At CEDIA Expo 2018, I had the opportunity to meet with Krell Industries executives Walter Schofield and Gordon Shackelford to learn more about the steps the company is taking to address market concerns in the wake of a lot of nasty rumors about Krell’s viability. Step one of the new direction for Krell involved the hiring of Walter Scofield as its new Chief Operating Officer as Strata-gee recently reported just a few weeks ago. In this meeting, I was to learn of more steps coming.
See what Krell execs told me about the company’s comeback…
This was the first substantial face-to-face meeting I’ve had with Schofield, and the first time ever that I met Shackelford, Krell’s Vice President of Sales. This meeting took place at Schofield’s invitation, saying he was anxious to share information with me on the new status and direction of Krell. In the meeting, Schofield conveyed confidence and spoke in a quick manner that at times was quite animated, physically moving and gesticulating as he spoke with apparent passion. Shackleford was more restrained, at first not saying much at all, and often quick to defer to Schofield.
We first reported on Krell’s issues back in March of this year, when multiple sources came to us with reports of financial difficulties at the company. Many reported that the company was on the verge of – or already was in the process of – filing for bankruptcy. One development that many pointed to was the fact that the company was refusing to issue RMAs, even for customer repair units.
The Rumors in March of Financial Trouble at Krell
In a discussion with owner Rondi D’Agostino at the time, she denied the company was in bankruptcy or considering shutting down. It was, she told me, business as usual. As far as refusing RMAs, that simply was an effort, she said, to better pace the inflow of product returns to match the capacity of their service department and nothing more. In fact, D’Agostino said, she was just about to reopen the RMA process for new returns, as service had caught up on their waiting units.
After that, the rumor mill did seem to calm down…although the company remained quiet. Then we learned of Schofield’s appointment. Within days of the news of his arrival, Schofield reached out to Strata-gee, proposing a meeting at CEDIA Expo…to which I agreed.
Schofield Promises Transparency to Strata-gee
At Expo, Schofield pledged to me that he wants to be fully transparent with Strata-gee. He pulled out his laptop, launching a PowerPoint presentation he said he had created to present his plans to their existing partners for getting Krell back on track. This presentation was shown to reps, dealers, distributors and other stakeholders to give them a sense of where the company is at…and where it is going.
“I want to make sure that people know that Krell has not been sitting on their hands during this period,” Schofield said in a somewhat urgent tone. “We’ve got the new 300I integrated amplifier…150 watts per channel…300 watts into 4 ohms…iBias…and Class A operation.”
Adding, as he handed me a document mock-up, “I want you to be one of the very first people to see our brand new brochure.”
Talk of a New Integrated Amplifier…Again
Now, to be perfectly honest, I’ve been hearing about this amp for months. In fact, when D’Agostino was trying to convince me that the company was fine back in March, she mentioned that they were only 60-days away from launching a new integrated amplifier. She was obviously referring to the 300I, which has still not shipped even though it is now 6 months later.
So my ears perked up when Schofield mentioned it again. I saw the brochure mock-up, and that looked real. Schofield walked me through the brochure which talks about “the iconic nature of the brand” and its commitment to producing high-performance, high-quality products.
“So, when is the 300I shipping?” I asked. Long pause, “Um…we’ve had a little bit of an issue with the metal bits on the faceplate,” Schofield explained, suggesting it is yet still delayed. The company expects new faceplate samples “in a few weeks.” He did not give me a committed shipping date. “Stay tuned,” he said, suggesting that they are ready to go just as soon as this faceplate issue is resolved.
When is the 300I Shipping? “Um…”
“We do plan on demoing it at Rocky Mountain Audio Fest, which is early October,” Shackelford offered helpfully.
Carrying on with his presentation, Schofield mentioned that the company has launched “XD” technology, which is an update to Krell amplifiers. He explained that during development of the 300I, Krell engineer David Goodman “found a way to change the output stage to vastly improve the sound quality.” And that change to the output stage is known as Krell’s XD technology.
The effect is “hugely audible” Schofield said. “Much better macro/micro dynamics, blacker background, more organic – so you can really hear the lower harmonics of the registers of wind instruments. It had the bite…it truly is an astounding difference. As of Wednesday (September 5th) every amplifier that leaves the factory has the [XD] upgrade included.”
New Krell XD Technology & Customer Modifications
To make the technology more tangible, XD is denoted on the faceplate of these new Krell models. The company will offer customers the opportunity to have their legacy products updated with the XD modification. Cost to the consumer for the upgrade is $1,000 for two-channels, $1,200 for three-channels, $1,300 for five. The customer must bear the cost of shipping their unit to the factory, but the factory will pay the return shipping of the modified unit back to the customer.
Moving on through his list of new positive actions to drive Krell’s comeback – the new COO told me that the company is investing in stocking up on parts. This is responsive to a past criticism that the company was not able to build new units, or repair legacy ones, because their of their weak financial position cost the company its credit standing with critical parts suppliers.
Stocking Up on Parts
Without addressing that allegation directly, Schofield told me the company has invested a lot of money into parts, so much so that he claims they’ll be able to increase production – or as he put it, “our product build” – to a rate that is “more than three times what our current monthly product build is.”
“We won’t necessarily be building to order,” Schofield clarified. “But we will produce inventory across the board of the twelve top-selling SKUs as denoted by past purchases. We will have all of those products ready to ship by mid-October.”
Out of Stocks? ‘Should Never Be Longer Than 4 Weeks’
Alas, the 300I is the only model still in question…while they wait to clear up the issue with the faceplate metal.
Inventory “will be available on a first-come, first-served basis. However, if we’re out of a particular SKU, we will be building this inventory on a monthly basis, so the wait should never be longer than four weeks,” Schofield committed.
Schofield also said that the company will be sending out regular inventory updates to international and domestic dealers to let them know what is available. He envisions a green-yellow-red model by model indicator so dealers know where they stand.
Research and Development Activities are Reinvigorated
Schofield also shared that the company’s research and development department is quite active again. And while he asked Strata-gee to be careful not to pre-announce new products which might depress sales of existing models, he did reveal some of the specific new products the company is working on. It is noteworthy that the window for the market introduction of these new products is not ten years in the future…or five years in the future. Rather, he claims the company will openly demonstrate its reinvigorated status with new products introduced sometime soon, perhaps as early as 2019.
Throughout our discussion, I felt that Schofield was trying to demonstrate a tangible desire to drive Krell in an entirely new direction – to right past wrongs and to be open to change. It was perhaps in the spirit of this last point – to be open to change – that I have to admit Schofield surprised me with his next topic…the future.
Should Krell Make Lower Priced Products?
Although he admitted that the company is only now beginning to “wrap our heads around it,” he said his team at Krell is studying whether it should consider building lower cost products under the Krell brand name. He suggested that it would not be anything really inexpensive, “…because it wouldn’t be a Krell.” But certainly looking at products that might better bridge the gap between its existing market position and the larger market as a whole.
This is something that, to me at least, sounds a little dangerous. The company has made a series of missteps over the last few years – for whatever reason – and that has been the predominant source of their currently challenged position. It seems as though much ground could be gained by undoing these missteps and getting back to being the reliable supplier of high-end, high-performance electronics that the company is known for – even renowned for.
Seeking a Broader Audience
So I asked, “Are you looking to appeal to a broader audience?”
Yes, Krell’s COO exclaimed, that is the perfect way to frame the thinking behind this investigation. He also noted that they feel that they need to find a way to build a bridge to millennials who are seeking to move up into better gear…but for whom, the step to Krell right now is simply too large. Potentially, this bridge product would be between the broader based Japanese products, and the existing high-end solutions.
“There are 92 million millennials out there,” Schofield exclaimed. “And we want to appeal to them.”
Shackelford jumped in and added that the thinking was not just about the age demographic (millennials), but also about the company being more aggressive at addressing changes in the market. “The high-end has kind of changed, as well,” Shackelford noted.
Schofield’s next point is that, based on past missteps by past owners, the company needs to reinstill the market’s faith in the brands reliability. To do that, Krell is doing what many people might feel might be a bit of a reverse-trend strategy – all critical key parts and components will be sourced here in the U.S. Previously, like most companies, parts i overseas – but Krell had some issues, particularly back in 2014 and 2015, he tells me – with unreliable parts.
This move, while it may cost them more to do so…will ensure greater reliability. In the case of this move, Schofield acknowledged that the company had already been moving in this direction even before he joined them. But it is a move that he wholeheartedly supports.
More Krell Marketing
Schofield said that Krell is planning on turbocharging their marketing. Once the beneficiary of glowing reviews from the audiophile media, the company has been pretty much dark over the last few years. No more, he says, suggesting that he’s personally making the rounds of various buff books to let the world know that Krell is very much alive.
Beyond that, they have placed certain models seeking reviews, and anticipate new reviews are in the works. This includes some of the more mainstream books, such as Sound & Vision.
The company is also in the process of retaining a public relations company to help them re-engage with industry media – so expect to see more stories about the Krell comeback on your favorite website or magazine.
Schofield says that they will be doing more cross promotions with Acura & Hundai. In case you didn’t know it, Krell has designed mobile electronics systems for both the Acura RL and the Hundai Genesis vehicles. So again, promotions here can help rebuild visibility for the brand.
Hold Everything! – What About FINANCES??
After a long litany of items, some incredibly detailed and very “inside baseball,” I stopped Schofield and went back to what I perceive to be Krell’s main issue…financial strength. Plans are great, but they are only meaningful if you have money to invest in them.
So I asked, “Does Krell have any money?” Interestingly, Schofield danced around that question a bit, clearly uncomfortable. “We have money,” he quipped.
But from where does this money come, I persisted. “It’s private money,” he said.
Ultimately, Schofield revealed that Rondi D’Agostino has invested additional capital into the company. This was clearly a topic outside of his comfort zone, but he says that the company now has a strong financial base.
I wish he had been as confident in addressing this issue of the company’s finances as he had about the others…as the company’s troubled finances is seen as their biggest problem. If I were him, I would have started my presentation on the steps the company has taken to address its financial issues…as this is absolutely the most persistent question I hear about Krell.
It All SOUNDS Good, But NONE of This Matters
So Schofield’s presentation was slick, if a little unnecessarily particular…sort of burying me in the minutiae of his plan. But at the end of the day, none of this matters. Even more important than having a perfect plan (from a company that has not been a reliable partner)…is demonstrating a higher level of execution – even on a lesser plan.
As General George S. Patton once said: “A good plan, violently executed now, is better than a perfect plan next week.”
So for Krell, despite what they say are their plans for the future – what needs to be proven today is that they are:
- financially stable
- able to right past wrongs
- can build and ship reliable, high-quality products
- are able to fully support their partners such that they can feel comfortable recommending and selling Krell products again
Show Us You Mean It
Only once these immediate concerns are fully addressed, will we then worry about their promises of a brighter future.
Talk is cheap…it’s time for team Krell to get to work and show us they mean it…
Learn all about Krell by visiting: www.krellonline.com.