General Forum

Re: Business analysis - Bang and Olufsen has designed itself away from its customers

KingOfSnake — Sun, 21 Aug 2011 02:44:31 GMT

Chris (Moxxey), hope this finds you well - I don't come on BW much for obvious reasons but came across your post the other day about the colour schemes in the Mini Showrooms. I had already been considering the colour schemes for our new showroom in any case but you got me thinking. The crux of it for me was to strike a balance, obviously the showroom needs to appeal to the younger audience but are they the target audience I wish to appeal to? For me you are in the main looking at late twenty-somethings onwards, so the balance has been to come up with a colour scheme that is in some ways neutral and more conservative but has touches of flair to it. Off-white, pastel colours etc all illuminated by Lutron controlled floor and ceiling lights - hopefully if I can do it then B&O can! Am off to do some more painting today! Paint alone has cost about £800 but coupled with that we have had to design in flexibility with cabling and to be honest that is because the future with B&O, if they follow the same path with overpriced products, is unsure, so aluminium boxed trunking all-round. I found the opening article interesting but in terms of content it is nothing a 2 year old couldn't have written down on an empty cigarette packet! It is a real challenge for the CEO and I agree B&O can no longer rely on the historic strength of the brand.

Bit of an impulse buy but I bought a couple of pairs of Anthony Gallo Reference 3.1 speakers recently at £2500 per pair or thereabouts - with help from Steve at Sounds Heavenly a power amp was added to drive the second coil (subwoofer) in the speakers and they are superb, way beyond the performance of 9's IMHO and nearer (very near) 5's performance - what have AG done in the marketplace? They have released the 3.5 and raised the price to nearer £6000! It is not only B&O doing it!

Re: Business analysis - Bang and Olufsen has designed itself away from its customers

Chris — Sat, 20 Aug 2011 16:42:38 GMT

"45+"

" youthful enthusiasm for iPad simplicity"

We told you so..................

Re: Business analysis - Bang and Olufsen has designed itself away from its customers

elephant — Sat, 20 Aug 2011 16:15:03 GMT

Great article ! Thank you

Re: Business analysis - Bang and Olufsen has designed itself away from its customers

casdave — Sat, 20 Aug 2011 15:16:04 GMT

B & O's problems in my opinion stem from proprietry network technology which makes it incompatible with any other manufacturer, requiring the new entrant an extremely high step just to gain a toehold into the marque.

Unfortunately the proprietry network has been well bypassed with relatively easy digital networking, which is also very much cheaper.

B & O needs to produce design oriented products that match the aspirations of a younger market, just as Apple have. It can be done, Apple looked dead and buried ten years ago, just last week it was the highest capitalised company in the world, albeit for a few hours only.

The sound and video source is pretty much near perfect, which leaves product design and feel the only avenue left.

Re: Business analysis - Bang and Olufsen has designed itself away from its customers

Tod Daniel — Sat, 20 Aug 2011 15:02:26 GMT

OMG the old 1990's catologues were awesome. I loved the feel of the catalogue with real people and their wonderful systems in their homes! I used to look forward to a new catalogue every autumn. Over the past few years it's become a little shallow with millionairre houses, Aston Martin's and so real sign of life in the houses - kind of soul less. Id love to see a return of that style of real catalogue!

Re: Business analysis - Bang and Olufsen has designed itself away from its customers

TripEnglish — Sat, 20 Aug 2011 14:49:07 GMT

Spot on, Moxxey. Spot on.

There's a retail rennaisance from Apple to Ralph Lauren and everything in between. You can barely sell coffee and a croissant without some special feeling in your space. That Bang & Olufsen stores look the same way they did in the late 90s is baffling.

I personally never cared much for the B1 concept. It segmented products when our core competency is interconnectedness. It employed cheap woods and industrial carpeting when our equipment was supposed to communicate a bespoke feeling. It was never very easy to live with either. Up until a few years ago we were wallpapering focus panels every month or so!

Re: Business analysis - Bang and Olufsen has designed itself away from its customers

moxxey — Sat, 20 Aug 2011 14:05:00 GMT

One thing I would add - and I pointed this out to my dealer today - is that the stores do look dated. They are starting to look a bit long-in-the-tooth, to me. Worse, my local dealer has an Avant in the window. An Avant! Two windows, one used for a pre-loved Avant.

I still think they need to push on with the catalogue and make it much more lifestyle. Take apartments and houses where people have installed B&O equipment and promote their story. Tell potential customers why B&O equipment helped match their requirements. I'm sick of reading about how musicians chose B&O equipment and the latest catalogue has too much silly PR blurb about how the equipment will radiate your world blah blah. It's not even welll written. It's not written by someone who speaks English.

And, for the attention of B&O's much-maligned PR, I'm quite happy to discuss how much of a benefit the installation of Beocom 5s has been in our office.

Re: Business analysis - Bang and Olufsen has designed itself away from its customers

Tod Daniel — Sat, 20 Aug 2011 13:56:11 GMT

Fascinating read but very much how I had expected! Poor Tue, I really would not want his job even if he offered me £1m however, ive got faith in the guy!

For a while i've been thinking that it's the car speaker system end that is going to save B&O financially and it does look that way. I love the Harman Kardon 10 speaker system in my MINI and for the £500 option it's a bargain as the sound is purely amazing! However, would I have the B&O option if it was available in MINI? Yes, of course I would!

Business analysis - Bang and Olufsen has designed itself away from its customers

Claus — Sat, 20 Aug 2011 13:43:37 GMT

The Danish newspaper "Politiken" Thusday brought this analysis on B&O which I've translated. Hope you'll find it enlightening.
- Claus

The icon Bang & Olufsen has designed itself away from its customers

Bang and Olufsen is in trouble. This has been the case for some years now, and B&O’s latest financial statements reveals that the last 12 months has been no exception. It has since 2008 led to an extraordinary capital injection and two unplanned director replacements, so now CEO Tue Mantoni – with a history of motorcycle manufacturer Triumph – got to find a recipe for growth.

Surely, the turnover has increased by 4 percent over the past year compared to previous year and is now again marginally higher than for 15 years ago (!) - the financial year 1995/96. But improvement is due solely to B&O’s success in selling expensive car sound systems for brands like Audi, BMW, Aston Martin and Mercedes. This activity has increased by 69 percent the past year. Congratulations
with this part.

But the core activity consisting of complex TV and Audio systems actually fell by 4 percent over the past year. It shows that B & O's sale is challenged both in a long and short perspective. And to refer to the economic crisis is an explanation that doesn’t hold in practice: German Loewe – B&O's perhaps the nearest competitor – sells well. So do PPR and LVMH (the companies behind luxury brands as Gucci and Louis Vuitton) which have long recreated the sale after the crisis.

Tue Mantonis challenge is more structural. He admits indeed that the challenges are greater than he thought when he became general manager five months ago. But he also believes that the potential is larger than he originally estimated. He summarizes the situation in six challenges and three strengths.

The threats include:

An initial unstable technological situation. It is unclear in what direction giants as Apple and Sony leads the technology.
B & O has an obscure product portfolio. Think of the mobile phone Serene, which from the beginning could almost less than nothing.
B & O has a hard time to get new customers - especially younger ones. B & O's expression is very much "45+" and far from the youthful enthusiasm for iPad simplicity.
Company market orientation is weak – while internal bureaucracy is significant.
Sales efforts are weak in the individual stores, majority of who are named B1 only sell B & O equipment. At the same time see the stores look like they have done in last 15 years.
And finally, the B & O had too little focus in emerging economies – especially China. There is too many B1 shops in mature markets and only 24 in China. In comparison Mercedes has 300 Chinese dealers and will increase to 500.

As if that's not enough for a director depression you can add a slow product launch. Fifteen years old big sellers as BeoSound 9000 and 3200 are still on the shelves - but not much longer according to Mantoni. In addition to all this, the products are expensive. A TV costs DKK 30,000+/EUR 5.000+ and that’s a lot of money. Especially when the technology evolved changes every three years or so. Tue Mantoni is also fully aware that prices are under pressure.

The strengths that must lift the B&O's sale of five years to DKK 8-10 billion/EUR 1,1-1,3 billion are:

A strong brand which is of particular importance in the effort to raise turnover I growth markets.
A very wide brand distribution with the 680 B1 shops.
And a great ability to differentiate products.

More specifically, Mantoni will make the average B&O salesman as good as the top third; he will focus far more on growth markets; he will launch better products recognizing that the B & O's edge over competitors has shrunk – and then he will launch a new product group with lower complexity and an expression that speaks to new – especially younger – customers.

Here we are probably at the core of B&O’s problems: Design and functionality.
Other manufacturers such as Loewe, Samsung and Sony make nice looking screens, so B & O is not as unique as previously when many homes were filled with badly designed TVs etc.

At the same time B&O has for several years developed a special expression there is more peculiar than really wonderful. In an otherwise minimalist IT time, B&O developed both male height column-shaped speakers and sculpted cone-shaped speakers with reminisces of ‘70s box speakers added some aluminium.
And an oversized iPad docking station, which must have been an early prototype that the bureaucracy in Struer just forgot to discard.

Even the most enthusiastic Radio and TV nerd will have difficulties in persuading the spouse to acquire these expensive "monsters" when there are more elegant alternatives.
And while Apple and several mobile manufacturers has simplified the use of electronic hardware, so that anybody can master them in the blink of an eye, B&O stuck in a remote advanced that it requires a medium long technical training only to utilized a few of the functions.

Tue Mantonis challenges are very clear. No matter how strong B&O's brand is or has been, the company's development department must now prove its worth. New simple products launched in large numbers and in a style that speaks to more customers than now, is what’s needed if the small niche manufacturer within five years shall reach a turnover of up to DKK 10 billion/EUR 1,3 billion as planned.

(Source: Politiken 18.08.2011. Text: Business editor Tage Otkjær. Translation: Claus Hensing)