After a rough year and an especially rough third quarter, Ericsson has finally named a new CEO – Börje Ekholm, who serves on the company’s Board of Directors – but with the decision to go with an embedded company man instead of a bold outsider has raised questions of whether Ekholm has what it takes to turn Ericsson’s fortunes around.
Ekholm will take over as CEO effective January 16, 2017, and will also remain a member of the Board. Jan Frykhammar will remain interim CEO until Ekholm officially takes charge.
Ericsson board chairman Leif Johansson said in a statement that Ekholm has “a solid understanding of both the technology and business implications of the ongoing convergence of telecoms, IT and media.” From the press release:
“Having served on Ericsson’s Board of Directors for the past ten years, Börje Ekholm has full understanding of the challenges and the opportunities Ericsson currently faces,” Johansson said. “In the middle of a significant company transformation I am confident that Ericsson will benefit from Börje Ekholm’s world-class ability to forcefully execute on strategic direction and plans. Börje Ekholm brings years of experience from leading a publicly listed company with a strong track record of driving shareholder value.”
However, Caroline Gabriel, co-founder and director of Rethink Research, said in a blog post that the selection of Ekholm is a “dangerously safe” one that isn’t the visionary rainmaker Ericsson arguably needs at this stage:
When IBM was failing in 1993, it appointed the head of a biscuit company, Lou Gerstner, amid a storm of criticism that someone with no experience of technology could not possibly run a computer firm. In fact, he brought an outsider’s eye to a business which was too much in love with the dark arts of its technology to change radically, and the turnaround became business school history.
Ericsson is very much in the same position as IBM was more than two decades ago. The technologies it dominates are being squeezed in terms of the value chain; the profits are shifting to new platforms in which the Swedish firm has powerful competitors; its traditional customers are under pressure and it has not acted sufficiently quickly to gain new ones.
Ericsson reportedly did consider candidates from outside the industry – at one point Saab chief Hakan Buskhe was believed to be in the running.
And technically Ekholm is an outsider in the sense that his track record lies more in finance than telecoms (although he does have an engineering background as well). Ekholm currently serves as CEO of Patricia Industries, a division within Investor, for whom Ekholm served as president and CEO for ten years. His resumé also includes Investor Growth Capital, Novare Kapital and McKinsey & Co.
On the other hand, Ekholm seems focused initially on cutting costs rather than offering anything in the way of innovative vision. Granted, he doesn’t actually start the job until January, and cost efficiencies are generally a good thing. The problem is that capex and opex are not necessarily the core of Ericsson’s troubles, Gabriel argues:
Ericsson does not need a new chief to tell it to make more cuts. It needs a CEO with a vision of how the newly lean company can generate growth, from its targeted ‘new businesses’, such as cloud and media, which are important but expanding too slowly to offset decline in the networks sales; and also from directions which it has not even thought about yet.