Ericsson: Innovation from the Periphery

UNIVERSITY OF NAIROBI SCHOOL OF BUSINESS

DSM 608 ADVANCED STRATEGIC MANAGEMENT JANUARY 2013 – APRIL 2013

CASE STUDY ERICSSON: INNOVATION FROM THE PERIPHERY

JOSIAH HABWE

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ERICSSON INNOVATION FROM THE PERIPHERY

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TABLE OF CONTENTS

INDEX

TITLE

PAGE

TITLE PAGE

1

TABLE OF CONTENTS

3

1.0

INTRODUCTION

4

2.0

INCEPTION OF ERICSSON AND SRA

5

3.0

CHALLENGES FACED BY SRA

6

4.0

STRATEGIES EMPLOYED BY SRA

11

5.0

OTHER STRATEGIES SRA COULD HAVE IMPLEMENTED

15

6.0

WHERE IS ERICSSON TODAY?

19

7.0

CONCLUSION AND RECOMMENDATION

22

BIBLIOGRAPHY

23

1.0

INTRODUCTION

1.1

Overview of Ericsson Page 3 of 23

Ericsson is a world-leading provider of telecommunications equipment and services to mobile and fixed network operators. Over 1,000 networks in more than 180 countries use our network equipment, and more than 40 percent of the world 's mobile traffic passes through Ericsson networks.

Ericsson is one of the few companies worldwide that can offer end-to-end solutions for all major mobile communication standards. Ericsson views itself as a key facilitator of global communication.

Ericsson’s key competitors include Huawei, Nokia-Siemens and Alcatel Lucent

1.2

Global Overview

2.0

INCEPTION OF ERICSSON AND SRA

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2.1

Inception of Ericsson

In 1876, a small factory was opened by Lars Magnus Ericsson and thence began the evolution of a global company. LM Ericsson was founded at Drottninggatan 15 in Stockholm, Sweden. On September 18 the company delivered two signal telegraph of its own design to the Swedish state railways.

1.2

Inception of SRA (Svenska RadioAktiebolaget)

In 1919, Svenska RadioAktiebolaget (SRA) was established. Its owners included L.M. Ericsson, AGA and ASEA. SRA was to specialize in Radio Communication. To ensure SRA had access to international know-how, the Marconi Company was also invited to take part in its formation. In 1927, L.M. Ericsson acquired the shares of its Swedish partners, reaching a holding of 57 percent. In May 1923, SRA became the Swedish pioneer in broadcasting. 1.3 Early Years and the Entry into the Global Market

During the 1950s and 60s, Ericsson increased its operations outside Sweden. Previously, the company had mainly operated telephone networks in other countries on concession, but now manufacturing plants were established. The establishment of manufacturing plants outside Sweden was a result in part of increased sales efforts and in part from being forced. Many countries, particularly in Latin America, demanded that the manufacture of telephone equipment should be located within the country. Faced with the threat of being shut out of many markets, Ericsson established manufacturing operations in more countries than originally planned. As a result, and in part through more effective sales, Ericsson expanded strongly in international markets in the 1950s and 60s.

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2.0

CHALLENGES FACED BY SRA IN GAINING ACCEPTANCE OF MOBILE

TELEPHONY AS THE FUTURE OF COMMUNICATION

2.1

Internal Challenges Faced by SRA

SRA was small and in pursuit of a relatively unrelated technology within. GE-Marconi owned 29% of the company. Its independence was as a result of the fact that Managers in Ericsson especially the Public Telecommunications Division saw SRA as a totally different and nonessential. As quoted by one Manager “They were not really a part of us. They looked different and behaved differently. They were considered a garage outfit or a bicycle repair shop”.Lundqvist, the head of SRA had a vision of the future of mobile telephony. This vision was laughed off as wishful cowboy thinking.

Even with the fact that SRA, being quite remote both in terms of technology and products, had spent its whole 60-year history in a less protected and quite competitive business environment. Most managers at Ericsson did not know much about SRA; it was a minor, independent and pretty unglamorous business. AXE was the flagship of Ericsson and Public Telecommunications was its captain. As John Meurling described it: ‘We [Public Telecom] were the biggest, the most important, and the most beautiful part of the Ericsson Group – and we knew it.’

Another challenge was the fact that Ericsson was narrow minded. It had cocooned itself in PTT and was not particularly enthusiastic about mobile phone systems as mobile telecommunication was simply seen to have a limited future. Even when Swedish and other Nordic PTTs were developing and establishing mobile telephony in Sweden and the Nordic countries and were joining forces in order to develop the Nordic Mobile Telephone (NMT) network. When Telecommunication equipment manufacturers were asked in 1977 to submit proposals to provide the NMT network. Ericsson and SRA and their competitors – among them NEC, Motorola, Mitsubishi and Fujitsu – were invited to bid. Ericsson, however, was not interested in providing switches for mobile systems. They only offered switches, but it was more in order to preserve old relations with its long-term partner, the Swedish PTT, than enthusiastically to enter a new Page 6 of 23

market. However, Ericsson did not offer its latest technology (AXE) at first. An adjusted AXE switch for mobile telecommunication was initially offered but they subsequently did offer AXE at the insistence of the Swedish PTT, who had indicated that otherwise it might adopt the technology of NEC, the closest contestant.

The fact that while other businesses took a active role in research for mobile phone systems Ericsson’s lack of enthusiasm for mobile phone systems reflected its very small role compared with its other businesses. Mobile telephony was seen as something more exclusive and directed towards professional use. Personal application was something not very serious – a service for the privileged. SRA thus had a lot of convincing to do.

SRA (Ericsson’s Radio Communication arm) was seen to lack the right competences for mobile telephony. In fact, the rest of Ericsson did not think much of the SRA personnel. As one SRA manager of the time explained: ‘We were considered as lacking in knowledge, stupid and inexperienced. These are challenges SRA had to fight off from Ericsson who were knew their involvement in radi technology was in closed radio systems and had questioned SRA had adequate knowledge and expertise in mobile telephony(Open system).

SRA knew they had personnel competencies and enthusiasm for the NMT venture but its technology was inferior and outdated and lacked technological(mobile systems competencies) as they didn’t have their own base stations which is a central part of a mobile system as SRA had focused on mobile telephone itself than the entire mobile system.

Even with winning the NMT order Ericsson was still disinterested in mobile telephone systems and consequently there was little integration of Ericsson’s and SRA’s products, mobile telephone switches and radio equipment, respectively.When AKe Lundqvist took the initiative on a mobile telephony system in Saudi Arabia. He suggested to Ericsson’s CEO, Björn Lundvall and the head of Ericsson’s Public Telecommunications Switching Division, Håkan Ledin, to offer the Saudis a mobile telephone system ‘Can’t we try to sell a mobile telephone system to Saudi Arabia? They want the latest of everything else.’The two were only prepared to go along with Lundqvist’s Page 7 of 23

ideas as any mobile phone deal would only be small compared with the fixed network that represented the main order.

In Saudi the set-up was not without problems as the Saudi’s had order 8,000 mobile stations, which put pressure on production sources – there were no terminals left to sell in the Nordic home market which led to competitors exploiting the situation to their advantage. Furthermore, there were important quality problems. Among other things, the telephone station keypads melted in the hot Saudi sun, and the armour-plated limousines and cars caused installation problems. In addition, on the Nordic market as SRA tried to get its first generation of mobile phones into production, the competitors were bringing out their second generation. Flemming Örneholm, SRA’s Marketing Manager at the time, referred to the situation as a disaster: It was a mess . . . Quality was certainly not up to expectations . . . The competitors were beating the hell out of Ericsson [SRA].

Even in the early years of mobile phone networks, Ericsson and SRA continued to submit separate offers as there were different views on mobile system integration resulting in increased tension between the two units. SRA continued to fight dual battles for a more complete system concept, both internally, versus the Switching Division and corporate management, and in the market. This was apparent in the Netherlands, where both the Dutch PTT and Ericsson’s corporate management and Switching Division had to be convinced of the advantage of the integrated system idea. From Ericsson there were separate offers as usual; the Switching Division offered switches, and SRA offered radio technology. The only consolation, however, even if there was no coherent arrangement for mobile phone systems, SRA was finally given at least the marketing responsibility for them.

Another challenge was seen in the US when SRA entered the market they not only lacked the products they also developed a base station based on their prior knowledge in radio technology for the military. Åke Lundqvist recalls: ‘Normally it takes 3–4 years to develop a base station. We took one that we used for military purposes; but we managed it; it had a good technical performance. They also had to strengthen themselves in order to fulfil all requirements regarding Page 8 of 23

planning, installation and testing and the issue of financing, a challenge to SRA since the risks involved were high and financing was not one of the company’ strengths while competitors could offering creative financing solutions which was heavily limited their market position..

ERA(Formerly SRA) faced other challenges were in Europe where they faced a more increasingly complicated environment, including various uncertainties about technologies and standards, and deregulated markets involving more and more multifaceted customers. The market potential was highly unpredictable and competition intensified.

As per ERA manager of the time explained: We were independent entrepreneurs …. hunting mobile telephone technology . . . fighting over markets . . . and firing at everything we saw. This entrepreneurial and independent culture of ERA caused frequent friction with the more methodical and bureaucratically oriented corporate management and switching division in the Public Telecommunications business area. Ericsson was ignorant, there was animosity and competition’ Despite their market success and growth, ERA was still regarded as a minor business and was treated accordingly by corporate management and, in particular, by managers in Switching, who ‘considered us as something the cat dragged in’, From corporate management’s point of view ERA was not considered to have a strategy. The CEO of Ericsson criticised ERA’s strategy for being ‘completely absent’. It was argued that there even seemed to be talks about getting rid of ERA altogether: ‘It was most probably discussed . . . I am sure someone tried to strangle us.’

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2.2

Other Challenges Faced

High competition The PTTs had historically been the principal markets for these products. Roughly a dozen telecommunications companies dominated the world market (AT&T, Ericsson, CIT-Alcatel, Fujitsu, Hitachi, ITT, NEC, OKI, Plessey, Siemens, Strowger). They competed for orders from the PTTs where markets were open.

Legal and political restrictions of doing business in certain countries The US and British market was initially closed local PTT bought only from local companies. Similar arrangements prevailed in many other markets. Political considerations often played a larger role than commercial or technological ones. Once a relationship had been built with a PTT, it usually lasted for a very long time, with continuous follow-up contracts, and competition was limited. John Meurling, director of corporate relations and investor relations at Ericsson of the time: The vendor–customer relationship could often be described as marriage-like: once a PTT had made its system choice – or often vendor choice, which might go back to the beginning of the century – the relationship was expected to continue for a long time . . . Not many countries were supplied by one manufacturer only, but very few countries had more than two or three. For most companies it was cozy.

Non-uniformity of analog mobile systems Another obvious problem was that the various national analogue mobile telephone networks (NMT, TACS, etc.) was that terminals or telephones could not be used across borders. These meant that shifting telecommunication from bordering countries was a tough choice as there was need for a compatible infrastructure.This had to led to the standardisation organisation of western Europe’s PTTs appointing a group, GSM (Groupe Spéciale Mobile), to work on a new common standard for mobile telephony in1982.

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3.0

STRATEGIES EMPLOYED BY SRA

SRA’s major business was in the military radio market. The following are strategies adopted by SRA: 1. Strategic Alliances: Development of the Nordic mobile telephone network The Swedish and other Nordic PTTs were pivotal in developing and establishing mobile telephony in Sweden and the Nordic countries. They joined forces in order to develop the Nordic Mobile Telephone (NMT) network. Telecommunication equipment manufacturers were asked in 1977 to submit proposals to provide the NMT network.

2. Acquisitions: Acquiring the first commercial cellular mobile system in the world SRA needed competence in commercial cellular mobile system area hence acquired Sonab in 1978, a rival in radio technology and the leader in mobile stations in Sweden at that time.

3. Selling Integrated Mobile Telephony Systems At the end of the 1970s and beginning of the 1980s more PTTs started to show an interest in mobile telephony. SRA began to see a sizeable potential market and started to penetrate more markets, ‘shooting at everything they saw’ as one manager put it. They wanted to provide a more coordinated and integrated mobile telephony system of

Ericsson’s switches and their own radio equipment to the operators. However, even if there was no coherent arrangement for mobile phone systems, SRA were finally given at least the marketing responsibility for them.

4. A contract in the Netherlands SRA continued to fight dual battles for a more complete system concept, both internally, versus the Switching Division and corporate management, and in the market. This was apparent in the Netherlands, where both the Dutch PTT and Ericsson’s corporate management and Switching Division had to be convinced of the advantage of the integrated system idea. From Ericsson there were separate offers as usual; the Switching Division offered switches, and SRA offered radio technology. Nevertheless, Lundqvist continued to fight. He happened to know, and managed to Page 11 of 23

recruit, one of the best US consultants in the area, Chan Rypinski. SRA and Lundqvist were playing a tough game with high stakes. First, he obtained partial consent from the CEO. Second, the Switching Division was convinced. With SRA playing the leading role, they and Ericsson finally managed to win the contract, which included a complete system of switches, base stations and cell planning services (the design and planning of the number of cells, base stations, etc.), but it was a hard sell to the PTT. Thus, SRA and Ericsson had begun to sell a more integrated system and not only separate parts of mobile telephony.

5. Focus

on

information

systems,

the

merger

between

computer

and

telecommunication technology Ericsson was to participate in this vision in order to create the ‘paperless office’. The company made a bold strategic change, forming an entirely new business area, Ericsson Information Systems (EIS), including four new divisions. Beginning in 1981, EIS received considerable attention, resources, capital and manpower. Two main acquisitions were made to obtain the new technologies needed.
8

6. Take-Overs: Buying firms or consultancy services SRA continued its aggressive and ambitious ways of doing business. In order to acquire knowledge in mobile telephony, SRA had an active policy: ‘We had a well-developed buying approach, we bought firms or consultancy services’ (Åke Lundqvist). Through the consultant in the Netherlands case, Åke Lundqvist happened to meet another US-based consultant, Jan Jubon, who urged SRA to enter the US. Lundqvist was interested, and the consultant was hired to submit a market report. The SRA management made a decision to enter. The entry was initially a trial and error expedition. SRA thought the risks were reasonable in order to make a try. The organisation set up was small, in temporary offices and with staff commuting to the US.

7. Research and Development: Developing a base station They developed a base station based on their prior knowledge in radio technology for the military. Åke Lundqvist recalls: ‘Normally it takes 3–4 years to develop a base station. Page 12 of 23

We took one that we used for military purposes; but we managed it; it had a good technical performance.

8. Re-branding: Changing name SRA became a wholly owned company under the name of Ericsson Radio Systems AB (Inc.). ERA became part of Radio Communications, one of seven business areas that were created.

9. Trade Associations (Competitive Interdependencies): Buying the Swedish radio technology company The Nordic PTTs (to which Ericsson SRA belonged) decided to upgrade the NMT system in 1983. ERA, which still lacked complete base station technology and products at this time, bought the Swedish radio technology company Magnetic the same year.

10. Acquiring Swedish base station company Radio system In 1988 the Swedish base station company Radio system was acquired. It increased ERA’s market share in base stations considerably and together with strong market growth ERA gained almost 40 per cent share of the world market for mobile telephony systems.

11. Adopting digital standard in the US Ericsson enjoyed repeated success when the digital standard in the US was adopted (Digital AMPS – Advanced Mobile Phone System). With digital mobile telephony in the US, Ericsson managed to increase its market share there considerably. The company also had similar successes in another digital system, the Personal Communication System (PCS), in the US. Moreover, Ericsson became a competitor in the segment based on the Japanese digital standard, Pacific Digital Cellular (PDC).

12. Dividing Radio Communication business area into two In 1992 the Radio Communication business area was divided into two new business areas: Mobile Systems, including mobile system infrastructure equipment, and Mobile Phones and Terminals, with 44 and 26 per cent of total sales, respectively. Page 13 of 23

13. Cost Cutting: Adoption of a tough cost-cutting programme The financial crisis hit Ericsson hard and there were even worries that the company would not survive. However, a very tough cost-cutting programme seemed to have been effective and the company signalled in July 2003 that the crisis was over with a return to profit during the year.

14. Joint venture with Sony’s mobile telephony handset division. Ericsson was criticised for being too much of a technology-focused company and not enough of a consumer products company, which resulted in well-engineered phones, some even argued over-engineered – ‘while failing on basics such as design, usability and battery-life’. The solution was a joint venture with Sony’s mobile telephony handset division in 2001, but the former profitability and market share figures had not returned.

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4.0

OTHER STRATEGIES SRA COULD HAVE IMPLEMENTED

SRA was an autonomous and self-reliant company with a vision. As a small subsidiary of Ericsson it could have been included in the overall company vision and expansion strategy alike. Although it ended up being a classical example of innovations from the periphery, the opportunities would have been better exploited if the growth and innovations in SRA had been strategically planned and well executed. From the 1960s the company had consolidated into communication and military radio equipment, leaving consumer goods out. Its major business was in the military market. Technology having been the fundamental of the core capabilities in this firm, it could have become central in deciding the strategy of this firm plus that of its subsidiaries.

Another Strategy the company should have employed is to invest more in research and development. This would have ensured the firm takes advantage of the strategy technology interrelationship which could either have been a short term focus situation where the current strategy capitalizes on current technology or long term strategy where current strategy cultivates future technology through innovation as discussed above or again as a long term strategy the current technology would have been used to drive cognition of strategy. When the first Cellular system was delivered to Saudi there was a lot of pressure on production sources. Tasked to deliver more than 8000 mobile stations there were no terminals left to sell in the Nordic home market. Competitors naturally exploited the situation with other problems like key pads melting adding onto the quality problems it had then. Investing in the future in mobile technology would have ensured generation of technology to meet both such current and future mobile telephony needs. This would be through idea generation processes to solidify the foundation already set at SRA as demonstrated through the dedication of its president Ake Lundqvist who was extremely enthusiastic about mobile telephony.

The other strategy that SRA should have implemented is that of ensuring all its Managers and institutional leaders adopted and sustained implementation of ideas and became sufficiently committed to these ideas to transform them into good currency. All along, all actions which Page 15 of 23

facilitated the innovations in SRA from the periphery were either accidental or a means to a different end while driving Ericson’s interests. Its public communications unit was not interested in providing switches for mobile systems. When they finally offered them, it was more in order to preserve old relations with its long-term partners, like the Swedish PTT, than enthusiastically to enter a new market. Ericsson’s lack of enthusiasm for mobile phone systems reflected its very small role compared with other businesses and a belief by Management that mobile telephony would continue to be of minor importance. The Management should have created intra and extra organizational infrastructures in which innovation can flourish while also seeking external and internal support. Institutional leadership would therefore have ensured creation of a clear

mission, purpose structures and systems, defending institutional integrity and ordering internal conflict which Ade Lundqvist encountered to end. In fact one of SRAs main resources at the time was its entrepreneurial spirit and perhaps, insight compared with the rest of Ericsson and competitors. As Ake Lundqvist put it: ‘We had a vision to eliminate the wire in telephony, everybody laughed at us!’

Another strategy which would have been implemented by Ericsson should have been to consolidate its operations from the word go. Even during the early days when the mobile technology had started to sell, Ericsson and SRA still submitted separate offers and the different views on mobile system integration resulted in increased tension between the two units. However even then, there was no coherent arrangement for mobile phone systems. SRA continued to fight battles for more completed system concept and corporate management and in the market. This was apparent in the Netherlands, where both the Dutch PTT and Ericsson’s corporate management and Switching Division had to be convinced of the advantage of integrated system idea. From Ericsson’s there were separate offers as usual; the Switching Division offered switches, and SRA offered radio technology which Lundqvist strongly disapproved and fought to the end. This protracted Boardroom wars could have been used instead to facilitate the integration and investment in mobile telephony.

The other strategy could have been to explore new markets or expansion opportunities like the US, UK and Canada early and avoid conflict with Ericsson at home and avoid looking like a competitor instead of a subsidiary. The ambitious and aggressive way of doing business should Page 16 of 23

have been used early including the well-developed buying approach where SRA bough firms or consultancy services after 1983 which was their breakthrough into the US market through a US based consultant Jan Jubon whom Ake Lundqvist met and he urged SRA to enter the US. As it were while mobile telephony was now central to SRA, it was still a peripheral and negligible business for the rest of Ericsson. The entire radio communications business area, of which SRA was part only accounted for 5 percent of Ericsson’s sales in 1982 and mobile telephony was only a small part of that. This was important as it opened up more avenues through Financing solution to new clients, aggressive marketing to develop the new markets and enhance proactiveness in the firms innovation and creativity.

On innovation, Ericsson could have given consumer products of the company enough attention so that the consumer products innovation would have ensured a more sustainable competitive advantage. Ericsson was criticized of being too much of a technology driven company and not enough of a consumer products company which resulted in well-engineered phones, some even argued over-engineered – while failing on basics such as design, usability and battery-life. The solution which came late was the joint venture with Sony’s mobile telephony handset division in 2001 although the profitability and market share figures had not returned. Analysts actually expected Ericsson to make its 50 percent stake with Sony in Japan. Since then, there were interesting products out which also brought an excellent blend of skills from the two partners.

Finally SRA consolidation of ownership and restructuring should have also been used as a strategy. British GE-Marconi owned 29 percent of the company since the 1960s, a major competitor of Ericsson in the switching. It wasn’t until the 1980s that Ericsson acquired this

back. This was finally done in 1982/83 but even then Ericsson did not pay much attention to SRA: they kept their focus on EIS. However, SRA became a wholly owned company under the name of Ericsson Radio Systems AB (Inc). ERA became part of Radio Communications, one of seven business areas that were created. In 1986 Lars Ramqvist, former president of the

components business area, became one of three vice presidents and part of Ericsson Corporate Executive Committee and assigned to examine Ericssons coprpporate strategy and he identified several core businesses which among them all , mobile telephony incuded althgogh the AXE switching system was clearly still the central product. By the time restructuring was taking Page 17 of 23

effect it was said that when Ramqvist arrived staff got more freedom. There was reorganization and some people disappeared then. But it was unclear if it was a strategic undertaking at the time. Ericsson’s success in mobile telephony was based on the far sighted and advanced

development work in the field of radion that was begun at an early stage within Ericssons Radio Systems.

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5.0

WHERE IS ERICSSON TODAY? Financial

By 2001, after years of success, Ericsson experienced major difficulties. The

Times (29 May 2001) reported: The group’s handset business is in crisis and its infrastructure arm is being battered by global economic slowdown . However, Ericsson was not the only telecoms group being hit by global slowdown and having a difficult transition to third-generation (3G) mobile telephony. But the problems were not just the market’s making. The financial crisis had hit Ericsson hard and there were even worries that the company would not survive. The scars of the long downturn would be visible at Ericsson for a long time – as by 2004 the company was half the size it was at the beginning of 2001 when it had 107,000 employees and would be down to 47,000 by the time its cost-cutting programme was complete at the end of that year. It lost SKr53bn (a58bn) in 2001 and 2002. There was still no evidence of growth in revenues. In 2003 they were almost half the peak level of SKr221bn (a243bn) seen in 2002. Moreover, its debt was still rated as junk by the credit rating agencies and some credit analysts believed it need to strengthen its balance sheet again. Ericsson’s mobile telephony handset business had been even worse hit than their infrastructure arm. It had gone through a major crisis with decreasing market shares and design, quality and image problems. As reported by the Financial Times (29 May 2001): As recently as 1998, Ericsson’s handsets business was almost neck-and-neck with Finland’s Nokia and was the world’s leading supplier of digital cellular phones. By 2002, it was making bigger losses than any other company in the handsets business.

Criticism of Ericsson for being too much of a technology-focused company and not enough of a consumer products company, which resulted in well-engineered phones, some even argued overengineered – ‘while failing on basics such as design, usability and battery-life’. The solution was a joint venture with Sony’s mobile telephony handset division in 2001, but the former profitability and market share figures had not returned. During the first 115 years of its history, Ericsson regarded itself as an engineering company primarily focused on telecommunications. Quite simply, the company was a manufacturer. Today Ericsson sees itself as a communications company that enables people all over the world to make themselves heard. Communication is the primary focus, while the manufacture of the underlying technology is of secondary importance. Page 19 of 23

The development and marketing of mobile systems for different standards has made Ericsson tremendously successful. Today the company is the world leader in mobile systems, and as measured in recognition, mobile telephones account for more than 80 percent of what the world associates with the name Ericsson. In October 2001, Ericsson 's cell phone division merged with the major Japanese home electronics firm Sony and formed SonyEricsson Communications. Sony acquired Ericsson 's share in the venture on February 16, 2012. Ericsson received the Best Access Technology recognition for its VDSL2 solution for fixed broadband access at the Broad World Forum. Current CEO is Hans Vestberg

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Page 21 of 23

6.0

CONCLUSION AND RECOMMENDATION

All in all, a change in Ericsson’s management finally led to the recognition that mobile telephony identified as one of the pillars of the company’s business, and only at that time Ericsson finally adopted a strategy of promoting this branch. Soon total sales from mobile telephony amounted to 70% of the corporate total, and within five years the number of employees almost quadrupled.

Today, Ericsson is still a world leader in mobile telephony. We believe it is fair to say that this market dominance is not due to the Ericsson management, but basically the foresight and vision of an individual, who followed a clear strategic goal, namely to “eliminate the wire in telephony” and to make mobile telephony the dominating technology. Ericsson, on the other hand, did not initially recognize the enormous potential and only supported this development when it was clear that it was a breakthrough and important if the company was to secure a sustainable future.

A major lesson to be learned from this case, especially in a technological company, is that there must be room for innovative groups and individuals, who should be given the freedom and support to pursue their vision if it augurs well with the company overall goals and objectives. A company cannot afford to rely only on the further development and improvement of an already successful product, but must look for completely new emerging trends and lifestyles that will open up new markets and consumer groups.

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BIBLIOGRAPHY

Entrepreneurship in technological systems – The development of mobile telephony in Sweden, Dissertation, EFI, Stockholm School of Economics. Regnér, P. (1999)

Ericsson and the creation of the mobile telephony systems business, Patrick Regnér, Stockholm School of Economics, 2001

Ericsson Annual Report, 2012

www.ericssonhistory.com/

www.ericsson.com

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Bibliography: Entrepreneurship in technological systems – The development of mobile telephony in Sweden, Dissertation, EFI, Stockholm School of Economics. Regnér, P. (1999) Ericsson and the creation of the mobile telephony systems business, Patrick Regnér, Stockholm School of Economics, 2001 Ericsson Annual Report, 2012 www.ericssonhistory.com/ www.ericsson.com Page 23 of 23