MBA Presentation MBA in International Management: ESCP Europe Business School Group Presentation: Leading Teams & Organizations Case study analysis of Oticon's organizational transformation

1. Oticon Change Process
Putting People First
Leading Teams and Organisations
Fanelli Maurizio
Gutin Nitin
Kouzlovleva Anna
Madden Oliver
Ndichi Amina

2. Regaining traction after losing market leadership
ESCP Europe MBA in IM – London S2 Group 2 Leading Teams and Organizations – Oticon Leadership 2
LOSING WINNING POSITION
HISTORICAL MARKET LEADERSHIP
LACK OF INNOVATIONS
STATUS QUO THINKING
BUREAUCRATIC STRUCTURE
NEED  NEW LEADER
PRESERVING CORE VALUES

3. Lars Kolind gained his authority on legal-rational grounds
Kolind’s regime was largely tied to legal
rationality, legal legitimacy and
bureaucracy.
Soon, following strong decisions were
observed :
• Wall-free office structure with movable
furniture.
• Introduction of paperless office concept.
• Opting for the mode of communication as
electronic informal chat system from e-mail.
• Shifting office to less-attractive place, next
to manufacturing plant.
• Put “spaghetti structure” in place of old and
traditional org structure.
ESCP Europe MBA in IM – London S2 Group 2 Leading Teams and Organizations – Oticon Leadership 3

4. Oticon’s inspirational transformation story
Leading Teams and Organizations – Oticon Change Process
Lars Kolind gained his authority on legal-rational grounds
And he led with a strong vision once appointed as CEO
Kolind transformed Oticon into the first spaghetti organization
This spaghetti organization enabled a coaching culture
Success was dependent upon the unique situation
This management style will likely work only in short bursts
4

5. Lars Kolind gained his authority on legal-rational grounds
“Lars Kolind was an unexpected
choice for CEO as he had had no
previous experience in the industry.
He had, however, come from a
company producing scientific
instruments (Radiometer) that had
gained first place in another
niche market. Furthermore, his
values corresponded to those of
the Foundation Board members
for the most part. Thus, Lars
Kolind and his team were only the
third management of Oticon since
its founding in 1904.”
ESCP Europe MBA in IM – London S2 Group 2 Leading Teams and Organizations – Oticon Leadership 5

6. Kolind set ambitious goals: a 30% increase in productivity in three years, an objective which became
known as «Project 330».
«I gave it on where Otico is going to relocate, but I insisted on carrying through with this
reorganization plan. I decided that was the way it had to be. Full stop.» Kolind
Kolind alternated different leadership styles
And he led with a strong vision once appointed as CEO
6
Source: Daniel Goleman Leadership That Gets Results, 2000
ESCP Europe MBA in IM – London S2 Group 2 Leading Teams and Organizations – Oticon Change Process
Kolind wrote a 4-page memo where he described his dream for the kind of organization he
believed would achieve a sustainable competitive advantage: an organization that would lead in
innovation, flexibility and creativity.
Think the unthinkable No paper, jobs and walls Dialogue and action
Kolind’s Vision Pillars
• more efficiency and flexibility
• maximization of individual contribution
• understanding of relationships between
your tasks and company strategy
• start from scratch
• design your job
• be innovative
• creativity
• speed
• productivity

7. Kolind transformed Oticon into the first spaghetti organization
ESCP Europe MBA in IM – London S2 Group 2 Leading Teams and Organizations – Oticon Leadership 7
New Oticon Big financial
losses
Profitability
August 1991 Q1 1992 Q2 1992
+18 MDKK
S2 1992
New headquarters
+ Failed product intro
> New CFO
+36 MDKK
S1 1993
+13
%
+23
%

8. This spaghetti organization enhanced skill development
ESCP Europe MBA in IM – London S2 Group 2 Leading Teams and Organizations – Oticon Leadership 8
 The development of « Multi-Focus » which
was a great success and exceeded the
sales projections by 100%
 Removing and lowering many internal
AND external barriers
 Knowledge about what was happening in
the company and development of a new
set of skills
 Encourage initiave and new idea
development
 The structure was provided by the projects
 Each employee has several different projects
 The staff were multi-skilled. > « In the past,
your importance was related to your position,
now it comes from your contribution. »
 No formal communication > get rid of the paper,
electronic information technology system, emails
and documents accessible by everyone.

9. Success was dependent upon the unique situation
Internal Factors
Employees were very loyal to Oticon
Kolind’s values corresponded to those of the
Foundation Board members
Strong R&D on MultiFocus product
Enhanced creativity and idea sharing
ESCP Europe MBA in IM – London S2 Group 2 Leading Teams and Organizations – Oticon Leadership 9
External Factors
Initially, loss of market position
Then, return to profitability
Press and Board willingness to cover the new
headquarters
UNIQUESITUATION
SPAGHETTISUCCESS

10. This management style will likely work only in short bursts
ESCP Europe MBA in IM – London S2 Group 2 Leading Teams and Organizations – Oticon Leadership 10
Holocratic Structure
 Effective under the right vision
Not sustainable
without contingencies
Limits and Risks
 If time to market
urgency increases more
efficiency will be needed
 Leadership change –
new structure may arise
 Lack of promotion
opportunities
 Difficulty to rank or
prioritize innovations
frustration amongst
project leaders
 Conflict in decision
making, project priority
determination
 Long decision cycle
 Semi-flat structure with
movement between projects
 Fewer projects to assure no
wasted innovation
 Clear definition of project
importance/priority
 Promotion opportunity

11. Thank You!