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Harman: Revolutionising change in audio equipment markets


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Carsten Olesen, GM & VP of Harman Lifestyle, Europe

In 2012 Carsten Olesen was appointed GM & VP of Harman Lifestyle in Europe, the Middle East and Africa. A dedicated and passionate leader; Carsten had already served the global manufacturer of audio systems across Scandinavia, France, Germany and India during the previous thirteen years. This challenge, based at Harman Lifestyle’s EMEA headquarters in Amsterdam, he explained, was his biggest yet.

Although a world leader in connected automotive audio solutions, Harman’s consumer lifestyle brands were struggling. Iconic names like JBL, AKG and Harman Kardon attached to CD players, Blue Ray and DVD players and loudspeaker enclosures - renowned for their superior sound quality - were intrinsically stuck in what Carsten termed “the loudspeaker age.” He continued: “The company was caught in the past. Lifestyle audio had entered a new era and we were falling behind.”

During the last six years, as Carsten explained, streaming has become the preferred way to consume music. Audio products that meet this need are those that consumers can use at home as well as ‘on the go’ and which have wireless internet connectivity giving you access to online music streaming services. Significantly, in Carsten’s view, with this change, came a change in attitudes towards music too. “It’s no longer about how many CDs you have, or how many songs are available on your iPod. What’s important now is accessibility and how you’re engaging with new technologies.”

In addition to the imperative for instant access over ownership, Carsten also explained that the accessory factor is another feature demanded by consumers today, especially Millennials. “Elements that allow customers to express their personality; so, colour, shape, etc.” Harman has since developed products that match these criteria, but in the fast-paced consumer electronics industry, has acknowledged there is no time to rest.

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Enthused by the enormous growth opportunities on the horizon, but aware of the deep organisational restructure and repositioning needed to achieve that growth, Carsten set out his vision for the division. Defining what made Harman successful and what its future role in the industry should be; it included substantial investment in new operating structures, talent acquisition and training.

The key factor was turning the sales force to face the new market. Armed with a strong portfolio of new ‘on the go’ audio products, transforming Harman’s approach to strategic key accounts was of paramount importance. After reviewing cost structures and how the division positioned its resources relative to market trends, Carsten acknowledged deep change was necessary to accomplish growth potential: “I went into the project with a cost perspective, but soon realised it was more about achieving scale. So, it became a cost repositioning rather than costs cutting exercise.”

Two major issues needed to be dealt with. From a database of 12,000 customers, only a small number generated eighty percent of turnover. Furthermore, only a fraction of Harman’s huge portfolio of lifestyle audio products still contributed to sales. Internal knowledge of newer products was also lacking and operating profit was in negative double digits.

His biggest challenge? Yes. But in Carsten’s words: “The kind of challenge I like because you can only do better.” His first actions included reducing the customer database from 12,000 to 3,000 as well as SKUs (stock keeping units) from 15,000 to 500. Highlighting this wasn’t a cost-cutting exercise, Carsten did compare the process with “heart surgery” as it involved various office moves, the consolidation of subdivisions and hiring and embedding new talent while saying goodbye to several long-serving employees. “Overall it was a rough but productive process. We gained a better oversight of activities, became better at business development and completely refocused our efforts on streaming and audio on the go.”

Once the right infrastructure was in place, it was time for Carsten and his new team to secure and maximise opportunities with a select number of integrated distribution partners. He explained how, while streamlining the customer database was important, understanding the true “growth partners” for Harman Lifestyle was vital as these hand-picked few would be where the business would “first and foremost launch new technologies.”

An immediate success in this area was signing a long-term innovative partnership agreement with Europe’s biggest consumer electronics retailer, Media Markt/Saturn. Harman Lifestyle was selected as the “audio captain” for Media Markt’s 1000 stores across Europe. Furthermore, in the UK, Harman’s most underdeveloped market, further agreements were secured with Argos and John Lewis as well as Dixons Carphone, which owns Currys.

As Carsten explained: “Currys is particularly interesting as it gives us a solid foundation in which to expand in the UK. We have established a strategic account team to develop and maximise our all our partnerships within Dixons Carphone which also owns various other market leading retailers in Northern and Southern Europe.” Tying things up are additional arrangements with Darty Group, recently acquired by French retailer FNAC, which has a major presence in France, Iberia and the Benelux; as well as Amazon.

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The scale of the success of these developments in under five years is phenomenal. Between 2013 and 2016 Harman Lifestyle’s annual turnover increased from circa $150 million to $400 million. Average quarterly revenue is higher than the division’s overall revenue when Carsten took the reins in 2012 and consumer lifestyle audio equipment is now second only to automotive audio equipment, when it comes to overall sales within the wider Harman International group: “It’s been a unique and exciting journey and in some respects, we’re just getting started. We’re now the market leader in portable audio devices in five European countries and we’re using this position to elevate the audio experience for the educated listener.”

High turnover, Carsten highlighted, brings bigger promotional budgets to the table and in 2017 the business will be ramping up its marketing and advertising activities. Harman, Carsten explained, has historically been engineering led and relied too much on technical quality as a key selling point, to the detriment of telling great stories about its products. “There’s only so much tweaking you can do to make products better than competitors. When I joined the business, there was little investment in marketing, now we have a global marketing strategy and some exciting initiatives planned.”

At the heart of this strategy is understanding the customer journey and the importance of referrals and recommendations. Carsten indicated that increased investment in what he called “street-level marketing and social media tie-ins” is a key focus: “In the UK, we will soon be announcing a new partnership with a leading omnichannel retailer. The partnership is aimed at giving UK customers easy access to the best-connected home, portable audio and headphone products. To coincide with the launch, we will also be announcing our collaboration with a top UK performer/artist who will promote and endorse our brands. Consumers should expect to see various promotional tie-ins such as the opportunity to win tickets if they buy Harman technologies.”

Currys and Harman will also be doing co-branded events at this year’s V Festival. This is as part of Harman’s wider 100 days of the summer program, which will see their brands showcased at other major European events including the Montreux Jazz Festival and Tomorrowland in Belgium. “It’s all about engaging with people on the spot as opposed to traditional above the line marketing techniques.”

As well as music personalities and events, Harman is partnering with sports stars and fashion brands, which they consider to be other major influencers of their target customer base. They include sponsorship deals with Footballer of the Year Jerome Boateng of Bayern Munich and French international footballer Rafael Varane of Real Madrid which will help raise their profile in Germany, France and Spain. Carsten also highlighted Harman’s alliance with the US sports brand Under Amour (one of the fastest growing sports brands in the world) to develop high-end cutting edge equipment for endurance sports and general fitness: “These amazing products, which have gone through over one thousand hours of testing by leading athletes, will appeal to a growing consumer segment.”

While getting messages out is driving greater awareness of Harman’s Lifestyle offering, under no circumstances has the business let its engineering prowess slide. Harman, Carsten explains: “…is a technology company with more than six thousand patents and 12,000 software developers, deeply engaged in the connected world.”

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The wider business, most well-known for its market leading position in the connected automotive space where it provides market-proven navigation and infotainment solutions for the world's car consumers, is also renowned for technology applications in a variety of other areas. For example, JBL is the number one brand for pro-audio and studio equipment, stage sound and movies (seventy percent of all cinemas in the world are equipped with JBL professional cinema loudspeakers). In addition, Harman also develops enterprise and AMX technologies and has even created algorithms to improve the sound in flat screen TVs, an innovation that led to a co-branded collaboration with LG.

In terms of its Lifestyle brands, Carsten revealed Harman will be bringing to the market several new and innovative wireless audio devices at premium prices over the next few years. Streaming, he argued, has up until now been focused on relatively inexpensive, though well made, products. Harman anticipates an increased demand for more powerful high-quality audio products with wireless connectivity. These products, which will come in different shapes, colours, materials etc. will also be combined with advanced signal processing allowing users, for example, to move sound around to suit their position in a room: “They are essentially replacing products from the loudspeaker age. With average prices climbing in this category, wireless devices with the same audio quality and capability as component devices is an emerging market worth paying attention to.” 

Voice and AI, Carsten confirmed, are other big areas of investment. With Google, Microsoft, Amazon and Apple all active in these markets, Harman sees plenty of partnership opportunities forthcoming. The business is already an early integration partner of Google, supplying audio add-ons and solutions built especially for the Google Home platform. “Voice is the next generation of browsing and consumers will soon choose voice products in the same way they select Yahoo, Bing, Google or Baidu, etc. when they browse online.”

Generally, IOT (Internet of Things) is expected to play a major role in many areas moving forward and Harman aims to be at the cutting edge of this technology. With a leading European retailer, discussions are already ongoing about how Harman can supply embedded audio for robots, which will be used to guide customers around stores. “Customers will be able to talk and interact with these robots, therefore, voice and acoustics quality is important.” Augmenting the immersive experience of virtual reality devices and creating entertainment suites for self-driving cars is a further glimpse of what’s to come: “We offer a full technology palette providing innovation that drives the connected world.”

It was perhaps no surprise therefore when, in November 2016, the technology press reported that Harman International was to be acquired by Samsung for $8 billion. Carsten explained how competition in connected technology and AI is already fierce with Apple and Google, etc. and even with the scale of Harman, when it comes to the development and integration of artificial intelligence algorithms and machine learning the business would likely struggle to match these companies. While Harman enables Samsung a foot into the soon to be explosive connected car market, Harman will benefit through its ability to build great sound into many of Samsung’s lifestyle products.

With the transaction in the process of being completed, Carsten revealed his personal excitement about the merger: “Samsung is one of the most admired companies in the world and together we can accelerate our growth through combined resources and synergies. The much-anticipated Galaxy Tab S3, which uses AKG tuned quad stereo speakers, as well as Samsung’s Galaxy S8 smartphone introduced on March 29th which comes with AKG in-ear headphones, are just the tip of the iceberg when it comes to future potential collaborations.”

He added: “It’s an incredible time to work at Harman.”