Ericsson is one of the world’s leading telecommunications companies that supplies turnkey business solutions to multiple telecommunications operators. The organisation demarcates the globe into smaller sections called market units. Each of them is made up of geographical clusters of countries. The unit considered within the scope of this case study is called market unit sub-Saharan Africa. It consists of forty three countries and its head office is situated in South Africa. Out of twenty three market units around the globe, this one is the largest. Sub-Saharan Africa is further divided into four regions, each with its own Project Office supporting all project activities. The livelihood of the organisation is formed by projects and project management practices, which is why all its employees strive towards achieving operational excellence in everything they do. The Projects Offices under consideration vary in operational maturity, size and age. The first Project Office established in 2002 in this market unit was in South Africa with a total head count of four employees. It was closely followed by the establishment of the Project Office in Nigeria in 2003 with six employees, and afterwards, in 2006 and 2007, the Project Offices in Kenya and Senegal were set up. The Nigerian and South African Project Offices developed their own ways of work processes and procedures independently from one another. At present, these Project Offices can boast of thirty two and fifty five employees, and nine and ten employees in Kenya and Senegal respectively. An increase in head count, expansion of business and detached practices are threatening Ericsson’s competitiveness in the market.
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Telecommunications is a fast-moving and very dynamic industry. Technology updates and constantly changing customer requirements are only several key challenges that require fast and efficient performance. Each country in the world is unique and has its own specific working conditions. Operation across forty three countries within sub-Saharan Africa poses its own unique challenges such as cultural diversity, demographics, maturity and politics (Kreitner & Kinicki, 2004:115). When working in an industry where most competitors are fairly equal in delivering business solutions, it is required to find a technique that would set Ericsson in sub-Saharan Africa apart from the rest of the field. In striving to be exceptionally efficient, to be the partner of choice and to master operational excellence, the Project Offices must standardise and simplify processes. Standardising business processes and procedures will enable Ericsson to respond to customer needs faster with increased focus on delivering superior quality business solutions, instead of squandering resources on putting the basics in place.
PM Solutions (2007: Online) indicates key benefits, such as follows:
Meurling and Jeans (2000:440-445) capture the legend of Ericsson so accurately that this aspect is quoted verbatim:
“In the first 25 years since the establishment in 1876, the organisation developed from a small workshop to a business with sales in a wide range of markets, and manufacturing both in Sweden and in some countries outside Sweden. It served, above all, the growing needs of the emerging telephone operators. Though they included World War I, the following 30 years saw steady growth, increased competition on the home market, the gaining of telephone operating concessions and the establishment of LM Ericsson factories in several more countries. It also saw the birth of LM Ericsson’s first automatic exchange system – with Televerket as its godfather.” (Meurling & Jeans, 2000:440).
“After the Kreuger crash of 1932, a period of reconstruction followed, during a world economic depression. It meant the retreat from many of the telephone concessions, retirement from several markets and the introduction of various new products to compensate for a decline in the telephone business. It also included the severe disruption by World War II. In the post-war era, the modern LM Ericsson Organisation began to emerge. It was driven by the timely introduction of new switching technology. The pattern of the telecoms manufacturing industry was changing: several competitors withdrew from the international market, leaving fewer, but larger and stronger players.” (Meurling & Jeans, 2000:440).
“From the 1960s onwards, LM Ericsson was among the top international suppliers, but not yet in the top echelon. The telephone administration monopolies were the dominant customers and ruled supreme. Many markets were closed to LM Ericsson. Often, political considerations rather than product excellence and price decided the outcome of successful business. But, notwithstanding political ties and traditional relationships, by the 1970s telecommunications had become a large technology-driven business. Stored program control and digital switching and transmission offered manufacturers incentives to develop superior products and gain market shares.
The mobile systems business emerged in the mid 1980s, and again Ericsson successfully exploited its ability to develop new technology. During the 1990s, the digital mobile system as last brought the organisation to a leading position in a world that was dramatically restructured by worldwide liberation and de-regulation. Ericsson faced a global market and global competition. Success was obtained through firstly; LM Ericsson had developed a real-life understanding of the strategic value of product development – the strength and willingness to invest increasing amounts of money in R&D.
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Secondly, the organisation built up the special know-how and technology to develop large systems, to manage development projects involving thousands of people in many countries, and running over several years.
Thirdly, the organisation steadily expanded and strengthened its market presence worldwide, which meant that it had a growing installed base and existing customers to whom it could market its large systems.
The fourth strength was the organisation’s manufacturing facilities – LM Ericsson was, basically an international network of telecommunications equipment factories. This ensured capability to build equipment, and was also a key political element in gaining new markets and maintaining market presence.
The fifth element of strength was, of course, the Ericsson people; professional, loyal and with a collective outlook defined by long and strong LM Ericsson traditions.
LM Ericsson had its culture, rigid but rewarding: its soul was that of a manufacturer, its operations to a large extent centred on its factories. The technology drive of the business from around 1950 brought out new generations of telecoms engineers and internationally-focused marketers to make the most of these facilities.” (Meurling & Jeans, 2000:440-442).
“During the 1980s Ericsson had a sound base, and, adept at exploiting its market presence, was able to take the lead in digital switching and in the first generation of mobile telephone systems. With mobile systems for the new digital world standards, the organisation finally claimed its place among the half dozen leading telecommunications companies of the world.” (Meurling & Jeans, 2000:442).
“But by the mid ‘90s, the while traditional reference framework had dissolved, and in a few years it had become evident that the tactics that served the organisation so well for over a hundred years were less and less relevant. A new market has emerged, with new rules and tactics. It is a global market and furthermore, a market that no longer depends on large system. It is a market looking for networks and networking, driven to a very high degree by the spread of the Internet and mobility. And as a consequence of new technology and new political thinking, telecoms has become an industry in which manufacturing, the building of the system hardware has lost most of its strategic importance.
The traditional competitors are still there, and they too are meeting new conditions. But, as a typical outcome of the new era in telecommunications, new business opportunities have created a community of new companies as competitors – fast-moving, market-orientated, technology-based and hungry. Many of them are focused on networking: software, Internet access, routers and so on.
Notwithstanding Ericsson’s rapid expansion, organisation traditions have been strong and the large-system philosophy lived on in parts of the organisation. In the late ‘80s a new major development programme begun; which took several years before reality caught up and the project was stopped. At the same time, in another new area, mobile telephones, new skills in consumer electronics production and consumer marketing had to be acquired. The organisation showed that it could acquire them, even though some knocks had to be taken and tough lessons had to be learned. Now, the organisation is coming through its metamorphosis. Much manufacturing is being outsourced; many factories have been sold or closed. R&D spending continues at a high level, but with a different focus: smaller systems with networking ability; software technology; network integration and the creation of new applications and services. The toughest challenge has been to change the mindsets of Ericsson’s people – to develop an understanding of the changes in today’s business process; to develop the competence to create new business situations, not just new technology; to build an ability to create situations in which Ericsson itself can determine the direction of its own business. It’s happening. Ericsson continues to develop technology and new products, as it must, at a high rate; but above all it is building the competence to develop business, to create business platforms. The organisation must have the competence to use technology in its business, instead of making technology its business. Today, technology is the lubricant of Ericsson’s business.
Excellence in product development must continue high, but with projects on a somewhat different scale. Development programmes will be intense, but limited in time. The modern start-up companies demonstrate the potential for creating new products around a business idea. Ericsson had introduced a ‘small organisation within the organisation’ mode of working – dedicated project organisations set up for specific development, or other, programmes, highly independent and providing individual incentives. And, most important, each ‘small organisation’ works close to, or together with, one or more key customer. Ericsson is learning to understand and to be part of its customers’ development – and to help customers create their own business opportunities.
In the ‘80s and early ‘90s, the concept of ‘change’ became one of the most overworked clichés in management speak. ‘Embracing change’, ‘welcoming change’, ‘living with change’, ‘adapting to change’ – the subject appeared with boring predictability in every management conference, every meeting between management and staff, every consultant’s report. That shouldn’t surprise anybody. The rate of change in business, as in every other area of life, had increased dramatically. And change is hard to understand and cope with. In the 1983 structure, mobile telephones aren’t even mentioned! 15 years later, mobile telephones are Ericsson’s second largest business. Such a shift is bigger than that from operator-manned to automatic exchanges, bigger than the shift from analogue to digital systems. The shift from selling business systems to selling consumer electronics means a more or less complete change-out at every level below the organisation’s ultimate core values. The people who willed the business, like Ǻke Lundqvist, may have had the traditional systems background; but the people, who made it, like Flemming Örneholm, had to have consumer marketing experience. And very few consumer marketers would see opportunities in a systems house like Ericsson. Mostly, Ericsson had to learn all on its own. It was slow and painful, but it happened – and Ericsson managed itself successfully through one of the most difficult transformations any organisation can undertake.
It’s worth pointing out that as time went by, and it became clear that the mobile phones were not only a big business but by far the most visible business, the pain went in two directions. For the Ericsson people involved, there was the great difficulty of remaking their business lives. For the Ericsson people not involved with mobiles, there was the chagrin when all the glamour became attached to these upstart products. The traditional Ericsson values of long, patient, persevering development of systems with a lifetime of years, even decades – values of which most people were fiercely proud – suddenly seemed almost irrelevant in this new, frivolous fashion business.
In order to cope with more change, both sides happily co-exist, and respect each other’s professionalism. Management of change has indeed been and continues to be the challenge. And, as will occur in any dynamic industrial organisation, change of management may also at times become necessary when it is apparent that the rate of change is not rapid enough.
Ericsson has become much more market- and customer-orientated, which means that the right projects have a much better chance to get the support and resources they deserve. And that’s reflected in the growth over the last decade. What is being done now, as we enter the twenty first century – by restructuring, by streamlining, by flattening management, by fostering small companies within the big one, by clearing the lines of communication to and from the customers – is to make it as easy as possible to be successful. There’s no real glory in doing things the hard way.
The next focus area that emerges very forcefully is how effectively Ericsson can react to change. And not just react to it, but actually help to create it. Over and over again, by its work in developing new standards, by partnering, by competitive demonstrations of its preferred technologies and by acquisitions, Ericsson had affected and continues to affect the course of world telecoms.” (Meurling & Jeans, 2000:443-445).
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Building upon the strengths and successes achieved by Ericsson over the years, this investigative study will focus on the heart of this powerful company, called operations. The core of Ericsson is the sales and accounting management teams with all the other departments representing business support functions. However, without a strong and efficient driving mechanism, no entity is able to function.
The value-add of establishing Project Offices is having a central area within Operations, where responsibility and accountability are maintained, while all project-related activities are governed by standardised ways of work. According to Soon (2005:34), working for Johor Port Berhad (JPB) in Johor, Malaysia, the value of having a Project Office can be seen in the fact that: “… by following proper methodology, we have better control over the scope, issue management, progress measurement and tracking”. Maintaining a certain level of excellence in the execution of projects contributes to the overall maturity of the Project Office, as well as to the improvement in customer satisfaction. The Project Office gives Project Managers a sense of belonging and a solid support structure; it also deals with career guidance and personal growth needs. With the basic structure being well-established, the Project Office is required to increase its value-add by positively contributing to the bottom line. Operational Excellence is born and needs to be fed, coached and monitored to ensure maximum results. At the present time the basic functions of the Project Offices evolved into a creative organisation with results indicating a reduction in operational expenses due to efficiencies found in new ways of work. Abeyta (2005:34) echoes this sentiment in stating that the creation of a Project Office in Aflac “…allows the company to perform more project work with the same amount of money”. All project activities are aligned by Project Offices with the organisation’s core values, namely professionalism, respect and perseverance.
“If you think of standardisation as the best that you know today, but which is to be improved tomorrow; you get somewhere” (Henry Ford, 1863-1947, American Industrialist, Founder of Ford Motor Company).
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