Rebuilding an insolvent Kenwood by turning to professional radio and cars (2002)

Attachment to the founding business, and the coldness to sort it

What stands out in this rescue is not a blanket cut of the loss-making divisions but the order of the sorting: the earning businesses and the losing ones were separated, and then home audio — losing money, but seen as the core of the company — was kept, while mobile phones, which were breaking even, were deliberately let go. From inside the company it had long been clear which businesses earned and which bled. That it could not withdraw from home audio anyway was, people close to it at the time say, because the staff had joined out of a longing for “Kenwood, the audio maker” — an attachment to the founding business. It may be precisely because the manager came from outside that he could honour that attachment and still sort by the numbers.

The turn towards professional radio and car electronics did not, however, put Kenwood alone back on a high growth path. The road to scale in a mature AV industry ran through the 2008 merger with Victor Company of Japan and into a larger restructuring. What a company in crisis discards and what it keeps, and in what order it decides — Kenwood’s sorting in 2002 shows that a judgement running against intuition, cutting what looked like the growth business and keeping part of a business that looked in decline, can be the starting point of a rebuild. It also left behind the question of where the person able to make that judgement is to be found.