Sennheiser Electronic GmbH & Co. KG

1938–1949

Based near Hannover, Germany, Sennheiser Electronic GmbH & Co. KG is one of the world's leading manufacturers of audio equipment. The company's Berlin-based subsidiary Neumann GmbH is the world market leader for top quality studio recording microphones. An established supplier to the global music and entertainment industry and to the broadcasting media, most of Sennheiser's revenues come from high-end microphones and headsets for professional and personal use, including special noise-canceling headsets for pilots and headsets for call centers and multimedia applications. Sennheiser also makes hearing aids and wireless broadcasting systems and equips conference centers, museums, and trade shows with audio-communication systems. While roughly 60 percent of the company's output is manufactured in Germany, Sennheiser exports four-fifths of its total output, with the United States the company's largest geographical market. Foreign production facilities are located in Tullamore, Ireland, and in Albuquerque, New Mexico, in the United States. Sennheiser products, which received numerous industry awards, are distributed by authorized dealers all around the world. The family enterprise is owned and directed by the founder's son.

From Scientist to Entrepreneur after World War II

Company founder Fritz Sennheiser was a realist by nature, and it was this quality that put him on track to entrepreneurial success. In the early 1930s, when confronted with the decision of what professional path he should pursue, the young man abandoned his dream of becoming an landscape gardener. At a time of economic depression, he had concluded, the demand for such services would be very limited. Therefore, Sennheiser decided to pursue his second career choice and became an electrical engineer. He studied wave technology at the Technical University's Heinrich-Hertz-Institute--at the time Germany's center for radio technology--in his home town of Berlin. In 1938, Sennheiser followed his professor to Hannover's Technical University, where he helped him establish a new research institute for radio frequency technology and electro-acoustics. The institute worked on encoded language transmission and developed radio devices for the German army. Sennheiser received his Ph.D. and later became the institute's deputy head. During World War II, the institute's building was destroyed by heavy bombing and its staff of roughly 50 moved into an old farm house in Wennebostel, a small town north of Hannover. After Germany's defeat in the spring of 1945, the Hannover region was occupied by the British Allied Forces. The British military administration made all research in the area of radio frequency and encoding a capital crime but offered Sennheiser the opportunity to continue his work at Cambridge, England.

Sennheiser did not want to leave his country and declined. However, with Germany's academic landscape in ruins, there was no other place where he could make his living as a scientist doing research in his field. With the former institute's remaining staff of seven, Sennheiser decided to make a new start and to found a private enterprise. In 1945, with his personal savings as his start-up capital, Sennheiser established a radio mechanics workshop and research laboratory on the former institute's premises, which he called Laboratorium Wennebostel, in short, "Labor W." Equipped with some of the old institute's machinery the British had forgotten to dismantle, Sennheiser and his seven employees went to work.

Labor W's first products were made out of seven measuring devices the British had left behind on the institute's premises. Sennheiser and his staff converted the devices into valve voltmeters, and Sennheiser made his first successful sale at the Hannover branch of German electric appliances manufacturer Siemens. Siemens bought all seven instruments. Some time later, Sennheiser heard back from them again. The company asked if Labor W could take over the production of a special microphone for radio stations. Sennheiser's team agreed to rebuild the "MD1" microphone from the model they were given by Siemens, since the former supplier's factory had been destroyed in the war. During the postwar years, Labor W developed valuable know-how in microphone technology that laid the foundation for a successful private enterprise.

Commercial Success with Innovative Microphones in the 1950s

Two years after Sennheiser's team of researchers had begun to build the "MD 1" for Siemens, they came up with their own, improved model, the "MD 2." Beginning in 1949, the company decided to market the patented model under the "Labor W" label and to establish the necessary distribution network. However, most of the company's business was still done with Siemens, which in turn helped "Labor W" to become a respected manufacturer in the field of electro-acoustics. Dedicated to pushing the limits in the chosen field, Sennheiser's research team began to put out a constant stream of innovative microphone designs that often set industry standards for many decades.

Between 1950 and 1960, the company's sales exploded, from roughly half a million deutsche marks in 1950 to almost ten million a decade later.

1950–1969

In 1950, Labor W introduced the "MD 3" "invisible microphone"--an extremely slim design with a tiny head did not obstruct an audiences's view of a performer's face as conventional models did. In 1951, the company launched the "MD 4" noise-canceling microphone that suppressed feedback and ambient noise--a novelty in the market. A major success was the introduction of the "MD 21" reporter's microphone in 1954. It's rugged and sturdy design and extreme reliability made it a long-term bestseller among the world's radio and TV-broadcasters. In 1958, the company launched the wireless transmission system "Mikroport." Consisting of a small microphone and a pocket radio transmitter, it allowed TV-show hosts to move more freely in the studio. Besides microphones for the broadcasting and entertainment industry, Labor W developed magnetic acoustic transducers for use in dictating machines and hearing aids. For many years, the company became the sole supplier of these miniaturized microphones, which were roughly the size of a dime, to German manufacturers of dictating machines and hearing aids. The company also developed amplifiers and microphones for telephone receivers.

Due to the quickly rising demand--driven by the growing number of TV and radio stations and the introduction of dictation devices--Labor W grew rapidly. Sennheiser, whose goal initially was merely to create a source of income for himself and his former co-workers, was repeatedly overwhelmed by his own success. He had never intended to employ more than 100 employees. However, that number was soon surpassed. Even the next limit he set himself of 300 employees did not last long. Labor W was riding the wave of rapid expansion, fueled by the German "economic miracle" following World War II. Between 1950 and 1960, the company's sales exploded, from roughly half a million deutsche marks in 1950 to almost ten million a decade later. During the same time period, the company's payroll grew from 67 to 695 employees. Labor W had become a major supplier to the German electronics industry, selling its products to brand name manufacturers such as Telefunken and Grundig. However, with the number of competitors on the rise, the original equipment manufacturer (OEM) business became less profitable. To lower the company's dependence on its industrial clients, Labor W focused its marketing efforts on its own brand name. In 1958, the company was renamed Sennheiser Electronic, which also became the company's new brand name.

Sennheiser Brand Takes off in the 1960s

Slowly but steadily, Sennheiser established a network of authorized dealers and expanded the company's production facilities. Determined to preserve the company's independence from outside investors, the pace of this expansion was dictated by the cash flow available for investment. Sennheiser's own brand name business took off during the 1960s. Sales from products with the Sennheiser label rose to roughly two-fifths of total sales by 1966 and reached 50 percent by the end of the decade. At the same time, the company's export business began to thrive, reaching about one-third of total sales by 1969.

Much of this success was due to two new Sennheiser products that became instant bestsellers. One of them, the MD 421 dynamic studio microphone, was introduced in 1960. Its flexibility of use, excellent sound reproduction, and long durability made the MD 421 a long-term bestseller. Another commercial success of the 1960s in the professional microphone market were Sennheiser's condenser gun microphones, which featured a highly directional pickup pattern that was able to capture the sound in TV and film studios within the viewing angle of the camera while remaining free of ambient noise outside this range. The "gun mics" became a mainstay in Hollywood's dream factories and elsewhere in the world.

In 1968, Sennheiser entered the headset market with the HD414, the first dynamic stereo headphones with an "open" design. Patented in 1967, the HD414 was the result of experiments at Sennheiser that led to a completely new headset design. Until then, headsets had a closed capsule to insulate the listener's ear from outside noise. The experiments showed that an open design that allowed that kind of noise created a more natural sound impression. However, with portable audio devices such as Walkman cassette players merely in the research pipeline of the world's consumer electronics giants, the market for such headsets seemed very limited. A conservative market prognosis predicted a world market of under 1,000 such headsets. Sennheiser was optimistic and produced 5,000. Yet the market success of the HD414 was so overwhelming that the company struggled to catch up with demand for many years.

Sennheiser's success in continually developing innovative products was made possible by the company founders' conviction that his engineers needed a lot of freedom to experiment. In the company's 50th anniversary chronicle, this attitude was described in Fritz Sennheiser's own words: "I am convinced that you cannot be an innovator in product design and development if your engineers are not allowed to tinker around and come up with new ideas. After all, business isn't only about selling products. Above all, it's about selling ideas." A scientific researcher and technological innovator by heart, Sennheiser protected this "freedom to play" of his engineers against the constant attacks from his bottom-line oriented sales manager, who pressed him to focus the company's development efforts solely on marketable products. Lavishly funded with 11 percent of the company's total sales, Sennheiser's research and development department was easily able to compete with that of a large consumer electronics manufacturer.

1970–2000

Naturally, not all of the ideas Sennheiser's engineers came up with were accepted by the customers they had in mind. One example was "Philharmonic," the first hi-fi system with active speakers and a remote control. The expensive system sold poorly and its production was phased out a few years after it was introduced. However, Sennheiser's continuous innovation efforts provided the basis for the company's success in the following decades.

Expansion and Leadership Change: 1970s-80s

By the beginning of the 1970s, Sennheiser was an established brand name for high-quality professional audio equipment such as microphones and headsets. At a time when Japanese consumer electronics manufacturers flooded the world market with new audio equipment at low prices, Sennheiser decided to stick with the company's policy of developing innovative new products of high quality in its established niche markets that allowed higher profit margins. However, in order to secure future growth, the company began to expand its network of authorized dealers and sales subsidiaries in Europe and all over the world. By the end of the 1970s, there were 57 authorized dealers and sales offices for Sennheiser products: 23 in Europe, 25 in Asia, and nine in North America. Even the speeches of Soviet political leaders in the Kremlin were captured by Sennheiser microphones. These efforts to expand the company's markets yielded impressive results. Sennheiser's sales increased from DEM 18 million in 1970 to DEM 63 million in 1980. By the late 1970s, the company's production capacity reached its limits. However, Fritz Sennheiser was able to solve this problem almost immediately. When the premises and buildings of a bankrupt company only 15 miles from Wennebostel were auctioned off, he walked in with a suitcase of cash and bought the new site on the spot. The new production subsidiary opened in 1977.

The year 1982 marked an important milestone in Sennheiser's history. Company founder Fritz Sennheiser decided to hand over the reins to his son Jörg. Jörg Sennheiser had practically grown up with the company. He began to play with spare parts from the factory as a young boy and later started building his own devices--often with the help of Sennheiser's engineers. Not surprisingly, the junior Sennheiser became an acoustic-electric engineer himself. After receiving his Ph.D., Sennheiser began to work for the company's very first customer--Siemens. It was there that he decided to take over the family enterprise. In 1976, the company was transformed into Sennheiser KG, a limited partnership, and the founder's son became the limited partner. After taking over as CEO in 1982, Jörg Sennheiser initiated some changes in management. The company's marketing efforts were geared at two different segments--professionals and consumers--and each segment was managed by a designated product manager. In 1984, Sennheiser launched a product development plan for the next decade and focused its efforts on putting out tailor-made products for these different market segments.

During the 1980s, Sennheiser's engineers pioneered wireless transmission and noise reduction technologies and refined its existing product lines. In 1980, the company introduced its first wireless vocal microphone, followed one year later by a pocket-sized radio transmitter and an accompanying receiver. Partly funded by Germany's second public TV station, ZDF, the new wireless technology made possible complete freedom on stage with flawless sound reproduction of live stage shows such as musicals. In 1983, Sennheiser launched a new kind of hearing aid based on infrared technology. Sennheiser's efforts in refining the company's line of professional studio microphones were intensified to match the new technical standards of the upcoming digital recording technologies. The company founder's life work culminated in 1987, when Fritz Sennheiser received the "Scientific and Engineering Award," the "technical Oscar" awarded by the American Academy of Motion Picture Arts and Sciences, for the MKH 816 interference tube microphone.

Becoming a Global Player: 1990s-2000s

In the late 1980s, competition among manufacturers of audio equipment--and consequently cost pressures--began to intensify. Sennheiser reacted by entering new markets with a number of innovative products and technologies, by expanding the company's network of foreign subsidiaries, by intensifying the company's marketing communication, by moving production to countries where labor was cheaper, and by taking over one of its competitors. Following an inquiry from the German airline Lufthansa, Sennheiser introduced the "NoiseGuard" headset for pilots in 1988. The NoiseGuard technology cut the ambient noise pilots are exposed to in the cockpit in half and was subsequently adopted by many of the world's airlines. The technology was later developed further for use in Sennheiser's hearing aids. Throughout the 1990s, Sennheiser continued to refine radio frequency- and infrared-based wireless technologies for microphones, headphones, and transmission systems as well as for high-end hi-fi consumers. Another invention, the "AudioBeam" technology, was presented by Sennheiser in 2000. AudioBeam made it possible to focus sound waves similar to beams of light. The result was that sound could be projected upon a limited area very precisely. Museums and trade shows were among the first applications of the AudioBeam technology, where the sound of multimedia exhibits could be directed from above at the visitor in front of it, while it was not audible farther away from the exhibit.

1928–2003

Beginning in 1988, Sennheiser founded a number of foreign subsidiaries to strengthen the company's presence in major markets, such as France, the United Kingdom, Belgium, the Netherlands, Singapore, the United States, Canada, and Mexico. To complement Sennheiser's product range, these subsidiaries also took on the distribution of speakers and amplifiers from other brand name manufacturers. The company's subsidiary in the United States, Sennheiser Electronic Corporation, was established in 1991 and soon gained a considerable market share. In 1999, a production plant was built in Albuquerque, New Mexico, to satisfy the growing demand for Sennheiser products in North and South America. By 2001, the United States had become the company's single most important geographical market.

In 1991, Sennheiser moved its headset production to Ireland to cut cost. One year later, the company acquired German microphone manufacturer Georg Neumann GmbH. Founded in 1928, the Berlin-based company had achieved a reputation for making the best studio microphones in the world. After the takeover, production of "Neumann" microphones was moved to Wennebostel, while product development, distribution, and customer service remained in Germany's capital. The production of high-tech components for microphones was outsourced to suppliers in Asia in the late 1990s but later moved back to Germany for quality reasons. However, Sennheiser outsourced the production of cables and components made from plastic.

After a short dip in sales accompanied by higher cost caused by the reorganization after the Neumann-takeover in the early 1990s, Sennheiser got back on the growth track in a generally stagnating market. In 2003, the company launched a joint venture, Sennheiser Communications A/S, together with Danish William Demant Holding A/S. Headquartered in Kopenhagen, Denmark, the new subsidiary entered the expanding market of telecommunications and multimedia with the introduction of five headsets designed for use in call centers and for facilities with computer-based multimedia applications.

In 1996, Jörg Sennheiser handed over the day-to-day management of the business to an external management team. Sennheiser became the president of the newly established advisory board of Sennheiser Electronic GmbH & Co. KG and focused mainly on public relations and the future direction the company might take. In the near future, he saw NoiseGuard and AudioBeam applications for passenger cars. Convinced that the area of electro-acoustics would be able to sustain the company into the 21st century, he foresaw appliances that automatically adapted to the users' personal preferences and mood and that improved communication between people. Standing on a sound financial basis, Sennheiser still financed its expanding research and development programs from the company's cash flow. Since the founding family's goal remained to keep the company vital in the long run, there were no plans to go public. Jörg Sennheiser's three children--all in their twenties or thirties--may or may not become actively involved in the family enterprise. "They can apply for a job, if they want to work for Sennheiser," the founder's son told Süddeutsche Zeitung in 2000 and added: "There is no family privilege."