Bose CEO Lila Snyder on the fight for high-quality audio

I'm having an existential crisis here.

Since co supply chain has become a more exciting environment.

Thank you so much.

It's crazy.

We are having a lot of fun in what I would describe as our second chapter of the transformation of Bose since I joined. And so, as you said, in some ways, many things are the same. We're still making amazing products for our customers. We're still excited about bringing that new technology forward in both our consumer business and our automotive business. But I would say two things fundamentally have changed as we've thought about growth for Bose for the future. For 60 years it was all Bose and we're now a multibrand company. So as you said we've made a couple of acquisitions. One of those was of the Macintosh brand. So, a legendary 75-year-old audio file brand that we absolutely love and also Sonus Fabber, which is an Italian craftsmanship heritage brand that's also been around for over 40 years. And so, that made us brought us two things from one brand to multibrands, but also into the luxury audio space. Second change for us is we've always been an amazing products company where we develop technology through research and a lot of development cycles and all of that technology went into Bose products and today what's different is we're still doing that and we've added a technology business we call audio tech where we're taking that technology and starting to put it into other places and the big insight for us was sound is really important. It's getting more important, we think, given everything that's going on in the world around us. And there are so many products, devices, that are out there that are using sound, whether that's audio or voice or even noise cancelling where those things are incredibly relevant, but they're not products that Bose would make. They're not targeted at our customer set, but we really have a strong belief in bringing great audio to as many places as we can.

So, it's a B2B TTOC business, if you will. So, our customers are large companies that are putting products into the market. So, I'll give you a couple of examples. We've partnered with Motorola on a series of products from earbuds to making the phone itself sound better. So, a Motorola is a good example. We partnered with XRE. They're making pretty awesome VR XR glasses, right? So, that's an experience where sound really matters a lot. So, we've had a lot of fun partnering with them, and you're starting to see Bose technology show up in a lot of different verticals from mobile to compute to, you know, other people's headphones and audio products for sure. But you know we just released with a partner called Senna a motorcycle helmet communications device and we're excited about all the places we're bringing our new our technology and it's actually creating a broader aperture for how we think about invention and research at Bose as well which is really exciting.

Yeah.

When you said this is new for Bose in a way yes but in a way it's exactly what we've been doing in automotive for over 40 years and so we do have a model for doing this inside the company and it's just broadening that thinking into new spaces. First and foremost we're selling technology and the technology is the key and then in some cases we're also selling the brand so you might get technology in a product without a sound by Bose or powered by Bose logo on it or you might get the logo as well, but you'll never get the logo without the tech, if that makes sense. Some of our partners are interested in the brand, some are not. Sometimes we're interested in having our brand on connected to their brand and sometimes we're not. And so that's part of the discussion we have with each of our customers about whether it makes sense for them and for us. And so, you know, when you see it, know that it's been really thoughtful, but it's also attached to a lot of great technology that's inside that product.

As you would expect, the technology has a licensing fee to it and so does the brand. We've invested over 60 years in our brand. We're incredibly proud of it. It is, I think, one of the most iconic brands in the world, full stop and certainly within the audio space and so we are incredibly careful about where we put the brand and it certainly isn't free when you put it on a product.

I did have a Jeep with a Macintosh sound system several years ago. The blue meters were they it was a very fake Android app that ran on a very slow Android infotainment system, but I still loved it.

We think of them as two completely separate brands. And then, you know, think about Sonus Fabber as yet another third brand, all of which are targeting really passionate fans of those brands for what they stand for. So when we thought about the getting into the luxury space and acquiring those two brands, we spent a lot of time saying what is it that we're going to do internally to protect the brands, right? That we do not want to boify anything that is happening in those brands. And so we've set it up as a separate business unit. We have a luxury audio business unit that houses those two brands. We are very careful as you said we have no intention of bringing products down market. We believe both markets are exciting. We've been in that premium audio space for a long time. And when we looked at what we're calling luxury audio, we had two really important insights. I think one is that as we're doing our own technology work, there's a lot of really exciting technology we develop that just isn't right for a premium audio product. It's right for something that sits at a higher level. And we just didn't have anywhere to put it. And that was true on the consumer product side and it's certainly true on the automotive side where we felt like we were bumping up against what you could put in a premium product and the ceiling of what we wanted to do was much higher. So the first reason we're excited about it is it sort of unleashes the creativity of our engineers to think about what you could do at those higher price points with just a different type of customer, a different type of experience. So we were excited on the technology side, equally excited I think about this idea of luxury. If you look at the luxury market at large across all categories, what you find is that audio is really under represented compared to the role luxury plays in automotive or hospitality and travel or fashion, leather goods. And when we really sat back and thought about it, given how much music is a passion point for people, it didn't make sense to us. We think there's a huge opportunity to attract new customers to the category if the experience feels more like a luxury experience. And so, you know, when you think about those products, it's certainly about how they sound. But you went right to it. It's the iconic design, it's the artistry, it's the craftsmanship. All of our luxury products, whether it's Macintosh or Sonus Fabber, are handmade. They are crafted one by one for you as the customer. And there's something incredibly special about that.

We weren't actually shopping for brands first. The first thing was strategically we saw the opportunity in luxury space. We saw an opportunity to create something new around luxury audio and we were really excited about that. And so once we had made this strategic decision to go there, we had a lot of conversation about buy a brand or create a brand. But the reality is in luxury at those price points, history and heritage is part of what you're buying. And so we sort of intuitively knew we wanted to find a brand or brands that really had that strong history that we felt like we could build on top of. We thought those were both brands that had incredibly passionate fans and we saw opportunity for us to take them to a new level and so that was how we ended up acquiring the Macintosh Group.

Yeah.

So we've brought it into our engineering organization but we've also kept a lot of the aspects a little bit separate. So the probably the best example of that is Bose has a Bose sound. Everybody knows that. You buy a Bose product, you buy one the headphones I'm wearing, you know, the speaker in your house, your car, there is a sound signature to brands that consumers expect. And so that comes from the engineers, right? The engineers are tuning products to sound like they should. And so we're very careful on the engineering side to protect the sound signature of Macintosh. What we don't want is for you to hear a Macintosh product or a Sonus Fabber product and imagine that it sounds different. So that's one. And initially like you do with I think any acquisition, you want to be careful to protect what you bought. So we've integrated it. Yes. But we have a separate team that is doing the engineering for luxury and we're slowly kind of adding Bose technology to it where it makes sense. So there are things for example on the Bose side where we can be incredibly helpful in terms of you know the software aspects the connectivity those sorts of things those are things that we do really well and they're not the most important part of those products but they have to work and so there are aspects that we've started to add into the products and you'll see more of that over time.

The value comes from the sound. You know, if you visit us at Bose, you should come visit us at Bose in Framingham and you listen to a Macintosh system, a Sonus Fabber system, they're incredible. They're not anything like what you would get at a Best Buy in a premium product from Bose or anyone else. And that's incredibly special. Part of that is the technology itself. Part of that is that it is more analog. So it has a different sound signature to it. It's got a lot more power behind it because that's what certainly Macintosh is known for and that's what you need to power a Sonus Fabber set of speakers. You're also paying for design. You're paying in a way. It's a little bit of art. We just launched a new integrated amplifier, the MA2375 for Macintosh. I'm so excited about it. It's sort of got that retro look with the vacuum tubes. It is just such a It is a design piece. I want to sit it, you know, on my desk. I want it to be, you know, I want it to be a part of the decor. You would say the same thing on the Sonus Fabber side. It's like buying an incredible piece of Italian furniture that has been handmade with natural materials and just feels like art that also sounds beautiful. So there's more to the value proposition in the luxury space. It's true in the premium space too. Design really matters. Color matters, feel, touch, comfort, all those things matter in addition to the sound. I think it's just even that much more elevated in the luxury space.

Yeah.

It is more complexity for sure. It is a broader mission and I think we're ready for it. So when I was here last time, we were in the middle of the transformation that I would say was solidifying the foundation of Bose and now we're building on top of that. So we've built an amazing marketing and brand infrastructure that we're now using to power three brands instead of one. But a lot of that capability can be put in the direction of all three. So the key is real clarity about who the customer is which we've done a lot of work on the Bose brand for sure and you know we talk about the music lover for Bose but we've done the same work for Macintosh and the same work for Sonus Fabber so that we are a thousand percent clear who the customer is and how we want to talk to that customer. So on the products side of our company, I think really clear about what the mission is for each one of those brands. On the technology side, interestingly, as we become more of a B2B technology company, it's actually creating advantages back to the Bose brand and our luxury business as well. And what I mean by that is it's caused us to completely rethink the way that we do research and we develop our tech. So when in the past if you think about Bose developing products we were developing purpose-built technology for a pair of headphones or a car audio system and you know I think last time we talked about the tech franchises we care a lot about noise cancellation we care about immersive lifelike audio and we care about this idea of hearing what you want and those are all experiences that are built on some basic building blocks of technology that we've been developing for a long time, but because we were developing them for our own products, we've had to do a bit of a complete shift in the way that we think about it. So that we're now developing kind of ground up those building blocks and now we're able to say with common platforms with common algorithms AI think of them as sort of AI units we can create different experiences for our own products and we can port that same technology through the same platform tech into other people's products. What that's creating is a lot of efficiency at the research and development level. It's creating more breadth because now that we're thinking about things like noise cancellation for different spaces or spatial audio or hearing what you want, it actually is creating more innovation and more invention at the core and it's making us faster because we've made these building blocks a lot more consumable for our B2B customers. Guess what? Makes us faster at bringing our own products to market, too.

So you know there's a business unit structure, there's a functional structure and we are living in what I would describe as hybrid. So for the core functions that matter deeply to what we deliver, like engineering, like marketing, like supply chain, those are global functions that support all of our businesses. But because we've added new customer sets, and really two new businesses with luxury and audio tech, we're also running four business units. So those four business units have business unit presidents and they draw on the global functions for the work that they need.

About 2500.

We're global all over the place.

I don't actually think about it that way, but the one thing that I do know is that is sort of the most important statistic to me is half of our employees are engineers.

We are for sure. So I think probably not unique to us, you know, we've been in this transition of hardware long long ago just hardware and then hardware and software and then more and more software. And now as we're building the technology pieces, those are you truly just software products that are and algorithm kind of AI based products that we're selling in. And so you see that mix shift continuing. We're certainly seeing growth in our engineering ranks. And we've got a lot more productivity out of engineering as we start to have more sophisticated tools as we use AI and other things to help with some of that development. So, yes, growing and I think more productivity per engineer, if you will, as we start to use more sophisticated tools to do the development.

Yeah, I'm probably oversimplifying. We're really selling three things. We're definitely selling software, algorithms, etc. I'll come back to your how do you protect it question. One of the very special things about Bose is actually systems engineering, which is an underappreciated discipline in my view. So, software is great, but software has to run on hardware in our world, right? Ultimately, that software has to get delivered through something. And the magic at Bose, I think the secret sauce has always been systems engineering and how you're marrying together hardware elements, software elements for an experience that feels unified across the device and that's optimized to provide the best experiences. So we're certainly doing that on our own products, but you see that kind of a service as we start to sell more and more technology into our B2B customers. There's also a lot of desire for help on that system side because our expertise there is real. That's always been true in automotive in our automotive business. And it is increasingly true in our partnerships and our customers on the audio tech side as well. So I think that's a second piece which is really important to call out is that it's not just software for software sake. It's software that has to be integrated into a system where everything comes together to work. And then you've got kind of the idea of systems engineering and then services on top of that. So how you tune a product. Some of our partners and customers need help with that, want help with that, some don't. So you know there are a lot of services that get married along. Sometimes it's the systems engineering, sometimes it's things like tuning, etc. So three pieces.

I think there's a second the bigger market for us is not audio products, things that we call audio second. So, for example, the XR glasses, the main function is not audio, but audio is really important. The car, you don't usually buy a car because it has a Bose sound system, but when you buy the car, the sound system is actually one of the most important features of the car. A projector that you buy for your house, you're buying because it's a great projector. We're partnering with Epson, but the sound is also really important there. So, it's a little bit different, I think, when you get into audio. Second, in the audio market, I think the key is there are so many different customers who want different things. And so when you think about products that have ingredient technology that's the same, it's really enabling you to do things for your customer and the experience that you're trying to create. So I'll just use Skull Candy as an example. Skull Candy just launched a pair of headphones with Sound by Bose and you couldn't have two more diverse customer sets, right, between who they're targeting and who we're targeting. We helped them with the technology, right? So there's Bose technology inside to help make that sound better, but the design choices of what they want for their customer are incredibly different than what you would find. And so I don't think you would ever put those two products, a Bose headphone and a Skull Candy headphone side by side and say, "Wow, this is really commoditized. It sounds the same." It is the same. They're very, very, very different.