A conversation about the 2020 financial year with Dr. Andreas and Daniel Sennheiser
"We want employees, customers and partners to understand why we make which decisions."
How did the financial year in 2020 go for Sennheiser? Which challenges did you face?
Daniel Sennheiser: We felt the impact of the worldwide pandemic at first hand – especially the effects on the concert and event industry: Suddenly, there were no more live concerts and events. Shops were closed, shopping was no longer possible. All this, of course, affected the sale of our products. We have faced these and other effects of the Corona pandemic anew again and again: Together with all employees, we found solutions and carried the company through the crisis – not only with a great effort, but also with a lot of heart and soul, teamwork and flexibility. The Sennheiser team has shown incredible cohesion and a great willingness to help each other over the past year. This enabled us to achieve a stabilization of our business at the end of 2020 and to close the year significantly better than we had initially expected.
"Together with all employees, we found solutions and carried the company through the crisis – not only with a great effort, but also with a lot of heart and soul, teamwork and flexibility."
– Daniel Sennheiser
How did your four business units develop in 2020?
Andreas Sennheiser: There was a very strong decline in the first half of 2020. The consumer business – starting in the Asian market – already collapsed in the first quarter. When the lockdown measures were implemented worldwide, including business closures, we experienced a drop in sales of up to 50 per cent in individual months. Fortunately, the consumer business recovered quickly in the second half of the year. Our strong online presence also helped us in this.
In the professional sector, especially in Pro Audio and Business Communication, there was a similar development due to cancelled events, but also because it was not possible to install conference technology in office and meeting rooms for a longer period of time. At the same time, we have seen a demand in the professional music sector for products that can be used at home.
Looking back, what determined success in this extraordinary year?
Daniel Sennheiser: We have always reacted quickly and adapted to the new framework conditions. As early as March, we sent our employees – wherever possible – to the home office. We were well prepared for this, because we had already offered the option of working from home long before the pandemic. Technology, infrastructure and a corresponding work culture were therefore generally in place and our IT ensured that all our employees could work from their home offices within a very short time. Of course, it is a challenge to be exclusively connected virtually for months and still maintain a sense of togetherness among each other and with the clients. Our teams showed a lot of creativity here. Projects such as #ThisIsYourCrew were created, in which Sennheiser employees photographed themselves in their home offices to show our customers: 'We continue to work on audio solutions for you, no matter where we are'.
With formats such as #DontStopTheMusic or #DontStopTheEducation, we offered musicians and other professional users a common platform on our social media channels to support them during the crisis. Added to this was consistent cost management, with which we saved 50 million euros in personnel and material costs through short- and medium-term measures. We had a phase of short-time work in Germany lasting about six months and reduced working hours in other countries; senior managers voluntarily gave up part of their salaries during the same period.
Andreas Sennheiser: One of the reasons we weathered the crisis much better than expected was that we did not even try to develop long-term plans or concepts. Instead, we always responded to the various dynamics of the pandemic in the individual markets and business areas with the greatest possible flexibility and individuality. This approach of the greatest possible agility, coupled with a strong customer focus and centralized cost management, was decisive for success in our view.
"One of the reasons we weathered the crisis much better than expected was that we did not even try to develop long-term plans or concepts. Instead, we always responded to the various dynamics of the pandemic in the individual markets and business areas with the greatest possible flexibility and individuality."
– Andreas Sennheiser
Despite all the challenges – were there also areas that developed positively, especially during the pandemic?
Andreas Sennheiser: Yes, Neumann developed very positively throughout the year: Artists who couldn't be on stage went into the studios and produced. For that you need the appropriate studio equipment. The demand for our ceiling microphones, for example, which are controlled contact-free, has also risen sharply. For the challenge of universities and other educational institutions to enable simultaneous online and face-to-face participation for lectures and seminars, our team often found Connect Ceiling 2 to be the perfect solution. We are certain that hybrid educational offerings will continue to grow in importance and that the pandemic here will act as a catalyst for future virtual collaboration, whether in the lecture hall or meeting rooms.
What changes has the pandemic caused for you personally and what insights have you gained?
Daniel Sennheiser: Many people around me talked about deceleration. That is not what I experienced. Of course, there was no more travelling, there was a stronger focus on your local environment, which I found very positive. But the concentration on one place, combined with virtual work, has also brought new challenges for me: you no longer meet colleagues by chance, you no longer experience in person how they are doing.
That's why we make a lot of phone calls, ask what's on colleagues' minds, where there might be problems with childcare or stressful situations, and how we can support staff in the best possible way so that they stay mentally healthy despite the really challenging conditions. At the same time, we tried to be on site in the office whenever possible – even if there were hardly any employees in the offices. Simply to show: we are there. Especially towards our team in production. To do this, I commuted from Zurich to Hanover almost weekly by VW bus. In the process, I came to another exciting conclusion: people always believe that it takes an incredible amount to manage a business. The past year has shown me that a VW bus and a laptop are sufficient for me. I have done hundreds of hours of video conferencing from the VW Bus.
What do you think will be different after the pandemic than before? How will working life change in general and at Sennheiser specifically? And what will change for your customers, the culture and music industry?
Andreas Sennheiser: I think we will experience two phases: First, a strong catch-up phase. People want to see each other again, want to go to concerts again, are looking for enjoyment and live experiences. This joy of being together, of music, is thousands of years old. This basic need for shared experiences with lots of volume and lots of emotions will remain. But I also believe that there will be a change of mindset when it comes to travelling in a professional context. Until now, we could only think of trade fairs or big product launches as personal experiences. Something will change here. We will see a hybridization in collaboration. And this change will be sustainable.
Daniel Sennheiser: The way we work together will be different. For example, we recently agreed with the Sennheiser works council in Germany that 40% of working time can be spent in a home office without employees needing additional coordination or approval. This has various advantages: more flexibility or the better possibility of reconciling family, work and free time. Managers have seen that physical presence is not a prerequisite for good performance. And that ultimately leads to a whole new evaluation of work, especially mental work, of which we have a lot in the company. I can even imagine that in the future we will no longer measure work so much in hours and minutes, but for example in tasks that are solved.
"Managers have seen that physical presence is not a prerequisite for good performance. And that ultimately leads to a whole new evaluation of work."
– Daniel Sennheiser
A defining moment for you and the entire company was certainly the decision you announced at the beginning of the year to concentrate completely on the Professional Division. What were your motives?
Daniel Sennheiser: We have evaluated all four business divisions strategically: Pro Audio, Business Communication, Neumann and Consumer Electronics. We see strong growth opportunities in all four areas and have developed individual strategies for each segment. In doing so, we have recognised that we can be successful in the Professional Division in the long term on our own, because we have everything we need to participate in market growth and to develop the markets ourselves. At the same time, however, we realised that we are better positioned in the Consumer Business with a partner who can promote growth even more strongly than we can on our own. So we decided to actively search for a business partner, accompanied by transparent communication. We received very positive feedback from the market and were able to find our preferred partner relatively quickly in Sonova, which will now continue the Consumer Business under the Sennheiser brand.
You have been very proactive with the search for a business partner. How did this openness influence the process?
Andreas Sennheiser: We have always been a transparent company – both internally and externally. We want employees, customers and partners to be able to understand why we make certain decisions. So for us it was primarily a question of attitude. We wanted to deal with the issue openly. And the interest from the market was – as mentioned – great. This showed us once again how strong our brand and our position in the Consumer Business are.
As a hearing aid manufacturer, many people perhaps did not immediately have Sonova in mind as a partner for your Consumer Business?
Daniel Sennheiser: We did. Because we see many similarities, not only on the technical level, but also culturally. Dealing with sound and tone attracts a special kind of people. Not only do we share a passion for unique audio experiences, we also share very similar corporate values and high standards for product quality. We have received a lot of appreciation by Sonova for our products, our customers and of course for our employees and their skills.
Then a planned partnership turned into a sale. Why this step?
Andreas Sennheiser: We made the decision to sell the business so that Sonova can significantly invest in it, shape it and take it forward. In the future, we will work together under the Sennheiser brand, closely exchange ideas on its development and brand identity, and we are linked through licensing agreements. So we maintain a close partnership.
After more than 75 years, in the middle of a worldwide pandemic, to sell about half of the company is a significant step. How difficult was the decision?
Daniel Sennheiser: That takes a certain amount of courage. But part of entrepreneurship is not simply preserving what is already there, but developing consistently and strategically. After the sale of the Consumer Business, Sennheiser will be about the same size as when we took over the management of the company. So, together with the Sennheiser team, we have achieved significant growth, the company has become more profitable and now the sale and the associated proceeds also create new degrees of freedom for us. For example, we now have the opportunity to invest intensively in the Professional Business. At the same time, the Consumer Business owned by Sonova will also develop further.
Andreas Sennheiser: Yes, we are reducing the size of the company we manage ourselves – but in return we have markets and products that are defensible in the long term and that no one else can offer. We enjoy this, we are proud of it, and we want to develop it further – financially independently, from our own resources. Growth per se is not a target for us.
What are your plans and goals for the Professional Business?
Andreas Sennheiser: A strongly growing market for which we have developed outstanding solutions is Business Communication. Here we focus on universities, among others, and develop products for remote learning and lecturing. Our ambitious goal is to be present in the majority of the world's meeting rooms and lecture halls. In Pro Audio, the growth potential is in software and workflow solutions. Evolution Wireless Digital is a great example. You can think of the "Smart Assist" app as a "sound engineer in your pocket": It's an intuitive system where we combine outstanding technology and software. With it, we give musicians who don't have a sound engineer the possibility to bring great sound to the stage. And of course we are thinking further ahead – for example, in the direction of remote workflows and remote mixing, i.e. enabling productions across different locations without all participants necessarily having to be live at one location. Completely new business models are emerging here. And Neumann is a brand that stands for a clear promise of quality, which means that it will remain number one in the long term and can even expand its leading position.
"Our ambitious goal is to be present in the majority of the world's meeting rooms and lecture halls."
– Andreas Sennheiser
When you look back at the past 15 months: strategic realignment of the company, a global pandemic, refocusing and sale of a division. How do you look at this time of change?
Daniel Sennheiser: Change has a lot to do with how we see the world. We will certainly never get back to a situation where there is a stable planning horizon over a period of 5 to 10 years. The world will become more volatile, there will be much more uncertainty. Changes will follow each other faster and we will have to learn to make quick decisions with less clear structures, but also less clear data. On the one hand, it is important to have a stringent strategy. But a strategy is first only a declaration of intent; you have to remain open to reality at all times. As family entrepreneurs, we bear the responsibility for the continuity of our company – over generations. This includes making courageous decisions, because responsibility does not mean maintaining the status quo but sustainably aligning a business to the customer needs and external conditions in order to ensure long-term success.