Svanberg, Carl-Henric 1952–
Chief executive officer, Telefon LM Ericsson
Born: May 29, 1952, in Porjus, Sweden.
Education: Linköping Institute of Technology, MS, 1977; Uppsala University, BS, 1983.
Family: Married Agneta Skoog (nurse midwife); children: three.
Career: Asea, 1978–1985, various foreign assignments in project exports; Securitas Group, 1986–1990, president of alarm division; 1990–1994, first executive vice president; Assa Abloy Group, 1994–2003, president and chief executive officer; Telefon LM Ericsson, 2003–, president and chief executive officer.
Awards: Business Leader of the Year, PA Consulting Group and Affärsvärlden, 1998; Best CEO, Stockholm Stock Exchange "Dreamteam," Veckans Affärer, 2001.
Address: Telefonvägen 30, SE 126-25 Stockholm, Sweden; http://www.ericsson.com.
■ Carl-Henric Svanberg in 2003 was named president and CEO of Telefon LM Ericsson, the world's leading maker of wireless telecommunications infrastructure equipment. One of Sweden's historically most important and globally successful corporations, Ericsson abandoned its long-standing preference for selecting a CEO from the internal ranks. Svanberg was admired as a perennially successful leader, notably as president and CEO of Assa Abloy, the world's leading lock manufacturer. Svanberg, with no previous experience in the telecommunications industry, took the reins at Ericsson as the fourth CEO in five years in the wake of a severe industry and corporate downturn. There were skeptics among analysts and the media, but many looked to Svanberg as a golden boy who would use his considerable personal skills and abilities to turn around the venerable Swedish telecommunications company. Coworkers and analysts described Svanberg as an exceptional communicator with a remarkable ability to inspire and motivate others.
LEARNING VALUABLE LESSONS
Svanberg cultivated his social skills while growing up in northern Sweden. His father was a bookkeeper for the Swedish State Power Board, and the family moved frequently, as many as 10 times before Svanberg was 10 years old. The constant change of those years taught Svanberg to become rapidly familiar and comfortable with new surroundings and to quickly develop a rapport with new people.
Svanberg discovered early in life that he enjoyed working with other people and leading them as a team. Through a long and active involvement with the Boy Scouts, Svanberg observed that the best way to lead was to influence people through the power of persuasion and to create a common vision and purpose. He discovered on hikes and around the campfire that authority alone was neither sufficient nor effective and that employing the authority of command meant impoverished ideas and failed communication. Svanberg readily recognized his experience with the Boy Scouts, in which he had learned to listen and to respect others, as instrumental to forming his leadership style.
A defining trait in Svanberg's character was his willingness to work hard. As a student he held several jobs doing manual labor in construction, on the docks, and in garbage collection. At the Linköping Institute of Technology, Svanberg chose to study engineering after an initial period of interest in teaching. He considered engineering a difficult subject and chose it for that reason. According to Svanberg, he was always drawn to a challenge and to doing things that seemed hard.
After graduating from Linköping Institute, Svanberg joined the Swedish engineering export firm Asea in 1978. (Asea merged with the Swiss company BBC to form Asea Brown Boveri in 1988.) Svanberg knew little about business, but the prospect of working abroad and the challenge of project leadership attracted him. Svanberg moved up the ladder quickly, and by the age of 28 he had begun managing a three-year SEK 100 million project to build power plants in Colombia. In an interview with the Swedish business publication Affärsvärlden, Svanberg described the project in Colombia and his early years at Asea, a company that served as a management training ground for many of Sweden's top CEOs: "I was not very prominent, but that's how it all worked. And you grew with the responsibility" (October 2, 2002). During this period Svanberg studied business administration in the evening to complement his education in engineering. He found that the practical business experience he gained at Asea was an enormous help and facilitated his studies. While others struggled with concepts such as forward currency exchange contracts and accounting, Svanberg already had real-world experience with such subjects.
In 1986 Securitas, a Swedish security company, recruited Svanberg to run its alarm division. As president, Svanberg turned the losing operation into a profitable success, although not without encountering difficulties. Svanberg acknowledged that he learned an important basic fact about running a company during this period: The only way to avoid outside interference was to be successful and profitable.
In 1987 Securitas developed a strategy for expansion built on the company's core operations in guard and security services. It began with the purchase of Assa, a Swedish lock company, in 1988. By 1990, when Svanberg was promoted to first executive vice president in charge of alarm solutions and locks, the company's acquisition campaign was under way. Working closely with the CEO, Melker Schörling, and later his successor, Thomas Berglund, Svanberg helped hone the formula for success that propelled Securitas to greater heights—a series of acquisitions in Scandinavia, Europe, and the United States. The moves resulted in dramatically increased growth and a sharply rising share price that reflected the market's enthusiasm for the company's strategy. By 1994 Securitas's sales exceeded SEK 6 billion, more than a sixfold increase from its pre-acquisition days in 1988.
In 1994 Securitas spun off its Swedish lock-making operations to form a joint venture with Finland-based Abloy. Svanberg became president and CEO of the merged company, Assa Abloy. The company was listed on the Stockholm Stock Exchange later that year. Unlike the security services industry, which enjoyed comparatively high growth in the early 1990s, the lock industry experienced cyclical demand more or less in concert with the construction industry. In 1994 Assa Abloy struggled when the lock industry declined considerably. Svanberg took a personal risk and demonstrated his commitment to Assa Abloy and his strategy and vision for its future by borrowing SEK 25 million to invest in the company.
To compete in the low-growth, mature lock industry, Svanberg employed an acquisition strategy, as he had at Securitas. Svanberg approached potential acquisitions in a friendly manner and focused on mutual benefit. Dubbed the "gentle conqueror," Svanberg never instituted a hostile takeover. Acquisitions brought market share gains and sales growth. But owing to diverse national standards and requirements, there was minimal potential for the manufacturing efficiencies normally associated with greater size and economies of scale. By the end of 2001 Assa Abloy was manufacturing 500,000 types of locks in dozens of factories that mainly produced products unique to their local markets. Svanberg focused on achieving synergy, efficiency, and productivity gains through shared learning. This approach to shared learning across markets enabled Assa Abloy to benefit from its global reach and identify ways to operate more efficiently.
Assa Abloy succeeded in effectively and quickly integrating new acquisitions despite the obstacles encountered in the combination of companies with diverse strategies, operations, accounting systems, corporate cultures, and national heritages. Svanberg established a disciplined method for achieving the desired results. According to Svanberg, he focused on creating the right organizational structure, offering the proper product mix, and ensuring that accounting practices were identical to allow for comparison across the company.
Svanberg structured operations in individual business units charged with focusing on local markets and running their own businesses. The ongoing role of the head office was to promote cross-fertilization and knowledge sharing. Svanberg instituted regular, monthly meetings with business unit managers to focus on financial and operational results and to stimulate the flow of ideas. In addition, Svanberg fervently advocated benchmarking, the statistical comparison of operations as a tool for continuous improvement, and used it diligently to help the business units share and apply best practices.
Using a business model not commonly seen in Europe, Svanberg gave business unit managers freedom to run their own businesses and set their own goals. He enthusiastically urged the managers to stretch their goals as much as possible without being unrealistic. He rewarded the managers for positive results by linking employee compensation to business unit measures for efficiency and profitability. In 1998 Fabrizio Pier-allini, the portfolio manager of Vontobel International Equity fund, told David Franecki of Barron's that Svanberg was a "productivity pioneer."
Assa Abloy regularly added companies—more than one hundred around the world during Svanberg's time as CEO. Uniting Assa Abloy's companies and getting employees to identify with the larger organization presented a recurring challenge. In 2000 Assa Abloy became the world's leading lock company when it acquired the lock brand Yale and doubled the number of employees to 24,000. To address the size of this integration challenge, Svanberg committed SEK 100 million to sponsor a sailboat in the Volvo Ocean Race in 2002. Assa Abloy had newly acquired companies in nearly all of the ports where the race made stops. The race offered an unusual opportunity for accelerating the integration process through a common project that united employees, management, and customers.
During Svanberg's nine-year tenure, Assa Abloy produced impressive results. Svanberg made 45 acquisitions, totaling more than one hundred companies, and increased the number of employees to 28,750 from 4,700. The company achieved 30 percent annual sales growth to SEK 25 billion and pretax profit that increased 50 percent annually to SEK 2 billion from SEK 70 million. The share price increased more than 20 times. At the start of 2003, however, opportunities for acquisition-led growth were declining. Analysts expressed concern that Assa Abloy would not be able to grow at the established pace as the company shifted its focus toward generating growth from internal operations.
Svanberg, relaxed, self-assured, and successful, fit the image of the modern leader. He was an excellent communicator and an accomplished speaker who had a head for numbers and felt at ease in front of any audience. Such skills combined with a track record of success endeared him to analysts, investors, and the news media. Svanberg's style of leadership exemplified the informality and teamwork typically favored in Scandinavia. He was self-confident but also humble and unpretentious. His door was always open, and he encouraged dialogue, gladly trading ideas with colleagues in the hallways. Having fun was part of the equation when working with Svanberg. Assa Abloy's chief financial officer Göran Jansson in 2002 told the Swedish business weekly Veckans Affärer that Svanberg was a "very positive and enthusiastic boss…. It is so much fun to work with Carl-Henric. My wife usually points out that every time I talk with him on the phone, we laugh!"
Observers attributed Svanberg's success as a leader to his ability to get the maximum effort from others and to get them working together toward common and well-understood goals. Svanberg provided direction through clear and consistent communication. To motivate and inspire, Svanberg relied, in part, on the person's natural desire to succeed. Svanberg's ability to tap this reservoir and help others achieve their goals was rewarded with dedication, commitment, and enthusiasm. Anna Bernsten, a vice president at Assa Abloy, described Svanberg to Dagens Nyheter as "a boss that you would work day and night for" (February 8, 2003).
In April 2003 Svanberg joined LM Ericsson as president and CEO and purchased Ericsson shares for SEK 100 million. For three years before the management change, Ericsson had endured the ill effects of a rapid decline in the telecommunications infrastructure industry. Employees were weary from aggressive cost-savings and restructuring programs that included 50,000 layoffs. Ericsson suffered stunning losses—a combined SEK 30 billion after taxes in 2001 and 2002—and its share price plummeted to 5 percent of its all-time high.
Analysts and market watchers reacted with surprise when Ericsson announced Svanberg's appointment. Ericsson traditionally had hired from within. Svanberg was the first CEO from outside the company in 60 years. Most observers believed that bringing in new blood at Ericsson was a good move, but many analysts questioned Svanberg's complete lack of telecommunications experience. Others wondered how his experience leading a low-tech company that made its name and generated its growth through acquisitions would translate to an industry marked by rapidly changing technology and a company that needed to generate internal growth.
Svanberg maintained that his experience restructuring struggling companies would be useful. As for lacking telecommunications experience, he promised to dedicate himself to learning all that he needed. A colleague expressed confidence that Svanberg would transform the technology-driven company, telling Nicholas George of the Financial Times : "Ericsson has remained a very traditional engineering company, with lots of handbooks, papers and bureaucracy. Carl-Henric will revolutionise it" (February 7, 2003). The market believed or at least wanted very badly to believe in Svanberg. Nearly one in every two Swedish households owned Ericsson shares, the value of which rose 14 percent after the announcement and was up 4.5 percent at the close of trading. Assa Abloy shares declined 14.6 percent for the day.
When Time reporter Charles P. Wallace asked Svanberg why he wanted "such a migraine" as the top job at Ericsson, Svanberg replied, "The headache is what's so attractive. I felt prepared to take on a challenge of this magnitude." Svanberg made it clear that the customer would play a more central role than in Ericsson's technology-focused past. Responding to a question regarding the possible sale of poorly performing divisions, Svanberg declared that he saw no reason to shed Ericsson's money-losing wireless handset joint venture Sony Ericsson. Svanberg saw benefits in ownership, which provided customer insight not easily gained through other means. Svanberg intended to understand customer needs at all points in the sales and distribution chain. Understanding the customer's customer was critical to working with direct customers as business partners.
Profitability was Svanberg's goal, even if depressed market conditions persisted. He did not plan to wait for an upturn in demand for infrastructure equipment (the networks that wireless operating companies used to provide wireless service to end users). To achieve profitability without the promise of growth meant more cost cutting. Svanberg accelerated cost-savings programs already in place and announced additional job cuts to lower the total work force to 47,000, the lowest number in 35 years.
Efforts to improve operational efficiencies followed. Svanberg established a program called "Operation Excellence" to identify opportunities for greater precision in operations from research and development through sales effectiveness to manufacturing and distribution. Svanberg wanted Ericsson to be a strong and more efficient company that was well prepared to take advantage of increased growth but that was not in need of it.
Svanberg planned to rid Ericsson of its long-entrenched bureaucratic ways and create a simpler organization with more direct lines of responsibility. Organizational changes introduced at the beginning of 2004 eliminated management layers and reflected the importance Svanberg placed on understanding and responding to customer needs. Svanberg established a separate group function for marketing and sales and split the systems business unit into two separate units to reflect different sets of customer needs and manufacturing processes. One unit focused on low-volume, specialized products; the other unit focused on high-volume, standardized products.
In 2003 Ericsson reported a quarterly gross profit, not including restructuring costs, for the first time in three years. Cost-cutting programs implemented before Svanberg took over showed results. The measures Svanberg implemented to achieve operational efficiencies accelerated cost reductions, and Svanberg reported improved profit for the fourth quarter of 2003. The joint venture Sony Ericsson also returned to profit in 2003.
Encouraged by Ericsson's positive and better than expected results by the middle of 2004, some analysts and investors regarded improving market demand forecasts for network infrastructure equipment as a sign Ericsson would show strong growth as early as 2004. Svanberg, wary of premature or excessive optimism, responded cautiously to suggestions of market growth and strength.
sources for further information
"ASSA ABLOY CEO change from Carl-Henric Svanberg to Bo Dankis," Dagens Nyheter, February 8, 2003, http://www.assaabloy.com/artarchive.php?id=1343.
Brown-Homes, Christopher, "Ericsson Sets Sights on Better Times Ahead," Financial Times (London edition), October 7, 2003.
Franecki, David, "Mutual Choice: Generating Gains by Avoiding Losses," Barron's, August 10, 1998, pp. 43–44.
George, Nicholas, "Fresh Face to Front Floundering Ericsson," Financial Times (London edition), February 7, 2003.
"The Last Executives in the Barnevik School," Affärsvärlden, October 8, 2002, http://www.assaabloy.com/artarchive.php?id=999.
Pringle, David, Buster Kantraw, and Silvia Ascarelli, "Ericsson Picks Assa Abloy CEO as its New Head," Wall Street Journal (Europe edition), February 7, 2003.
"The Second Guy," Veckans Affärer, November 4, 2002, http://www.assaabloy.com/artarchive.php?id=1137.
Wallace, Charles P., "Ericsson's Wake-Up Call," Time (Europe edition), May 12, 2003.
—Catherine L. Naghdi