Nordic Leadership in ICT

1. 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 Rouvinen Jyrki 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

2. Finland & Sweden in ICT Petri Rouvinen

3. 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

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

5. 1.8 4.0 1.6 3.1 Ericsson of Swedish GDP Nokia of Finnish GDP Direct impact Indirect impact (sub-contracting & partnering) % of GDP in 2000 WORLD RECORD!? Presented by Petri Rouvinen at the Nordic Leadership in ICT Seminar, 22 Sep. 2015

6. 38.2% 28.7 42.1 9.6 15.1 Swedish ICT Sector Finnish ICT Sector Direct share of Ericsson/Nokia Share of ICT Sector Value Added in 2000, % Other ICT firms’ share 57.2% 61,8 42,8 Presented by Petri Rouvinen at the Nordic Leadership in ICT Seminar, 22 Sep. 2015

7. 0 1 2 3 4 5 6 7 8 9 10 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Finland Sweden The ICT sector as a percentage of GDP NMT Cf. Ch 2 GSM 1st disrupt In wireless network eq.: 1. Huawei 2. Ericsson 3. Nokia (Siemens; Alcatel- Lucent) Worldwide: From monopolies to competition The 2nd disruption Cloud computing Mobile Internet Big data, analytics Tech 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

8. ICT sector: 5–6% of GDP, 3–4% or working hours Nokia/Ericsson: 0.5% of GDP, 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% Presented by Petri Rouvinen at the Nordic Leadership in ICT Seminar, 22 Sep. 2015

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

10. History of the Swedish ICT Sector Eric Giertz

11. 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

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

13. Source: Giertz, Marionettens död, Ekerlids förlag Presented by Eric Giertz at the Nordic Leadership in ICT Seminar, 22 Sep. 2015

14. ”Developing Couples” Four parties plan from acorns to oak trees KTH ASEA Vattenfall Ericsson Televerket Saab Defence ASEA SJ (rail) Private Companies Public Partners Government E X P O R T Presented by Eric Giertz at the Nordic Leadership in ICT Seminar, 22 Sep. 2015

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

16. From stagnation to bankruptcies & emergency measures in 1970–1990 Nils G. Åslings Industriakut Presented by Eric Giertz at the Nordic Leadership in ICT Seminar, 22 Sep. 2015

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

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

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

20. Sweden Today Eric Giertz

21. 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 Commercial Software Net services Repair & Maintenance Operations R&D Presented by Eric Giertz at the Nordic Leadership in ICT Seminar, 22 Sep. 2015

22. Number of employees in ICT industry in Sweden 117,011 129,458 130,221 127,560 132,142 105,000 110,000 115,000 120,000 125,000 130,000 135,000 2007 2008 2009 2010 2011 Presented by Eric Giertz at the Nordic Leadership in ICT Seminar, 22 Sep. 2015

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

24. Number of employees in Hardware companies Hardware (Complete products and systems) Hardware (Components) Presented by Eric Giertz at the Nordic Leadership in ICT Seminar, 22 Sep. 2015

25. No of employees in Software & Net services Net services Software Presented by Eric Giertz at the Nordic Leadership in ICT Seminar, 22 Sep. 2015

26. Internet-related business models Presented by Eric Giertz at the Nordic Leadership in ICT Seminar, 22 Sep. 2015

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

28. No of empl. in Maintenance & IT operations ICT operations Service & Maintenance of ICT systems Presented by Eric Giertz at the Nordic Leadership in ICT Seminar, 22 Sep. 2015

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

30. Enablers for Industry Dynamics Annika Rickne

31. Mergers & acq. as enablers of industry dynamics 0 20 40 60 80 100 120 0 500 1000 1500 2000 2500 3000 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Valueoftransactionsinbil.USD Numberoftransactions Announced Mergers & Acquisitions in the IT Consulting & Services Number of transactions Value of transactions • 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

32. 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

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

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

35. Very large concentration to Stockholm Presented by Annika Rickne at the Nordic Leadership in ICT Seminar, 22 Sep. 2015

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

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

38. Nordic gaming Kent Thorén

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

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

41. Overview: Early Hits Sweden 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 Presented by Kent Thorén at the Nordic Leadership in ICT Seminar, 22 Sep. 2015

42. Finland vs Sweden: Part I 0 200 400 600 800 1000 1200 1400 1600 1800 2000 2009 2010 2011 2012 2013 2014 Finland Sweden TurnoverMEuro • Dramatic shift! • Finland mobile success – Nokia’s pioneering efforts – supplying game industry with talent by down sourcing – Support from Tekes Presented by Kent Thorén at the Nordic Leadership in ICT Seminar, 22 Sep. 2015

43. Finland vs Sweden: Part II 2008 2010 2012 2014 SuperCell Rovio Fingersoft Other Companies Finland Sweden Mobile focus vs Broad footprint Super concentrated vs Concentrated Finland Sweden Presented by Kent Thorén at the Nordic Leadership in ICT Seminar, 22 Sep. 2015

44. The Swedish Game Development Sector Kent Thorén

45. 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

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

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

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

49. Key Success Factors Making really good games Penetrating Challenge Bypassing Reaching through market noise Virality Emotion Gameplay Novelty Presented by Kent Thorén at the Nordic Leadership in ICT Seminar, 22 Sep. 2015

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

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

52. ICT in Other Sectors Annika Rickne & Eric Giertz

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

54. ICT permeates many sectors Three aspects in focus here: – ICT consultants as drivers of change – Embedded systems in engineering – Towards cash-less banking Presented by Annika Rickne at the Nordic Leadership in ICT Seminar, 22 Sep. 2015

55. The importance of R&D-related Consultancy Presented by Eric Giertz at the Nordic Leadership in ICT Seminar, 22 Sep. 2015

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

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

58. Ericsson Firm XX Atlas CopcoDeLaval Saab Firm XX Kockum HusqvarnaViking Saab Automobile Ericsson Ericsson Saab Saab Hemocue Autoliv Ericsson Mobile Firm XX Saab Volvo 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

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

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

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