The archive · Work & Ways of Doing · Strategic decision · 1988–1998
Oticon's Spaghetti Organization: no departments, no titles, best profit since 1904
To save a loss-making hearing-aid maker, CEO Lars Kolind dissolved departments and titles — staff pitch and join projects in a paperless 'spaghetti' company.
Oticon A/S
What it had to solve
Oticon, the Danish hearing-aid maker founded in 1904, lost market share through the late 1980s and slid into losses. New CEO Lars Kolind first proposed moving headquarters and rebuilding it around knowledge work; managers and employees revolted against the move.
How it works
Oticon, Denmark's leading hearing-aid manufacturer since 1904, entered the late 1980s slow to react to changing market conditions, losing market share and slipping into losses. In 1988 the board appointed Lars Kolind, a former academic and management consultant, as CEO. His first plan — moving headquarters and rebuilding the company around knowledge sharing — was resisted by managers and employees alike, so he dropped the move but kept pushing the underlying idea.
What Kolind installed instead became famous as the 'spaghetti organization'. Beginning in 1990–1991, the formal structure was removed: no departments, no middle managers, no job titles. Everyone worked in a single open-plan office with desks on wheels, and every piece of incoming mail was scanned into a shared system so all information was freely accessible. Employees kept a 'job card' describing their competences and joined whichever projects they could pitch to colleagues or be recruited into — a deliberately tangled, project-driven structure with no vertical hierarchy or physical barriers.
The turnaround followed: after Kolind brought in a new managing director to address the finances, profitability was restored within six months, and by 1993 Oticon enjoyed its greatest profit since the company was founded in 1904. The 1994 IMD/Harvard case documenting the experiment won an EFMD award, and the model grew the top line for almost two decades, during which Oticon remained a dominant player in hearing aids with a continuous stream of product innovations.
Why it lands
- Scanned, shared mail meant anyone could spot a problem or opportunity — information no longer traveled only up and down a chain of command.
- Job cards and open project pitches turned employees into internal entrepreneurs who had to recruit colleagues and sell their ideas.
- Removing titles and private offices erased the status and physical barriers that stopped people from crossing functions.
- The redesign treated headquarters overhead as the problem and employee knowledge as the asset, cutting bureaucracy instead of adding process.
What it did
Within six months of Kolind bringing in a new managing director, profitability was restored, and by 1993 Oticon posted its best profit since its 1904 founding — a case that won a 1994 EFMD award. IMD's later retrospective credits the model with growing Oticon's top line for almost two decades while the company stayed a dominant hearing-aid player.
What you can take
Removing boxes and titles is only half the idea; the other half is open information and a visible internal market for skills, so initiative — not the org chart — decides what gets done.
Since then
The spaghetti structure was partially abandoned around 1996 as Oticon grew, and Kolind stepped back when Niels Jacobsen succeeded him as president in 1998. IMD's 2014 retrospective judged the experiment successful at growing the top line for almost two decades but said it gradually became too fragmented and costly as the company scaled, prompting a redesign toward technological innovation within defined competence domains. Oticon remained a dominant hearing-aid player through the late 2000s, when the global financial crisis and shifting industry dynamics forced another strategic review.
Sources
- Untangling spaghetti: How innovation changed at Oticon (A)
- Revolution at Oticon A/S: The Spaghetti Organization (Condensed)
- Oticon A/S: Spaghetti Organization and Beyond
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