The Danish design icon, B&O, is in deep, deep trouble. The company was bleeding heavily before the crisis, and now they are looking to raise 400M DKK in new capital in order to weather the Covid-19 storm (or at least that’s the convenient excuse).
The problems at B&O run deep. Back in the day it was a luxury icon. You spent money on their nicely Jacob Jensen designed stereos, TVs and speakers just to show off to other people and send a message that you could afford it, and they – most likely – couldn’t.
Today Samsung, LG, Sonos and what have you is not only considered just as good but better. Because function and affordable cost has taken over from form and high cost (except pretty much for Apple, which I consider somewhat of an outlier that just proves the point).
After having taken professor Scott Galloways Strategy Sprint course on what characterizes companies that grows to be trillion dollar companies, I decided to do the reverse exercise:
Can the T-Algorithm help explain why some companies – in this case B&O – go in the opposite direction and is moving closer to bankruptcy than world domination?
Maybe. It is worth a try. So here goes:
Appeals to Human Instinct? Does B&O’s products appeal to the Brain, the Heart, the Gut and/or the Genitals?
You could argue that when it was a real ‘thing’, it appealed to the Genitals, ie “I’m a better off and more attractive and thus a better mate for you because I can afford spending an obscene amount of money on a stereo?”
But now? Not more. It has zero sex appeal left. Zero. It no longer sends a message of testosterone to own and display B&O. The brand has – so to say – been neutered. Ouch.
Career Accelerant: Is B&O a place young talent goes to work to further their career?
Can they attract the best and brightest? B&O had a kind of a second coming with their Play spin-out brand for headphones on-the-go a couple of yours ago. The team behind was younger, bright, skilled and ambitious.
Success followed in a tough Red Ocean-market. And then for some inexplicable reason, B&O decided to ditch the Play brand and move it into the old brand fold to try to breathe new life into their comatose brand patient.
Guess what happened? Great people started to get new great opportunities. Elsewhere.
Mark? Narrow pass but trending towards Failed.
Growth & Margins: Has B&O been able to maintain a business with high growth and high margins?
On the face value of their last several earnings calls…eehhm…not so much. In fact quite the opposite. And that’s me being super generous.
Back in the day when their design appealed to mating (see Genitals above), they had a fighting chance. When customers figured out that the hardware was essentially the same as in much cheaper competitive products, and they didn’t want to overpay for a fancy wrapping, they kind of lost their mojo.
Mark? Failed, but more due to market circumstance than their own doing. Except for not really being able to keep up with the times in terms of great, valuable design.
Rundle: Does B&O have the opportunity to create an attractive bundle that can form the basis of a business relying on recurring revenues?
Absolutely. Not. In. A. Million. Years. Next question.
Mark? Failed due to No Show.
Vertical integration: Does B&O already have or are they able to create vertical integration through their supply chain?
Well, they have been sort of trying through their franchised brand stores. However, they have turned out to be more of an offloading dock for stock products sitting idle in warehouses, because no-one seemed really willing to buy them.
They were instead stashed away in stores and as a result the franchise owners ceremonially cried quarter after quarter about too much inventory in their stores leading to even more ceremonially write-downs by B&O.
Not exactly efficient, let alone profitable.
As for the supply chain backwards there is no room for vertical integration. Apart from a few inhouse components and technologies, the vast majority of components in B&O products are commodities you can source all over, and B&O has for a long time been way too little a player to really be able to exercise pressure on the supply chain.
Benjamin Button Product: Does B&Os products become better with age and/or use?
Not really. It’s home electronics essentially, and they don’t age very well. Of course there is a secondary market for some of their design classics, but it would be a far, FAR cry to call that a Benjamin Button effect.
Visionary Storytelling: Does B&O have a compelling story to tell?
Well, yes they actually do. They have a great story steeped in tradition, excellence in design and sound (primarily), and they are still pushing the exclusivity of the experience super hard.
The problem is that the size of the audience who is listening – and who even find the story interesting at all – is diminishing.
Every time a senior citizen dies, one more of those who remembered what B&O once was and think they still are goes away. Brutal but true.
It doesn’t help B&O that a lot of the narrative the past 10-20 years has been about the constant crisis of the company, the eternal struggle to survive and stay relevant, which brings me to the last point…
(Mark? Passed but with a mediocre grade).
Likeability: Does B&O have a management team that customers, partners and employees have confidence in?
In short: No! Why? Because it is super, f****** hard to be likeable, when you change your CEO once every year (OK, maybe not exactly that often but very often).
B&O have burned through several CEOs over the last 20 years, and the story has been anything but consistent; one minut it is a branding guy with no real message in charge, the next minute it is an engineer, who then gets replaced by someone who nobody knows who is, because – yes – he is THAT anonymous.
I mean, really?
B&O has essentially been left rudderless. There has been nobody to truly rally around, who could articulate that the company may be akin to a plane in flames flying on the last fumes, but we will all eventually get down safely and live to take another flight – with no flames.
The man at the helm has essentially been AVOL for years.
Mark? Utterly Failed. In an abysmal way.
Which ultimately reflects back on the parents of this particular student; the board.
Having said all that and the above using the T-Algorithm, it should thus come as no surprise, why it is that B&O is closer to being a Zero Dollar Company soon than ever a Trillion Dollar Company in the future.