Sonova’s Secrets

13 July 2008 (Last Updated July 13th, 2008 18:30)

They have just posted record profits and a number of famous people front their Hear the World campaign. Sonova's CEO, Dr Valentin Chapero, tells Paul French the secrets behind his company's success.

Sonova’s Secrets

Paul French: With record sales and 12.3% growth, it is fair to say 2007/08 was a great year for Sonova. To what do you attribute your success?

Valentin Chapero: First and foremost it is our motivated and highly qualified employees who produce extraordinary work on an ongoing basis and consistently put our strategy of innovation, expansion of our sales and distribution capacity and pro-active cost management into practice.

Look at our rate of innovation: we generate 59% of our hearing system sales with products that are younger than two years. We are continuously extending our sales network.

In the last year, we have opened up distribution companies in India, China, Japan, Russia, Mexico and South Africa.

PF: How do you think changing the name from Phonak Holding AG to Sonova has helped?

VC: Through the name change of the holding, the autonomy of the various brands such as Phonak and Unitron Hearing was reinforced, guaranteeing them all equal opportunities. The name change was also a logical step in our long-term strategy of offering hearing healthcare products through multiple brands and diverse activities. We don't want to be just a hearing system company, but an all-round hearing healthcare company.

PF: What makes Sonova tick? What drives you on as a company?

VC: We want to be the leading provider of innovative hearing healthcare solutions and give people all over the world as natural a hearing experience as possible through the use of our products. The fundamental driver of our success is our corporate culture: people value focused, hands-on mentality, not hierarchies.

PF: What are your thoughts on the medical device industry as a whole?

"We don't want to be just a hearing system company, but an all-round hearing healthcare company."

VC: The medical device industry is a wonderful place to work. Not only do you help people but typically you are in a highly innovative business with very exciting perspectives going forward. I guess the heavily regulated environment and the exposure to the diverse health insurance systems is the other side of the same coin.

PF: How does the advent of new technology help you and the medical device industry as a whole?

VC: Technology does not equal innovation. Many technologies have come and gone with a lot of initial hype, to then fizzle out within a few years. The combination of people's creativity with innovative approaches and state-of-the-art technology is what makes the industry tick.

PF: What can you tell us about Hear the World? What do the ambassadors do?

VC: Hear the World is a global initiative by our hearing device brand Phonak, created to raise public awareness about the importance of hearing. The initiative calls attention to the social and emotional impact of hearing loss and addresses prevention of and solutions to a problem that affects more than 10% of the world's population.

"The combination of people's creativity with innovative approaches and state-of-the-art technology is what makes the industry tick."

Through the Hear the World Foundation, Phonak supports charitable organisations and projects focused on helping hearing-impaired people. In the Hear the World initiative world famous musicians and actors such as Bryan Adams, Rod Stewart or Annie Lennox serve as ambassadors. They help to stress the importance of good hearing and to generate media attention for the topic of hearing by participating in Hear the World press conferences and in media briefings.

PF: How did you convince people like Mick Jagger, Amy Winehouse and Lindsay Lohan to become Hear the World ambassadors?

VC: It was not hard at all to convince them. As musicians or actors they know how important good hearing is. This is why they are naturally sympathetic to a cause dedicated to help people appreciate and preserve an individual's sense of sound.

PF: Market penetration rates for hearing systems have traditionally been very low – just around 20%. What difficulties does that bring you as a company and how do you overcome them?

VC: It is true that only one out of five persons who would need a hearing system actually wears one. Unfortunately, there is a strong stigma attached to hearing systems that we have to fight against. We are convinced that the penetration rate will increase in the long-term and are also taking several measures to make this happen.

The Hear the World initiative is one of these measures and at product level we try to establish a new, modern image of hearing systems with our Personal Communication Assistant Audéo.

PF: You recently announced that you are building a new technology centre, which will open at the end of 2009. What will that allow you to do that you cannot do already?

VC: The new manufacturing and technology centre simply gives us the possibility to expand our capacity, optimise our work-flow and implement highly innovative production processes. It is the logical consequence of our continually growing business and of our highly innovative product pipeline. With this centre we lay the foundations for Sonova's further growth.

PF: The new technology centre will use innovative production methods. What can you tell us about those?

"Only one out of five persons who would need a hearing system actually wears one."

VC: As a result of the most sophisticated microelectronic packaging we will integrate even more powerful and smaller, customised circuits in 65nm technology. We will increasingly focus on the multi-component injection moulding process, which combines hard plastic and elastomers in a single flow of work and we will continue to produce customised in-the-ear hearing systems using the latest digital technology.

PF: How do you intend to achieve your goal of pursuing a clear growth strategy and building market share?

VC: By putting into practice our strategy of innovation, expansion of our sales and distribution capacity and pro-active cost management. In February 2008 we already successfully launched Exélia, our new first-class hearing system, and Naída for people with profound hearing loss. More important product launches are still to come in the current financial year. We also plan to expand our range of services and our sales and distribution capacity.

PF: You recently announced that there would be "another wave of innovations corresponding with the group's growth and especially the hearing system brand Phonak". What can you tell us about that?

VC: We are constantly launching new, innovative products. The next products will be launched at the German hearing instrument trade fair EUHA in October this year, but I don't want to give away any details at this stage.

PF: What markets do you see as being strong in future?

VC: Our focus is still on the core markets North America and Europe. Growth in the BRIC countries (Brazil, Russia, India and China) is very high, but from quite a low base. We will have to wait some more years until these markets will have a real impact on our business.

PF: What has been your biggest R&D success to date and how was it achieved?

"As a result of the most sophisticated microelectronic packaging we will integrate even more powerful and smaller, customised circuits in 65nm technology."

VC: I'd say this was the introduction of our freely programmable hard and software platform PALIO. This was a major step as by using this platform, Sonova can benefit from economies of scale, flexibility in design and production, increased product development capacity and reduced time to market for new product launches. Since then, the platform has been further improved and its successor CORE now even contains wireless technology.

PF: What are you doing in terms of R&D now?

VC: As already mentioned, we are constantly improving the freely programmable hard and software platform. And there is still a lot of improvement potential for the hearing performance and also for the aesthetics and comfort of the products.

PF: Finally, what does the future hold for the medical device industry as a whole?

VC: The combination of a continuously ageing population, higher economic output, new technologies and growing health awareness of our society will generate sustainable growth for many years to come.