Innovation strategies of the 19th century : The case of LM Ericsson

Abstract: For any given firm in any industry, market success is a desire that all strive for, and this is achieved by outsmarting competition through brilliant strategies. To develop these strategies many firms resort to innovation, and as such innovation is the key to developing better strategies for market success. It is with this acknowledgement that this thesis delves into the history of LM Ericsson in order to unearth the innovation strategies that lay behind the company‟s success during the last decade of the 19th century. To achieve this mission, we ask ourselves such questions as to what was unique with Lars Magnus Ericsson that he relayed to the company that ensured success. We even try to find out if there were any technology related aspects that facilitated this success and finally take a look at the company‟s business environment to find out if the environment played any roles which can be attributed to the company‟s success. Getting the above mentioned tasks accomplished required the application of appropriate methodological steps. Owing to the historical nature of the study and the data to be collected all indications were leaning towards a qualitative study based on secondary data with a case study as the most suitable design given that the aim of study was to explore LM Ericsson‟s innovation strategies. But this study‟s relevance is tied to the relationship with theory wherein relevance is proclaimed if the empirical data collected can somehow be related to the theories used in the study. With respect to the issue of relevance, an inductive approach was suitable as we sought to make some theoretical inferences out of the findings arrived at. The application of the chosen approach edged the thesis closer towards achieving the stated aim of study. An analysis was therefore done with the help of relevant theories among them open innovation, path dependence, competitive strategy as well as theory on networks. The conclusion arrived at was that Lars Magnus Ericsson possessed a raft of unique capabilities, among them innate engineering skills, handiness, and a host of other personal attributes such as thoroughness and cautiousness. All these traits together with the favourable domestic business environment incorporating limited number of competitors and the low level of technology at that time worked in favour of the company. In addition it is also important to note that the path dependent nature of the telephone technology as well as the lack of patents in telephone technology in the Nordic region, allowed the founder of the company to borrow foreign knowledge for use in developing products. But perhaps the most outstanding of all the success factors, personal qualities aside, was LM Ericsson‟s collaboration with Henrik Cedergren‟s SAT (Stockholms Allmänna Telefonaktiebolag). There is no doubt Lars Magnus Ericsson would have succeeded thanks to his innate skills which were instrumental in the production of quality products, but he would probably not have been as successful as he was. Collaboration with SAT highly promoted the success of the company. The special relationship endeared the company to the telephone market, and made the innovation equation complete for LM Ericsson. The company could thus concentrate on improving its technical skills base while SAT delivered the markets and success was inevitable. When this relationship tended towards its end by the turn of the century, LM Ericsson‟s fortunes began to diminish and it had no choice but to diversify beyond the domestic market it once dominated with SAT‟s help, to venture into foreign markets. This highlights the epicentre of LM Ericsson‟s success pillars, thereby bringing us to the most important lesson we learn with this case as one of the major reasons behind LM Ericsson‟s success. Before proceeding to the main body of this thesis, the reader‟s attention is being drawn to the fact that the company which is the subject of this study shares the same name with its founder. Therefore in a bid to differentiate between the founder and the company to ensure clarity the full names of Lars Magnus Ericsson is used in reference to the founder while LM Ericsson refers to the company