Through waves of technological change, the Bose brand has remained synonymous with state-of-the-art sound—in homes and cars, for business travel, and in professional settings like hotels, restaurants, and concert halls. But like many successful companies, as it faces new competitors and blurring industry boundaries, the company’s search for new growth has forced a kind of existential dilemma: Are we an audio company? Or something more?
In asking this question, the company began a path toward “dual transformation”—a two-pronged approach to optimizing its core businesses while launching an entirely new business. In the core audio business—its “A transformation”—the company is, for example, fortifying its noise-cancelling headphones franchise, adding digital services, and launching an innovative new audio-focused AR platform.
For its “B transformation,” Bose has launched a new wellness division, with products aimed at helping people live healthier lives. It may seem like a surprising move, but a closer look reveals not only the logic, but interesting lessons for other companies looking to successfully build and scale new businesses outside of their historical focus.
Starting in 2015, Bose began quietly building this new division alongside its consumer, auto, and professional divisions. The group’s first product, Bose Hearphones, is a “conversation-enhancing headset” that combines noise-cancelling with directional microphones. It is controlled by a phone app, so that users can customize their listening for different situations, such as noisy restaurants. Bose is also focused on the 60 percent of adults who report problems with sleep. In June 2018, it introduced the Bose noise-masking Sleep Buds, which filter out sounds such as snoring and other ambient noise.
Creating a new B business comes with unique challenges, and when Bose launched the effort to move into health and wellness, it recognized that it would need to make deliberate choices about strategy, talent, and scaling. Below are a few insights from Bose’s efforts that have relevance for any company trying to launch a new business outside the core.
To create a successful B business, exploit unfair advantages. Many companies get animated by big trends that create potential for new businesses, without being sufficiently clear about what gives them a right to play. Without a clear basis for competitive advantage, companies often struggle with better-positioned competitors. As Bose looked for adjacencies in the areas that they are distinctive in—audio, control systems, brand trust, and the ability to communicate the benefits of technology—health and wellness applications rose to the top. Seeing that the company’s technologies and competencies could be applied in a way that could help people lead healthier lives, it’s no surprise that the two initial products are audio-based. That’s not to say they are extensions of existing products. Bose’s efforts in hearing and sleep offer fundamentally different value propositions, have new approaches to the channel, and require additional technical capabilities. But the grounding in what has historically made Bose a market leader gives the company a foundation to build on.
Don’t launch the B business before you have the B business. To minimize organizational complexity and manage expectations, Bose did not set up a separate division until they had made substantial progress on real business opportunities. Many organizations make the mistake of establishing separate organizations that are larger than necessary for early-stage exploration. In fact, Bose did not establish a formal wellness division until two years after it started exploring sleep and hearing assistance. The focus for these two years was to carefully explore customer needs, test product-market fit, and determine whether their products could solve real problems. Only when the two emerging businesses demonstrated significant progress did they begin to build a more holistic strategy to attack the wellness market and begin building the necessary infrastructure and teams to scale the business.
Don’t make the new business simply a place to house non-core projects. There should be a clear strategy that defines what is in and out of bounds for the new business. Bose’s strategy focuses on specific areas of wellness where they believe they can create value in a differentiated way. Even after launching the division, they have continued to sharpen their portfolio focus, rather than expand.
Build linkages with the core business that are made up of ‘boundary spanners. One of the most difficult challenges when creating a new business is borrowing from the core without it becoming a constraint. To address this challenge, some of the key leaders in the wellness division are long-term Bose people with strong networks and knowledge of Bose systems. These leaders can help effectively tap into resources and processes that accelerate progress, helping get things done and leveraging the core effectively. Of course, any new business area will require new talent and skillsets as well. The wellness team tries to create the right balance with at least 30 percent new employees from other industries—mostly from medical and healthcare. Actively and thoughtfully managing this existing-new talent is critical for new businesses.
Focus on building a strong culture. In addition to new solutions and business models, entities outside the core business often require distinct, purpose-built operating models and cultures to succeed. One of the keys to building a strong culture is having a clear purpose. The wellness division’s purpose—helping people live healthier, more engaged lives—serves to create a strong, motivated team while also attracting new talent. Further reinforcing the unique culture, Bose Wellness moved from the Framingham, Mass. headquarters to Boston Landing, a new mixed-use development closer to downtown Boston. This new space puts them closer to the startup and venture capital communities.
Anticipate the step change between development and scale. Going from an emerging to a scaled business is difficult, even for a company with lots of experience designing, building, and selling hardware. Many of the skills and capabilities that are essential for early-stage iteration are not the same required for scaling a proven concept. For example, Bose found that the early engineering teams, who were great at rapid prototyping and concept development, didn’t necessarily have the right skills to craft production-quality code. In addition, once you have a product in market, there are new challenges that will inevitably arise, including product support and updating. Successful companies anticipate these challenges and put in place the right structures and processes to deliberately manage a scaling business while also continuing to explore and launch next generation products.
Few companies can rely exclusively on their existing engines to meet all their growth needs. While forging into new markets is replete with challenges, they can be thoughtfully addressed with deliberate design choices when it comes to strategy, focus, people, and culture. By building on elements of what has made Bose successful—and starting small with careful investments—Bose is positioning itself to take advantage of new opportunities, rather than be disrupted by them.
Ned Calder is a partner at Innosight, the growth strategy consulting firm, where he leads the industrial and technology solutions practice. InnoLead regularly publishes Thought Leadership pieces written by our Strategic Partner firms.