Ericsson’s mobile telephony systems case study – A Revisit

This case authored by Patric Regner though seemingly technical has some excellent strategic lessons. And this was proved convincingly by the presenting group in our class at Tasmac today. This happens to be the first presentation of the new semester Oct 2010 –Jan 2011. Audience participation was spectacular and the question – answer session brilliant. It was evident all the participants had studied the case well.

The key strategic issues

(a) Strategic change from a public telecommunication to a mobile telephony focus.

(b) How strategic innovation may emerge from the periphery of an organization.

(c) How a small and insignificant unit (SRA) in Ericsson turned the company into the world’s largest supplier of mobile telephone systems.

Hamza, Harshita, Shraddha, Rajat

Ericsson and SRA – Why the conflict

Ericsson – The parent had grown large and trapped in a narrow vision – the switching and transmission systems.

R&D efforts and resources invested in switching and later in their digital switching technology product – AXE its flagship controlled by Ericsson’s Public Telecommunication division. The latter was not interested in switches for mobile systems – finally they did offer switches to the Swedish PTT only to preserve old relations.

Ericsson due to the standing demand and assured contacts from the Swedish PTT had did not develop competitiveness.  A bureaucratic culture had set in thereby lacking agility. It became slow to respond to the market changes.

SRA – a small autonomous subsidiary operated in an entrepreneurial style. It had a focus on radio products for military and civilian use. It believed the future belonged to mobile telephony.

It was different from its Swedish parent not only due to size but also minimal revenue earnings. It reflected a British culture.  Because GE-Marconi had 29% ownership in SRA.

SRA’s bold strategic intent in 1983 was – by 2000 the sales of Ericsson mobile telephone business will surpass its favorite business of public telephone systems. This was ridiculed and laughed at by the main organization members.

Ake Lundqvist was an aggressive leader who believed passionately in his vision – success in mobile telephony. SRA lacked resources and technology to execute its mobile telephony expansion in different countries. It filled its technology gaps by acquiring companies and fought for resources from within.

SRA fought a dual battle – internal (switching division & corporate management) and the external market for gaining contracts.

Therefore a clash of culture, different styles of working and differing vision led to a running internal conflict between the two.

Amrita put up a point as to why did Ake resign when Ericsson had achieved complete success? The same point had come up in the presentation done in the previous semester. Both Naveen and Ravi were of the view that a Ake was a leader who thrives best in an unstructured situation such leaders do not fit well in a large steady setting. They love challenges and ambiguity.

Core competencies

An interesting point was nicely brought up by Naveen on Ericsson’s inability to achieve its declared strategic intent – ‘the merging of computers and communications – C&C’. He compared it with the success of NEC who in 1980s had declared a similar strategic intent and achieved it too. This was because the latter developed a strategic architecture to align the entire organizations resources towards implementing the core competency of C&C. Ericsson could not mobilize resources through a strategic architecture- perhaps due to organizational inertia.

I compliment the smartly attired presenting team comprising Rajat, Hamza, Shraddha and Harshita for a well rehearsed and coordinated presentation. The entire class in particular Ravi, Naveen, Vishaal, Amrita and others participated actively by contributing their thoughts meaningfully.

Conclusion

Finally Ake’s strategic intent did become real in the year 2000. Some credit is also due to the parent Ericsson who allowed some autonomy to SRA.

Well done folks!