Oticon Holding: Lars Kolind and the Spaghetti Organization

Faced with heavy losses, company CEO Lars Kolind re-thought the way they did business

What do you do when your company is faced with heavy financial losses? You revolutionize the way you do business.

Oticon Holding A/S is a Danish company that has been making hearing aids for nearly a century. In 1988, faced with heavy losses, the company revolutionized the way it did business. After Lars Kolind became Oticon CEO in 1988, he stabilized the company financially. Later he designed and introduced a pioneering effort in organization structure and management style which was called the “Spaghetti Organization”.

First Oticon took down the walls—literally. All 150 of its employees were brought together to work in an open environment, without assigned offices or desks.

Then the company eliminated all titles, departments and divisions. The traditional management hierarchy was eliminated. People were assigned jobs on projects, and all work was done by temporary teams; team members all gathered in the same corner with their files.

At the same time that Oticon was getting rid of its formal structure, it invested in a leading-edge computer system, with communication links to ensure frequent informal contacts between the company’s Copenhagen headquarters and its operations in Europe and the United States.

The company was an early adopter of e-mail and made heavy use of videoconferencing. The company went paperless. This organizational revolution, based on new patterns of information exchange, was a clear success. Product development took place more quickly, and Oticon became the first company in its industry to introduce digital hearing aids.

The resulting financial success allowed the company to launch a number of takeovers in the industry, and by 1998 Oticon had become the world’s third largest player in the hearing-care business.

Given the unusual ways in which work is done at Oticon, what planning tools and techniques might be useful?

Environmental Scanning already plays a significant role at Oticon. Oticon realized that it’s traditional way of doing business was quickly becoming obsolete, and it needed to quickly adapt to the market in order to stay competitive. Some of Oticon’s biggest competitors are industry giants such as Sony, Siemens and Phillips.

Competitor intelligence will have to be used to anticipate any significant moves and their impact on Oticon that competitors may use. Oticon is a global corporation, so some form of global scanning will have to be used to provide the company with information related to the way they do business.

Suppose that some organization wanted to use Oticon as a benchmark. What types of things might it learn from Oticon?

With Benchmarking, of the most important things that a company might learn from Oticon is their success at creating “the ultimate flexible organization”. Oticon turned their back on employee hierarchy and instead focused on running their business with teams of informal groups.

Oticon also realized that employees work best in places that are comfortable to them. The company reorganized their workplace, and at the same time allowed teams to work outside the Oticon’s premises.  By doing this, Oticon is obtaining positive results and is able to stay ahead of its competition.