The traditional keys to the success of this nearly century-old company are focusing on customer needs and running an efficient business.

Instead of focusing on technology as its end, since 1904, Oticon Inc has used it as a means to its end—helping people to hear. “People first is the principle under which we conduct our product development because, ultimately, our business is about delivering end-user benefits,” says Mikael Worning, MS, president of the United States headquarters of Oticon Inc, in Somerset, NJ. “If we do that right, we also believe we are doing what is best for the hearing care professionals, making their jobs easier and more rewarding.”

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Donald Shum, PhD,

vice president of
audiology and
professional relations
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Mikael Worning, MS,
president of US
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Tom Falvey,
vice president
of operations.

It is the focus on the audiological over the technological that makes Oticon stand out from its myriad of competitors, and reflects the company’s humanistic model, encompassing a more biologically and socially based model. “From a technical standpoint, we believe we are cutting edge just like the other advanced technology companies are,” says Donald Schum, PhD, vice president audiology and professional relations for Oticon Inc. “We try to provide that in terms of all our communications aspects, especially to other professionals…to make sure that they understand what we’re trying to do with our products, what we believe is in the best interest of the patient, how to get the most from the product for the patient from an audiological standpoint, meaning that it’s not just the technology that’s involved, but understanding the hearing loss, understanding the way patients approach the process, what sort of problems they face, what sort of issues that they have to deal with, and how an advanced technology hearing aid, along with a very smart clinical program for the patient, can lead to the highest level of benefit. Our belief is that the hearing aid is not a complete solution for the patient. The hearing aid and good knowledge on the part of the professional are essential to get the best level of benefit for the patient.”

And this humanistic business model—which is reflected as much in the corporate culture as in the marketplace—has fed the bottom line. “Ultimately, if you have an end user who has had their expectations met and you have delivered a solution that fulfills their needs, you have a happy professional who has had a successful business interaction with that person,” says Worning. “There is no conflict between serving those needs and running an efficient business.”

The focus on humanism does not mean the company has shied away from technological innovation, which includes its Adapto digital hearing aid. In fact, the move to digital technology has aided the company’s mission, says Worning. “Until recently, we had more knowledge about what we wanted to do from an audiological standpoint than the technology could fulfill,” he says. “So, to a certain extent, we were hardware dependent. With the delivery of the digital platforms and their flexibility and possibilities, we’ve been liberated from hardware dependency. We can push for new insights into audiology, physiology, and the fitting process—that we now have the potential to address—with our advanced technology.” Reflecting this audiological approach, each Oticon hearing device is individually fitted and oriented to the customer—taking into account factors such as age and lifestyle.

And unlike many of its competitors, the company avoids adding features just for their own sake. “We don’t want to deliver features, we want to deliver benefits,” says Worning.

The company’s humanistic approach is reflected in the administration of its United States headquarters in Somerset. Though tied to its European parent, the US office has a large degree of autonomy, says Worning. “Our business across all countries carries the same philosophical foundation, so it’s not that difficult to stay in sync,” he says.

There are no walls or dividers among any of the plant’s 275 employees including senior management like Tom Falvey, vice president of operations. “We’re all in this together,” he says. “Our logic is that walls stifle communication. We want everybody fully engaged in the operation, so you know exactly what’s going on at any given time. We’re not big on titles or areas of responsibility. If anybody sees something that needs to get done, they roll up their sleeves and just do it—from the top all the way down.” The plant is ISO 9002 certified, and recently was enlarged 60%.

Oticon Inc’s American headquarters is centered in Somerset, NJ.

Though the US plant does not do any manufacturing, it does assemble Oticon’s various products. Each hearing device includes a card with the name of the person who assembled it. According to Falvey, the company’s ability to motivate and make employees feel valued has contributed to its high-quality products and low turnover. Among the methods used to keep employee motivation high is a bulletin board with positive customer feedback tacked to it and a pay for performance system.

This lack of barriers translates beyond the company’s walls. Falvey says that customer support is an ongoing and regular part of business. “I encourage our service manager and our production manager [to keep] in constant communication with the dispensers—our customers—because I don’t want information filtered,” he says. “And I think it works twofold. We get direct feedback from our dispensers, and we give direct feedback to the dispensers. We have a very good working relationship, so they feel very comfortable picking up a phone and calling the production managers directly.”

Supporting audiologists goes beyond simply answering questions or handling problems that may come up. The company offers separate training and sales courses to them as well. “We’re not the only company that does this, but we were one of the companies that saw early on the need to have…a sophisticated training process,” says Schum. “We also have a lot of different avenues for phone support for our customers. In fact, sometimes we worry that we have too many places people can call to get support. We do proactive training in the marketplace and then we also do reactive training to the sort of issues they have and the sort of problems that they will come to us with.” A large number of the customer contact people are audiologists.

The Company that Love Built

The Oticon Foundation focuses on research to alleviate hearing impairment.

Love inspired Hans Demant to found Oticon in 1904. A representative for General Acoustics in Odense, Denmark, Demant wanted to find a way to help his hearing impaired wife. “[Hans Demant] slid into the hearing aid business by delivering a solution that he had heard about from America to his wife,” says Mikael Worning, MS, president, Oticon Inc. “That spread like rings in the water, and by default he more or less slid into the hearing aid business.”

When Demant died in 1910, his son, William, took over the Copenhagen-based company, which he would control until the 1950s when he and his wife, Ida, donated their Oticon stock, forming the William Demant & Ida Emilie Foundation. “The foundation was started as a generational transition from the son of the original founder who had no apparent heirs, and at that time he decided to bestow the company to this foundation,” says Worning.

Today, the foundation, which eventually changed its name to the Oticon Foundation, owns about two thirds of the company, and, according to Worning, this gives Oticon a distinct edge in the market. “This foundation has a very narrow charter focusing on the alleviation of hearing impairment, which has given us enormous strategic focus throughout all these years because we have not been forced to cater to stock market swings or changing management because we’ve always had this ability to look long term,” he says.

Though the manufacturer of a range of hearing aids today, the company originally imported its products from the United States. This changed during World War II. Because of the German trade blockade, the company—which at the time employed 16—had to manufacture its own products. The first hearing aid produced by the company was a copy of an existing instrument, the Acousticon. The first true Oticon hearing aid, the Oticon model TA, would be introduced in 1946.

The company expanded throughout the 1960s, establishing operations in the Netherlands, the United States, Switzerland, and Germany. By the 1970s, Oticon was the world’s largest hearing aid manufacturer, a position it would hold for several years. The 1970s also saw the establishment of the company’s independent research unit, Eriksholm Research Centre (located approximately 20 miles north of Copenhagen), a group dedicated to pure audiological research.

While the company moved from a technologically driven model to an audiologically driven one in the 1980s, the 1990s marked the introduction of a number of technologically advanced hearing aids to the market including the MultiFocus, the first fully automatic hearing aid, and the DigiFocus, the first digital hearing aid. Its latest hearing instrument, the Adapto, was introduced in 2001. N

—Chris Wolski

Schum adds that by helping audiologists understand the technology, they will be able to help their customers better. “What we have come to realize more recently [is that] we need to help the professionals who deal with our products to be able to explain the benefits of advanced technologies to their patients,” he says. “Because we know that the emotional buy-in on the part of the patients to take responsibility for the success of the hearing aid fitting falls on the patients to a greater degree than a lot of them realize. And so what we are turning to now is a very good training system that we’ve established and that we believe is effective; we’re trying to put more concentration in helping our customers transmit knowledge to the patients, so the patients understand the role of the technology, the limitations of the technology, and the critical factors for success.”

Though Oticon has a customer focus, Schum admits that not every audiologist or end user would benefit from being an Oticon customer. He says that there is a profile each of these customers has to fit. “The sort of professional that we deal with is not interested in using a transactional model of salesmanship—where it’s just what kind of price they can do, what kind of deal they can do—that’s not who we appeal to,” he says. “We tend to appeal to professionals who want to do well by the patients, want to give them the best possible solution, and realize that there are some interpersonal factors that are certainly important in getting that good solution to the patients. Who are they going to be fitting? They are probably going to be fitting patients who are willing to take responsibility and realize that they need a good solution, and they need to move forward and do the right thing for their hearing. I believe the patients who end up getting fit with our products are probably the ones who are most ready to use hearing aids.”

Tom Falvey, vice presient of operations (left), consults with members of the Oticon team.

Changing the Culture
Though Oticon is different from its competitors in its focus, it shares the same fundamental problem—trying to compete in a market where there is a powerful opposition to wearing hearing devices. “The facts show we have a long way to go [to break down the stigma of wearing a hearing aid],” says Worning. “I think [breaking down this stigma] is a continuous focus in all lines of approach from product introductions to the hearing care professional’s approach to the market to emphasizing the gigantic improvement in the quality of life that hearing health care delivers. But there’s no quick fix.”

Schum says that the company’s philosophy is ideally suited to help to overcome the stigma. “We think that the humanistic model that we use is one of the best ways we can attack the problem, because if making hearing aids smaller or better or cheaper were enough to break the…barrier, then we would have solved that problem and the penetration of hearing aids would have gotten better every year. None of those technological horizons have changed that barrier whatsoever, and we believe it is a much more complex social issue,” he says.

In addition, the company is working to change the perception of hearing loss in other ways. “The Focus on People Awards…that we do develop positive role models of individuals with heairng loss—who despite their loss are doing effective things within the community or within the society,” says Schum. “No one approach is going to solve every issue, but certainly with every attempt we can make in many different areas, we hope there’s an accumulated effect over time.”

What also sets Oticon apart is the fact that it is run, not by the heirs of the founding Demant family (see sidebar), but by the Oticon Foundation.

The foundation also works beyond the boundaries of the company, expanding upon its humanistic mission. “The Oticon Foundation does not set our development agenda,” says Schum. “In other words, the avenues we work in are in a more traditional business model, so the foundation is independent of what we do in terms of product development. They truly are interested in funding projects that will in general address the betterment of all persons across the world with hearing impairment. For example, in the United States, we recently funded a project in Spokane, Wash, a state where legislation had to be passed to upgrade the basic level of training that a hearing aid dispenser would need to have. We provided a large grant to help with the educational process there, believing that [improving] the education of the professionals dealing with the product is in the best interest of the patient.”

There are no walls or dividers separating Oticon’s 275 employees—includiing its senior management team. According to Tom Falvey, vice president of operations, “Walls stifle communication.”

Changing the Future
The Oticon Foundation also gives the company an edge with its Eriksholm Research Centre. “By design and intention, we have separated Eriksholm from our development facility,” says Worning. “The reason we’ve done that is because we wanted the hearing-impairment benefits or the end-user benefits to develop in an independent academic environment where there would be no profit…or other restraints on them. We wanted a pure research and development facility. This freedom has enabled Eriksholm to interact with universities and other academic institutions in developing the next breakthrough.” The company also engages in more traditional, product-related research.

Every Oticon product is heavily tested through the Eriksholm center, which has access to 800 research test subjects—end users—who, Worning says, ultimately develop the product through their feedback. “You can make a lot of ideas work in a research facility where you have infinite time and infinite skill level, but these ideas also have to stand the test of a competitive environment,” says Worning. The average development cycle is 5 years.

The Somerset plant is involved in the continuous research cycle with developers working at the US plant and is in constant contact with the staff. “We’re in constant communication, not only from a new product standpoint, but how we understand what’s going right with the products we have, what are the areas of opportunity where we could improve upon these products,” says Falvey. “Every time a new product is launched, they incorporate those improvements into the next generation, so there’s a continuous improvement philosophy that we’re operating under here.”

The company has also made its technology available to other research institutions. “When we developed the first digital product, the DigiFocus, we actually made it available in a research version to a number of universities around the world,” says Worning. “We said, ‘Test out your pet ideas on this platform and see how it works, then come back and let’s talk about them.’ We have a fantastic cross-fertilization that ultimately produces superior finished products.”

Chris Wolski is associate editor of Hearing Products Report.