Nordic Leadership in ICT

Small & beautiful: The ICT success of Finland & Sweden

The seminar on Nordic Leadership in ICT VINNOVA, Mäster Samuelsgatan 56, Stockholm 22 Sep. 2015, 09:30–12:00

Eric Giertz, Annika Rickne & Petri RouvinenJyrki Ali-Yrkkö, Niklas Arvidsson, Anders Broström, Magnus Gens,

Fredrik Johansson, Annu Kotiranta, Sven Lindmark, Monia Lougui, Juri Mattila, Mika Pajarinen, Bryan Pon, Timo Seppälä, Kent Thorén & Pekka Ylä-Anttila

Finland & Sweden in ICTPetri Rouvinen

Towards the end of 1999 ...

Finland & Sweden on top of ICT – In hype & in reality

Presented by Petri Rouvinen at the Nordic Leadership in ICT Seminar, 22 Sep. 2015

fdsaf

SEK 44238 m.Nokia’s GDP (value added)in Finland,

Year 2000

SEK 42382 m.Ericsson’s GDP (value added)in Sweden,

Year 2000

≈

2000 2000


Ericsson of Swedish GDP Nokia of Finnish GDP

1.84.0

1.6

3.1

Direct impact

Indirect impact(sub-contracting & partnering)

% of GDPin 2000

WORLDRECORD!?


38.2%

Swedish ICT Sector Finnish ICT Sector

28.742.1

9.6

15.1

Direct shareof Ericsson/Nokia

Share of ICT Sector Value Added in 2000, %

Indirect share

of Ericsson/Nokia

Other ICTfirms’ share

57.2%

61,8 42,8


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The ICT sector as a percentage of GDP

NMTCf. Ch 2

GSM1st disrupt

In wireless network eq.:

1. Huawei2. Ericsson3. Nokia

(Siemens; Alcatel-Lucent)

Worldwide:From monopolies

to competition

The 2nd disruption

Cloud computingMobile Internet

Big data, analyticsTech convergence

Services, software, deeper diffusion of ICT in using sectors

As presented by Petri Rouvinen at the Nordic Leadership in ICT Seminar, 22 Sep. 2015

ICT sector: 5–6% of GDP,3–4% or working hours

Nokia/Ericsson: 0.5% ofGDP, 10% of ICT sectors

The highest economy-wide share of ICT experts

Similarities

Swe FinLow ICT investment intensity

Smaller in absolute terms

Small ICT consulting: Below 10%

High ICT investment intensity

Bigger: 2× employees, 6× firms

Large ICT consulting: Over 25%


History of the Finnish ICT Sector• 1880s: The Finnish Senate – a dispersed telecom infra

– Operation: PTO-regulator & hundreds of private telecom operators– Equipment: International competition, little domestic

• Since 1970s: Digitalization in other sectors– Banking & engineering (pulp & paper eq.)– Demanding Soviet exports– Electronics: TVs etc.

• NMT: Int’l provision of telecom equip.

• 1990s: Facilitating factors– Global

• Analog Digital• GSM (standardization process; Nokia; Tekes)• Worldwide liberalization of telecom markets

– Domestic• From a semi-closed to an open economy (reality & mindset)• Relaxed constraints: Abundant supply of capital & labor


History of the Swedish ICT SectorEric Giertz

Sweden: A belated but fast industrialization

1844–1866: A new foundation is put in place – Liberal reforms– free trade– Infra service providers– Banks– A new parliament

1860–1920: Industrialization– Entrepreneurship– Domestic industries– Export industries– 400 private tele associations (Ericsson 1876)

Presented by Eric Giertz at the Nordic Leadership in ICT Seminar, 22 Sep. 2015

From consolidation to welfare state 1920–1970

• Engineering industry goes bankrupt– Concentration of ownership (financial spheres)– Engineers hired as CEOs– Restructuring & rationalization

• Social democratic government 1932– Takes over infra service providers– Close cooperation with private industry– Focus on productivity growth, not on new ventures

• Supportive labor unions– Higher productivity is promoted– The Saltsjöbaden agreement– Compulsory work & motion studies


Source: Giertz, Marionettens död, Ekerlids förlag


”Developing Couples”Four parties plan from acorns to oak trees

KTH

ASEAVattenfall

EricssonTeleverket

SaabDefence

ASEASJ (rail)

Private Companies

Public Partners

Government

EXPORT


Close Government–Industry Cooperation

A Swedish computer industry is born – 1948 The public agency MMN is established at KTH– BESK is completed in 1953 (the US, France, Britain and Sweden)– SARA in 1957 (Saab) – D21 in 1962– Facit leaves computers in 1963– A new development couple 12,000 main frame computers (failed)

Ericsson + Televerket = A very tight couple– 1970 Ellemtel – a joint venture is established– Joint development of electronic and automated switching– 1976 Televerket puts AXE in operation in Södertälje– 1978 Ellemtel transfers AXE competence to Ericsson


From stagnation to bankruptcies &emergency measures in 1970–1990

Nils G. ÅslingsIndustriakut


http://www.svd.se/images/ettan/021218/palme.jpg

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http://images.google.se/imgres?imgurl=http://upload.wikimedia.org/wikipedia/sv/7/7c/Ssab2.jpg&imgrefurl=http://sv.wikipedia.org/wiki/SSAB&h=97&w=288&sz=33&hl=sv&start=18&um=1&tbnid=P0ZlAdMe5-1ttM:&tbnh=39&tbnw=115&prev=/images?q=ssab+logga&gbv=2&svnum=10&um=1&hl=sv

The end of close gov’t–industry cooperation

A new generation of social democrats in in the cabinet– SSU holds a congress in 1967– A new position as Minister of Industry 1969– Sveriges Investeringsbank 1967, Statsföretag AB 1969– STU 1969, SUAB 1969, SIND 1973– LO convention proposed Wage earner funds in 1971

Sweden: In good health … and then to an emergency room– 1976 A new liberal-conservative government– government becomes sole owner in many industries


Gov’t is involved in ICT restructuring

Datasaab is established– Stansaab established 1971 (SRT, Saab Scania, SUAB)– Alfaskop is a huge success– SRT leaves in 1973– 1978 Stansaab & Saab Scania computer division = Datasaab

A state-owned PC industry is born – January 1978 – a meeting in Linköping– August 1978 ABC 80 is introduced– 1979 Government takes over

Ericsson and Nokia takes over

NMT & GSM opens world market for EricssonPresented by Eric Giertz at the Nordic Leadership in ICT Seminar, 22 Sep. 2015

Hunting for global growth in 1990–2005• Televerket & Ericsson are divorced

– Liberalization in 1993– Ericsson takes over Teli (1994) and Ellemtel (1995)– Telia AB makes IPO 2000– Telia acquires Sonera in 2002

• Ericsson survived when bubble burst– Ericsson outsourcing late 1990s– Ericsson on top March 2000– Ericsson hit by 3G licensees– Leaves handsets to Sony Ericsson– Saved by new issued shares in July 2002– Employment in Sweden from 43,000 to 21,000 in four years

• A diversified ICT Sector is bornPresented by Eric Giertz at the Nordic Leadership in ICT Seminar, 22 Sep. 2015

Sweden TodayEric Giertz

Software and services Hardware

Products and systems

IT Operations, Application Mngnt and

Maintenance

Software and net services IT Consultants Components

The Swedish ICT Sector of Today

CommercialSoftware

Net services

Repair & Maintenance

Operations R&D


Number of employees in ICT industry in Sweden

105,000

110,000

115,000

120,000

125,000

130,000

135,000

117,011

129,458 130,221

127,560

132,142

2007 2008 2009 2010 2011


Number of employees in different business logics

Software

Net Services

Service and Maintenance of ICT systems

ICT operations

ICT consultancy firms (Commercial systems)

ICT consultancy firms (R&D related)

Hardware (Components)

Hardware (Complete products and systems)


Number of employees in Hardware companies

Hardware (Complete products and systems)

Hardware (Components)


No of employees in Software & Net services

Net services

Software


Internet-related business models


Internet-related business models

• Proof of Concepts• Industrial exits• Loved by Business angels & VCs

• Employ rather few people• Great importance for the use of

ICT in other sectors of industry

• Technology based B2B-companies serve many customers in consolidated industries


No of empl. in Maintenance & IT operations

ICT operations

Service & Maintenanceof ICT systems


No of empl. in ICT-consultancy firms in Sweden

R&D-related: 12 397 employees 492 work places 363 companies

Administration: 25 633 employees 1 118 work places 766 companies


Enablers for Industry DynamicsAnnika Rickne

Mergers & acq. as enablers of industry dynamics

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• In general, mergers and acquisitions (M&A) may create consolidation, productivity, mobility, etc.

• Cyclic patterns of M&A – as linked to industry cycles

• Focus: ICT software and services sector

Presented by Annika Rickne at the Nordic Leadership in ICT Seminar, 22 Sep. 2015

Enablers for ind. dyn.: M&A in the Swedish economy

Swedish ICT software & service sector, 2000–2008: 9 341 firms– 28% have been acquired (2 657 firms) (4 001 M&A)

– 1 % acquired by foreign owned companies & still operate in Sweden (131 firms)

– So 5% of the acquired firms got a foreign owner

– Acquired firm in average 25 employees

Intensive M&A activity in Sweden

Above all small firms that are acquired

Motifs: Investment in tech capacity & int’l customer base acquisitions to pursue growth strategies Presented by Annika Rickne at the Nordic Leadership in ICT Seminar, 22 Sep. 2015

Enablers for ind. dyn.: M&A for industrial transformation • Larger actors – to compete on global markets

– But did not lead to new Swedish based multinationals

• Efficiency through synergy & scale

• New firm formation– Larger firms abandon niche markets => open up for new entry– New impulses and opportunities for entrepreneurship– M&As increase the frequency of spin-out by 33% two years after the event

• Technology and competence diffusion– Learning between acquired and owner firm– Stimulated between-firm job mobility of key persons in the sector– Increased managerial turnover

• Possibility for exit through M&As– Motivation for entrepreneurs

• Private wealth – to potentially reinvestPresented by Annika Rickne at the Nordic Leadership in ICT Seminar, 22 Sep. 2015

Enablers for industry dynamics:Entrepreneurial Hotspots: Sweden & Stockholm

• International reputation as highly ICT productive environment, especially Stockholm

• Goodwill builds on long history

• Software & hardware development, highly educated & experienced, work efficiently at high standards

• Flat organization, consensus models Speed

• Attract foreign capital

• Pride & rationale in staying SwedishPresented by Annika Rickne at the Nordic Leadership in ICT Seminar, 22 Sep. 2015

Very largeconcentration to Stockholm


Enablers for industry dynamics:Entrepreneurial Hotspots: Silicon Valley• Scale: firms, investors & customers

• Role models & peers

• Competent, connected & operational investors with large pockets

• Speed

• Experienced in growth management

• A portal to the customers – consumers + B2B

• A portal to the US marketPresented by Annika Rickne at the Nordic Leadership in ICT Seminar, 22 Sep. 2015

Enablers for industry dynamics:Entrepreneurial Hotspots: Potential for Sweden

• Remain as a leading hotspot• Renew flow of engineers & designers from educ.• Shortage of engineers + low mobility:

Has to be solved!• Increase mobility between business & academia• Retain experienced managers & engineers• Facilitate angel & VC investment + management

involvement through legal arrangements• Demanding, competent & early customers• Tap into hotspots, e.g., Silicon Valley - Pave the way!


Nordic gamingKent Thorén

Presented by Kent Thorén at the Nordic Leadership in ICT Seminar, 22 Sep. 2015

Nordic gaming: Historic development

• Commercial video games initiated in the US & Japan in early 1970s

• Nordic (early attempts in 1980s, but) more sustainable companies started around 1990 Industry formation

• Conditions– Rewritable storage media– Home computers (PC games)– Multimedia skills from “demo” groups


Overview: Early HitsSweden Norway Denmark Finland

DICE (Pinball, Rally games)

atod (Edge, The Lawnmower man)

Funcom (Pocahontas, The Longest Jorney)

IO Interactive (Hitman)

Housemarque (Supreme Snowboarding)

Development patterns


Finland vs Sweden: Part I

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• Dramatic shift!• Finland mobile success

– Nokia’s pioneering efforts – supplying game industry with talent by down sourcing

– Support from Tekes


Finland vs Sweden: Part II

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SuperCell

Rovio

Fingersoft

Other Companies

Finland Sweden Mobile focus vs Broad footprint

Super concentrated vs Concentrated

Finland Sweden


The Swedish Game Development SectorKent Thorén

Sweden: Overview of Development

• PC Games

• AAA games on PC and Console (PS, xBox)

• Facebook games (King)

• Mobile games (King, Toca Boca, Mediocre etc)

• PC Games? (Indie developers via Steam etc)

• VR? Presented by Kent Thorén at the Nordic Leadership in ICT Seminar, 22 Sep. 2015

Backpacker Pan Vision/Aniware Minecraft Mojang Battlefield DICE Mirrors edge DICE Bioniuc Commando Grin Motorhead DICE Candy crush saga King Need for Speed Ghost Chronicles of Riddick Starbreeze/Tigon Payday Overkill/Starbreeze Entropia Universe MindArk Pinball DICE Europa Universalis Paradox RalliSport Challenge DICE Far Cry 3 Massive Renegade Ops Avalanche Goat Simulator Coffee Stain Smash hit Mediocre Hotline Miami Dennaton Snactum Coffee Stain Ignition Unique Development Sprinkle Mediocre Just Cause Avalanche Stardoll Stardoll Labyrinth 2 Illusion Labs Starstable Pizel Tales Mad Skills Motocross Turborilla Syndicate Starbreeze Magicka Arrowhead/Paradox Unravel Coldwood ManagerZone Power Challenge Word Brain MAG Interactive Midtown Madness DICE World in Conflict Massive

Major Releases 2015/6: Star Wars Battlefront (DICE), Magicka 2 (Paradox Interactive), Mirrors Edge Catalyst (DICE), Need for Speed – Rivals (Ghost), Just Cause 3 (Avalanche), Tom Clancy’s The Division (Massive), Mad Max (Avalanche), Wolfenstein: The New Order (Machine Games), Minecraft on Hololens, Warhammer Vermintid (FatShark)

Examples


Launch of First Game

Developing Second Game

Developing First Game

Drop off forming a Company

Launch of First Game

Forming a Company

Informal Group Enters Game Competitions

Major StudioGame Education Project

Developing Second Game

Consulting or

employment

Consulting

Typical Patterns


Key Success Factors

Making really good games

Penetrating

Challenge

BypassingReaching through market noise

Virality

Emotion

Gameplay

Novelty


Key Success Factors

Beneficial Circumstances

Competence

Making really good games

Reaching through market noise

IT Competence

Quality culture

Creativity

Design

Business Culture

Game Competence

Team orientation

Previous Success*

Sharing Culture

Reputation

Contacts

Courage

Cross-firm support

Flat org.


Key Findings

• Success on all platforms

• Games of high quality – international reputation

• The industry is the source of its own competitive advantage, thanks to culture of sharing & helping?

• Education-incubator combinations Regional clusters

• Capital difficult to get

• No targeted public supportPresented by Kent Thorén at the Nordic Leadership in ICT Seminar, 22 Sep. 2015

ICT in Other SectorsAnnika Rickne & Eric Giertz

ICT in Other Sectors• ICT technology, products & knowledge permeates many sectors

– ICT in tech & competence platforms, development processes, process equipment, internal administration, decentralization processes, communications, global networks, service offerings, customer communication, access to global markets, etc.

– Increases work productivity: Sweden above OECD average – Spurs innovation– Retail, health care, media, etc.– A sharing economy

• Recent trends: Big data, cloud computing, Internet of Things

• Evidence from how various sectors in Finland uses ICT– 1/3 has software development (mostly by contracting)– 1/3 sees digitalization as enhancing their products – 1/3 expects Big Data to have large impact in the next 3 years– 43% expects Internet of Things to have large impact in the next 3 yearsPresented by Annika Rickne at the Nordic Leadership in ICT Seminar, 22 Sep. 2015

ICT permeates many sectors

Three aspects in focus here:

– ICT consultants as drivers of change

– Embedded systems in engineering

– Towards cash-less banking


The importance of R&D-related Consultancy


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http://hiq.se/

http://hiq.se/

http://www.hotswap.eu/




http://www.t2data.se/

R&D related ICT Consultancy firms

Typical customers:Engineering Corporations making complex & assembled products

• Developing software components (embedded systems) in costumer products & systems

• Developing software & systems for production processes


R&D related ICT Consultancy firms

• A handful dominating larger companies (~1000 employees)

• Domestic owners

• Mainly domestic market but some customers in other Nordic countries

• Differs a lot from ICT-consultancy firms working with commercial systems


Ericsson

Firm XX

Atlas CopcoDeLaval

SaabFirm XX

Kockum

HusqvarnaViking

Saab Automobile

Ericsson

Ericsson

Saab

Saab

Hemocue

Autoliv

Ericsson Mobile

Firm XX

SaabVolvo

Atlas Copco

Volvo

Kapsch

Firm XX

Firm XX

Firm XX ABB

Presented by Eric Giertz at the Nordic Leadership in ICT Seminar, 22.9.2015

To be discussed

• Does Sweden differ from other industrial nations?

• Can externalization of ICT-related R&D partly explain why large Swedish engineering firms have survived radical tech shifts when foreign competitors have failed?


Emergence of an ICT-based disruptive mobile payment service

• Long cooperation b/w Swedish banks in infrastructure & services

• Involvement of regulatory actors Harmony between reg. frameworks & business operations

• The corporate society 2.0

• Emergence of mobile payment services: Swish– Societal interest in reducing cash payments – Pressures from ICT-skilled competitors (telecom)

– Potential new entrants in the payment service industry– Tech advances (processing of transactions,

real time handling, access Internet via smart phones)– Disrupting the cash infrastructure & also the card infrastructurePresented by Annika Rickne at the Nordic Leadership in ICT Seminar, 22 Sep. 2015

Swish


Nordic Leadership in ICT

Data & Analytics

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