The Case for Fanaticism

At Danish electronics maker Bang Olufsen, design always wins. Is that any way to run a business?

"The Farm," Bang & Olufsen's headquarters in Struer, Denmark, seems like something lifted from a Stanley Kubrick dreamscape. Its smooth, clean lines of glass, metal, and dark stone rising out of the weathered fields suggest a futuristic utopia emerging from a hopelessly arcane terrestrial existence.

It's the perfect backdrop for Bang & Olufsen's line of visually stunning, supremely distinctive products. It unveils only four or five each year, like an $18,000 pair of speakers and a $19,000 42-inch brushed-aluminum plasma television so striking that customers joke they prefer to watch it when it's off.

For 80 years, groundbreaking aesthetics coupled with sci-fi features, such as a CD player that opens with the wave of a hand, or self-equalizing speakers, have given B&O products a magical quality that transcends the stylistic comings and goings of competitors. In the eyes of B&O's brain trust, making that happen boils down to a shocking, and shockingly simple, strategy: Design always wins.

"Personally, I have no influence on design," says B&O CEO Torben Ballegaard Sorensen, an always smiling, somehow exquisitely tan, square-jawed Dane. In other words, Sorensen, despite his business acumen (or because of it), serves as little more than a steward whose task it is to ensure that B&O's design process continues unfettered, as it has since the 1960s. Sorensen runs the company's operations, but he hands over control of product development and design to one superdominant personality—a freelance designer, no less.

It's a business model that wouldn't work for most companies, even companies that embrace great design. Consider what happened in December 2003, when Sorensen asked that an inch be added to the depth of the BeoVision MX 8000 TV. He wanted to incorporate electronics that would make the set compatible with HDTV standards—a simple enhancement that would have extended its life and preserved its $10 million-a-year cash flow.

Bang & Olufsen's chief designer, David Lewis, cried foul. The alteration would have been an affront, Lewis says now, to one of the elementary principles of design: "Sometimes, it's what's not there that really counts." That is, truly elegant design incorporates top-notch functionality into a simple, uncluttered form.

"I had to negotiate with [Lewis] for three weeks over this one inch," Sorensen says merrily. "Finally, I told him, 'We're only talking $10 million. Forget about it.' "

Think about that: Lewis was unwilling to compromise design, even if that meant walking away from easy revenue. And Sorensen was prepared to accede—even though B&O's sales were down 14% from their peak two years earlier.

Insane, right? But for Sorensen, the incident is a healthy reminder that in the long run, his company's competitive edge derives solely from this sort of purism. Customers pay top dollar for a TV precisely because Lewis won't tolerate an inch more of plastic. "If I had prevailed—if I could have easily forced a decision—I would have violated the very design integrity that gives us an advantage," Sorensen says. Lewis ultimately figured out how to accommodate the features without altering the TV's profile.

The truly amazing thing is, Lewis doesn't even work for Sorensen. The native Londoner heads his own studio in Copenhagen, yet he has controlled design for nearly every B&O product made since the 1980s, from remote controls to the highest-end audio systems. Lewis says it's important to keep some distance from the company so he can present challenging, almost absurd design ideas without regard for internal marketing or engineering issues. "My role," he intones, "is to light a fire under people here, to give them impossible challenges." Amused eyebrows arch up among B&O staffers as he says this, clueing a visitor in to the wild understatement of the remark.

Sometimes, impossible challenges can open up unexpected opportunities. One of Lewis's most famous skirmishes involved the BeoLab 8000, a sleek set of speakers designed in 1991 and still among the company's top sellers. As the speakers headed to production, engineers discovered they couldn't make a flat cap with the polished finish Lewis wanted. Their proposed solution was to substitute a cap with a rounded edge, instead of sharp as the design called for.

True to form, Lewis wouldn't budge. At his insistence, B&O launched an intense research effort into aluminum production, finally coming up with a solution that involved outfitting a cutting tool with natural diamonds. Today, the company is leveraging its newfound aluminum expertise to make specialty auto parts for the likes of BMW and Audi.

Indeed, Bang & Olufsen's problem isn't that Lewis is too demanding or Sorensen too yielding. No, it's that other electronics manufacturers are starting to think like they do. Apple's iPod is a case in point. Bang & Olufsen had already deployed touch-wheel technology in a CD player, and it already had an MP3 player—just not the two together—when Apple unleashed Jonathan Ive's masterwork in 2001.

Products like the iPod, which make available groundbreaking design and technology at mass-market prices, signal a potential threat to Bang & Olufsen, says analyst Peter Nyborg Moltke at Danish investment bank Gudme Raaschou. "The question becomes, Will [B&O] continuously be able to differentiate in this environment?" Moltke says. "We just don't know." He notes that while B&O's earnings are up by 13%, its top line is still flat.

But neither Sorensen nor Lewis seems particularly concerned. If executed right, they believe, their adherence to design purity will insulate the company for decades to come. In any case, they understand that fanaticism is all B&O really has.

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