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Some thoughts on Linn's woes and other matters... (longish)

Posted by DevillEars (A) on April 28, 2007 at 06:41:32

Okay, so Linn have been surviving on the "glories of the past" for some time, and the bottom has begun to drop out, forcing a change of strategy, but how many other similarly-minded UK manufacturers are likely to face similar problems?

OTHER POTENTIAL CANDIDATES

Let's first take a look at SME - another company built on a history of excellence in vinyl reproduction - and consider them against the backdrop of Linn. What have SME done in the last 10-12 years that is different to what Linn have tried?

- SME stuck to their core-competencies and DID NOT dive into HT/AV
- SME also stuck to analogue replay and avoided digital
- SME continued to plough-in R&D and evolved their product range
- SME products have maintained their high engineering standards

Unfortunately, by staying focused on vinyl, SME may just have sealed their fate as the 2-channel market shrinks - and the vinyl segment of it shrinks with it. SME will probably outlast Linn, but not by much.

Next, let's consider Naim. They have embraced HT/AV and have also embraced digital replay. The big question about Naim is whether or not they have done enough in R&D to keep pace with the "audio innovators" of this world and have not, as a result, kept pace. Naim DO have a semi-cult status and a very loyal following, but is it really growing?

I have my doubts that, without a shift in strategy and budget allocation, Naim will survive in their current form as their entry into HT/AV may just have alienated some of the traditionalists in their following.

There are probably many others, but the two listed are pretty typical.

OTHER MATTERS

Immature and rapidly-evolving market segments such as AV/HT demand constant and high R&D expenditure just to keep up with the opposition, but this also implies frequent product supercession which, in turn, implies shorter product life-cycles and, as a result, a limited window in which to recoup any R&D spend.

Volume manufacture/sales such as achieved by the major mid-range Japanese electronics giants such as Sony, Denon, etc. support both high R&D spend and rapid product supercession in the drive to lead the market with new capabilities, but for low-volume, high-end (ie: pricey) UK-based companies like Linn and Naim, product life-cycles need to be longer to permit the recouping of R&D as well as bringing home some profit for the shareholders.

It is interesting to note that even some of these large electronics giants are beginning to experience some financial difficulties as a result of entries into inappropriate market segments (ie: those that don't permit leveraging of core-competencies, other R&D, etc.)

This "gap" in product life cycles is likely to be the Achilles Heel of these UK boutique brands - their products will automatically be left behind in those market segments that are not yet mature in terms of technology and/or standards.

A POSSIBLE WAY OUT?

So, maybe - just maybe - the secret for survival for these companies is to carefully select the market niches in which they will play - and to do so based on the "stability-factor" (or maturity-level) of both the standards and the technology required by the niches, to enable them to maintain long-ish product life cycles.

This shift will require a conscious decision to get out of - and stay out of - any market segments that are exemplified by rapid evolution of both standards and technologies! (Unacceptably high R&D demands?)

This will also allow them to put more focus on engineering and quality, funded by the savings of not having to spend R&D capital chasing rapidly-moving targets.

This does not mean that these companies must just "return to their traditional knitting" - which would surely result in them just fading away - but to be very cautious when considering entering new market niches/segments and applying a "checklist" of prerequisite conditions to determine whether or not the segment/niche is, in fact, an area in which they have a decent probability of succeeding.

SHORTER-TERM COURSE CORRECTIONS?

Another alternative is to look at ways and means of reducing cost while improving quality and many US manufacturers have already started down this road by buying-in technologies and outsourcing manufacturing sub-processes.

In today's world, specialisation is the order of the day, and very few manufacturers still perform/build each and every process/element.

Computer Numeric Controlled (CNC) machining provides very high levels of quality and fine tolerances but with a high level consistency, resulting in lower reject rates - something that is not easy to achieve using human artisans and largely manual processes. For components and sub-components that demand close-tolerance machining, it makes more sense to outsource the machining aspects to specialists that have both the knowledge AND the necessary equipment.

JRDG outsource the machining of those gorgeous cases, so why shouldn't Linn (and other vinyl replay manufacturers) outsource the close-tolerance machining of items like sub-chassis', platters, bearings, arm components, etc.? They've also "bought-in" other technologies (as in B&O's ICEpower amplification modules) and fitted them into externally manufactured casework and marketed the combination as "their product"...

NB: I'm not touting Jeff Rowland as "The Model of Financial Stability in Audio" - just using them as an example of a possible future scenario for survival in this rapidly changing market.

Just as the IT industry has moved from proprietary and fully home-grown product to systems assembled from bought-in components, maybe the Audio industry needs to do the same...

Or is this sh*t I'm smoking of particularly fine quality?

DevillEars

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