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Calculator Disruption
In 1981, the German
  group Kraftwerk
  released a single
  called Pocket
  Calculator.
The lyrics were
  simple, straight
  forward and very
  thoughtful…
I’m the operator
                      with my pocket calculator
                      I’m adding…
                      … And subtracting
                      I’m controlling…
                      … And composing

          By pressing down a special key
               It plays a little melody
( http://www.youtube.com/watch?v=zZt64_XOflk )
About ten years before ”Pocket Calculator”,
calculators were far from pocket size…
Calculators used to be big, heavy and
expensive mechanical devices…
… And well, these calculators were disrupted
and the Digital Pocket Calculator emerged as
the dominant design…
In 1972, the Swedish firm Facit faced
bankruptcy. The shift from mechanical to
digital calculators created great difficulties.
Facit was the main employer in the small
town Åtvidaberg and thus…
… the entire society suffered from this disruption.
All of a sudden, the value of Facit’s products
had diminished, the amount of unsold
products and inventories increased rapidly…
… The disruption seemed
to come from nowhere…
… In Sweden a term was coined in
order to describe how large successful
firms could collapse so rapidly…
The ’Facit Disease’
Facit used to be a
large, well reputed
and profitable
company – how
could this happen?
Did Facit recognize the threat?
Let’s take a closer look at what actually happened
to Facit in this technological shift…
Facit came from
the kingdom of Sweden
Its
 headquarters
 were located
in a small town
     called
  Åtvidaberg
The firm started in the 1920’s as a company
called ’Åtvidaberg Industries’, which was
mainly producing office furniture.
Under the leadership of Elof Ericsson,
the firm focused increasingly on
calculators and grew rapidly.
In 1932, the first calculator with ten
keys was manufactured in Åtvidaberg.
It was called FACIT.
Facit became a great success and was
exported to the entire world. Åtvidaberg
Industries was a source of pride for
Sweden in the era after World War 2.
Along with the expansion of Åtvidaberg
Industries, the town Åtvidaberg grew rapidly…
Elof Ericsson and his family
used to live in this house. Elof
was widely acclaimed for his
leadership, both in Åtvidaberg
and in Sweden.
At the age of
38, Elof’s
son, Gunnar
Ericsson
became
CEO of the
company.
While Åtvidaberg
 was a large player
 in the calculator
 market, it was still
 very small
 compared to other
 actors. For
 instance, IBM was
 25 times bigger in
 the 1950’s.
The industry was
technologically mature,
yet there was still a
great demand globally
for calculators…
… Therefore, Ericsson
focused the company
more towards selling
calculators globally…
… The name of the company was changed to
FACIT and all products were now sold under the
same brand with similar design…
… The focus on calculators,
marketing, the FACIT brand
and global expansion was
referred to as ”The New Deal”.
Under the leadership of Gunnar Ericsson sales
and profits grew rapidly as the FACIT brand
became recognized internationally…
The little ”FACIT Guy” with his long hat
symbolized a wizard, who could rapidly make
accurate calculations for the customer.
In the 1960’s the
FACIT wizard was
seen in most
parts of the
world…
The global
 expansion
 was very
 successful…
In the skyscrapers of New York
                            In the mines of Rhodesia




        The whole world uses FACIT


                            At the marketplaces
 In downtown London
                            in Mongolia
The FACIT brand was everywhere…
The remarkable growth in the 1960’s
implied that FACIT, Gunnar
Ericsson and Åtvidaberg became a
role model for Swedish industry.
The company was admired by both
industrialists and politicians.
Gunnar Ericsson was
fantastic at marketing…
In 1966 he invited the Brazilian national
soccer team to practice in Åtvidaberg…
In the small town Åtvidaberg, in the small
country of Sweden, legends like Pelé
entered this grass in order to practice prior
to the World Championships in 1966.
Photos like this featuring Gunnar
Ericsson and Pelé were spread
throughout the entire world.
     Fantastic Marketing!
Mr. Ericsson was
 almost a celebrity
 in these years. He
 was the CEO of
 Facit, the board
 member of various
 international
 soccer
 associations as
 well as a member
 of the Swedish
 parliament.
Ericsson used his
  extensive network
  frequently in order
  to sell the Facit
  calculators.
Here, down by the lake in
Åtvidaberg were Gunnar Ericsson
lived, cocktail parties were held.
Politicians, Industrial leaders and
international guests gathered and
made new acquaintances.
While the Facit
 Wizard was
 conquering the
 world, some
 important
 breakthroughs
 were made in the
 field of digital
 technology…
In order to explore this new area, the
  company founded a subsidiary called
  Facit Electronics.
Facit succeeded in
 developing some
 big computers,
 at one point the
 strongest
 computer in the
 world was made
 by Facit.
However, these projects
 generated huge losses.
 Deadlines and budgets were
 not met and Facit Electronics
 never had the resources to
 match global players like IBM.
As a consequence, Facit
 Electronics was
 terminated in 1962-63.
Instead, Facit focused
  increasingly on the magic of
  its core business –
  mechanical calculators.
Sales and profits kept rising
 through the 1960’s…
As the company grew, the
 town Åtvidaberg grew…
As the company grew, the soccer
 team in Åtvidaberg rised to the
 Swedish elite division…
Many of the Swedish soccer
 stars in those days moved to
 Åtvidaberg, to join the team
 and to work for Facit.
Thus, not only the company, but also the town
 and its soccer team were largely built upon the
 continuing success of mechanical technology.
In the years 1957-1972, the amount of
  employees increased from about 6000
  to almost 14 000.
Revenues increased with 500 percent
  and the products were sold in 140
  countries all over the world.
However, digital calculators also
 started to prosper in the 1960’s.
Initially, digital calculators were
  expensive, big, and demanded a
  lot of electricity.
However, digital technology has a
  high pace of development and
  the calculators became smaller,
  cheaper and better over time…
Given that Facit was a relatively small
 company, with competence in
 mechanical technology, the firm
 tried to benefit from the new
 technology through collaborations.
In 1965, the digital calculators
  started to enter the market slowly.
The same year, Gunnar Ericsson
  signed a contract with Hayakawa
  (owned by Sharp), which gave Facit
  exclusivity in selling their calculators
  throughout the world for 2 years..
Hayakawa had the technology and
  Facit had a global market
  organization and a strong brand.
A perfect match – in the short term…
In the 1960’s Facit acquired several
  manufacturers of mechanical
  calculators but failed to consolidate
  the R&D organizations.
As digital calculators were
 improved the competition
 increased, thus forcing Facit to
 cut prices and to loose profits…
Initially, the collaboration with Hayakawa
  helped Facit to keep sales up.
These calculators held the Facit brand,
 but they were Made in Japan.
In 1965 4000 digital calculators
  were sold in the world. The same
  figure reached 25 000 in 1966!
In 1967 15 percent of the global
  calculator market was digital.
The collaboration implied that Facit
 was depending upon Hayakawa in
 order to survive…
Over time, Hayakawa started to build
 its own sales organization.
Facit’s development lagged behind, the
 R&D organization was too small and
 fragmented throughout the world…
As Hayakawa started to enter Facit’s
 markets in many countries, the
 relationship between the two companies
 became increasingly strained…
However, Facit was
 still a growing and
 profitable firm in
 the late 1960’s.
Some of the engineers
 argued that the
 mechanical calculators
 could at best be sold
 until 1971-72, whereas
 parts of the board were
 less worried about the
 future…
As Hayakawa
    and other
 manufacturers of
digital calculators
   improved their
 technology, Facit
encountered great
problems in 1970-
  71 and did not
   know what to
       do…
Facit’s mechanical calculators
 had reached a dead end.
The amount of unsold
 calculators increased rapidly.
“We sit here in the forests and
  have no idea what’s going on
  in the world.”

// Quote from a board meeting
In 1972, the situation
  became
  desperate. Sales
  decreased sharply
  and thousands of
  people were laid
  off in Åtvidaberg
  and throughout the
  world.
Even the soccer
  stars had to leave
  the company later
  on.
Only a few years after
 having shown record
 profits, Facit now
 faced bankruptcy.
I’m the operator
              with my pocket calculator
              I’m adding
              And subtracting
              I’m controlling
              And composing


By pressing down a special key
     It plays a little melody
It’s amazing how much value can be destroyed in
   such a short period of time…
Imagine the amount of manufacturing
  sites that became irrelevant…
Imagine how the entire value chain of
  suppliers of mechanical components
  became irrelevant…
Imagine the amount of
  knowledge that became
  irrelevant in only a few years…
”The coggwheels in the mechanical calculators
   were the soul of the company”
 // Gert Persson, used to work at Facit Electronics
The economic value of this soul
 was destroyed in the early 1970’s.
The Swedish firm Electrolux offered to buy
  Facit in 1972.
The owners had to accept and Electrolux
  paid 80 MSEK for a company which had
  been an industrial giant only a few
  years ago.
Given that Facit had a profitable turnover of
  about 1 Billion SEK in 1970, this gives an
  idea of how much value was destroyed.
Later on, Electrolux sold the different parts
  of Facit for 200 MSEK in total.
Gunnar Ericsson
 was no longer an
 admired
 industrial leader.
 Much of the blame
 was put on him
 personally.
It’s always tempting to play the blame game.
   But it’s not very constructive. Many, many
   other firms suffered greatly in this and other
   technological shifts.
Could something have been done differently?
I don’t know. No one really knows.
Maybe Facit should have acquired Hayakawa or
   another digital manufacturer earlier?
Maybe they should have invested more aggressively
   in R&D instead of marketing in the early 1960’s?
However, somewhere, for someone, a lot of economic
   value (mechanical knowledge, manufacturing, sales
   and networks) would have to become obsolete.
This fact can’t be changed by any strategy, or
   anything.
Therefore we should think twice before we accuse
   managers or firms for being incompetent when they
   fail in technological shifts.
So what’s the main
            lesson from this story?



Well, I think it illustrates how technological
 shifts destroy the vale of previous
 competence and therefore create difficulties,
 simply because the capabilities of industrial
 giants all of a sudden become irrelevant.
Moreover, it illustrates how the furious pace of
 digital technology and the fact that it attacks
 from below often threatens established firms.
”The coggwheels in the mechanical calculators
   were the soul of the company”
 // Gert Persson, used to work at Facit Electronics




       This quote actually explains the
        ’Facit Disease’ very eloquently.
Thanks to the following sources:
Pettersson, T. (2003) I teknikrevolutionens
  centrum: företagsledning och utveckling i Facit
  1957-1972, Uppsala Papers in Financial and
  Business History, Report 16
“Facit av en era”, Computer Sweden nr 22 2004
Facitindustrierna efter 1972, Åtvidabergs
  Teknikhistoriska Sällskap
Åtvidabergs Bruks och Facit Museum, Sweden
Åssa Industri och Bil Museum, Sweden
Image Attributions




http://www.flickr.com/photos/71432201@N00/889045042/
http://www.flickr.com/photos/71432201@N00/889000088/
http://www.flickr.com/photos/71432201@N00/888129447/
    http://www.flickr.com/photos/ocad123/1065955129/
        http://www.flickr.com/photos/gak/16999155/
      http://www.flickr.com/photos/clango/439862166/
Photos taken at:

Åtvidabergs Bruks och Facit Museum, Sweden
http://brukskultur.atvidaberg.se/index2.html

Åssa Industri och Bil Museum, Sweden
http://www.assamuseet.se/


              Thank You!
Links of interest:

http://archive.corren.se/archive/2007/12/20/jidow0
  01baatzzc.xml

http://www.oldcalculatormuseum.com/

http://en.wikipedia.org/wiki/Electronic_calculator
Christian Sandström is a
                PhD student at Chalmers
               University of Technology in
               Gothenburg, Sweden. He
                writes and speaks about
                disruptive innovation and
                  technological change.




  www.christiansandstrom.org
christian.sandstrom@chalmers.se

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Facit and the Disruptive Electronic Calculator

  • 2. In 1981, the German group Kraftwerk released a single called Pocket Calculator. The lyrics were simple, straight forward and very thoughtful…
  • 3. I’m the operator with my pocket calculator I’m adding… … And subtracting I’m controlling… … And composing By pressing down a special key It plays a little melody ( http://www.youtube.com/watch?v=zZt64_XOflk )
  • 4. About ten years before ”Pocket Calculator”, calculators were far from pocket size…
  • 5.
  • 6. Calculators used to be big, heavy and expensive mechanical devices…
  • 7. … And well, these calculators were disrupted and the Digital Pocket Calculator emerged as the dominant design…
  • 8. In 1972, the Swedish firm Facit faced bankruptcy. The shift from mechanical to digital calculators created great difficulties.
  • 9.
  • 10. Facit was the main employer in the small town Åtvidaberg and thus…
  • 11. … the entire society suffered from this disruption.
  • 12. All of a sudden, the value of Facit’s products had diminished, the amount of unsold products and inventories increased rapidly…
  • 13. … The disruption seemed to come from nowhere…
  • 14. … In Sweden a term was coined in order to describe how large successful firms could collapse so rapidly…
  • 16. Facit used to be a large, well reputed and profitable company – how could this happen?
  • 17. Did Facit recognize the threat?
  • 18. Let’s take a closer look at what actually happened to Facit in this technological shift…
  • 19. Facit came from the kingdom of Sweden
  • 20. Its headquarters were located in a small town called Åtvidaberg
  • 21.
  • 22.
  • 23.
  • 24.
  • 25.
  • 26. The firm started in the 1920’s as a company called ’Åtvidaberg Industries’, which was mainly producing office furniture.
  • 27. Under the leadership of Elof Ericsson, the firm focused increasingly on calculators and grew rapidly.
  • 28. In 1932, the first calculator with ten keys was manufactured in Åtvidaberg.
  • 29. It was called FACIT.
  • 30.
  • 31. Facit became a great success and was exported to the entire world. Åtvidaberg Industries was a source of pride for Sweden in the era after World War 2.
  • 32. Along with the expansion of Åtvidaberg Industries, the town Åtvidaberg grew rapidly…
  • 33.
  • 34. Elof Ericsson and his family used to live in this house. Elof was widely acclaimed for his leadership, both in Åtvidaberg and in Sweden.
  • 35. At the age of 38, Elof’s son, Gunnar Ericsson became CEO of the company.
  • 36. While Åtvidaberg was a large player in the calculator market, it was still very small compared to other actors. For instance, IBM was 25 times bigger in the 1950’s.
  • 37. The industry was technologically mature, yet there was still a great demand globally for calculators…
  • 38. … Therefore, Ericsson focused the company more towards selling calculators globally…
  • 39. … The name of the company was changed to FACIT and all products were now sold under the same brand with similar design…
  • 40. … The focus on calculators, marketing, the FACIT brand and global expansion was referred to as ”The New Deal”.
  • 41. Under the leadership of Gunnar Ericsson sales and profits grew rapidly as the FACIT brand became recognized internationally…
  • 42. The little ”FACIT Guy” with his long hat symbolized a wizard, who could rapidly make accurate calculations for the customer.
  • 43. In the 1960’s the FACIT wizard was seen in most parts of the world…
  • 44.
  • 45. The global expansion was very successful…
  • 46.
  • 47.
  • 48. In the skyscrapers of New York In the mines of Rhodesia The whole world uses FACIT At the marketplaces In downtown London in Mongolia
  • 49. The FACIT brand was everywhere…
  • 50.
  • 51.
  • 52.
  • 53.
  • 54.
  • 55. The remarkable growth in the 1960’s implied that FACIT, Gunnar Ericsson and Åtvidaberg became a role model for Swedish industry. The company was admired by both industrialists and politicians.
  • 56. Gunnar Ericsson was fantastic at marketing…
  • 57. In 1966 he invited the Brazilian national soccer team to practice in Åtvidaberg…
  • 58. In the small town Åtvidaberg, in the small country of Sweden, legends like Pelé entered this grass in order to practice prior to the World Championships in 1966.
  • 59.
  • 60. Photos like this featuring Gunnar Ericsson and Pelé were spread throughout the entire world. Fantastic Marketing!
  • 61. Mr. Ericsson was almost a celebrity in these years. He was the CEO of Facit, the board member of various international soccer associations as well as a member of the Swedish parliament.
  • 62. Ericsson used his extensive network frequently in order to sell the Facit calculators.
  • 63.
  • 64. Here, down by the lake in Åtvidaberg were Gunnar Ericsson lived, cocktail parties were held. Politicians, Industrial leaders and international guests gathered and made new acquaintances.
  • 65.
  • 66.
  • 67. While the Facit Wizard was conquering the world, some important breakthroughs were made in the field of digital technology…
  • 68. In order to explore this new area, the company founded a subsidiary called Facit Electronics.
  • 69. Facit succeeded in developing some big computers, at one point the strongest computer in the world was made by Facit.
  • 70.
  • 71.
  • 72. However, these projects generated huge losses. Deadlines and budgets were not met and Facit Electronics never had the resources to match global players like IBM.
  • 73. As a consequence, Facit Electronics was terminated in 1962-63.
  • 74. Instead, Facit focused increasingly on the magic of its core business – mechanical calculators.
  • 75.
  • 76.
  • 77. Sales and profits kept rising through the 1960’s…
  • 78.
  • 79. As the company grew, the town Åtvidaberg grew…
  • 80.
  • 81.
  • 82. As the company grew, the soccer team in Åtvidaberg rised to the Swedish elite division…
  • 83. Many of the Swedish soccer stars in those days moved to Åtvidaberg, to join the team and to work for Facit.
  • 84. Thus, not only the company, but also the town and its soccer team were largely built upon the continuing success of mechanical technology.
  • 85. In the years 1957-1972, the amount of employees increased from about 6000 to almost 14 000. Revenues increased with 500 percent and the products were sold in 140 countries all over the world.
  • 86. However, digital calculators also started to prosper in the 1960’s.
  • 87. Initially, digital calculators were expensive, big, and demanded a lot of electricity. However, digital technology has a high pace of development and the calculators became smaller, cheaper and better over time…
  • 88. Given that Facit was a relatively small company, with competence in mechanical technology, the firm tried to benefit from the new technology through collaborations.
  • 89. In 1965, the digital calculators started to enter the market slowly. The same year, Gunnar Ericsson signed a contract with Hayakawa (owned by Sharp), which gave Facit exclusivity in selling their calculators throughout the world for 2 years..
  • 90. Hayakawa had the technology and Facit had a global market organization and a strong brand. A perfect match – in the short term…
  • 91. In the 1960’s Facit acquired several manufacturers of mechanical calculators but failed to consolidate the R&D organizations.
  • 92. As digital calculators were improved the competition increased, thus forcing Facit to cut prices and to loose profits…
  • 93. Initially, the collaboration with Hayakawa helped Facit to keep sales up.
  • 94. These calculators held the Facit brand, but they were Made in Japan.
  • 95. In 1965 4000 digital calculators were sold in the world. The same figure reached 25 000 in 1966! In 1967 15 percent of the global calculator market was digital.
  • 96. The collaboration implied that Facit was depending upon Hayakawa in order to survive… Over time, Hayakawa started to build its own sales organization.
  • 97. Facit’s development lagged behind, the R&D organization was too small and fragmented throughout the world…
  • 98. As Hayakawa started to enter Facit’s markets in many countries, the relationship between the two companies became increasingly strained…
  • 99. However, Facit was still a growing and profitable firm in the late 1960’s.
  • 100. Some of the engineers argued that the mechanical calculators could at best be sold until 1971-72, whereas parts of the board were less worried about the future…
  • 101. As Hayakawa and other manufacturers of digital calculators improved their technology, Facit encountered great problems in 1970- 71 and did not know what to do…
  • 102. Facit’s mechanical calculators had reached a dead end.
  • 103. The amount of unsold calculators increased rapidly.
  • 104.
  • 105. “We sit here in the forests and have no idea what’s going on in the world.” // Quote from a board meeting
  • 106. In 1972, the situation became desperate. Sales decreased sharply and thousands of people were laid off in Åtvidaberg and throughout the world. Even the soccer stars had to leave the company later on.
  • 107. Only a few years after having shown record profits, Facit now faced bankruptcy.
  • 108. I’m the operator with my pocket calculator I’m adding And subtracting I’m controlling And composing By pressing down a special key It plays a little melody
  • 109.
  • 110. It’s amazing how much value can be destroyed in such a short period of time…
  • 111.
  • 112. Imagine the amount of manufacturing sites that became irrelevant…
  • 113. Imagine how the entire value chain of suppliers of mechanical components became irrelevant…
  • 114. Imagine the amount of knowledge that became irrelevant in only a few years…
  • 115. ”The coggwheels in the mechanical calculators were the soul of the company” // Gert Persson, used to work at Facit Electronics
  • 116. The economic value of this soul was destroyed in the early 1970’s.
  • 117.
  • 118. The Swedish firm Electrolux offered to buy Facit in 1972. The owners had to accept and Electrolux paid 80 MSEK for a company which had been an industrial giant only a few years ago. Given that Facit had a profitable turnover of about 1 Billion SEK in 1970, this gives an idea of how much value was destroyed. Later on, Electrolux sold the different parts of Facit for 200 MSEK in total.
  • 119.
  • 120.
  • 121.
  • 122.
  • 123. Gunnar Ericsson was no longer an admired industrial leader. Much of the blame was put on him personally.
  • 124. It’s always tempting to play the blame game. But it’s not very constructive. Many, many other firms suffered greatly in this and other technological shifts. Could something have been done differently?
  • 125. I don’t know. No one really knows. Maybe Facit should have acquired Hayakawa or another digital manufacturer earlier? Maybe they should have invested more aggressively in R&D instead of marketing in the early 1960’s? However, somewhere, for someone, a lot of economic value (mechanical knowledge, manufacturing, sales and networks) would have to become obsolete. This fact can’t be changed by any strategy, or anything. Therefore we should think twice before we accuse managers or firms for being incompetent when they fail in technological shifts.
  • 126.
  • 127. So what’s the main lesson from this story? Well, I think it illustrates how technological shifts destroy the vale of previous competence and therefore create difficulties, simply because the capabilities of industrial giants all of a sudden become irrelevant. Moreover, it illustrates how the furious pace of digital technology and the fact that it attacks from below often threatens established firms.
  • 128. ”The coggwheels in the mechanical calculators were the soul of the company” // Gert Persson, used to work at Facit Electronics This quote actually explains the ’Facit Disease’ very eloquently.
  • 129.
  • 130. Thanks to the following sources: Pettersson, T. (2003) I teknikrevolutionens centrum: företagsledning och utveckling i Facit 1957-1972, Uppsala Papers in Financial and Business History, Report 16 “Facit av en era”, Computer Sweden nr 22 2004 Facitindustrierna efter 1972, Åtvidabergs Teknikhistoriska Sällskap Åtvidabergs Bruks och Facit Museum, Sweden Åssa Industri och Bil Museum, Sweden
  • 131. Image Attributions http://www.flickr.com/photos/71432201@N00/889045042/ http://www.flickr.com/photos/71432201@N00/889000088/ http://www.flickr.com/photos/71432201@N00/888129447/ http://www.flickr.com/photos/ocad123/1065955129/ http://www.flickr.com/photos/gak/16999155/ http://www.flickr.com/photos/clango/439862166/
  • 132. Photos taken at: Åtvidabergs Bruks och Facit Museum, Sweden http://brukskultur.atvidaberg.se/index2.html Åssa Industri och Bil Museum, Sweden http://www.assamuseet.se/ Thank You!
  • 133. Links of interest: http://archive.corren.se/archive/2007/12/20/jidow0 01baatzzc.xml http://www.oldcalculatormuseum.com/ http://en.wikipedia.org/wiki/Electronic_calculator
  • 134.
  • 135. Christian Sandström is a PhD student at Chalmers University of Technology in Gothenburg, Sweden. He writes and speaks about disruptive innovation and technological change. www.christiansandstrom.org christian.sandstrom@chalmers.se