Challenging the Core Business Model

Scandinavian companies, as our team has come to realize recently, tend to stick out in regards to their longevity and ability to change quickly with macroeconomic trends. This characteristic can be seen as a major difference between the American business structure, where companies may come and go in a quicker lifecycle or be slower in their efforts to challenge their business models in ways which may otherwise prolong the company’s life.

This trend was first pointed out when we visited the company Kairos Future in Stockholm. There, we had a discussion, which included the topic of businesses needing to focus farther into their futures than they currently do. They mentioned a fact that out of the top 10 companies in Sweden 100 years ago, there are still around 7-8 that were still in the top 10 today. Whereas, if you compared the same statistic to the United States, only 2 or so would still be in the top 10. This may be an indicator that the lifespan of a Scandinavian company is longer than that of a United States company due to their ability to change with macroeconomic trends.

The earliest, and most notable example which comes to mind is the Finnish company Nokia, who once was a rubber boots manufacturer in the early 1900’s, but saw a chance to move into the electronics and communication space. As such, they operated profitably for decades, and were once market leaders in the industry.

Beyond Nokia, though, the trend still resonates with three companies we’ve visited in the last week and a half across both Stockholm and Gothenburg:

Ziggy Creative Company in Stockholm challenged one of its clients, a smartphone phone manufacturer, to change their business model by no longer focusing on selling phone hardware to profit, but to innovate and provide an application store which would be sustainable and would garner continued profit streams in future years. Later, Apple released an Application store and Google released its Android store.

SandvikSandvik, based in Stockholm also challenged their business model, divesting businesses which were not the sole dominate player in their respective markets. Subsequently, Sandvik began moving into greater areas that they could dominate in which may not have been their core concentration (steel production and engineering). They also directly challenged their corporate culture, realizing it would need a serious overhaul to compete effectively in the rapidly changing technology revolution and reduced their average executive age by 17 years overnight through leadership changes and layoffs.

Finally, Volvo Corporation followed a similar path and divested its consumer automobile division late in the 1990’s in order to focus on its more profitable and sustainable divisions. This allowed Volvo to have more free cash flows and focus on continuing the company’s profitability without the division that was most sensitive to changes in the macroeconomic environment.

While it may be unrealistic to say companies in the United States do not take this same action at all, it is still surprising to see that most of the bigger Scandinavian corporate success stories have succeeded in challenging, changing, and profiting from drastically altered business strategies.