The Turnaround Story of TC Electronic

Introduction

TC Electronic A/S, a renowned brand in the music and broadcasting industry, faced challenges during the declining market just before the 2008 financial crisis. In April 2008, the company initiated a turnaround, leading to the decision to implement Scrum in its 45-person development department. Prior to this, the development department followed a traditional matrix organisation, consisting of separate lines for mechanics, electronics, and software development. The implementation of Scrum aimed to engage employees, enhance the user and business perspective, and streamline development cycles by pivoting the organisation into small business units, each operating as a Scrum team with end-to-end product development capabilities.

Transformation and Organisational Pivot

Under the initiative of Anders Fauerskov, the CEO and one of the company’s owners, TC Electronic A/S decided to break away from the traditional matrix organisation. They replaced the mechanics, electronics, and software development lines with three business units: Bass Amplifiers, Guitar Effect Pedals, and PRO (Broadcast and High-End Studio Equipment). Each business unit operated as a Scrum team, possessing all the competences required to take a product from concept to launch, including mechanics, electronics, firmware, algorithms, and system software development.
 
Acknowledging that potential releasable product increments could not be achieved in the short sprint cycles when developing physical products, the company decided not to do a Scrum by the book implementation. However it recognised the need for an iterative and incremental approach to product development so instead, the focus shifted to deliver demonstratable results that showcased the progress of the development project and provided valuable insights and feedback.
MVP of a platform for broadcasting products

Challenging Existing Processes and Sourcing Strategies

Throughout the transformation, the implementation team, which included one of the later co-founders of Better Change, Bent Myllerup, realised the need to challenge existing processes related to sourcing, engineering work, and production planning. TC Electronic A/S adapted their sourcing strategy, using small local vendors for prototype production instead of relying solely on final production lines in Asia. This change led to reduced development time and a significant return on investment due to quicker iterations and reduced delays.

Moreover, the company prioritised having a workable, though not sellable, product as early as possible. Workable products could be based on evaluation boards for various technologies, wired together to create functional prototypes. This approach facilitated early verification and knowledge creation while allowing electronics and software development to occur in parallel, expediting the overall development process and decision-making.

Investing in Simulation Capabilities

To further improve development efficiency, TC Electronic A/S made substantial investments in simulation capabilities for high-speed electronic boards. This investment empowered the teams to perform virtual testing and validation, reducing the need for costly physical prototypes and minimising time-to-market for new products.

Benefits of the Scrum in Hardware Implementation

The successful implementation of Scrum and the organisational pivot yielded several benefits for TC Electronic A/S:

  • Increased Market Share: The company gained a larger share in the guitar effect market by introducing more innovative products at competitive price points.
  • Market Disruption: TC Electronic A/S disrupted the bass amplification market by introducing fully digitised products.
  • Strengthened Position: The company solidified its position as a provider of high-end studio and broadcast equipment.
  • Reduced Development Time: New platform projects could be released in half the normal time, allowing the company to respond faster to market  demands.
  • Lower Aftermarket Costs: Improved product quality and better understanding of user needs led to lower post-sale support costs.
  • Increased Product Throughput: Despite a 30% reduction in staff, the company managed to increase the throughput of new products, thanks to the Agile approach.

Conclusion

TC Electronic A/S’ successful implementation of Scrum and organisational pivot brought about a remarkable turnaround for the company. By embracing Agile principles, TC Electronic A/S achieved greater innovation, market share, and cost efficiencies, positioning itself as a leader in the music and broadcasting industry. The company’s journey serves as an inspiring case study for other organisations seeking to drive transformative change, foster collaboration, and thrive in challenging market conditions through Agile methodologies.