was no longer enough to cater only to design andfunctional features, a core focus of B&O. There is a growing trend of customers who prefer better and smarter looking technology driven devices. Apple¶s strategy was offering value for money products and bridging innovation in business and technological fronts. At B&O, Sørensenwas hired as the CEO to specifically address the situation. He infused the concept of ³idealab´which injected new ideas from outside the traditional perspectives. But things had still notimproved. The new incoming CEO Karl Kristian Hvidt Nielsen now faces the mammoth task of finding ways to tackle the crisis. Perhaps the biggest challenge Nielsen faces is keeping theconsumers interests in B&O products in times when consumer¶s preferences in media industryhas changed dramatically. Going forward, many valid and critical questions are raisedconcerning why B&O¶s fared poorly, some of which were; was the company lacking variety of innovation or was the organization troubled by misguided strategy? Was the company targetingthe wrong customers or is it temporarily reeling through the present world financial crisis? Were