As most of us are aware, BeoWorld were kindly invited to the Bang & Olufsen UK Head Office in Winnersh to put our questions to Lars Flyvholm, the new CEO of B&O Region West (UK, Ireland and Benelux) on Wednesday 24th September 2008.
We launched a thread asking you - the BeoWorld user, what questions you would like answered. So, we simply asked them..
After almost 1 hour and 20 minutes, 2 cups of coffee and a glass of water Lars and myself concluded the interview before someone collapsed, and back i came to the BeoWorld Offices to type up my findings..
I thought about hoping everyone was wrong when they said Lars was a very genuine, likeable and enthusiastic person. However, i would have come away very disappointed as he is all three of these. He is obviously in it because he loves the brand, realises mistakes have been made, and is very keen to fix them and move forward as quickly as possible. Personally, i think Struer have picked a good man for the job - but as ever, results speak louder than words. I am looking forward to seeing them, as i am sure the dealers are!
I think the interview gives an insight into 'the man' - and although he obviously cannot be too candid in his replies or give too much away, he has answered as frankly as possible without getting himself into trouble with the marketing department or IdeaLand !! LOL
So - without further ado, here we have..
THE BEOWORLD INTERVIEW WITH LARS FLYVHOLM
Firstly – what is your background, and what path has your career followed?
Well, my background is in business. I have a Business Degree, and I basically started as an office trainee with B&O back in 1991 and have been with the company ever since (apart from 2 years when I finished my training during ‘break point’ and there was no job for me!) I came back in 1995 though, and I've been here ever since!
It's been an extremely interesting career at B&O for me as I've not had the same job for any more than a three year period. I have always worked in sales related positions for the company – from South America, Eastern Europe, Turkey, Singapore (Asian Office – dealing with China, Australia etc), USA, Canada, Mexico – then eventually back to Denmark in 2004 as Head of Product Management.
After 2 years, my job changed to Business Management where I took on Shop Design, Traning, and Business Intelligence on top of the Product Management responsibility. Then, since July 1st this year I have been in charge of ‘Region West’ which is UK, Ireland and Benelux. I've had a long career with the company so far, and it’s been a lot of fun - plus I've met some very interesting people!
What made you decide to work for Bang & Olufsen and what were your previous experiences with the brand and/or its products?
Well, I may disappoint a few people when I tell you I didn’t grow up with Bang & Olufsen products in our home. People tend to think that all Danish families have B&O, but hey - that’s not always the case! However, the parents of my girlfriend back then (who is now my wife) when I was at business school had B&O as her father had actually worked for them. He spoke so highly of the company it gave me a very positive view of Bang & Olufsen. I didn’t live too far away from the factory either, and as there aren't exactly a great deal of other interesting companies around there – so it kind of seemed like a natural thing for me to do!
What excites you about working for B&O ?
What excites me at the moment is the challenge we have in this part of the world. There are now ‘fresh eyes’ and energies within the company as we appoint new people with new ideas and outlooks. I think looking back over the last couple of years, things are happening now that we have almost seen coming (from the inside). Like most people on BeoWorld I have a passion for the brand, and right now I’m very excited about the prospects for us – but I realise it’s not going to be easy!
When considering taking the job in charge of Region West, did you have any main concerns or reservations? – After all, you must have known you were going to be faced with declining sales in a declining market. Most people would be reluctant to accept such a task as it may reflect badly on their career if they failed.
Honestly. No! I knew this job was going to be difficult, and things certainly couldn’t be turned around immediately. My main concerns were more on a private level to be honest as I've made a commitment here in the UK whilst my family remain in Denmark. My wife and I had a lot of conversations about this - and it was actually with her blessing that I took the job. I just feel extremely positive about the whole thing though – we have a great team of people, great distribution and although it’s difficult now, I know things will turn around.
Slightly abstract this one – but the question was asked on one of our “Wednesday threads” and they wondered what your answer would be.. So – ‘What did you want to be as a grown-up when you were a child?’
A professional Football Player! I will be careful about which team I say I wanted to play for as I may upset some people on BeoWorld – but my Danish heroes were Jan Molby and Peter Schmeichel, so either Liverpool or Manchester United would have been good! Living in Singapore though, my friend worked for Carlsberg – and I was only allowed cheap beers if I said I supported Liverpool !! (laughs). To be fair though, i don't have one particular team i follow closely.
Where did you first hear about BeoWorld?
I honestly cannot remember when.. possibly 5 years ago whilst doing a Google search? When I took the job in Denmark 4 years ago, I certainly took a deeper interest as it became much more relevant to my position there.
What was the opinion of BeoWorld in the early days, and has this changed now? If it has changed, how so?
Personally, my opinion of BeoWorld has never changed. I have always been very positive about the website, and it’s amazing that people spend so much time and energy talking about the brand. It’s really proof of the both the following and potential of the brand!
Can you tell if BeoWorld has any impact on dealer traffic – good or bad? Do you have a rough percentage of dealers and customers that walk into stores that are aware of the site?
Well, we cannot ever have any actual figures on this – but I certainly think that a lot of potential B&O customers do a great deal of research to assist them in making a purchase, and they frequently end up visiting BeoWorld. I see this as very positive.
What can BeoWorld do to help B&O increase market share whilst still remaining honest and fair about the products?
I do think that the credibility of BeoWorld rests on the fact that it is a truly independent website, and that’s very important. I can’t honestly think of anything that BeoWorld can do for us at the moment apart from stay the same! I may get back to you at some point though.. <smiles>
What would you like to see BeoWorld do that we don’t already – and what would you like us not to do?
Not to do? Well, I don’t have anything there – but one of things I find really interesting are the Polls you make. One of the things I think you could help us with is if we ask you to do certain polls. I think a common conception in the marketplace is that we do not listen to the customer, and to a certain degree in certain areas that has been true. However, do understand that if you listen to the market too closely you become like the market, not what you should be! I do find the polls really interesting though and I’d love to see more.
First – the nicer parts of Bang & Olufsen products and their effect on peoples lives. Plenty of BeoWorld users cannot quantify exactly why their current B&O products put a smile on their face every time they use it. How best would you describe why this is?
Very interesting question. Well, once you can actually quantify that – it will lose it’s magic. It’s something you cannot really explain and if you could dissect this, then it could be copied. I think it’s just a result of a perfect combination of our core competencies.
The Beo5 Remote has been a success as far as the concept goes, but has also been a failure in many cases in the actual end result of the product to the consumer. How do you feel about the failures of either the back-up from Struer or the dealer incompetency when trying to set up this product? Obviously not all dealers have experienced the same levels of this issue, but we know of plenty of B&O customers that have either thrown them in a draw and gone back to the Beo4 or have returned them to their dealer for a refund. Do you think that releasing the templates online and allowing customers the access to program their Beo5 themselves may have been a better idea?
That’s a very important and valid question, and something that of course has been discussed a lot within the company. Whilst we know that from a design and conceptual point of view we had a true Bang & Olufsen product, we fully realise that we were not ready to release it from a software perspective. The dealer tool and software was simply not ready to hit the market then and we apologised to our dealers about this at the conference this year. We have now relaunched an updated version which works perfectly.
As for the last point about customers having access to set-up, it would have been even worse of we had released a configurator that didn’t work in the customers own homes – so we're glad we didn’t. The tool has to work, and i do think now that there could be some opportunities in the future for customers to do some things for themselves. If your cable company changes the channels or logos.. why not be able to plug that via USB into your computer and do simple changes for yourself?
Many BeoWorld users would buy a Beo5 if they knew its exact capabilities. It is indeed a strikingly designed remote, but will it ever be able to do ‘two-way’, will it be able to control non-B&O devices without a PUC controller, and can it become a ‘learning’ remote? Is there anything else that we need to know about it that may sway us into buying one?
When you go into home integration, things become more complex – and we are designing a filter to go between ML and other systems. This will be controllable with the Beo5. As for two-way - we do believe it will make a lot of sense in the future, and I certainly think we will see this in the future. Wether that will be with the Beo5 or some other product, who knows.
Many customers bought products such as BeoMedia 1 and have been very disappointed that it has not been an ‘evolving platform’ of software upgrades and extra functions as time progressed. Would B&O prefer their customers to just buy new products every few years, or is there any real support for existing products that are software based that we don’t know about?
I do think that generally with software based products, our wish has always been to make a platform where customers can get upgrades without having to buy a new product. As for Beomedia 1 in itself, sometimes you need software support where the platform is just not capable of handling it – and in a world where things go so fast this can often happen. However, BeoSound 5 for instance will be connected to the internet and software updates will be constant. Hopefully we can keep things completely up to date this way.
It’s an age-old question, but how do you personally justify a B&O television being up to ten times the price of a similar screen-sized branded unit such as Sony/Toshiba/Philips etc in such fast moving times? The B&O unit certainly looks better on the exterior, but in a short space of time the technology inside has become outdated, leaving a very overpriced shell in many consumers opinions.
I understand the questions and I've seen numerous threads on BeoWorld about this and think it’s a very complicated answer. One part that people have to remember is that by being 2, 3, 4, 5 or 10 times the price this premium can partly be explained by the ‘brand value’. People will pay many times more for this, and you can see this with cars. Why does a Mercedes cost twice as much as Honda? That’s brand value, and some people with a good argument would say that we have been neglecting that lately with some of our product releases. Another part of the premium price is the ‘buying experience’ at a B&O dealer. Here you do get an exceptional service and buying experience, which you oviously also “pay” for..
Also in the case of fpr instance a BeoVision 7, you must remember that you are buying a lot more than just a television – you are buying the core of a home cinema. However - all that being said, recently the differentiation in our concepts and products have been lacking a little, so I do understand certain reservations people have had. I do not see us reducing prices, but our simple goal is to make the price gap justifiable by producing new concepts and making the products even better.
Do you think production can or will ever be moved back to Denmark - making the products truly Danish? A lot of quality issues have arisen which many dealers think would not have happened had the products been assembled in Denmark. A lot of consumers are also happy to pay a slight premium to know that a distinctly Danish product was actually made there..
This is a very important question for me, so I have to phrase this correctly! This a truly an incorrect perception of the facts as the few quality problems we have had are nothing to do with the fact that we have been producing outside Denmark. In fact, the main problems we have had to deal with have all been from Denmark! Certain dealers have thought moving away from Struer with production has been the cause of problems, when in fact the quality control in the Czech Republic if anything has been slightly better.
The concept of B&O products being ‘truly Danish’ is also incorrect.. where did we get CRT tubes from? Where do we get transistors from? Not Denmark.. The production can/will never be moved solely back to Denmark. No company in this industry would be able to survive unless they were ‘ultra-high end niche’ – and we are simply ‘niche’. You discussed price before, and many people may think we make huge profits due to our prices, but if you look at our accounts you will see we don’t! The costs of production are growing and growing, and the fact that we can outsource is a huge help to the business.
In the next 10 years, where would Bang & Olufsen like to see themselves – as a major player, or very much a niche product as they already are?
Well, this is really a question for the CEO Kalle Hvidt Nielsen, but my own opinion is that we do not not see ourselves as a major player. We are not big enough, and we will never be big enough to win that battle! We will always be a ‘niche’ player, but not in a sense of appealing only to people with a lot of money to spend. We aim for our niche to be people who value all the aspects we offer through our core competencies - and whilst we appreciate this costs money we do not aim to be a brand that is known solely for it’s high prices. No matter what we do though, we will always be a ‘niche’ company.
Do you feel that by increasing prices year on year you are strengthening the exclusivity, or perhaps alienating the majority of the buying public?
Once again we come back to price, but looking at increases you can see that all we seek to do is keep up with inflation. Our costs of production increase every year just as everybody elses do.. I can assure you that we do not have a ‘price strategy’ to keep on driving the prices up and make the brand more ‘exclusive’. That is not our aim whatsoever.
Do you see Bang & Olufsen being primarily a hardware producer, or do you feel the company will be forced to be equally software driven? If the latter, how could you possibly keep pace without having a proven partner to assist, and who would you like this to be – or do you think you can do a perfect job ‘in-house’?
Firstly, we realise that we are no longer just a hardware company as software is going to be such an important part of the future. How can we keep pace without having a proven partner? Well, people are probably unaware that we have several ‘proven partners’.. We own 51% of a software company in the Baltics, we work with a huge software company in India and have excellent software partners we work with all around the world. We place as much emphasis on finding the right software companies as we do on buying our Aluminium – it really is that important. We specialise in concepts and ideas, and now realise exactly what software can do for our products.
Software being an issue, how do B&O intend to keep up with dealer information and improve on the training needed?
As mentioned, this is an extremely important aspect. This may be an advert here, but as an example we are (here in the UK) currently looking for a new Product Trainer that has a very good IT background. We know that in the future our products will be very much part of a ‘network’ in the customers home, so we do need a high degree of competency in our distribution system. We are very aware that this is important.
How do you seek to improve sales in the UK?
<laughs> That’s a very fraught question in the middle of everything here! Certainly my strategy is that we first have a task in ‘cleaning ourselves up’. There have recently been some difficult years, and the dealers know that. We have not actually grown for the last 3 or 4 years here in the UK and I do not see a turning point right around the corner. Every newspaper and television channel these days is reporting bad news, so I feel the way to improve sales are getting the basics right from our end.
We've had no control over the products coming out of Denmark, but what we can do now is prepare for the day the product portfolio is just right and improve on the quality of the sales person in the store. We will also focus on the quality of aftersales and ensure that first-time buyers and people who continue to purchase Bang & Olufsen products get the very best service and have a really good experience. Once the economy does turn round, we will then have created a really positive perception of the brand and hopefully this can serve us well.
We all know that B&O will be severing ties with Samsung, which will see a return to the ‘core business’ of the brand. What do you feel the core business is ?
The core business is to make people smile as we spoke about before! I really think however that the core business is our strengths in picture quality, sound quality and to some degree home telephony. This is where 80% of our business lays and where recently we introduced ‘entry level’ products to attract new customers we found that the main buyers were loyal Bang & Olufsen customers who ended up being disappointed. It wasn’t really very successful, so we decided to concentrate on what we are good at – and that’s to make Audio/Video and Loudspeakers.
That’s not to say someone may not have a crazy idea and 'whoomph' – there’s a new business! We had that with telephones, and now it’s an important part of our business. You can’t place fences around your business, but at this stage we must concentrate on what we do best.
Forgetting about severing ties, it has been mentioned by many B&O fans that the brand shares a great deal of similarity with Apple. How do you feel about this comparison, and would you personally like to see any collaboration with them? We are aware that Torben Ballegaard Sorensen did not favour Apple and preferred Microsoft, but that relationship has never seemed to bring a great deal to the brand so far. Your thoughts?
Apple are very smart business people that have created a whole ‘brand’ as well as a product and I admire them for this. We actually sell our earphones and earsets in Apple Stores, and that’s a perfect match. We even sell Earset 3 for the iPhone too!
Whether we should have a closer collaboration has been discussed a lot of times. Yes, they do a lot of smart things, but I really do not know what my own opinion is on this! I certainly have nothing against Apple and I think they do some extremely good things, so I think we could learn from them in the way they manage to create a hype around the brand and how they approach the market and create a very exciting store experience. One of the things we could bring to Apple is our obsession with detail and quality, but I am not exactly sure on which specific area such a collaboration should be based.
We are aware that the BeoSound 5 is going to be ‘internet friendly’. Is this the direction that some or all of B&O’s future products will follow?
We can’t say all our future products will be internet friendly as that would not make sense in some cases, but you can say that a lot of products will have integration into Cat 5 or Cat 6 and then a connection to the internet. This will then enable automatic software updates, and future applications then becoming available to the customer.
How do Bang & Olufsen hope to tackle the whole digital media issue, and who will they look to partner with?
What we are trying to do (and this will take time, products and new concepts) is to give customers the convenience of not having to think about it actually being digital media. We want to make access to their media enjoyable and easy, but as regards who to partner up with – there are no specific companies we are looking at. If you tie yourself to one company, you limit yourself – so we will try and concentrate on interfaces that allow you to access much more.
Will B&O make it easier in the future to replace hardware parts to keep a product up to date? It may provide better value for money as the exterior will always be unquestionably B&O, and keeping the insides up to current spec may provide a much cheaper upgrade alternative and therefore make the product a more viable purchase at such a premium price..
The current example that we are tackling this issue with is the BeoVision 7- 40”. You will be able to upgrade the DVD drive to Blu-Ray on the latest Mk3 models – and I think that yes, it is something we would like to be able to do. When people look at our prices again, they must consider we spend a great deal of money on looking at making a product compatible to work together with other products. I don’t think any other company would prefer to give their customers the option to internally upgrade, but I think it’s something Bang & Olufsen should do more..
Today, video is distributed in a link system using RF – a dated technology. Can you tell us something about the next generation Link System, and what will it offer? Would it be possible to upgrade or integrate an existing link system into this technology if it were released?
Yes, when we do a new link system we always spend a lot of money creating a converter system that allows for compatability. I’m not too technical - but it will be based on a system that is Cat 5 or Cat 6 and of course that will allow us to have a much better integration with the ‘outer world’ in a sense that it will allow much more sophisticated control etc. I think it general it will be a huge improvement, and I see it as quite an urgent development as technology progresses so quickly.
Design.. It has been hinted that perhaps it is a time for change, and the David Lewis monopoly isn’t perhaps the best thing for the brand any more. Do you favour outsourcing design – or do you feel the same designer throughout would be a better idea?
I did notice the comments on BeoWorld about this recently – and I must state that we have never used just one designer. Although we have used David Lewis for a long time, we have a group of designers from other design houses we are working with. The BeoSound 5 is not a David Lewis design for instance!
You are right in saying that perhaps it is important to have more than one designer, but also remember that David Lewis knows the company inside out – and that can also be an advantage..
Will B&O ever consider a scheme where loyalty to the brand is rewarded? Many B&O customers spend a huge amount, but seem to get little or no reward in either the form of discount from their dealers or ‘kickbacks’ from the company in order to encourage an upgrade. In the current financial climate, everyone is looking for a deal – how will B&O address this, if at all ?
We have had certain discussions about this, and there is certainly a point here. One of the things we have done in the UK is the ‘Virtuoso’ card, where people can get interest free credit and spread the cost of their B&O over a period at no extra cost. And there has earlier been discussion about offering these customers extra benefits in the future.
I don’t know quite how we could look at a ‘club’ or loyalty scheme though, but I definitely think it should be considered. It’s a good idea.
I cannot really condense this any more, so I will ask for your thoughts on the following question from one of our members in full –
“It is clear that Bang & Olufsen is having a hard time these days (to say the least), with the sudden eviction of its CEO and the unexpected bad results that led to that situation.
The fact that a new CEO with a technical knowledge/formation has been chosen may be a hint in itself of the way B&O will attempt to struggle in a very competitive market... (It seems like a break point in the policy of "shiny new mobile devices" Torben Ballegaard Soresen was so fond of, and which in the end just turn to be basic rebadged products).
As usual, one could have thought that B&O was protected from any turbulence by the fact it occupies a well-known high-end niche market, with devoted fans... BUT the problem is that the ever rising price strategy of B&O has led many loyal clients unable to cope with that pace, and eventually made them go to other brands (Loewe must say a big thanks to B&O for that, I think), when they still would have bought B&O if they could have.
If one can easily understand that raising the prices will allow ponctually B&O to get a better margin and cope with some difficulties, it is just the easiest way to do so... Knutsen in its own time took radical measures (other than raising prices over and over, ad nauseam) to revitalize the brand and to inject energy in the products lines, and still he managed to apply a clever price strategy (more expensive than the others but not at an unrealistic level, as it is today).
To my eyes, it is really the core question B&O will have to face : what will be the strategy of the new CEO for B&O to regain its past supremacy and glamour, while still being affordable?
The best part of the dream is that one knows he or she will be able to attain this dream someday soon (by saving for most of us), but if he knows from scratch it won't be anywhere near achievable, then the dream (and the magic of it) falls apart...”
I can say again that we don’t have a rising price strategy – we simply increased prices in line with inflation. As for the price levels, as mentioned before – we do need to increase the value of our products to match, then exceed this.
I don’t see our products becoming ‘affordable’ to the masses in the future, so people need to accept our products will always be niche and not appeal to everybody. The days of trying to access all markets are now gone, and we must concentrate on our strengths. Our aim is always to match the price to the product but I admit that lately, in some cases, this has not been achieved – so that is what we are going to work towards and even surpass. Instead of saying ‘can we reduce prices’ we must simply make the product worth the price being asked.
I think referring to the final point – if the product is really worth that amount, you will just keep focused and keep saving. Again, it’s a little like cars – but we are simply not capable of delivering a true Bang & Olufsen product at a greatly reduced price.
And Finally, one more question from one of our Spanish members -
Bang & Olufsen's core competencies:
Design
Picture
Sound
Materials
Mechanical Movements
User Interaction
System Integration
Quality
My question is, where and what do you see Bang & Olufsen lacking today in these 8 competences, and what is Bang & Olufsen going to do in order to continue applying these?
Looking at these, I think the problem is that we have not been at the same level with all of them at the same time. When all of these competencies are working ‘in synch’ it really gives that magic we strive for - and although we have some great strengths in most, we have not been at that level in others. As things have gone more towards ‘Digital’ we still believe that touch and feel are a very important part – so user interaction and mechanical movements will always be extremely important. The way you can integrate software and mechanical movement is something that can really make that ‘B&O smile’ even bigger!
The BeoSound 5 is a perfect example of this, and whilst other people can emulate software – they cannot replicate the mechanical interface the way we do. That is what makes us unique in my opinion and gives us a huge edge over our competitiors.
Looking at the last competence - of course we have also had too many quality problems by our standards lately, and I think the main issue here was created when the new ROHS directive came in with lead free soldering for the PCB. Over time that can create fractures that create short-circuits and other problems during transportation - and the majority of our ‘out of box' failures are down to this one issue. This doesn’t help the customer of course, and we realize that maybe in the past we not have placed enough energy into addressing this issue quickly enough.
Well, that’s the end of the interview.. I would like to thank you on behalf of BeoWorld for taking the time to talk to us and answer our questions, and we all wish you the very best in your new position!
It was my pleasure – thank you very much!
_____________________________________________
END