Steinway & Son’s - 150 Years of Using Fine Craftsmanship as a Moat



Steinway and Sons, known as Steinway, is well known for its high-quality piano craftsmanship. The company was founded in 1853 by Henry E. Steinway and would remain in family control for over a hundred years. Steinway focused on innovation (120 patents) and craft production (not mass production) for high-end markets and virtuoso pianists even while their competitors would focus on mass production for the middle-income consumer.

Here is an informative case study (H/T Member @ianbookman) that I know you will enjoy:

How Commitment to Craftsmanship Leads to Unique Value: Steinway & Sons’ Differentiation Strategy

Here are just a few interesting nuggets from the study:

  • By besting other piano makers at exhibitions, Steinway & Sons compiled evidence that critical and knowledgeable audiences, including judges in technical competitions, considered its pianos to be better than those of other firms.
  • Theodore Steinway (son of Henry) searched all over Europe for ideas and materials to help him realize his vision. Dolge (1911), who knew Theodore personally, described his approach:
    • Step by step he invaded the fields of modern science, investigating and testing different kinds of wood in order to ascertain why one kind or another was best adapted for piano construction, then taking up the study of metallurgy, to find a proper alloy for casting iron plates which would stand the tremendous strain of 75,000 pounds of the new concert-grand piano that was already born in his mind, calling chemistry to his aid to establish the scientific basis for felts, glue, varnish oils—in short, nothing in the realm of science having any bearing on piano construction was overlooked.
  • Through Theodore’s innovations and design efforts, Steinway & Sons was awarded 54 U.S. patents (Table 1). In the period 1868–1889, these inventions included 22 patents for piano actions (e.g., keys, hammers), 11 for the vibrator (e.g., strings, pins, plate), five for the res- onator (e.g., soundboard, ribs), seven for the case and frame, four for the design, and five for manufactur- ing technology (Table 2).
  • By the early 19th century, several firms made pianos, competition had developed, and consumers could choose from a range of craftmade pianos. Over the next century, the technologies for manufacturing pianos evolved, improved, and diversified (Dolge 1911, Hoover 1981). By the time the industry had stabilized in the late 19th century, most firms had moved to mass production technologies in order to make and sell pianos in mass markets. Only a few firms, including Steinway & Sons, continued to use craft-based production methods to make and sell higher-priced pianos to virtuoso concert pianists and a wealthier clientele. A strategy based on craft-produced pianos and high prices remained viable because— unlike mass-produced pianos—the touch, feel, power, and sound of pianos made using craft methods are unique, and virtuoso pianists place high value on these distinctive characteristics.
  • The Steinway & Sons factory relied on its apprenticeship system to teach piano making and ensure tacit knowledge was passed from masters to apprentices without written codification. It would stay this way well into the mid-20th century.
  • During the U.S. Civil War, William Steinway had seen labor unrest and violence threaten the firm’s New York City factory. To put physical distance between the firm and any future labor unrest, in 1873 Steinway & Sons purchased 400 acres in Astoria, Queens—an area distant from Manhattan. William’s diary entries indicate his pride in creating a new factory town where workers could own brick homes, drink fresh water, and stroll under the trees on Steinway Avenue—still a main thoroughfare in Queens. The new town included a school, a library, a church, and an amusement park. Establishing Steinway village had two long-term strategic consequences. First, it strengthened employees identification with Steinway & Sons, for identification occurs as employees feel they belong to and perceive oneness with their employing organization. A distinguishing feature of Steinway & Sons has been its high employee retention and, to its workers, Steinway Village signaled the firm’s concern for the long-term satisfaction and well-being of its employees. Second, the village became an invaluable repository of technical skills and (tacit) knowledge since the long- tenured employees who continued to live there helped the firm preserve its knowledge base. Succeeding generations of employees often have come from families living in close proximity to the company, and this has helped preserve the integrity of the firm’s tacit knowledge. Although other considerations drove the original decision to establish Steinway Village, over the years it helped Steinway & Sons maintain its strategic commitment to craftsmanship.
  • To extend the Steinway-sponsored relationships with virtuoso pianists, the firm established its Steinway Artists program in 1905. The Steinway Artists included the world’s best virtuoso pianists who agreed to endorse and play a Steinway D grand piano in their concerts. To support the Steinway Artists, the firm established piano banks in several U.S. cities. Steinway Artists visited the banks and chose the concert grand piano that they believed best fitted the sound and feel they wanted for their performance. In the early 1900s, the number of sponsored concert tours by Steinway Artists increased and the roster grew to around 600 virtuoso pianists.
  • In 1900, Steinway & Sons hired the advertising agency N. W. Ayer & Son to increase its sales to wealthy customers by building on the widely-recognized craftsmanship and high status associated with the Steinway piano. The advertising message was that while musicians bought a Steinway piano because of its performance abilities, others bought one because of the high status and culture associated with the Steinway name.
  • Over almost 150 years, Steinway & Sons incurred major financial losses in the aftermath of the Great Depression—a period when most other piano makers were driven out of business—and during World War II—when the U.S. government forced piano makers to stop producing pianos and instead do war- related work. These two events were exogenous shocks that hit all industry firms regardless of their strategy or how successful they were. After radio broadcasts began in 1920, the piano was no longer the center of the family home, and sales to middle-class homes declined rapidly (Lieberman 1995). Steinway piano sales to upscale markets, how- ever, continued until 1926, when the firm sold an all- time annual high of 6,294 grand pianos (Table 7). In 1930, however, demand plummeted to 2,379 units and profits dropped—from a net profit of $580,000 in 1929 to a net loss of $265,000 in 1930 (Figure 2)… The point is that in regard to piano making, Steinway & Sons’ competitive advantage in the high-end market segments has endured.
  • Steinway & Sons’ enduring success would be difficult to explain without considering the firm’s unrelenting commitment to quality and the decision by other firms to replace craft-based with mass-production methods in an effort to reduce manufacturing costs and cater to a broader, mass-market customer base. Being one of the only piano makers in the United States to have remained fully committed to craftsmanship since its founding, users and especially virtuoso performers have always valued the unique characteristics of Stein- way pianos. Steinway & Sons never strayed from its craft-based manufacturing approach and consistently over time kept on improving its pianos and production methods. Steinway & Sons case thus suggests that a successful differentiation strategy may stem from a firm choosing to stay on the same peak where a firm can continue to use and further improve its current production methods even as competitors choose to move to other peaks.

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