Blake Augsburger on the restructuring at Harman Pro15 April 2016
The last time PSNEurope sat down with Harman’s Blake Augsburger was in July 2010. On the agenda were some hot topics: manufacturing issues in Mexico and Austria, investment in AVB, the purchase of Brazilian driver maker Selenium ahead of the World Cup and – most tantalisingly – what acquisitions might be coming next.
Little did your correspondent know just how aggressively Augburger’s division was going to feast in new markets: first gobbling up Danish lighting maker Martin Professional in December 2012, next Dutch beam-steering expert Duran Audio in October 2013, then video control giant AMX in May 2014 (for a cool $365m).
But in order to fully exploit all these new verticals, some radical reworking of the company infrastructure has had to take place. Thus Harman Professional Solutions Division was officially inaugurated on 1 October 2015… and once again, PSNEurope was invited to California to sit down with the executive vice president (Harman International) and president, Professional Solutions Division & Americas country manager. There were a few surprises in store…
PSNEurope: Let’s start with the new company structure.
Blake Augsburger: We used to be organised around products: a mixer business unit (BU), a microphones BU, a signal processing BU and so on … Then we started the acquisitions – first lighting, then video. Our strategy the whole time has been to sell complete systems or solutions. In fact, we even changed our name: we’re now the Harman Professional Solutions Division.
But it’s difficult to [sell solutions] when you’re set up with a P&L based on products, because your motivation, your ‘solutions’ targets are not necessarily aligned with the guy who has, say, the same P&L for mixers.
We were having a hard time taking advantage of our new lighting and video offerings and integrating them into what we were already doing. For instance, AMX sold direct, [while the] audio brands sold through a distribution channel, so we had channel conflicts. We had things holding us back from taking full advantage of what we’d been building.
So, we put everything together, broke down the walls and created two Strategic Business Units (SBUs): Enterprise, our installation business, and Entertainment, our tour, cinema and retail business. We went from having seven product-based SBUs to two large SBUs, centred around the customers they serve, which allows us to see complete solutions down multiple channels.
Before, the product BUs had their own engineering departments – they made great consoles and amplifiers, etc – but while products worked well together, they weren’t “seamless”. Now, putting the teams together, the engineering team is driving a product roadmap based on a complete solution: for a nightclub, for a rental company and so on. This solves so many problems, internally and externally – we can talk about it with our customers and sell at a high level. The benefits are large.
While the new structure went ‘live’ on 1 October 2015, how long before that have you wanted to do this?
A year ago. It was a lot of work – it’s a big shift – we’re more than a billion dollars in revenue with 4,000-plus employees, it’s a big ship that you’re turning around.
Have you managed to do turn that ship without throwing too many people overboard?
Some people self-selected out. There were some upgrades, and some mutual separations. As a whole, the casualties have been small and fairly painless. Whenever you do something like this, there’s always going to be a bit of a challenge.
We’ve always focused on hiring the best mixing guy, the best signal processing guy … now we want to hire the best stadium guy, the best hospitality guy. The guy or gal who knows more about the hotel business than the BSS router.
Back to the structure…
On the Entertainment side [under Bryan Bradley], there are two Customer Solution Units – Scott Robbins for the Retail CSU, Brian Divine for the Touring and Cinema CSU. If you look at Enterprise, run by Kevin Morrison in Dallas: he has Kevin Bowyer running CEG [corporate, education, government], that’s our traditional AMX business, a lot of conference rooms and huddle spaces, selling to banks and hospitals, any kind of corporate environment. Then we have Hospitality under Dave McKinney – cruise ships, nightclubs, casinos, houses of worship – that’s also where we put the broadcast business and the Studer brand.
And then there’s Large Venue – stadiums and arenas, transportation, trains stations, theme parks. That pretty much encompasses the main verticals we serve. The logic makes a lot of sense, it flows well. I’ve listened hard and don’t think I’ve heard a negative comment about the structure yet. We’ve been heavily communicating about this, and I think it’s the right way to go. It gives us the structure we need to take the next step.
Looking at the acquisitions: AMX, as you have already implied, was a very important step.
AMX is a big video player, for switching and video infrastructure. That was a big piece to the puzzle. I’ve been working on this acquisition for 10 years.
Before that, Martin Professional was the first major acquisition, in December 2012.
That’s been a good deal for us, we bought them at the right time – the deal’s been good financially, they had the right products coming out at the right time.
What was the main consequence of that acquisition, as far as manufacturing goes?
We have built a large production facility in Hungary, and have moved our lighting production from Denmark to Hungary, and all of our mixing production from Potters Bar to Hungary. We already have several thousand people in Hungary who work for the automotive group (in Székesfehérvár) to the west of Budapest; the new factory is 90 minutes to the south. It’s all about costs: it’s very expensive to do production in Denmark and the UK. We’re very happy with the labour quality in Hungary, and having a team there already, it seemed like a natural fit. We were out of production at Potters Bar at the end of the year and out of Denmark in March. We’re already building lights and some Studer consoles there.
Back in December 2009, you said how you’d spent a lot of time and money working on the “biggest console facility in the world” in Potters Bar. It seems a shame all that is going.
It’s no longer cost viable. [Emphatically] In six years, business has changed dramatically. It’s much more competitive. To keep moving forward, you’ve got to keep an eye on your costs, push technology and innovation, and try to stay ahead of the other guy. In 2009, that was the best I had; today, I have critical mass for large-scale, high-quality electronics manufacturing in Hungary. By doing this, we’ve stepped up our game considerably.
One of our strategies was, we wanted to manufacture the whole chain. All our loudspeakers, for instance: control the entire vertical – a wood mill, we make our own transducers, the whole chain. In 2009, we didn’t have enough critical mass to open our own manufacturing facility, because back then, we didn’t own Martin Professional. If I’d have built a factory in Hungary and just put Studer consoles there, I wouldn’t have had enough volume to make the cost calculation work. But now, I can fill that factory, absorb all the overheads and take maximum benefit on the low hourly rates. So it makes sense. But I would have done it a long time ago if I could have figured out how to do it.
Running these small factories is tough: it takes away from what I want to focus on, which is engineering and innovation. Moving stuff around is a pain, it’s hard work, but it’s not our first rodeo, we’ve been doing this a long time. At the end of the day, the customer is going to get a better quality product coming out of Hungary, I really believe that.
Let’s get back to the audio acquisitions (after all, this is Pro Sound News!). Duran Audio was next in 2013.
That’s more of a technology play for us, in particular Intellivox technology, for train stations and airports, reverberant areas, and Duran gave us that. It was a good deal.
And then there’s the tunnel business… [A lot of Duran’s revenue was generated by voice evacuation and emergency systems in road tunnels – Ed.] But a lot of that business has been put on hold after the 2008/2009 crisis – we’re still hoping that will come to fruition. The jobs are there, just not the money. Oh, my gosh, if you were to look at the opportunity business for tunnels … but it will come back in time.
In live sound, too, we’re looking at how we apply the Duran beam-steering application. There’s a lot there we can use.
Are you still “aggressively pursuing opportunities”, as you’ve put it previously?
As a corporation, no. [Pauses] You are always looking – it’s a continuous process – but I couldn’t pinpoint what we’re looking at. I will tell you that I’m really busy absorbing this reorganisation and taking care of my factory in Europe, so give me a little time – when we’re done with that, then we can talk about this then [laughs].
Let’s look at some brands and some products. The Soundcraft Performer console, with its lighting control features: in July 2012, that was a brave attempt to create a new market. Is that still something you’re still looking at?
There’s a little bit of that going on, but it’s very limited – for nightclubs or small bands. But if you were doing a professional production, you probably wouldn’t follow that path.
Another European brand: AKG. How is that performing?
We’re doing OK – it’s really good with headphones, we’re doing much, much better with wired mics, we need to do better with wireless. It’s profitable, but we’re still number four [behind Sennheiser, Shure and Audio-Technica]. But it has a bigger role in the total corporation, because we do a lot in consumer headphones and in automotive: a lot of European cars have an AKG mic in the dash. It’s powerful within Harman, but it’s an area we’re focusing on: we see opportunity and they do have killer, top-of-the-pyramid product.
Your biggest brand: JBL. We’re still not seeing VTX on riders in Europe…
But it’s getting better. We’ve made some recent wins – SSE Audio Group for instance – and there are more in the pipeline. Part of the beauty of this new structure, and having a CSU specific for Touring, allows us to go out and focus on that vertical market. And if you were to look at the priority list for touring audio, number one is Europe. We’re going to have more demo gear there, more full time people there to run it, we’re going to take it by storm. We are definitely doubling down on improving our business in Europe! My message to you is we are focused, and we are going to do better. The VTX V20 is a great box. We’ve always had the products, just not the structure to go after that market. And up until last year, our rigging wasn’t as fantastic as it is now. We didn’t even have a demo rig in Europe before!
You said in 2010 you were “a thousand percent” invested in AVB.
Here’s the deal: I’m still in too far, and I’m still in a thousand percent! [But] I’ve got to do what the customer wants, and right now, the customer wants a Dante solution. As far as I’m concerned, I’ve taken a whole agnostic approach to networking. AVB works well in automotive because you don’t need a switch. The work we did there did not go to waste. And if someone comes up with a switching solution, we’re in the game! But my eggs are not all in that basket, and they never were. [Meanwhile] a majority of customers want Dante now.
How was the World Cup for you?
Awesome. We did 10 out of 12 stadiums. We did Sao Paolo airport and underground, Rio airport we’re doing for the Olympics… We bought [Brazilian driver manufacturer] Selenium for those two events, and it has definitely exceeded our expectations and helped us pay for the acquisition. Brazil is not a great place to be right now, but it’s done well for us.
And it’s all paid for?
Oh yeah. And we’ve used that as a starting point for our automotive business, by building a factory in Manaus. [Laughs] It’s the hottest place you’ve been to
in your life!