Exclusive Interview: Daniel & Andreas Sennheiser on Business Strategy

On March 1, 2022, the 75-year-old, Germany-based company Sennheiser announced that after 50 years, the audio specialist will now again be concentrating fully on the professional business. With its three business units, Pro Audio, Business Communication, and Neumann.Berlin, the Sennheiser Group aims to achieve sustainable growth and expand its strong global position as a provider of professional audio solutions. The Consumer Electronics business that was previously part of the Sennheiser Group has been fully transferred to Sonova Holding AG —one of the leading providers of hearing solutions—effective March 1, 2022.  

AV Technology's content director, Cindy Davis, sat down with Daniel and Andreas Sennheiser, Co-CEOs of Sennheiser Group, for a deeper dive into the company's business strategy.

Cindy: From a business development and strategy perspective, are you implementing business theories such as disruptive innovation or other growth strategies that are different from how Sennheiser has operated in the past? 

Daniel: Yes, absolutely. We're looking at business theory all the time. We are using many of those models, whether disruptive innovation, methods like design thinking in the ideation phase, and working with diverse and collaborative teams to come to team solutions. We believe very much in a non-hierarchical organization. We have a certain size with roughly 2000 employees, which needs some structure, of course, but we believe that our engineers, our designers, our marketers are most creative when they work in diverse teams and multifunctional teams and are organized by product groups rather than by functions.

And as a result, we really focus on the customer. A family-owned company also has the advantage of not spending time with analysts and talking to the broader financial public. We can focus 100 percent on our customers and spend our time there because that's really where we believe we create the extra value.

Cindy: Where do you see the growth?

Andreas: Every business unit now has its distinct growth strategy. We see growth opportunities in all those areas, and with the focus now on, and putting all our resources, our funds, and our capabilities for those three business units, we see that we can actually differentiate much better also in the future in order to gain a competitive advantage with the solutions that we have even more than we have today. On the one hand, that investment is significant on the development side to have more capabilities of new products. So, products are currency also for us; still, it's an important part. Development is important then also investment in our own production facilities. We believe that we have to produce the key components or even the entire products ourselves to provide the necessary quality to our customers. And last but not least, is investments in a global sales and service network that we're going to extend for all three business units. 

Daniel: In Pro Audio, we see two areas, we believe on one side, the high-end stage-oriented business, which is our D 6000 system, for example. Here we see investing into the workflow, into digital management systems as a big lever and a big opportunity for future growth because that business is coming back, has been really hard hit through the pandemic, but customers and artists are coming back on stage, and that will rebound probably bigger than ever before. But we also see big opportunities in the audio for video space, with more people creating content for social media platforms, YouTube, Instagram, and things like that. 

On the Business Communications side, we see great growth opportunities in two segments, mainly the higher education market, where hybrid learning solutions are important. Here, our microphones are on one side, and also our MobileConnect system is for the hard of hearing, especially in a large environment like a university. And on the other side, corporations where touchless audio is important. In meeting rooms like the one we have here, we are using a TeamConnect ceiling speaker right now, which you don't see above us. It's a fully automated dynamic beamforming microphone that looks around the room and knows where the speaker sits. 

On the third leg, the Neumann side, we see great growth opportunities in expanding the portfolio. We've historically been in microphones. We have a very successful monitor business with the Neumann speakers, where we see great growth opportunities still. We just launched a suite of instrument microphones, which expand the Neumann portfolio's opportunities while staying true to the Neumann quality reference, which is the reference in the industry.

Cindy: Will the three business units operate individually or collaboratively as a whole?

Daniel: We try to let all the business units branch out independently where it really matters for the customer in terms of a differentiation point. Our Business Communications sales team is a different kind of sales personnel. It's the guys that show up with the tie at the IT department of a large corporation. The sales team for Pro Audio is the guy with a black t-shirt that runs cable under the stage. Therefore, where it really matters for the customers, we let them branch out independently, but when it comes to finding synergies where our competency can be used best, for instance, with our cleanroom technologies for transducer manufacturing.

The two business divisions under the brand Sennheiser are being supplied from the same plant, of course, with different specifications but the same amount of qualification from the people. We really look at how we can take the best of all worlds, either efficiency or highest synergy in terms of quality or highest differentiation towards the customer.

Cindy: Do you anticipate AI and machine learning to play a significant role in developing new technologies?

Daniel: We see a lot of smartness being put into this using AI machine learning, but also just standard DSP algorithms here. Let me make a few examples with the ceiling microphone. One is, of course, the dynamic beamforming group scans the entire room, but if you want to go beyond it and say, we want to be able also to clean the audio signal, using machine learning algorithm to make sure that its speech intelligibility is enhanced. All the participants in a call have the same kind of audio. So that one doesn't have reverb who's at home, and the other one has a drop. So that it's actually not confusing with the coloration of the tone, there we see opportunities to just get it right.

Then the next step is to add an element of immersiveness to it because right now, we can already connect our positional data from the ceiling microphone to cameras. The cameras can actually be steered to the speaker, and the same information can be used to create an immersive environment and position sound sources in space. The fatigue is going down that you can much more relaxed follow conversations there. There are a lot of opportunities to enhance the experience by using advanced technologies.

Cindy: What about AR and VR?

Daniel: If we look at the hype cycle of AR, VR, we're probably in the value after the disillusionment. There are certain areas of AR, VR, which are business relevant, which will become more and more important. We also have a company, Dear Reality, in our portfolio, which is an authoring tool for 3D audio in virtual reality. So here, that in combination with virtual reality content, it is really interesting because it allows people to much more easily create virtual reality content, augmented reality content, and immersive audio content just for a pure playback. So, we see a big opportunity in that space as well.

Cindy: Are there specific innovations we can expect to see in the near future? 

Daniel: Well, probably we can't be precise on what's coming up. What I could explain is the focal points for also innovative and extensions in the different business units. For Neumann, it's covering more of the customer's workflow. Here we also see product extensions in the future that go beyond just microphones and speakers. We're looking into new areas to cover more of the production workflow. 

The solutions are put together from different bits and pieces on the biz comm. We have a microphone with a DSP. We have other devices that all form a chain; in the future, we will cover more of that chain to make it more seamless for the end-user and the installer.

We all know how cumbersome it is and how much time we spend in setting up a meeting room when we get into it. So, here, this is an example where I had to connect her computer to the system and then select the right devices. In the future, the idea is you just enter a meeting room, you say, "Please start my..." I don't know, "Four o'clock meeting with Cindy." And that's it. The system does everything in the background. And this is the very near future. 

For the Pro Audio part, of course, we will extend our digital portfolio significantly. On top of the digital technology on the hardware side, [we will] also offer value-added services, which are more software-enabled services.

Cindy: Is Sennheiser working on anything specific to the hybrid workforce? There has been a lot of discussions around creating parity for near and far. 

Daniel: We completely agree that the hybrid workforce is here to stay. If I look at our corporation here, we have already put a 40 percent mobile working scheme in place. Everybody is allowed to work 40 percent from anywhere and be 60 percent in the office. That can be extended and probably will even be extended because we believe that we don't need to have people in the office in order to ensure that they do good work. Actually, the opposite is true, as we have learned.

Now, if I think about the audio quality, on one side, it's the microphone that it's important. And here we are the absolute experts, our products are reliable, they're innovative, and they deliver remarkable sound, but then comes a big chain of things that we have not under control. With our knowledge and with our technologies, we are in very close collaborations with companies like Microsoft, Zoom, and others who are developing those networks or developing the software in between. 

In a collaborative approach, we will be able to enhance the audio through the whole value chain. And then obviously, the playback device is important, whether it's a speaker or headphone or headset, but that's also part of the overall equation.

Cindy: What technology trends can we expect Sennheiser to be addressing?

Andreas: Another area which we have not spoken about yet, but it's also an area of innovation for us, is AMBEO for mobility. It's bringing 3D-audio, spatial audio into cars. It's still in the project phase, but it's progressing very well. And here, as we have a trend towards electric self-driving cars, we see that the capsule of people being driven or driving themselves becomes more an area that could be your office, your entertainment center, or others. And here we are, exploring and finding solutions for the future using our 25 years of experience in immersive audio technology.

Daniel: We expect a comparable trend to the TV trend that we had. It was more resolution, bigger screens, and just more picture for almost ten years. And as this came to saturation of not being able to mount bigger TVs, everyone started focusing on the audio part. Suddenly production companies like Netflix and others hopped on on the trend to produce immersive audio formats. Then products like our virtual reality mic or others, which are able to mic in immersive formats, became a very strong trend. 

And we see this now also a push on Neumann side that with a lot of immersive audio production, our installation rate of full Atmos systems in studios went up tremendously last year. So that's a very clear proof-point that the visual part is deprioritized compared to the past, and audio is really picking up on all sides.