The power of simplicity
Ericsson’s turnaround is full of examples showing how difficult it is to say when, where and how different decisions are actually made. Decisions are rarely the result of the fall of a gavel on a committee table, recorded in the minutes of a meeting. Decisions evolve through processes involving many individuals.
Yet it is possible in retrospect to see that a de facto decision was made in the course of a few hours in the business-class section of British Airways flight BA0183 from London Heathrow to John F. Kennedy Airport in New York. There were still recognizable traces of the PowerPoint slides cobbled together during that flight 12,000 meters above the Atlantic in Ericsson’s presentation material several years later.
Svanberg and Sténson had been holding secret meetings with analysts in London and were now on their way to similar meetings in New York.
They had dinner on the plane, chatted, drank a glass or two of red wine and dozed for a while. Then Svanberg’s laptop came out and they were back at work. They tossed ideas round, argued, laughed and wrote things down – with the laptop going backwards and forwards between them.
PROFITABILITY THE PREREQUISITE
The first point saved on the laptop was that profitability was the essential prerequisite for everything. Restoring profitability was at the top of the list of priorities, way before anything else.
Svanberg and Sténson agreed on a list of seven success factors to turn the company around.
1. Good profitability, to provide credibility, a mandate for action and control over Ericsson’s own destiny
2. A strategic focus with a solid foundation of support, including a shared culture and shared values
3. Professional marketing and sales, with the task of creating maximum value for customers
4. A clear management structure and an efficient decision-making process with
a) Frank and critical discussions to ensure good decisions
b) A simple organization, quantifiable units, delegation of responsibilities
c) A slimmed-down and effective central staff to support business operations in the field
5. A leading position in research and development, based on genuine customer needs
6. World-class processes, simplification, lack of duplication, and an acceptance of responsibility
7. Frequently repeated and effective communication.
On flight BA0183, Svanberg and Sténson also created this simplified sketch of what had to be done and in what order:
First we have to attain profitability to gain control over our own destiny.
The profitable company will then develop world-class processes, a healthy internal culture and the capacity to surpass customer expectations.
Then we can regain our position as global leader in the industry.
Author: Svenolof Karlsson & Anders Lugn