The Business Environment at Oticon - Assignment Example

1. The business environment at Oticon had changed drastically between 1904 and 1980. This required a change in management and facing challenges such as increased competition and shortened product life cycles, requires a leader to steer the company through the change (Sorenson, 2000). For a turnaround of the company, leadership requires trust and commitment of others. Oticon needed such a leader that could motivate, direct, strategize and inspire the members of the organization. A leader is effective if he can enhance the group effectiveness. Lars Kolind proved to be a transformational leader as he could establish his beliefs and values and be consistent with them (Working Futures, 2005). He had the ability to influence others and determine the course of change. He assumed all decision-making powers or himself. Even though he assumed dictatorial powers he exhibited people skills. He could do so as he was a transformational leader and the strength of a leader lies in his ability to inspire others to give their best. A leader can transform the stagnating culture into a productive one. According to Edgar Schein, there is always resistance to change in the face of uncertainties when it is caused by organizational culture (Lakomski, 2001). The Oticon’s Foundation Board felt that Kolind has the ability to coordinate through a strong and shared set of common values that linked different groups from diverse cultures. Kolind demonstrated the qualities specified in The Five Practices of Exemplary Leadership – the model devised by Kouzes and Posner (Wiley, 2002). He could inspire a shared vision, challenge the process, inspire others to act and encourage the heart. The need for an “ultimate flexible organization” prompted him to make the people “think the unthinkable”. He even changed the objective of the company – to make people live as they wish and not just to assist them in hearing. He thus created a “disorganized organization” by abandoning the formal structure and processes. As Sorenson contends, leadership requires bringing people together from different cultures and background and still develop synergy as the whole is better than the sum of the parts. The CEO did not merely focus on cost-cutting measures as these can be short-term measures just to turn around a poor financial situation. He had long-term strategy in mind as he realized that in the future the emphasis would be on knowledge-based products. Communication is the essence is leadership and strategy change. Kolind abolished departments and job titles. The workplace was now open space filled with workstations that anyone could use. Memos, as the accepted mode of communication, were replaced by informal face-to-face dialogue. The leadership at Otincon also encouraged the employees to develop skills outside their portfolio and encouraged them to work on three different projects simultaneously. A CEO model leadership should have the following strategic roles – business model innovation, encouraging experimentation with business model innovation, creating improved business models and making business model innovation a priority (Mitchell, 2006). The CEO at Oticon fully demonstrates all these abilities as he brought about a total change through the innovative business model. 2. When environmental changes occur, a sequential approach to strategy is not viable and nor does an extended approach to adaptation work. By the time a new strategy is developed and the organization restructured, the environment would have changed many times (Roberts, 2004). In turbulent environments, multitude of decisions may have to be taken at different levels in the organization. It is usually the top management that sets the strategic direction. The designer or the innovator or the leader has to set the inert elements of the organization, such as the culture, so that the change in the organization is persistent. The new CEO at Oticon called himself a designer rather than a manager when he decided to abandon the formal organization. The essential features of leadership during this time require management and vision, communication and persuasion, apart from analytical problem solving. It was the Board’s vision that Kolind would be suitable as the CEO because he possessed the characteristics essential for turnaround. Kolind’s vision and foresight ensured that the strategy was not a short-term approach to bring about profitability. He was innovative as he adopted and implemented innovation in his strategy at Oticon. He was creative in his approach. He abandoned the pre-conceived notion of a firm’s organizational structure and changed the ways people behaved and interacted or even worked. He could do these because he had analyzed the problem. He was a mathematician, which enhances the analytical abilities in a person. He did cut costs and increase efficiency although he realized that merely focusing on cost-cutting was a short-tern vision. He knew this was inadequate to turnaround a critical position. He believed in openness and effective communication. He realized that to sustain competition in the industry required more radical action than just cutting costs. He wanted to attain the competitive edge through “fast and creative integration of all existing expertise in the field”. This is the characteristic of a leader with vision. His strategy was not to produce a traditional high-quality standard product with low margins. He, hence, set targets for the next three years which was communicated to the employees. The CEO had the visions that the market place was becoming customer-focused and hence he changed the strategy from producing a high-quality standard BTE product, to becoming a first-class service firm. Their vision was to “make people smile” and hence their vision was to produce products that developed and fitted individually for customers. The communication process at Oticon too was redefined with open spaces and face-to-face dialogue introduced as a part of change management. Communication was absolutely open to the extent that anyone could access anyone’s mail. In fact, the project teams were encouraged to look at each other’s files which encouraged creativity as the ideas could flow freely. Nobody was confined to a place as they could free-wheel their computers to where the groups worked on a project. The CEO could influence and persuade the employees to accept and respond to change. All of these changes demonstrate that the leadership at Oticon could turn the situation into a winning strategy. 3. During the tenure of Kolind, the first change in strategy was the corporate objective and the mission statement. They moved away from being a hearing-aid importing or manufacturing company to an organization that ‘restored the enjoyment of life that loss of hearing had taken away’. This strategy was necessary as the business environment had changed and it was important to have a customer-centric approach. They wanted to offer personalized services which ensure sales. The second change in strategy was the mode of open communication. Even though the CEO assumed dictatorial powers, he explained all his actions and justified why they were necessary. This generates trust from the employees which is essential for the success of any strategy. The company could implement the open communication strategy because the CEO’s calendar was also accessible by all. The new management at Oticon provided direction which was essential because if all pursue their own course of action, the result would be chaos. He also focused on human values and employing responsible adults. This strategy was meant to ensure that even when rules are not imposed, employees naturally exhibit responsible behaviour. This model was developed on the tradition that individual’s wishes are not important and the group as a whole matters. However, this strategy did not work at Scotland, Italy and Japan. The strategic changes introduced by the new management resulted in increased profits and productivity and higher levels of innovation. However, Kolind focused on advanced products that had a limited market even though the margins were higher. This premium product also had limited competition. It had led to growth in sales and profitability but what Kolind did not realize is that that average sales price had gone up while the unit sales had stagnated. This strategy of Kolind was short-lived and it did not change as the market situation changed. Technology had changed as hearing-aids had become computer programmable. This required that the dealers be given additional training and support. Dealers too were looking for manufacturers that could supply them the entire range of products – from the basic to the advanced. Since Oticon, during Kolind’ regime, focused on the advanced products, their dealership network too dwindled. Kolind has been focusing on the niche market without realizing that catering to mass market was essential to have continuous profits even if the margins were small. This can be made up with volume. Overall, Kolind’s strategy did help to bring about a change during the most turbulent times. As a leader he focused on the change in the organizational culture – from closed rooms to open workstations, from memos to face-to-face dialogues. He could persuade and encourage the employees to contribute to the growth of the organization. He could make them assume responsibilities for their action. Where his strategy failed was when he failed to recognize that the environment had again changed and catering to mass market instead of niche market was what could give sustained profits to the organization. References Lakomski, G. (2001). Organizational change, leadership and learning: culture as cognitive process. The International Journal of Educational Management. 15 (2), 68-77 Mitchell, D. W. (2006). STrategic roles for model leaders. Handbook of Business Strategy. 243-247 Roberts, J. (2004). The Modern Firm. Retrieved online 19 December 2009 from http://books.google.co.in/books?hl=en&lr=&id=ArSPJ6snpOsC&oi=fnd&pg=PT9&dq=The+modern+firm&ots=hBBsHHRGKV&sig=wKc07Fy1WMr_YbiYMZNS30XflnI#v=onepage&q=&f=false Sorenson, R. L. (2000). The Contribution of Leadership Style and Practices to Family and Business Success. FAMILY BUSINESS REVIEW, 13(3) Wiley, J. (2000). How The Leadership Challenge Began. Retrieved online 19 December 2009 from http://www.leadershipchallenge.com/WileyCDA/Section/id-131054.html Working Futures. (2005). Introduction to Excellence in management and leadership. Retrieved online 19 December 2009 from http://www.marcbowles.com/sample_courses/frontline_v5/fma1/fma1c.htm Read More