Oticon -- Disorganized Company Oticon A Long Case Study

Length: 8 pages Sources: 20 Subject: Business Type: Case Study Paper: #69206039 Related Topics: Internal Environment, Socialism, Innovation, Companies
Excerpt from Case Study :

Oticon -- disorganized company Oticon a long established company credited pioneering work hearing instruments. The case study attached. The aim paper explain actions behaviors company, Oticon, president, Lars Kolind, committed fundamental behavior entrepreneurship.

Under the leadership of CEO Lars Kolind, Oticon, a Danish company specializing in hearing aids and hearing aid technology, decided to revitalize its business through a complete new approach to the way it positioned itself on the market. The innovatory approach had a two-tier dimension. On one hand, the company would transform from a manufacturing corporation to a service organization, one where the focus would not be necessarily and entirely on the products it brought on the market, but rather on the idea that the service it offered improved the quality of life of its customers and potential clients.

The second dimension was a transformational one: in order to fulfill its first objective, the company would transform into a knowledge organization, one where the focus would be on decentralizing the company and on ensuring a free flow of ideas, projects and communication between the different employees within the organization. This transformation implied a concerted effort at all levels in already to implement the necessary changes. The results showed almost immediately, with Oticon producing more products for the market, with an increased market share throughout the years following the transformation.

This paper will focus on analyzing the different approaches that Oticon management proposed and how these approaches connect with entrepreneurship theory and whether the strategy and vision that CEO Kolind proposed were committed and aligned with the fundamental behavior of entrepreneurship.

Analysis

The analysis should probably start with the initial theories of entrepreneurship, as proposed during the first decades of the 20th century by economists such as Joseph Schumpeter

. Schumpeter argued that entrepreneurship transformed an idea into an innovation and that entrepreneurship is, essentially, both a creative and a destructive force, changing the established rules of the game and ensuring that something else replaces the old way of doing things

Following this fundamental theory of entrepreneurship, it seems that Oticon and CEO Lars Kolind indeed abided by the fundamental behavior of entrepreneurship. There are several aspects worth investigating from this point-of-view. First, Kolind had an idea that he was willing to commit to and transform it into an innovation. His idea was to transform the company from technology-based manufacturing company to a knowledge-based service business. The innovation resulting from this idea was that he turned Oticon around so that it became a knowledge organization, the appropriate framework that would support the new vision that Kolind had for the company.

The second interesting aspect worth discussing is the creative destruction of his actions, as part of entrepreneurship behavior. It is true that Schumpeter's theory refers to the outside environment and the market in which the company operates rather than the organization's internal environment. However, in this case, this creative destruction is wholly applicable to what Kolind did. He destroyed the previous structure of the company completely, at all levels. From a human resource perspective, job descriptions were given up on, managerial positions no longer had the same meaning as previously, while people were no longer assigned specific positions or projects to work on within the company. In its place (following the destructive), Kolind created an organization with loose connections between employees, with no top-down decision making processes and with an ability to be more flexible and react more quickly to the challenges on the market.

This creative destruction manifested itself in the smallest of details, including in terms of the physical working environment in which the company operated. The offices were destroyed and replaced with simple filing cabinets that the employees carried around with them as they moved between projects...

...

Walls were knocked down so that the employees could interact more easily with each other and produce ideas and concrete projects. The creative destruction reflected the innovation process on which Oticon had embarked.

The result, according to Schumpeter, should be a new industry. In Oticon's case and reported to the microenvironment of the organization, it resulted in a new process and a new way of doing business. From Schumpeter's theoretical perspective, it is clear that Kolind's approach matches the behavior of a true entrepreneur, ready to embark on an innovatory process.

Embarking on such a process also means assuming a dose of risk and part of the entrepreneurship theory revolves around the idea of taking a risk, of putting something on the line in order to implement the idea and transform it from an idea to an innovation and to an actual functional process

. Taking risk involves being capable of putting time and/or capital into an idea/venture in order to make it successful and productive, while bringing something new on the market.

The approach here is similar to the one taken when discussing Schumpeter's approach to entrepreneurship theory: rather than look at the external market and what Knight's ideas would mean from that perspective, the dimension and analysis will be internal. The question asked is whether Oticon took a risk in order to promote and support an innovative process. The answer is clearly positive and there are several arguments that can be brought to the table in that sense.

First, the risk of failure was tremendous and Oticon is indeed putting on the line both time and capital. In terms of time, all the changes that needed to be implemented took a significant amount of time and resources, both with physical challenges, such as changing the format of the work environment, and related challenges, such as training the employees to operate in the new environment. The capital placed in this venture and potentially affected by risk is also significant, with numerous perspectives worth investigating.

The time allocated to the innovation process can translate into opportunity costs: the employees could have been otherwise and more productively involved in the activity of the company. If the innovation fails and does not produce results, the company will need to evaluate its losses by considering these opportunity costs as well, in the form of the cost of products that was not delivered on the market during the time spent on company reorganization. This type of risk associated to the cost of opportunity could also translate into a loss of market share and a decrease of customer retention. Basically, Oticon agreed to take a significant amount of risk when deciding to reorganize and commit to a new business model. At the same time, the changes involved also consumed actual capital. Knocking down walls and using training sessions to promote the new ideas within the organization cost money.

There is also another underlying aspect of risk in the case of Oticon: the existence of true uncertainty in relation to the innovation process that it has proposed. Making a knowledge organization is something that has been done before, but Oticon can only inspire its actions from those previous processes, without knowing whether this process will work in the company, whether its own employees will accept it, whether the market (a very specific market, with customers having particular needs) will understand and embrace a knowledge organization and whether the innovation will actually fit into the market. As seen, the uncertainty of results in the case of the actions undertaken by Oticon has many variables to be considered.

A good deal of the modern theory of entrepreneurship links the role of the entrepreneur to an innovator, quite often equalizing the functions of the two. Kirzner mentions that the process of innovation, as part of the process of entrepreneurship, is a spontaneous "undeliberate learning" process that the entrepreneur undertakes, a sort of "learn as you go" strategy. In the case of Oticon, this theory seems to work and be applicable to the same degree as the others previously presented.

Indeed, the idea that the CEO had and that he put into practice had no clear potential result (as shown in the uncertainty analysis previously presented), but also no clear steps as to how this had to be done. Since the transformation of a company into a learning organization had been done before, there were some elements that could be incorporated, but really no 1 through 10 steps of making this a successful process and innovation. One can assume that Lars Kolind, as well as all the other employees, learned the process as it was undertaken and there are several arguments that point towards this conclusion.

In the case study, there is a distinct mention of the receptionists who continued to answer the telephone because this is what they were used to doing. Kolind himself, most likely, continued to be a ship captain for a while, even if he had clearly identified his transformational objective: becoming an architect and designing the processes that would take the organization in the desired place on the market. The entire transformational process at Oticon, associated with the entrepreneurship behavior that the CEO showed, was dominated…

Sources Used in Documents:

Bibliography

1. Schumpeter, Joseph. 1962. Capitalism, Socialism, and Democracy. Harper Perennial; 3rd edition

2. Reinert, Hugo; Reinert, Erik. 2006. Destruction in Economics: Nietzsche, Sombart, Schumpeter. The European Heritage in Economics and the Social Sciences, 2006, Volume 3, 55-85,

3. Knight, H. Frank. 2002. Risk, Uncertainty and Profit. Beard Books. On the Internet at http://books.google.com/books?id=Ntom6_pFQMcC&pg=PA386&lpg=PA386&dq=Knight,+Francis+A.+%22Risk,+Uncertainty+and+Profit&source=bl&ots=5FIDWvA4gY&sig=60kQO-F5dvryV7EWqoAU5fqS3kw&hl=en&ei=IEVJTrK_HaL30gHNmMjoBw&sa=X&oi=book_result&ct=result&resnum=6&ved=0CE0Q6AEwBQ#v=onepage&q=Knight%2C%20Francis%20A.%20%22Risk%2C%20Uncertainty%20and%20Profit&f=false. Last retrieved on August 15, 2011

4. Kirzner, Israel. 1985. Discovery and the Capitalist Process. University of Chicago Press.


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