Sonos in 2017: Non-Founder CEO Transition and Change Management

By Mike Volpi, Dione Chen
2018 | Case No. SM293 | Length 20 pgs.
Sonos, a home audio equipment manufacturer known for pioneering wireless speakers that offered home listeners greater convenience and superior sound quality, had good reason to be optimistic in 2015. For the past several years, sales had grown in excess of 50 percent annually, succeeded in cultivating an affluent, influential customer base and enjoyed a reputation for developing high-quality, innovative products. The company appeared destined to continue to take market share from established, traditional home audio equipment manufacturers. However, in mid-2015, Sonos was caught off guard when sales growth – a key performance indicator – slowed. Initially, the reasons for the slowdown weren’t clear. Amazon had made waves with its introduction of its first voice assistant device, the Amazon Echo with Alexa. These new devices offered consumers not only music, but also access to a wealth of fee-based and free information services and assistance. Google and Apple signaled they would enter this market as well. John MacFarlane, Sonos’ CEO, and many others within the company grossly underestimated the significance of the changes in technology and thought the impact of voice assistance was more hype than disruptive technology; others at Sonos were alarmed. By late-2016, sales growth totally stalled and it was increasingly clear that Sonos had fallen behind in a dramatically changed market and competitive landscape. There was no question something had to be done to get the company back on track. MacFarlane knew that the company was at a critical juncture, and decided that the company’s leadership and culture needed to change in order for the company to survive. In January 2017, MacFarlane handed the CEO reigns to Patrick Spence, the company’s first non-founder CEO to take the company to the next phase of growth. Spence knew that he urgently needed to drive a cultural shift and launch new products in order to compete in a dramatically different and fast-changing competitive landscape. What steps could — and should — he take in the first nine months on the job to drive innovation and a shift in culture? How could he build a new leadership team and improve teamwork across the company?

Learning Objective

This case encourages students to identify steps that a new non-founder CEO can take to drive change and ensure a company’s continued survival in a dramatically changing industry with formidable new competitors. 1. What missteps did Sonos make in 2015-2017? Which innovation-led growth opportuities did Sonos hit? Miss? 2. What steps can a founder CEO do to help or hurt a new non-founder CEO succeed? 3. What can a new CEO do to reaccelerate growth and empower an executive team to support change?
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