Oticon A/S: Spaghetti Organization and Beyond

Abstract:

The case is about Denmark-based Oticon A/S (Oticon), one of the world's leading developers, manufacturers, and wholesalers of hearing aids. In late 2008, the company was faced with some tough challenges due to factors such as the changing dynamics in the hearing aids industry and the global financial crisis. The case gives a detailed history of the company since the late 1980s, providing the students with the scope to analyze the spaghetti organization structure implemented by the company in the early 1990s and how it helped transform Oticon. Due to changes in market conditions and Oticon's slow reaction to the developments, the company lost market share in the late 1980s.

In 1988, Oticon appointed Lars Kolind (Kolind) as its new CEO. As a strategy to help the company tide over the difficult scenario and come out strong against competitors, Kolind designed and introduced a pioneering effort in organization structure and management style. The Oticon spaghetti organization was characterized by a project-focus, lack of vertical hierarchies and physical barriers, a networked information system, and a paperless office environment where information was freely accessible to all. The case then goes on to discuss the reasons that led to a partial abandonment of the spaghetti structure around 1996, while the company continued to be a dominant player in the hearing aid industry with a continuous stream of product innovations.

The case ends with a discussion of the market position of Oticon in late 2008 and the challenges faced by the company. The newly appointed executive board led by Chairman Niels Jacobsen (who succeeded Kolind as President in 1998) would have to overcome these challenges and steer Oticon through another turbulent phase.

Issues:

» Understand the diverse challenges that threatened Oticon's position in the hearing aid industry in the late 1980s.

» Appraise the business strategy that Lars Kolind adopted to revive the company.

» Examine the various tenets of the spaghetti organization structure and discuss its pros and cons.
 
» Critically analyze developments which took place at Oticon after the implementation of the spaghetti organization structure.

» Understand the reasons for the partial abandonment of the spaghetti organization at Oticon in later years.

» Assess whether Oticon will be able to sustain its growth and continue to excel given the strong competitive scenario in the hearing aid industry.

» Explore strategies that Oticon could follow to overcome the challenges posed by changing dynamics in the hearing aid industry and the global financial crisis.

Contents:

Keywords:

Organizational transformation , Business Process Reengineering, Organizational structure, Spaghetti Organization, Project-based organization, Flat organization structure, Matrix organization, Customer orientation, Leadership, Change management, Management style, Decision-making, Communication, Innovation, Project management

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