When Hans Demant founded Oticon in 1904 he could not have foreseen that the firm would become almost as famous for its approach to organizing as it was to be for its hearing aids. Inspired by a desire to help his wife to cope with her hearing loss, Hans began by importing devices from the United States. During the Second World War it proved impossible to import hearing aids, and the son of the founder (William Demant) began manufacturing under licence. By the 1960s Oticon had moved into international markets, and during the 1970s dedicated research and development facilities helped place Oticon at the forefront of hearing aid technologies. When the firm celebrated its centenary in 2004 it was the world’s second largest hearing aid manufacturer, and today the company has a turnover of around Dkr 5billion (£600 million) with sales offices in twenty-three countries. However, there have been difficult periods in Oticon’s evolution, and this case study explores the changes that took place as a response to one of those difficult periods.

From its founding through to the early 1970s, Oticon gained a reputation for excellence that centred on the company’s ability to miniaturize the electronic components for sound amplification and filtering. The mainstay of the business were so called ‘behind-the-ear’ (BTE) products, which used analogue components. However, as digital technology began to make its way into the hearing aid industry, Oticon suffered from a competence trap (Foss, 2003). The organization had developed a view that digitization and the switch to ‘in-the-ear’ (ITE) products were not commercially viable. Despite having developed the world’s first ITE product in 1977, Oticon managers considered that the costs of digital technology would probably be prohibitive for most customers. This uncertainty about the use of digital technology was set alongside obvious and existing competences in existing analogue devices, leading to a period when Oticon was trapped by its own skill set. The net result was that Oticon’s position in the marketplace was eroded, and by 1988 the firm faced a number of challenges.