You may be listening to us right now from a product designed and manufactured by Czech hands in Kopřivnice. And it doesn't matter if you're running with your dog, sitting on the couch with a deuce, or driving in the car. And the more luxurious the brand you're listening to, the more likely it is. Because the girls and guys in Kopřivnice make for such resounding brands as Bang & Olufsen, Bose, Sennheiser and more.
In fact, some of the products of these brands are manufactured by Tymphany, a league of champions among loudspeaker manufacturers. It also has its European headquarters in Kopřivnice. And it's run by a local. Could I have missed my chance?
And so Pavel Merhout, Managing director of Tymphany Acoustic Technology Europe, s.r.o. ound himself in the studio. I wanted to know from him...
🔸 How are politics and people governed in a multicultural society?
🔸 How to keep R&D on the cutting edge of innovation?
🔸 What is the policy of autonomous strategies?
🔸 How should a director or owner maintain company values?
🔸 How does a quality director become a managing director?
HOW THE OWNER OR MANAGER SHOULD MAINTAIN COMPANY VALUES (INTERVIEW TRANSCRIPT)
Martin Hurych
Hello. I'm Martin Hurych and this is another Ignition. Before we get into today's guest and today's topic, I have one big request for you. As is tradition, I'm going to ask you right now to like or ideally subscribe so that you don't forget about this after the episode is over. That way you won't miss anything I produce here on Ignition and you'll help me get across the social media algorithms, which will help me show Ignition to more people and invite great guests like today's. My guest today is Pavel Merhout, hi.
Pavel Merhout
Hi, Martin.
Introducing the guest and what he does when he's not doing anything?
Martin Hurych
Pavel is managing director of Tymphany Europe. Before we get into the company, what it does and where it does it, I always start here with a personal question, but I couldn't find anything on you. Do you rat on yourself, what do you like, what are your hobbies, what do you do when you're not doing anything?
Pavel Merhout
I'm married, I have a family, the fact is that my kids are bigger now, I have two girls that have come out of the nest, so now my wife and I are alone and it's given me a little bit of time off. So I've been doing some projects on the side.
Martin Hurych
I assume neither the kids nor the wife were happy because you're the head of the European branch of a multinational corporation. What's it like to be away from home, at least in the early days?
Pavel Merhout
I have to say, it's not like I've been away more than I've been home, which is fine. The branch is European and the main units are in Koprivnica, where I live a short distance away, and the other main unit is in Wales, where I show up one week a month, so it's not such a big deal.
What does Tymphany do?
Martin Hurych
Tymphany Europe is very likely not known to many people, yet very likely many people hear primarily voice through the brand's products. So what do you do and who do you do it for?
Pavel Merhout
We do audio, we do speakers and sound systems. The biggest brand where we do 60% of our turnover from our branch is Bang & Olufsen. The factory where I work was built in 2004, 2005 we started building, 2006 we opened it and that was the Bang & Olufsen factory. After a while, when we realised that we could grow the business, we had the capacity to do it, but that Bang couldn't fill that factory, we said we needed to find a new business somehow. That was through a partnership with Tymphany, which is great because Tymphany has great technology, we're the innovators, we go and set those trends in audio and Bang & Olufsen has that design again. So when we were talking in 2015, 2016, who is the right partner here, Tymphany was the choice. They came in and said they have the technology, Bang & Olufsen has the design and the acoustics, and when you put that together, it can't fail. Today we've been together for 7 years and I think it's great.
Martin Hurych
When you say we, you don't just mean the corporation, but you also have an R&D centre in Kopřivnice, if I understand correctly.
Pavel Merhout
We have an R&D center and there are mainly two groups. One group is for mechanical development and the other is for the acoustics. At the same time we have a group in Wales that does the drivers, the speakers, the units themselves. So we cover pretty much everything that the design needs, we're missing the hardware and software that we develop in Asia, but the collaboration is going nicely.
Martin Hurych
How far-fetched would it be to say that Bang & Olufsen is so great thanks to Czech hands?
Pavel Merhout
It's true. Bang & Olufsen itself has a portfolio of different products and in the Czech Republic they make the most iconic ones, the flagships, the most expensive ones and the ones with the most added value.
How are politics and people governed in a multicultural society?
Martin Hurych
Tymphany is truly global and the sun does not set on you because you are from America to Asia. At the same time you were joining Bang & Olufsen, so you were working for the Danes. How do you manage internal politics and people within such a multicultural company?
Pavel Merhout
You hit the nail on the head. Bang & Olufsen really is a typical Danish company. I think myself, by being with them for almost 20 years, I've absorbed a lot of that Scandinavian leadership. We have an open culture and our values are very high rather than processes, discipline, procedures and so on. At the same time, Bang & Olufsen is really a company that is traditional in mindset as well. Interestingly, Tymphany on the other hand is such a predatory aggressive company.
I might demonstrate this with a story I remembered. I always think the company carries a lot of the DNA of the founders. You can still feel Steve Jobs today from Apple, that vision and that vision and that incisiveness and all that. If you ask yourself how Bang & Olufsen came to be, it was two friends, Peter Bang and Svend Olufsen, Danes, who started soldering the first products on a chicken farm at one of their mom's house. Then when they saw that the business was going well, they decided to invest and build a factory. Their idea was to build the factory with a plan B, that if by chance it didn't work out, they made a deal with the town of Struer, where they were from, that they would buy it out as a school. So they had a kind of a cautious approach, if by chance it didn't work out, it's a school and we're not going to come out bad, we're going to take the money for the school and go out of business. That's such a very cautious, such a conservative approach.
On the other hand, Tymphany is a really interesting thing, Tymphany is owned by Primax Corporation. Primax was founded by a man called Raymond, who is Taiwanese, an extremely wise gentleman. I don't think there are really many businessmen like that in the world, he knows all these icons of all these big companies and he's 78 years old today. When he was 30, he worked for IBM and decided to go out on his own. He invented a product, wall sockets for telephone lines, and he tried to break into the American market with that product. He didn't have anything, he just had the product, he didn't have the line and there were no internet sales then, there were catalogue sales then. I suspect it was Radiohead that owned this catalog company that sold these components. He approached them about offering them business. So they said they would come and take a look, they wanted to see the line, the capacity, and then they would make some kind of arrangement. He had nothing, of course, and he knew that they would come in 14 days, so he went to China and hastily rented something there, got some people there, made some tables, made the sockets himself, scattered them on the tables and pretended that there was production there. They came, did an audit, said they were going to do it and wanted 10,000 units a month. So he got all the people back on board and he really had to get it going and deliver the 10,000 units. A year later, Radiohead won the best supplier award and they announced Raymond. So Raymond was invited on stage and there were hundreds of suppliers and they congratulated him. Raymond said he had to tell them something, but they knew what he was going to say because they could tell he was faking the whole thing. So Raymond wondered why they had chosen him and they told him that if someone could organize such a thing in 14 days, it couldn't fail. So I want to demonstrate the cautious approach of Bang & Olufsen and the very aggressive approach of Tymphana. Those two things met at Kopřivnice and now we've been balancing between that and finding our values and it's working.
Martin Hurych
What did you end up with? The way I'm listening to you, it sounds a little schizophrenic at first.
Pavel Merhout
That's right. Bang & Olufsen has its own market, it's a market for people who have money, who like beautiful things and who like audio. It does relatively well in that, the fluctuations are there, but somehow it works. But with Tymphany going independent and getting into a B2B position and we no longer just have Bang & Olufsen, we have 5, 6 other customers, so suddenly we're in a pure market environment. So we needed to get that value and when we're fighting for contracts we had to learn and it took us a year to learn, to promise something that we don't have in our hand yet. We always have to think and say to ourselves that with some risk we can probably do it, we don't know how yet, but we think we'll do it, we'll put it in that quota and we'll win the business.
How do you do business among corporations?
Martin Hurych
So how does B2B business work in your niche today? You have some long-term relationships with Bang & Olufsen, it used to be their factory, it's still a joint venture, it's probably easier there. But when we were talking here before the shoot, there were other big name brands like Sennheiser, Bose and others. How do you do corporate-to-corporate sales?
Pavel Merhout
It has to be said that we have three such main business areas. One is consumer for end customers and that's where we are in the higher segment. It's a really tough market environment, you have to be first to market with something new, you're playing for months and you have to meet the launch date.
Costs are very important because in that chain we are us, then our customer, then there is retail, everyone wants to have a margin on it and the customer has to be willing to pay it in the end. So that's a consumer that doesn't have that aggressive type of dynamic.
Then we have professional, that's the studio type products, where the tempo is slower, where a bit different laws work, or stage products. There, on the other hand, it's very traditional and our customers are very careful to make sure that the quality is there. They give it to their customers, which are musicians, and they want the best. These are products that are not for listening, but for creating that
of music, so the quality there is awfully high and therefore the tempo is slower and the conservatism is huge.
The third area where we see the biggest growth potential is automotive, and in automotive now with electric cars we have a whole new sphere opening up. We have partners and we're looking at where the automotive market is going to go and we know that you used to buy a car for the horsepower, you used to buy that roaring exhaust and that speed, but that's not the selling point anymore. That car will become an entertainment center or a work center on wheels. That interior has to have multimedia, it has to have perfect sound, the possibility to isolate yourself, the possibility to do these activities there, that will be the selling point. That's where we come in, where we think it's the right time to start breaking that business model a little bit. What we want to do now is we want to get to the very top of that development, completely ahead of that concept. We want to be able to talk those car companies into it so that we can really elevate the car to that selling point that even those car companies need.
We have built a very handy selling or business funnel, where we have three levels. The first level, the most cloud-based one, is called audio foundry. We have a space in Wales where we have car docks, we have acoustic chambers and various workshops, prototype workshops and things like that. We have a concept there, you can imagine it like a gym pass. We sell to those companies, those car companies for some membership fee for a year, they buy it, they can come in there and together they can share what they want to share or they can absorb those trends in audio. We can tell it how we think and absorb how they think and together create that trend of where the whole business should be going. That way we can get to the very beginning, get information on some concepts x years from now. I think that's a great thing that we've done, we've got it going in Wales and we're at the stage of wanting to clone it to the Czech Republic and maybe other parts of the world. That's the very top level of the funnel, which is interesting, that the car company can come in, invent something, take something and they can leave.
But it can also stay with us and translate into a project and that's what we call engineering services. We'll come up with the concept there, and at the end of that is some concept of the technology, how it should work. We come up with it, we pitch it to them, they pay for it, so they pay a fee in that foundry and then the NRE pays for that development. Again, there's a win-win. They've got what they wanted and we already know what they're working on, so then when we go to that third level, the car company can say somebody else is going to make it for them, but we already have a head start. We've got a head start in that we know the concept, we've created the concept, so we've kind of got an advantage and then the advantage of that business and for that product development and for that manufacturing is easier. I think we have a very clever model.
Martin Hurych
That's very nice. To give you an idea, how many customers do you need to have a year?
Pavel Merhout
Needless to say, we've been running this model for about a year, so we have about 8 of them in there at the moment.
Martin Hurych
How many malls are there in Europe?
Pavel Merhout
We have one for automotive. So it's not a super big team, we're in that startup phase and of course we want to grow and we will grow, but you have to start small.
How to keep R&D on the cutting edge of innovation?
Martin Hurych
We said at the beginning that the consumer segment is quite commercially active, maybe even a bit brutal, every week is a competitive advantage. You draw and invent the best of the best. How do you keep your R&D team in shape to be able to lead that race to set trends and not just follow them?
Pavel Merhout
This is a difficult thing, of course. The automotive mindset helps us a lot. The other thing to say is that we don't want to apply that idea of those engineering services only to automotive, but we are applying it to that commercial segment as well. We have a customer right now who has an idea that he would like some technology features on that speaker and he knows us, so he knows we can do it. The way it works is that we have a discussion, we have a series of workshops where we fine tune those expectations, we say what's possible and they think about what they would need. Now we're at the stage where they've come in saying they've really got an idea, but they'd like something that we've developed. So the recipe is to have the solution but not to offer it as a ready-made and unchangeable solution, you need to listen to the customer and fine-tune it, work it out with them. It's key to listen to the customer, to understand what they need.
Martin Hurych
For me, the key there is being able to be able to even tell the customer what is possible and guide them through their darkness. Do you have any processes in place, how do you generate new innovations, how do you come up with new technologies, trends, approaches to things that you might then start offering to the automotive industry?
Pavel Merhout
We do, but I wouldn't call it a disciplined, strict process. I don't even think it's possible. People ask a lot about where we get the ideas, the thoughts, but you really have to take it everywhere. We have a marketing department at my mother's in Taiwan and they think about what the customer is going to want in a year, in 2, in 5 and also it's input from a huge number of different areas from really thinking about how the customer's life is going to evolve. Like I said with the cars, you need to think for that customer, what they're going to need in some time and at the same time look at the trends of other companies and draw from that. I wouldn't say it's a process that really says, we've got this, let's come up with something. It's terribly intertwined.
What are the differences between the markets?
Martin Hurych
When I was working in corporate, I was working for an Anglo-American company and then for the Dutch, and I think it was even more noticeable within the Dutch. The mother invented something and the rest very often had to apply very blindly what the mother invented. The moment you have, for example in my case, production in Scandinavia and we are talking about heating and cooling of buildings and you have to populate South East Asia with these products designed for Scandinavia, we both know that this is nonsense. I'm wondering if you have something like that within sound as well, if maybe within each region there are different sound preferences.
Pavel Merhout
You have to look at the way these people live, because we're talking about audio. For example, with this Bang & Olufsen, we see that it's not entirely successful in America. If you ask yourself what it is, these are things where you can buy two speakers for a million crowns and put them in a parrot house now that costs twice as much, plus you're going to move in two years. The way of life in America is very unrooted, the houses are really light, a tornado comes, the house flies away, so the investment in that being, when you compare America and Europe, is completely different. Scandinavia, on the other hand, where people really design their houses, they spend a lot of time at home and put a lot of energy into it. The mindset is different there, you really invest in it. So that's the answer to the question of whether there is a global difference in the way we look at products.
What is the policy of autonomous strategies?
Martin Hurych
We had a conversation before the shoot and you brought it up in the prep as well, that you have a policy of autonomous strategies. How does that work and what is it?
Pavel Merhout
It's something that we're rolling out and Europe is in the vanguard of the corporation. Of course, I think everybody today sees that globalisation is going down a little bit and that localisation, local to local, is going to happen, so that's something we've been talking about for a few years now. We have embraced that in Europe with our team and I really think we have been able to draw that strategy to be more and more autonomous within Europe. Of course, we will never completely separate ourselves, there is know-how that we don't have, we have to draw on, there are processes intertwined with the mother, but we are doing well. You can see for yourself the business model we are rolling out in Europe. These are things that I think we can be proud of and the way you corporations need to regionalise, so we are doing it first in Europe and then we will do similar for other parts of the world.
Martin Hurych
When I looked at your site, you have a large production capacity in China. So does that mean that you are also looking internally for other sources?
Pavel Merhout
Capacitatively at the moment, I would say that Europe is 10% of the turnover of the whole corporation and I don't think it's going to be somehow diametrically opposed to us growing at half or something like that.
Martin Hurych
But when you have a factory in Kopřivnice, do you look for a supplier of some components within local to local and outside your own mother to deglobalize?
Pavel Merhout
Of course. In terms of components, we have a kind of hybrid strategy. Some components have to be smaller so that they can be transported cheaply or they have to be standardised or typically electronic components are better sourced from Asia. On the other hand, the bigger ones that make the design, that make the final cosmetics of the product, it's better to have them from Europe. So we have a combination and we can find a local supplier ourselves, right.
How do they control the supply chain?
Martin Hurych
There has been a lot of talk, especially after Covid, about local to local, but also about the fact that many multinational companies would like to have more control over the entire supply and procurement chain. What do you think?
Pavel Merhout
Vertical integration is something we definitely need to get going. We have at least two, potentially three, four key components that we need to be able to produce ourselves in the longer term. We're now working on making speakers ourselves within our capabilities, which at the moment, Tymphany does, but we're shipping it halfway around the world. There are more of these other similar components, such as wood. The wood in Europe is definitely better to do it yourself because you have control over that chain, when you launch a new product you don't have to convince someone to do it this way and not that way. You just make it the way you need it for the final design and at the same time you save two or three margins in that value chain. So it's a direction that we definitely need to go in and I think the business world in general will go in that direction.
Martin Hurych
Those components that are critical to you that should go into vertical integration, does that decision fall purely on a financial basis or are there some strategic things?
Pavel Merhout
There are three such elements. It has to pay off, we won't do it if we make a profit on it. The second thing is that there's the risk of mitigation of that supply chain. Often the customer asks us to do that because they don't want to have the risk of geopolitically China stopping supplying or some new tariffs landing there. Having that in hand in terms of that derisk is certainly more important. The third factor is ESG. We have Europe here and customers want it, we want it to be more environmentally friendly and if we have it under our control, of course the control, the ability to influence is much greater.
What is ESG and how to use it in business?
Martin Hurych
ESG, and previously social responsibility and gender, are usually the topics that are absorbed most quickly by large corporations for political reasons. Do you see any change in, say, the Green Deal or ESG in recent years? The Czechs have always been against the Green Deal and the Czechs have always been against everything, but on the other hand, I generally see that there is a bit of a retreat even under the weight of maybe economic problems and the activism is not so much. Do you see that too?
Pavel Merhout
I see and I think that it is a little bit of our Czech stupidity to go against it at all costs. I think that this is a good direction, and not just in the sense that it is something that the European Union will say and everyone will stand back and say that we do not need it. You really have to think long term about what it is going to look like here.
Martin Hurych
I even have a client who actively jumped into ESG and today says it is his big competitive advantage. From your position as the head of the European office of a large company, how could ESG help a lot of people in the Czech Republic, for example, as practically anything that needs to be filled out and is considered a big expense, just in business? Do you see that anywhere?
Pavel Merhout
I think that ESG is really too bureaucratic, I would agree with that, but that does not mean that it is bad. The fact that there are a lot of standards and a lot of auditors and a huge industry feeding off it, that is the side effect that could certainly be done better, but that does not mean that the idea is bad. I think it's also a lot about how everyone has it set up in their head, how we think, how we want to leave that footprint here in that positive light. I think ESG could also be done just by everyone doing the right thing.
Martin Hurych
Now it occurred to me that at the moment we're filming this episode, a lot of listeners aren't yet affected by this. Let's just briefly say what ESG is.
Pavel Merhout
Environmental, social, governance. The way I see it, it's about the company behaving responsibly. It behaves in a way that it does not harm the environment, that it behaves within the context of the society where we are, that we do not harm other parties and that we manage that and it all makes sense together.
Martin Hurych
You said customers want it, which is a positive. So do you see any real impacts within the business if I meet ESG and I meet these steps and I'm fair to myself, to the environment and to nature, does that have any business impacts?
Pavel Merhout
Absolutely. Customers want it, they also have that responsibility, they also have those standards that they have to meet, and these requirements are already reflected in the tender. Where it used to be said, the cheapest wins,
so today it is at least on the same level whether or not we have ESG and whether or not we have the supply chain derisk.
How important are values in a corporation?
Martin Hurych
I realize now, looking at my notes, that we have successfully escaped from the values when we were discussing those two totally different principles. I worked for the Swedes for a long time, and within that Anglo-American world we had several manufacturing plants in Sweden. There I know that a lot of those companies have strong values, and those people really look at it very differently than the Czechs, because for a Czech the value of a company is often a nuisance and a fabrication. What are your values?
Pavel Merhout
I would mainly say that I am very happy that we have managed to take one important step and that is that we did not let the values be imposed by the corporation. Instead, we reached out to a few people within our company and asked them to create their own values and then we looked to see if they aligned with the corporate ones. They do, but just the process of creating them ourselves gives it a whole different power. There's no need to make huge signs in the hallways and put it on the radio somewhere, these people know it, so they know it. So we've had that first step where a few volunteers have collected stories within our company and asked people to reflect back on when they've treated each other in a way that was fine and when they've treated each other in a way that maybe wasn't quite what we wanted to do. Those stories were then put into groups and within those groups some parallels emerged and we then gave those parallels names. Classically, we have one team, we have that trust and respect, we have that we're crossing our own boundaries and we have that Tymphany sound. We're pushing our own boundaries, there's an imprint of that breakthrough and Tymphany has a sound, it's kind of that pride that we do really good stuff and nice products. These are things that came from the bottom and today those people are really living it. We've been able to save some money on the budget for example, and people have said they're going to decorate it themselves at work and they've done that decor in the spirit of those values without somebody coming in from corporate and saying here it is, Tymphany has a sound. It's really about something else and for me that has a lot of power because once those people understand those values then they follow those values and they don't need a boss or a process manual to do it. They know it's the right thing to do and they can defend it. It gives us tremendous strength and I believe we can say about Tymphany, at least within Europe, that we are a value-driven company.
How should a director or owner maintain company values?
Martin Hurych
I like the process. We're both members of Scaleupboard, where there's a lot of emphasis on values in general, but we probably both know of plenty of cases where the value is A4 printed in a kitchen somewhere. What do you think a business owner or boss should do from their position to maintain those values? Because I often hear that values are important, I want to create it with people, somehow we create it, we maintain it for a while and then it ends up in that kitchen printed on that A4. What does the boss have to do to maintain a value-driven company?
Pavel Merhout
Stories happen every day in that company, so it's important to know what's going on. Then you need to notice and either verbally or otherwise positively evaluate those stories or those activities that match those values. When there is a deviation, on the other hand, we need to give that feedback and say that unfortunately we have gone wrong, that it is not quite what we said it would be. But I am a positive person and in my opinion I would almost say that the positivity is enough. One is motivated by positivity, that's something I believe in, so if I see that I've made a decision and I'm going to do it in a certain way and I've succeeded and someone else appreciates it, I'll tend to repeat it next time. I'm not going to tend to fake it or get it wrong. It'll happen, it might be a mistake and then there's feedback, but I'd say the ratio is about 90 to 10.
How does a quality director become a managing director?
Martin Hurych
So you have a lot to do in Bohemia and Moravia, because when I go out on the street, everyone's a caboose, there aren't many positive people here. When I checked you out on LinkedIn, I found out that you started your career as a quality engineer in a specific manufacturing plant and then you grew up to become a multinational head of a company responsible for the whole of Europe. That's not exactly a standard route, because these positions are usually taken by salespeople, economists, CFOs or professional managers. My clients have quality managers or meet quality managers. The qualitative person is not exactly a popular persona because they say the wrong things. How does one grow from a qualitative person into someone who is positive and has to manage a bunch of people across countries?
Pavel Merhout
Now you've described how quality is done wrong. The quality guy who is the cop and who is the controlling component and says, not this way, is the whip to do these things right, I think will never grow up. The right quality person is the one who sets the environment for those things to be done right the first time. That kind of quality person thinks about whether we have the processes set up right, whether everybody understands what to do, whether everybody knows the purpose and goal. If it all fits together, then no mistakes are made because everyone knows how it is right. A quality manager, I think, on the other hand, has a huge outlook and understands how the company is supposed to work and creates that environment, which in turn, in my opinion, is very much in line with the role of the boss.
Martin Hurych
So you are such a qualitarian of positive mood and values in Tymphany Europe?
Pavel Merhout
I don't think so. A qualitarian probably doesn't have the constituent to drag it out for that other business, which I think is my job.
Martin Hurych
Well, Pavel, I'm very glad you shared your experience with us, thanks.
Pavel Merhout
Thank you very much, Martin.
Martin Hurych
We took a peek into another business from a different perspective, today we looked at what it looks like in corporations. If you found anything, whether it was values, quality, business, innovation, that you can implement in your own company, then Paul and I did our job well. If that's the case, I'll ask you again to subscribe, like, forward to a friend, a colleague, another boss who might find this episode useful. You'll help me and Zagazh to get further among people.
Be sure to check out www.martinhurych.com/zazeh, where all the others besides this episode are. I can't help but keep my fingers crossed and wish you success, thanks.
(automaticky přepsáno Beey.io, upraveno a kráceno)