What Makes Sweden Tick?

On a street corner in downtown Stockholm, the Lydmar Hotel is small and apparently inconsequential. But, walk though the Lydmar’s doors — and you find yourself at the heart of one of the most vibrant economies in Europe.

The hotel’s unremarkable downstairs bar, a late night jazz venue, is crowded with the great and the good of the Stockholm digerati. Dressed in black, their conversation is intense and noisy. Cigarette smoke — from their heavily-taxed U.S.-branded cigarettes — fills the air.

Among those contributing to the fog is Jan Lapidoth. A striking, tall, white-haired figure, Lapidoth has played a leading role in two Scandinavian waves of success. In the first he was a vice president at SAS, the national airline, during a successful turnaround exercise. Today, as a publisher, investor and consultant, Lapidoth is a leading light in the emerging Swedish economy.

“Our enthusiasm for the new economy is rooted in the openness of a small nation which, combined with a reasonable understanding of English, allows influences from abroad to take root quickly. We are rather homogeneous and dominated by influential organizations, so once the critical mass is there, acceleration is fast,” says Lapidoth.

“Also, another idea is that we were once convinced that our neutrality had to be guaranteed by a proportionally high expenditure on military hardware. We built our own planes, designed our telecom equipment and even wanted to build our own atomic bomb. To do so, we needed to be in close contact with all the new technical movements around the world.”

Sweden continues to embrace technology with enthusiasm. Indeed, according to one survey, Sweden is the leading information technology country in the world. This has not happened overnight. There has been long-term government support for technology — tax-breaks for employees buying a computer, following on from initiatives such as free Internet access for students and earlier programs to give children access to PCs.

Sweden is also helped by the fact that its managers embraced new-economy style management practices decades ago. In Swedish businesses, the emphasis has long been on consensus and negotiation. Hierarchies are minimal. “We’re very conscious of results, but not who did it. We don’t need as many heroes,” explains one manager.

At the same time, Swedes have also remained healthily skeptical of the latest management fashions. “New ideas are better stated in quite general and even vague terms initially, in order to invite others into the process,” note Ingalill Holmberg and Staffan Akerblom of the Stockholm School of Economics. “Swedes are generally very suspicious of ready-made ideas or solutions.”

The most striking element in Swedish management, however, is its international perspective. When it comes to producing global companies, Scandinavia is remarkably successful — the only worthwhile European comparisons are with Switzerland and, perhaps, the Netherlands. Sweden’s companies transcend boundaries in ways few others can manage.

Internationalization is in the Swedish genes. Exports account for 40% of Sweden’s GDP. And management transfers to foreign subsidiaries have long been regarded as important learning opportunities for people on the way up — rather than demotions.

The international success of Swedish business is exemplified by the unlikely example of a company which exercised a monopoly for most of the 20th century and remains state-owned. When its monopoly was finally lifted, 300 competitors flocked to its market.

You would expect that company to have been consigned to the dustbin of history. Instead, it now owns one of the biggest brands in the world. Such is the company’s success that a book of its advertising campaigns sold a staggering 150,000 copies. State control is alive and well — and making a profit.

Sweden’s Vin & Sprit (V&S) is the state-owned success story — and “Absolut” its star brand. Absolut, the fifth largest spirits brand in the world, is the number one imported vodka in the United States, with 60% of the market. The big winner in this is the Swedish government.

State-owned monopolists are not usually renowned for their capacity to take risks or be imaginative and innovative in any way. V&S has. Its ad campaigns and the clever extensions to the Absolut brand have cemented its reputation for shrewd brand stewardship.

“Whether it is state-owned or not is not really an issue. We operate like any other company apart from the fact of our ownership,” says chief executive of Absolut, Göran Lundqvist. Formerly with Unilever, Mr. Lundqvist fails to detect any different in behavior between his past and current employers.

Analyzing the brand’s international success, Göran Lundqvist suggests that there is no blueprint, but believes that the major element is that Absolut considers the United States as its home market. “Perhaps that’s the secret. Sweden is where we manufacture and make decisions, but we grow from the United States out into the world.”

He says, “To do so, you need an information network and research that keep you abreast of what’s happening in the market. You have to be very local when you speak to your consumers. You have to understand the market and respect the consumers in that market. We treat all of our consumers with respect.”

Lundqvist was an Ohio State undergraduate and is naturally international, in the mold of so many Scandinavian executives. It is, he says, a force of geography and culture: “No one speaks Swedish. No one knows our culture. We’re forced to adapt. We’re a very small market — just 9 million people — with a high level of education. It’s a state of mind. The Dutch are the same. As a result, we find it easy to work in the United States. It is very straightforward and uncomplicated. They are also interested in the end results. It is just that our idols are different.”

Stuart Crainer is a business author and journalist based in Britain. This feature is an excerpt from his article, And the New Economy Winner Is… Europe,” in Strategy+Business, Issue 23, Second Quarter 2001.