Reference no: EM131920473

Question: Steinway & Sons Piano

Steinway pianos have long been the premier brand among serious pianists. Franz Liszt called his Steinway "a glorious masterpiece." Gioacchino Rossini, a 19th-century composer, described the Steinway sound as "great as thunder, sweet as the fluting of a nightingale." In short, Steinway's product is the piano of choice for the vast majority of concert artists. From the beginning, Steinways were a work of art. Jose Feghali, a classical pianist, illustrated this point when he remarked, "With the best pianos, you can walk into a room with 10 pianos and it's like playing 10 different instruments." The prices of the 5,000 or so pianos that Steinway produces each year range from $10,000 for an upright to $62,000 for a special-order concert grand piano. In the 1990s, Steinway & Sons encountered some problems. John and Robert Birmingham purchased the firm in a $53.5 million leverage buyout deal.

John's previous experience involved making plastic windows for envelopes. Robert's most recent experience was with a mail-order business selling products with bear themes. Robert Birmingham said that they were delighted with the purchase because they viewed Steinway as a "great opportunity" given the firm's "great name and great tradition." Steinway's craft-driven organization had not fared too well under its previous owner, CBS. The turmoil resulting from frequent management changes had reduced the consistency of Steinway's cherished reputation. Dealers complained that Steinways weren't of the same quality any more-they were often badly tuned and had sloppy finishes. Finally, in 1978, CBS hired a long-time piano industry executive who helped restore much of Steinway's reputation. Now, a new set of outsiders owned them. That the owners liked classical music did not assure Steinway's 1,000 employees that they knew how to make classic quality pianos. To make matters worse, the Birmingham brothers were now talking about using their "extensive manufacturing experience" to streamline operations. One commented that the operation was "too reliant on a few craftsmen." Soon modern manufacturing methods crept into the Steinway operation. A computer control system was introduced to keep track of parts and inventory. Eight million dollars was invested in new equipment to make the quality of small parts, such as piano hammers, more consistent.

The loose-leaf binders that specified how pianos were to be built were replaced with engineering drawings. By the late 1980s, Steinway had entered the 20th century. John Birmingham lamented: "The music industry is made up largely of people enamored of music and the instruments they make, but they don't necessarily have great management skills." As Steinway became more scientific, some stakeholders began to be concerned. Many of the older craftsmen found the new work environment not to their liking, and they left. Equally important, some within the industry began to be concerned that Steinway pianos were losing their personality. Some dealers and their customers even began to question the quality of Steinway's latest pianos. One classical pianist fumed that he had to use a 30-yearold Steinway because he could not find a new one he liked. Another dealer hired a consultant to review the quality of the pianos he had purchased from Steinway. He claimed that the soundboard, a key contributor to a piano's quality, had developed cracks. The consultant reported that this problem "indicated inadequate or improper controls over wood moisture content during various stages of manufacture." Subsequent study indicated that Steinway's new production quotas might have caused workers to pull wood from the conditioning rooms before it was ready to be bent, say, into a piano.

Assume that you are hired as a consultant to help Steinway deal with these latest problems. How could you use a value-driven approach to help this firm address these problems? What would you recommend?