Starkey Laboratories, Inc. Business Information, Profile, and History

Company Perspectives:

Starkey's "Yes We Can" philosophy and the company's commitment to helping the hearing impaired have made Starkey customer service legendary throughout the industry. Employees at all levels of the company are authorized to do whatever it takes to satisfy their internal and external customers.

History of Starkey Laboratories, Inc.

Starkey Laboratories, Inc. is the world's leader in manufacturing custom hearing instruments. The company operates 33 facilities in 18 countries around the globe. In addition to building some of the world's most highly regarded hearing aids (endorsed by numerous celebrities, including guitar legend Les Paul; country recording artist George Strait; NFL coach Dan Reeves; Hollywood stars Rod Steiger, Jane Russell, and Ernest Borgnine; and professional wrestler Vern Gagne), Starkey produces other technological devices designed to test, protect, and enhance the auditory health of people everywhere. The company markets its products under the Starkey Lab's name and also sells hearing devices through three wholly owned subsidiaries, Omni, Qualitone, and Nu-Ear.

Through the company's Starkey Hearing Foundation, Starkey Labs and its founder and owner William Austin provide hearing testing and hearing aids to people around the world who cannot afford to buy the products themselves. Begun in 1978, the Hearing Foundation has provided over 20,000 hearing aids to needy patients each year.

Building a Better Hearing Aid: 1961-80

In 1961 William Austin began working in his uncle's company, The Minnesota Hearing Aid Center. Austin had been pursuing a career in medicine and was enrolled at the University of Minnesota Medical School. Austin's work at The Minnesota Hearing Aid Center fitting patients for hearing devices helped him recognize that he was better suited for a career in business than medicine, and more importantly that the hearing aid business would help bridge his scientific interests and his broader interest in treating patients.

In 1962 Austin opened a retail hearing aid storefront in Sioux Falls, South Dakota. The store operated for a short while, but Austin found his first true success in 1967 when he opened a hearing aid repair service in a suburb of Minneapolis, St. Louis Park, Minnesota. What began as Professional Hearing Aid Service in 1967 led to a lifelong commitment on the part of Austin to help the hearing impaired throughout the world.

Professional Hearing Aid Service both fitted and repaired hearing aids but the newly founded company experienced its first pivotal growth when it began offering a flat service rate for equipment repairs. In a broader move, the company struck deals with hearing aid dispensers offering to service their products at a set rate, a practice that was new to the industry, and one that was very well received.

Within a very short time Austin's business was flourishing and he had to hire additional repair technicians. In two years, Professional Hearing Aid Service had over 30 employees and controlled the largest market share in the Twin Cities.

Austin did not stay satisfied with the repair end of the business for long and soon had his eye out for new industry innovations. Within a short time he located a small three-employee laboratory named Starkey. The laboratory had successfully cast inner ear molds, and Austin believed that the technology to make ear canal impressions would substantially impact the hearing aid industry. It had been widely accepted within the trade that the primary reason the hearing impaired refused to wear hearing aids was the stigma attached to wearing them. The cosmetic or vanity factor affected hearing aid manufacturers' sales more than any other issue. Austin invested in the notion that the more inconspicuous the device the greater the market share, and he bought Starkey labs and its technology in 1971. Austin merged his two companies, retaining the name Starkey Laboratories, Inc. for his new enterprise.

Starkey Labs issued its first CE model custom fitted in-the-ear amplification device in 1975. The company coupled the hearing aid with a warranty and satisfaction guaranteed trial period that later became an industry benchmark. Over the next few years Austin built Starkey into the world's leader in custom designed hearing aids.

By 1975 Starkey had outgrown its St. Louis Park facility and moved its operations to a spacious 13-acre campus in Eden Prairie, Minnesota. Austin's belief that the more unobtrusive a hearing device, the more likely the hard of hearing public was to wear it, was paying off and the company continued to grow, reaching revenue of $6 million by 1975.

In 1977 a campaign named the CARE program was begun to educate consumers. The program made use of booklets and videos showing the benefits restorative technology could provide. Starkey's campaign was developed to convince the average person that by amplifying sounds a person with hearing loss could lead a much better quality of life.

While improving the image of hearing aid users, Starkey Labs also began a fund in 1978 to make hearing aids affordable to the needy. The Starkey Fund was originally begun when hearing aid dispensers recycled their used batteries though Starkey. The dispensers then received credit that was donated to those who needed financial assistance in purchasing a hearing aid. The Starkey Fund later evolved into the Starkey Hearing Foundation, serving the world's poorest population in need of hearing technology.

By the late 1970s Diagnostic equipment was targeted by the laboratories. Austin and his staff developed several key research tools including the CHAT hearing aid tester, the Tinnitus Research Audiometer, and the Digital Dram Meter. All three inventions helped make testing patients a much more sophisticated and patient-specific process that led to further specialized development of hearing aid models.

The Reagan Years and Enormous Growth

The 1980s brought a good deal of international and national expansion to the company. Starkey Labs opened offices in Toronto, Canada; Glencoe, Minnesota; Hamburg, Germany; and Paris, France, between 1980 and 1982.

In 1983, the company brought to market the very first inter-ear canal hearing aid, known as the CE-5 Series. It was when a CE-5 series hearing aid was fitted for then President of the United States Ronald Reagan that the demand for hearing instruments took a dramatic upturn.

Reagan had suffered significant hearing loss when a blank gun cartridge had been shot off close to his ear on the set of a movie he was making. In the capacity of president, Reagan found that his hearing loss was making his interaction with dignitaries and the press extremely difficult. He thus called on Starkey Labs to remedy the situation. The new hearing device fitted by Bill Austin himself was hardly noticeable to the public and helped break down the stereotype of a hearing aid wearer. Moreover the public was educated by the press coverage on many aspects of hearing loss and the technology available to fix most hearing problems. Overnight demand for the model became so great that the publicity boosted sales exponentially and actually for a time had an adverse effect on the company. Though sales were at an all time high the company was not equipped to meet the demand and the volume took its toll on the employees of the firm. Too much growth, too quickly with the consequential supply and distribution problems were almost too much for the company. Fortunately over time things stabilized and Starkey Labs managed to stay competitive within the industry.

Like many other worldwide businesses in the 1980s a growing trend was consolidation through mergers and acquisitions. Large more established firms were taking over or squeezing out their competitors in many fields. Starkey Labs had managed to become one of the biggest names in hearing technology by this time and in addition to buying out several competitors the company continued its expansion by opening new manufacturing and retail units throughout the world. According to an article in Minnesota Business referring to the hearing aid industry, "to obtain more resources manufacturers began consolidating. Worldwide there were roughly 70 manufacturers in 1990 but that number had fallen to just 32 by the end of the decade."

In 1984 through 1985 Starkey opened facilities in Sydney, Australia; Atlanta, Georgia; Mt. Laurel, New Jersey; Portland, Oregon; Austin, Texas; and Marin, Switzerland. In 1988 Starkey opened new facilities in Miami, Florida, and Budapest, Hungary. A year later, Starkey Labs helped keep the industry consolidation going by acquiring Omni Hearing Systems and Nu-Ear Electronics. The companies became subsidiaries of Starkey while retaining their own names and markets.

By 1990 Starkey was ranked number one in the world in its ability to service all makes and models of hearing aids and was also cited for its inventory of replacement parts for a vast variety of models of hearing aids.

The 1990s continued Starkey's quest to become a leader in the hearing aid business worldwide. In the early 1990s Starkey opened a laboratory in Tokyo, Japan. It was at this point that the company felt pressured to compete with other companies that had already offered digital technology. The company placed a great deal of its resources towards research and development in digital and computer embedded technology and released the Digibot, S-AMP, Discovery CE-9 Series, Resolution programmable, Tympanette CIC, and Video Otoscope units during this period.

In 1995 Starkey Labs opened operations in Suzhou, China, and Auckland, New Zealand, and introduced a series of new products and services including its Euroline, Aura Care, Hear Net Online, and Interra BTE. The trend toward expansion continued the following year with new businesses in Warsaw, Seoul, Oslo, Stockholm, Prague, and Matamoros, Mexico.

Starkey Labs acquired a competitor, Qualitone, in 1996. In the late 1990s, Starkey further expanded by developing business in southeast Asia and continuing to grow its Latin American business.

Although the company had at times experienced supply problems with its digital aids, the management at Starkey Labs was convinced it had overcome the problems and was secure in its place as a leader in hearing technology. Austin and Starkey were featured in the December 2001 issue of Minnesota Business and the founder confidently declared, "we're properly positioned to move forward." Austin also shared his estate plans and his intention to will the stock in his company to his Hearing Foundation, with the option for employees to buy the company from the Foundation.

By the new millennium, Starkey Labs had become a $350 million company, with operations spanning the globe. The company's philanthropy through the Starkey Foundation and the work of Bill Austin provided great visibility and genuine goodwill to the business and all those involved with the Foundation. Starkey Labs held over 200 patents and had proved to be and innovator throughout its years. The business had moved towards digital and PC technology, and was attempting to gain a critical foothold in the digital marketplace. With many of the world's population aging and suffering from age-related hearing loss. Starkey appeared ready to capture its share of the multibillion-dollar biotech market.

Principal Subsidiaries: Omni Hearing Systems; Nu-Ear Electronics; Qualitone.

Principal Divisions: Prohear; Hearing Health Care Card; North American Commercial Leasing, Inc.; Star Travel.

Principal Competitors: Great Nordic; Oticon Holding AS; Widex APS; Siemens AG; Philips NV; Micro-Tech Inc.; Bernafaon-Maico; Dahlberg Inc.

Chronology

• Key Dates:
• 1967: William Austin opens Professional Hearing Aid Service in St. Louis Park, Minnesota.
• 1971: Austin buys out Starkey Labs to secure ear molding technology and renames his hearing aid business Starkey Laboratories, Inc.
• 1973: Starkey markets the CE-1 custom hearing aid with in-the-ear technology.
• 1975: Starkey builds 15-acre campus facility in Eden Prairie, Minnesota, to accommodate the company's growth.
• 1976: Starkey opens a subsidiary business in Manchester, England.
• 1977: Starkey launches the CARE program to promote the use of hearing enhancement technology.
• 1978: The Starkey Fund (later the Starkey Hearing Foundation) was begun to help provide hearing assistance to the needy.
• 1983: President Ronald Regan is fitted for hearing device; sales soar.
• 1989: Starkey buys Omni Hearing Systems and Nu Ear Electronics.
• 1993: The Tympanette (the first entirely in-the-ear aid) is marketed.
• 1995: Starkey headquarters and several international sites receive ISO 9001 Certification.
• 1996: Sequel Custom Programmable Instruments and Professional Fitting System are released.
• 1999: Starkey brings out digital hearing aid models.