Ericsson’s cooperation with Matra turned into a catastrophe. The difficulties escalated to the point where Ericsson’s representatives were denied admission to MET’s premises. Fundamental differences in company culture played a decisive role, if we are to believe the Thunderbird School of Global Management, which uses this as a case study to demonstrate how partners can underestimate the problems of working together.

However, the major problem for Ericsson was determining how it could sidestep the agreement to assign one-third of GSM revenues to Matra. The problem was resolved in 1992 when Matra acquired a new owner, a valid reason for terminating the contract.

“Ericsson had some amazing luck,” says Ulf J. Johansson. “Nortel wanted to expand in the commercial sector in Europe and made an offer for the section of Matra that was involved in the cooperation with Ericsson. “Nortel thought that they did us an disservice, but we didn't think so,” says Jöran Hoff. Björn Svedberg adds: “We were standing there, pens ready, waiting for the second when we could confirm that the agreement with Matra no longer applied.”

The collaboration with Siemens also ended somewhat disappointingly. The reason can be found in industrial policy. Siemens’ German competitors were not overjoyed with Ericsson’s incursion into Germany. In the end, the German regulator placed such demands on Siemens that the company was forced to scrap its cooperation with Ericsson, whose deliveries were instead taken over by Philips.

HIERARCHY PROBLEMS

ERA could also point to the inability of the different Siemens departments to work with each other. The complexity of GSM technology required the collaboration of the units working with radio and with exchanges. “That’s where it collapsed,” says Johansson. “All communication between different departments had to follow Siemens’ hierarchy, and it got stuck somewhere.”

Johansson compares the relationship between the different Siemens departments with ERA and the fixed-telephony side at Ericsson. “In our group there were conflicts between the two sides where priorities were concerned and a big brother/little brother complex that could lead to disputes. But we were able to solve most problems anyway. The cultures on both sides were fundamentally non-hierarchical; there was freedom with responsibility as long as we delivered results. We contacted each other without involving our bosses. Sometimes, of course, we argued about principles, but the kind of conflicts we had in Sweden were probably heaven on earth compared to what went on at Siemens or AT&T for instance.

“AT&T did not have hierarchy problems, but not even AT&T managed to come to terms with its monopoly tradition. Technological development worked, but commercial responsibility for both fixed telephony and mobile phones was centralized. And because mobile telephony accounted initially for only a few percent of sales, no attention was paid to radio customers. That left the door open for us from ERA.”

Author: Svenolof Karlsson & Anders Lugn

© Telefonaktiebolaget LM Ericsson and Centre for Business History

Contact info/About the site