Lars Kolind, the leader of Oticon Holding A/S, is sidled up to one of his company’s sleek coffee bars, talking about revolution. Oticon makes hearing aids — hardly the sort of business where you’d expect to find a genuine corporate radical. But over the last eight years, Kolind and his Danish colleagues, working from an elegant, three-tier loft space in an old Tuborg soda factory just north of Copenhagen, have built a business model so daring — and so successful — that they’ve conquered new markets and captured the imagination of business innovators around the world.
“Hearing aids are not the core of what this company is about,” Kolind says. “It’s about something more fundamental. It’s about the way people perceive work. We give people the freedom to do what they want.”
At first glance, Oticon seems less than revolutionary. Its 150-person headquarters has an oddly deserted feel. There are plenty of workstations, but no one is sitting at them. In fact, hardly anyone is sitting anywhere. Listen closely, though, and the sounds of subversion begin to register: the quiet chirping of the company’s “internal” mobile telephones; footsteps tapping up and down a three-story circular staircase; the rumble of wheels on hardwood, a signal that employees are moving their “offices” — standard-issue caddies with room for 30 hanging folders, a few binders, perhaps a family photo — and forming new self-managed teams.
“There’s a paradox here,” Kolind says. “We’re developing products twice as fast as anybody else. But when you look around, you see a very relaxed atmosphere. We’re not fast on the surface; we’re fast underneath.”
Not to mention fast in the marketplace. The company is on a growth tear. The billion-dollar world market for hearing aids has been flat for the last five years, but Oticon (1995 revenues: $160 million) has more than doubled in size. Operating profits ($20 million in 1995) are nearly ten times their 1990 level. The company has introduced at least ten major product innovations — including, recently, the world’s first digital hearing aid. Oticon went public in May 1995; its shares now trade for $100 — 50% above the IPO price.
Lars Kolind, 49, arrived at Oticon in 1988 to revive a deeply troubled company. He cut costs, increased productivity, and quickly steered the company back into the black. But he realized that incremental improvements would not be enough to prosper against diversified giants such as Sony, Siemens, and Philips. On New Year’s Day 1990, Kolind released a four-page memo on reinventing the company. It amounted to a declaration of dis-organization.
Oticon needed breakthroughs, Kolind wrote, and breakthroughs “require the combination of technology with audiology, psychology, and imagination. The ability to `think the unthinkable’ and make it happen.” In organizations of the future, he continued, “staff would be liberated to grow, personally and professionally, and to become more creative, action-oriented, and efficient.” What was the enemy of these new organizations? The organization itself.
So Kolind abolished the formal organization. Projects, not functions or departments, became the defining unit of work. Today at Oticon, teams form, disband, and form again as the work requires. Project leaders (basically, anyone with a compelling idea) compete to attract the resources and people to deliver results. Project owners (members of the company’s 10-person management team) provide advice and support, but make few actual decisions. The company has a hundred or so projects at any one time, and most people work on several projects at once. It is, essentially, a free market in work.
“We want each project to feel like a company, and the project leader to feel like a CEO,” Kolind says. “We allow a lot of freedom. We don’t worry if we use more resources than planned. Deadlines are what really matter.”
The company’s physical space reflects its logic of work. All vestiges of hierarchy have disappeared. Oticon headquarters is an anti-paper anti-office with uniform mobile workstations consisting of desks without drawers and state-of-the-art networked computers. People are always on the move, their “office” nothing more than where they choose to park their caddie for the duration of a project — anywhere from a few weeks to several months. It’s an environment that maximizes walking, talking, and acting.
“The most important communication is face-to-face communication,” says Torben Petersen, who led the development of Oticon’s new information systems. “If you can’t talk to someone because he’s sitting behind a secretary and a potted plant, he’ll never know what you know. People need to move around.”
And move they do. At Oticon, it’s hard to tell just who’s working where. A marketing team writing product brochures sits next to software engineers writing code; the “chip-design center” (one of the largest in Scandinavia) is a cluster of workstations virtually indistinguishable from an audiology research group; a functioning machine shop, which builds the tools used in the company’s Danish factory, sits just outside the cafeteria.
“When people move around and sit next to different people, they learn something about what others are doing,” says Poul Erik Lyregaard, Oticon’s R&D leader for 20 years. “They also learn to respect what those people do. It’s hard to maintain `enemy pictures’ in this company — they’re not `those bloody fools in marketing.’ You know too much about what people do.”
Oticon has embraced a number of technologies to support its dis-organization. One reason employees are free to move around is that they don’t have to drag lots of paper with them. Every morning, people visit the company’s second-floor “paper room” to sort through incoming mail. They may keep a few magazines and reports to work with for the day, but they run everything else through an electronic scanner and throw the originals into a shredder. The shredder feeds a long glass tube that empties into recycling bins on the ground floor — unleashing a daily blizzard of confetti.
Telephones are important too. Since Oticon employees are always on the move, there’s no place to take calls from customers and suppliers. That’s why mobile phones have become such a visible part of the company’s technology toolkit. They’re small, sleek — and a permanent appendage to the waists of Oticon’s employees. People talk on their phones as they stand at the coffee bars or take calls as they stride from lunch to the lab.
Oticon’s Think Tank applies technology to support shared creativity. The large, computer-filled conference room includes groupware systems for electronic brainstorming and electronic whiteboards connected to videoconferencing equipment. These tools “speed up our intellectual process by a factor of five,” Kolind claims. “We can do in one day what we used to do in one week. We use them whenever we come to a critical decision-making point. We also use groupware for collective writing of technical manuals. It’s fascinating to watch 10 people simultaneously working on one document.”
It’s hard to imagine a more dis-organized organization than Oticon. But even here, Kolind warns, it’s easy to fall back into old habits. Last Christmas was such a time. The company had spent a year obsessed with releasing a new line of digital hearing aids — a potential breakthrough product. The downside to this productive focus was a sense that long-standing project teams were hardening into something dangerously close to departments.
Kolind’s response? “I exploded the organization.”
In a rare top-down intervention, the CEO instructed people and teams to relocate based on the time horizons of their projects. Teams devoted to short-term business goals (sales, marketing, customer service) moved to the top floor. People working on medium-term projects (upgrading current products, for example) and long-term research went to the second floor. People focused on technology, infrastructure, and support moved to the first floor.
“It was total chaos,” Kolind declares approvingly. “Within three hours, over a hundred people had moved. To keep a company alive, one of the jobs of top management is to keep it dis-organized.”
Polly LaBarre (email@example.com) is a senior editor at Fast Company. Visit Oticon (http://www.oticon.com) on the World Wide Web.