Bang & Olufsen: Design Driven Innovation

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Professor Robert D. Austin and Research Associate Daniela Beyersdorfer prepared this case. HBS cases are developed solely as the basis for class

discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. The

authors gratefully acknowledge the assistance of the Centre for Art and Leadership at Copenhagen Business School for their help in the

preparation of this case.

Copyright © 2006, 2007 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-

7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may be

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photocopying, recording, or otherwise--without the permission of Harvard Business School.

ROBERT D. AUSTI N

DANIELA B EYERSDORFER

Bang & Olufsen: Design Driven Innovation1

"The Farm," Bang & Olufsen's futuristic glass-and-concrete headquarters, rose out of the green

fields of western Denmark "like something lifted from a Stanley Kubrick dreamscape."2 In a nearby

parking area, Christopher Sorensen stepped from his car and walked toward the entrance, on his way

to meet with a high-powered group that included the CEO, to discuss an important product program.

Within this 80-year-old company, based in rural Jutland where local people might still consider you

an outsider after 30 years, Sorensen would be very much the newcomer. Despite that, he would try to

convince the others to adjust the firm's successful design process--to change a winning game.

In April 2006, Bang & Olufsen (B&O) sold a range of televisions, audio systems, loudspeakers,

telephones, and other products (see Exhibit 1) in more than 60 countries. The company had a

worldwide reputation for idea-based products of high quality and artistic design, many of which

held places of honor in the permanent collections of the world's greatest art museums. (According to

a citation at the Museum of Modern Art in New York, B&O had "delivered the largest and most

consistent design portfolio among the world's industrial companies."3) This level of accomplishment

translated into high price points (see Exhibit 2) and profit margins, realized through an exclusive

network of dealers, from devoted and discerning customers.

To create products with appearance and functionality that made them instantly recognizable, the

company had evolved unique design and development processes. B&O gave designers free reign to

create new products that would challenge engineers to find a way to manufacture them. New ideas,

materials, and technologies made their way into B&O products only if designers put them there.

Customers had proven their willingness to pay handsomely for this degree of design integrity.

Enthusiasts liked to observe that "you can watch a B&O TV for hours--and then you turn it on"

as a tribute to the firm's design prowess. But in 2006 what happened after a product was turned on

1 The expression "design driven innovation" is adopted from work by Roberto Verganti. See Verganti, Roberto, "Design,

meanings and radical innovation: a meta-model and a research agenda," working paper, Department of Management,

Economics and Industrial Engineering, Politecnico di Milano, Italy, 2006.

2 Ryan Underwood, "The Case for Fanaticism," Fast Company, Issue 101, December 2005, p. 84.

3 Bang & Olufsen: From Spark to Icon, Struer, Denmark, 2005, p. 528.

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was getting more complicated. The Apple iPod, acclaimed by designers and closely integrated with

the online iTunes music service, had illustrated that design in the B&O market space had to

encompass more than physical form and function. In the future, the company envisioned that its

products would extend ever more deeply into virtual space, where great design meant great software

and network-based interaction with other products and services. Excellence in these areas required

skills and ideas different from B&O's traditional expertise.

Sorensen, hired two years earlier from an American consulting firm, was responsible for

addressing this issue. His organization, "Idealab," had begun experimenting with "supplementary

innovation," a way of injecting new ideas into products from outside the traditional process. Some

saw danger to B&O's reputation, and thus, to profit margins, in any move away from designers' near

absolute control over products. Might this be the first step down a slippery slope toward

undifferentiated products? Torben