Reuters

(Reuters)

How a Century of Telephone Expertise Doomed Ericsson

By Features BGR

The mobile phone industry is used to vendors flaming out, sometimes just a couple of years after companies peak. Yet few handset companies have self-destructed as spectacularly as Ericsson — particularly considering its pedigree in telephony.

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During the summer of 1997, Ericsson spent a few months as the No.1 mobile phone brand in the world, buoyed by the early success of its brand new miniature phone called the 788. Ericsson’s global market share briefly spiked to 27% around the same time Motorola’s long decline finally cost the company its global leadership position. Nokia was rapidly gaining ground, but had not yet pulled decisively ahead of its two main rivals.

For a brief moment, it looked like Ericsson might be able to retain its position as the world’s No.1 mobile phone brand. Yet just four years later, Ericsson was forced into a merger with Sony’s handset unit.

How can a company that became a leading landline telephone brand in 1890’s fumble its golden chance of dominating the mobile handset market so badly? The answer is most likely very simple: a long and successful history in a specific industry can fatally handicap a manufacturer when a device or a product morphs into a radically new form. In Ericsson’s case, the company was able to make the leap from landline phones to analog mobile phones in 1980s — and then to digital mobile phones in 1990s — but it was unable to comprehend how the mobile phone started evolving rapidly from a voice device into a data device.

LM Ericsson started out as the Huawei of 1880s. Its crafty Swedish founder, Lars Magnus Ericsson, reverse engineered Siemens telephones and started manufacturing sleeker versions that undercut Siemens and Bell on pricing. It’s worth noting that the Ericsson phones were not particularly innovative even back in 1890s. They were simply better engineered and designed versions of the leading models. You could argue that Ericsson’s corporate philosophy started hardening around the concept of engineering improved versions of existing models rather than pioneering new functionality a hundred years ago.

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Geographically, Ericsson was unusually adventurous for a Scandinavian company; it became a leading telecom vendor in Brazil during 1890s. Gustaf Öberg oversaw Ericsson’s successful expansion in China, including the break-through network contract in Guangzhou in 1913. The early push into Latin America and Asia meant that Ericsson was perfectly positioned for the mobile telephony revolution of the 1980s.

Ericsson’s strategy of classy copy-catting was particularly well-suited for competing against Motorola, a company that grabbed an early lead in mobile handset market. Motorola pioneered the analog mobile phone market and grabbed more than 60% of the global market, but was notorious for bad ergonomic design and clunky user interfaces.

Ericsson made hay during the 1990s by essentially repeating its 1880s strategy. Instead of reverse engineering Siemens, Ericsson used Motorola handsets as a template for creating more sophisticated devices.

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