Bang and Olufsen: Design Driven Innovation

Strengths and weaknesses of the company's design processes

The case was selected for two reasons: to illustrate a business model developed for a highly focused differentiated strategy; to generate discussion about how market forces and changing cycles can disrupt otherwise successful and entrenched business models.

1. What are the strengths and weaknesses of the company's design processes? What industries may benefit from similar processes?

2. What about the relationship between manufacturing and design? Are these mutually reinforcing functions?

3. The case emphasizes the importance of market cycles (slow, standard, fast) in the context of B&O's counter-intuitive approach for the industry. Are there strengths to their approach?

4. What are the market forces driving change at B&O at the time of the case, and how have those forces changed since then?

5. Which of B&O's capabilities or core competencies remain foundational even if the company moved towards a faster market cycle. Conversely, which capabilities/core competencies hinder the company's success?

6. If B&O wanted to become a broad market competitor in 2021, what would you recommend?

7. Evaluate the company's evolution since the publication of the case. What has changed?

"The Farm," Bang & Olufsen's futuristic glass-and-concrete headquarters, rose out of the green fields of western Denmark "like something lifted from a Stanley Kubrick dreamscape."2 In a nearby parking area, Christopher Sorensen stepped from his car and walked toward the entrance, on his way to meet with a high-powered group that included the CEO, to discuss an important product program. Within this 80-year-old company, based in rural Jutland where local people might still consider you an outsider after 30 years, Sorensen would be very much the newcomer. Despite that, he would try to convince the others to adjust the firm's successful design process—to change a winning game. In April 2006, Bang & Olufsen (B&O) sold a range of televisions, audio systems, loudspeakers, telephones, and other products (see Exhibit 1) in more than 60 countries.

The company had a worldwide reputation for idea-based products of high quality and artistic design, many of which held places of honor in the permanent collections of the world's greatest art museums. (According to a citation at the Museum of Modem Art in New York, B&O had "delivered the largest and most consistent design portfolio among the world's industrial companies."3) This level of accomplishment translated into high price points (see Exhibit 2) and profit margins, realized through an exclusive network of dealers, from devoted and discerning customers.

To create products with appearance and functionality that made them instantly recognizable, the company had evolved unique design and development processes. B&O gave designers free reign to create new products that would challenge engineers to find a way to manufacture them. New ideas, materials, and technologies made their way into B&O products only if designers put them there. Customers had proven their willingness to pay handsomely for this degree of design integrity.