Hearing the sound of success

Sonova's cochlear-shaped headquarters in Stafa, Switzerland, helps the company to realize its mission of "hear the world". [Provided to China Daily]

Strong emotional reasons to drive expansion, says Sonova chief

Despite being the world's largest hearing care services provider, the Switzerland-based Sonova Group believes that it has its task cut out in China, especially to sustain growth on a long-term basis.

Hearing care is a special need, which is not only attractive from a business perspective, but also from the strong emotional connections it provides, said Lukas Braunschweiler, chief executive officer of Sonova.

It is important for companies like Sonova to not only listen to what the customers really want, but also concentrate on raising awareness in China about the treatment available for various hearing disorders.

"People need a lot of support in China. I think innovation can yield lots of returns," Braunschweiler said during a recent trip to Beijing. The CEO mentioned that though China is currently the Swiss company's second-largest market in Asia, his frequent trips to the country are more with an eye on raising market awareness, rather than just selling products.

"There is no doubt that the market (in China) has immense growth potential," he said, adding that the Asia - Pacific region accounts for about 11 percent of the total business, with China being one of the mainstays.

"We have around 27 million people in China who could benefit from a hearing aid or a cochlear implant. Everybody in China could have a solution if they want. So the potential is obviously there," said Braunschweiler.

Though the potential exists, the country still lags in the ratio of people suffering from hearing impairments to those who undergo hearing correction, the CEO said.

The penetration level in China is rather low at about 5 percent, while the average in Europe, or North America, is around 20-25 percent.

According to Braunschweiler, the challenge for Sonova does not come in the form of product distribution, but more in reaching out to people who need expert guidance from professional audiologists.

"You cannot buy hearing instruments in a supermarket and fix it yourself. You need a professional service or expert who conducts a hearing test and then helps you with fittings and usage," said Braunschweiler, adding that China does not have enough hearing care professionals.

In addition, hearing aids and cochlear implant are products that need to be backed with long-term services, requiring brands to invest more in sustainable growth.

To illustrate his point, Braunschweiler cites an incident that he learned about from one of the employees in China.

"There was a 70-year-old retiree in a small county of Liaoning province who had lost hearing ability for several years and was suffering. His children bought him a hearing aid and soon he could hear voices again. But his excitement faded, when the device malfunctioned and he was unable to hear again. However, after simple checkups by the audiologists, it was discovered that there was nothing wrong with his hearing aid and the fault was due to the accumulated dirt.

"Lack of awareness about hearing disorders and the shortage of professionals who can provide quality consultancy and hearing care have contributed to the challenges in wearing and using hearing instruments," he said.

According to estimates, there are about 10,000 hearing care professionals with various levels of training catering to the more than 1.37 billion people in China. That works out to just one professional for 137,000 people. The World Health Organization estimates that about 150 million people in China suffer from various hearing disabilities.

There are also only four universities in China that offer bachelor programs in audiology studies. Given the huge potential of the market, this is definitely not enough, said Braunschweiler.

"That is why we are working with the government and also on a program to impart quality audiology education in China," he said, adding that the government is looking at having more professionals, providing academic knowledge to serve clients better.

With most of its global brands readily available in China, including Phonak, Unitron and Advanced Bionics, Sonova's presence in the Chinese market extends to various channels.

The company is an active part of the government market in China through its tenders for hearing instruments and cochlear implants, and an active participant in the mass market through its commercial distributors in various cities.

But Braunschweiler admits that the Chinese market structure is still unknown. While the government tenders and programs play a crucial role, the structures and the systems on the provincial level and in second- and third-tier cities also deserve to be part of the system, he said.

The market for hearing instruments and cochlear implants in China can be broadly divided into two categories - senior citizens and children.

China is aging rapidly. By the end of 2013, those aged above 60 and more are estimated to have exceeded 200 million, or 14.9 percent of the total population. Research has also shown that about 35 percent to 90 percent of the aged Chinese suffer from various hearing disorders.

Most of the existing hearing healthcare services are insufficient for the aged with hearing disabilities because of the lack of infrastructure and awareness of presbycusis, or age-related hearing loss.

The pediatric market refers to children who suffer from hearing disorders at an early age and is a sector that is gaining more attention from the government.

There are about 7,000 cochlear implants, a surgically implanted electronic device that provides a sense of sound to a person who is deaf or hard of hearing, in China. About 90 percent of these have been for children and are supported by various government programs, said Braunschweiler.

With a scientific background - a doctorate in physical chemistry from the Swiss Federal Institute of Technology in Zurich, Switzerland - Braunschweiler has spent most of his career in science and technology companies.

The 58-year-old official joined the Sonova Group as CEO in November 2011. Prior to that he was chief executive of Swiss technology group RUAG and headed Dionex Corporation.

Braunschweiler said Sonova's goal is to provide hearing care solutions that can make people hear better and provide a better life. "It is what motivates us." At Sonova, Braunschweiler has also been overseeing the re-launch of a successful product line in cochlear implants, significant growth in Asian markets, and increasing overall market share. But it is his pioneering initiatives in research and development, especially those involving innovation, that set him apart from his peers.

Sonova expects continued solid growth in sales and earnings this year and next, both in the hearing instrument and cochlear implant segment. Its group sales are expected to grow by 7 percent to 9 percent and earnings before interest, taxes and amortization to increase by 11 to 15 percent, both measured in local currencies.

"We are a medical technology company in hearing care segment. The core of our success is to focus on innovation, providing the best solutions to our customers," he said.