This was the very first day of BSM Scandinavia. With anxious anticipation of the trip to come, we departed for Amsterdam from Singapore. There were already some signs of the language barrier we were going to face before we reached Denmark. For example, some of us could not decipher clearly what the air stewardess was trying to tell us or understand the immigration officer when he was trying to tell us to take our laptops out of their pouches.
Only upon arriving in Copenhagen did I realize what being a minority felt like, as I have never been to Europe. Surrounded by the local Caucasians, I could imagine how foreign exchange students must feel when they first arrive in Singapore. A little friendliness from the locals goes a long ways, and the Danes seem to have no lack of that. Various examples: at the Copenhagen Airport, locals would smile and say good morning to us; while in Legoland one of the performers actually said “hi” in Chinese (Ni Hao) to us; and cars readily stopped for us to pass instead of honking at us like in Singapore. On the long bus ride, we thoroughly experienced the Danish scenery: several wind turbines, farmhouses and huge yellow patches of flowers (canola). Statoil petrol stations and Vestas wind turbines were much in evidence along the highway.
Legoland was great fun. One interesting thing I noted was the huge amount of branding, especially the miniature structures and buildings. Examples of some famous brands that were built with Lego are Vestas, British Airways and Singapore Airlines. The fact that a Singapore Airlines model was situated at a prominent location near the entrance to the theme park might suggest a strong relationship between SIA and Scandinavia.
We started off fresh this morning with a visit to the Lego office in Billund. I was really excited about this trip because I was an avid Lego fan with at least five huge sets when I was younger.
From the beginning of my BSM trip, I paid attention to patterns and similarities between ideas and companies that we visited, the phrases they used and the design of their offices. This is probably a side-effect of being an economics student (we see patterns in almost everything), but it gave me interesting insights regarding the company visits and the trip in general.
We were hosted graciously at Lego with three presentations, including one from a Lego set designer. His presentation gave us an interesting perspective on Lego. I was especially intrigued by his story regarding how he created his Lego shark prototype. All the presenters seemed genuine and enthusiastic in trying to tell us more regarding Lego.
Various important aspects regarding Lego were emphasized in the presentations. The core of Lego Group is about systematic and creative building, and its official slogan is “only the best is enough”. Lego comes from the Danish phrase “Leg Godt” which means “play well”. During the presentation, the importance of looking after stakeholders was mentioned repeatedly, a concept which forms the core of our Business, Government and Society module in SMU. The main difference between Lego and Mattel is that Lego is a one brand company while Mattel has numerous brands, so it is quite amazing how Lego is still retains a large market share despite being just one brand.
My favorite line for the presentation was” the toy industry is like a fashion industry”. Fickle yet some brands still manage to maintain their name in the market. The Lego portfolio consists of PG1, PG2 and PG3.
- PG1: classic such as Mindstorm and Creator
- PG2: licensed brands such as Star Wars and Batman
- PG3: more advanced themes such as Racers and Bionicle
A lot of thought has been put into the design of Lego themes. For example, Duplo bricks are designed to be big and smooth, so that it is less likely that kids will swallow them or injure themselves. Huge amount of research and surveying has also been done to test the needs and wants of children in different countries such as Germany and America such that the design and marketing of toys is tailored to its audience.
There was a discussion about creativity as well. How an idea in one connection can be useless but valuable in another connection. This reminded me of the talk by Mr. Fredrik Haren regarding how creativity is the joining of two pre-existing ideas to form a new one. So it seems there might be a common notion of creativity in Scandinavia.
The Google founder supposedly built the idea for his search engine using Lego bricks, and Google offices have bins of Lego around for their employees to play with in brainstorming of ideas. This illustrates how useful Lego might be in fostering creativity. The famous Lego crisis period during 2004, when they had to find a way to counter the rise of video games, is a valuable business case study. Lego lost its way when it tried to venture into video games and the trend of circle, curved designs. But in a short time, they managed to steer the company around, focusing on the original identity of brick and serious play.
Utilizing the help of their fan community was extremely important in shaping their new identity and for the future of Lego. Going into video games was not within the expertise of Lego, so they licensed it away, but they are in the midst of setting up an interactive virtual world with its loyal fan community online known as LugNet. So while they maintain their traditional identity, they are still receptive to using new technology to enhance their interaction with consumers. Though Lego uses plastic, it is environmental in the sense that people tend to keep Lego toys and not just throw them away after using. However, this seems like a rather uncommitted effort by Lego in maintaining its green ethos. More could be done in collecting old Lego toys and recycling them. My best take-away from Lego was that there was substance behind the Lego toy. The Lego brick represents a creative experience and process of creation. The Lego staff like to call if the “flow” experience, when a kid is fully engaged and having fun (as I did when I was given a Lego toy to fix during the presentations). It was good to learn that all my childhood years playing Lego were not in vain.
I was really impressed with the Lego factory, with various operations being highly mechanized and automated. Various pictures are hung signaling where various equipment and tools were located. This is extremely useful in accounting for items and for safety considerations. The same practice is adopted in our Singapore Armed Forces, but these efforts usually are carried out half-heartedly and only executed when logistic stock checks are near. A schedule for producing Lego parts with black, green and red labels to signify how fast and slow they are according to the original plan was a valuable organizational idea as well. These schedules were placed on large white boards so all employees can interact with them, and illustrated the flat structure of Scandinavian companies. The organization of the Lego factory workplace is something that Singapore factories should adopt and utilize.
Now I know partly why I loved Lego in the past. Its intricate design and malleable-ness allows for creativity to flow and for me to create new models at my own whim. The sheer amount of work put into creating the models and ensuring each Lego box had the right components meant me and other kids were not disappointed because of missing pieces. Lego seems to me a really good example of a Scandinavian company. The Lego staff was extremely generous as well, providing us with Lego toys and a really huge Scandinavian open sandwich.
The last visit of the day was to the Musikhuset Aarhus, and I absolutely loved it there. The theatre and concert halls were of an attractive minimalist design, different from the design adopted in the Esplanade. Being on the stage and especially backstage reminded me of “Honk the Musical” and how fun and gratifying it felt to put up a performance. I guess arts and the stage is something that I really enjoy and will be unable to run away from.
Grundfos’s office was rather similar to the Lego office. Located far out of the city area and appearing like a normal brick and mortar building, this perspective is completely changed once you enter the building. Upon entering the Lego factory, we discovered the extraordinary machinery hidden in the building; while upon entering Grundfos, a whole museum and auditorium was waiting for us to explore.
While talking to our driver, Lennarth, I realized that few people have heard of Grundfos before, because it operates and sells pumps which few consumers would take notice of. On this trip, we are probably learning a lot more about Scandinavian companies than even what most of the locals know about them. Grundfos started in a small Danish village and developed into a huge international company, with the bulk of its employees coming from the towns around where it began. This is the same story for Lego, and this tradition of hiring workers from the town where the company was founded has both pros and cons. The positive side is that employees are probably more loyal, while the negative side is that there might be a lack of talent to recruit. Both Lego and Grundfos try to solve the talent problem by setting up academies to develop the skills of their employees.
Like most Scandinavian companies, Grundfos’s goal is sustainability through using new technology to solve environmental problems. This is supposed to be achieved with other business goals by maintaining a triple bottom line, as saving the planet is supposedly good business (what we learnt in Business, Government and Society). Their slogan is “sustainability is when we have no waste products”. Improving the environmental friendliness of their products benefits the environment and brings profit to the company. I find this approach more logical and useful than companies which try to help the environment in areas where they have no expertise, while their products still pollute the environment (obviously a public relation facade).
The organizational structure of Grundfos is really special, with 84.8% ownership by the Poul Due Jensen Foundation instead of the founder’s family. This prevents anyone from selling away the company, but being owned by a charity foundation does raises questions about what are the appropriate salaries for the high management positions. Grundfos has a special arm known as Grundfos Finance, which basically lends out money to the other entities within Grundfos when they require funding for their projects. This is an interesting organizational concept, but it complicates the accounting records of Grundfos.
Grundfos New Business is an arm set up as a business incubator for radical innovation. They invest in entrepreneurial ideas, functioning very much like a venture capitalist, This differs from the incremental innovation they adopt in their R & D department (another concept we learnt in another SMU module: Technology and World Change). The art in Grundfos New Business is to screen ideas as fast as possible and select the feasible ones with high potential.
For corporate social responsibility, they have a concrete plan in place known as Grundfos Lifelink Project. It involves setting up solar-powered water pumps in villages without electricity and making purchases for clean water through hand phones (allowing easy monitoring for donors as well). I am impressed by the concept behind the project, especially the solar-powered water pump, but I have a few doubts about its overall effectiveness. It is unlikely that they would have a well-developed hand phone infrastructure in the Kenya villages they are helping, and coupled with the fact that most of the households have no hand phones in the first place; this renders the water-purchasing project pointless. How the solar-powered water pump can be produced at low cost and be introduced to more villages is another issue. Perhaps this idea could be suggested to TED, an online portal for ideas and innovation. The TED platform is used to discuss various issues, especially community projects that help the poor and how to make them more sustainable. Anyone interested in the newest innovation and initiatives around the world should visit the website TED.com.
Grundfos also mentioned issuing an award known as “Future Now Award” to encourage employees to come up with new ideas. I had to mention this because in the Singapore Armed Forces, they adopted a similar practice known as the Army WITS Project that offered monetary incentives for good ideas that we came up with regarding army issues. I wonder if the Singapore Armed Force ever had an officer that went on exchange to the Scandinavian countries and adopted these practices from them. To me, this connection seems rather probable.
For the last leg of the Grundfos presentation, we had a talk by an academic with the special position of senior writer. As expected of academics working in corporate situations, there was a lot of discussion about ideas rather than actual facts unlike business speakers. There were four interesting points to note from his presentation though.
Firstly, Grundfos is still thinking in Danish terms when it comes to working with other businesses and should adopt a more global approach (perhaps in its recruitment as well). Secondly, Grundfos maintains a work-life balance through additional cultural and sports programs such as Grundfos Olympics and renting an arts museum for the employees to visit. Thirdly, Neil due Jensen’s parents passed away when he was young, and he enjoys singing, dancing and playing musical instruments (related to his creativity?). I find the approach of studying a company by studying its founder and others behind it extremely logical and often neglected. In economics, I always aim to remember it is the people behind the companies that are making the decisions rather than lumping them together as an economic entity of one mind. Lastly, Scandinavian companies aim to produce environmentally-friendly products, while American companies aim to produce efficient products. This is an interesting by-product of the different mindsets of the two regions.
Another pattern I noticed is that Grundfos mentioned they were aiming to use green, blue and red indicators to judge their performance schedule, which is the same measure Lego already had in place in its factories. Seems like Scandinavian companies do actively learn best practices from each other.
Immediately upon entering Vestas, I noticed similarities in the architectural design of Scandinavian companies. The use of the revolving door which I had seen so often in other companies such as SEB and even Musikhuset Aarhus; the C-shaped meeting room arrangement of tables which was present in Grundfos as well in the morning. We were greeted by Louise Thomsen who showed us around the extremely futuristic complex of Vestas, resembling more a space station than a wind power company (there’s even a simulator). The futuristic design probably aims to show that Vestas is a cutting-edge company but I shudder to think how much the huge complex with its sophisticated touch screens would have cost to build.
The V in Vestas signifies victory and the willpower to win, a characteristic of the company. There was emphasis on how having a strong CEO lifted the company, similar to Lego and Grundfos. The themes of how the company overcame bankruptcy and aims to protect the environment were entirely similar to all the companies we have visited so far. Do these factors cause these companies to be successful, or successful companies tend to have these similar traits? This casual relationship is extremely interesting to economists and can be verified through further data testing (not within the scope of this journal).
The virtual reality simulator is a great way to conceptualize and verify designs before building them, as some errors might occur when different specialists are only concerned about their own area or structure they are building. The virtual reality simulator lets you join all the plans together in 3D, which is very valuable to any company involved in designing and building structures. It can also be used to train workers to familiarize themselves with how to do maintenance and for planning safety precautions.
Vestas has an extensive graduate program which Melanie Zabel, a German Vestas graduate, kindly described to us. She has been rotated to different countries, one of them being Singapore, and enjoyed the experience. The low hierarchy distinctive of Scandinavian work culture was present even in the Singapore branch of Vestas.
I think some of us might be interested to apply for the Vestas graduate program in the future, though if we get rejected we would probably have to join the Facebook group known as the “Rejects” (the one graduates joined after they got rejected due to the intensive nature of the interview).
Novo Nordisk with its blue bull logo was the last stop in the stretch of four companies that we met up with in Denmark. I liked the company design of Novo Nordisk the most, clean and simple with a comic block in the middle of the central pathway. Moving on to the presentations, Novo Nordisk has rebranded itself as the biggest company fighting against diabetes, with a 51.4 % market share in the world insulin market. It is now focusing on China as an individual main market known as International Operations, which all the other Scandinavian companies are doing as well.
Its brand is built on the slogan “Changing Diabetes”, and as Sebastian Page explained in his presentation on employer branding, Novo Nordisk uses a similar slogan known as “life-changing careers” to recruit employees. It aims to convince employees that joining Novo Nordisk will enable them to change and save lives (though joining any pharmaceutical company will probably allow you to do the same, but that’s branding). The rationale for employer branding is that there has to be brand continuity with the corporate brand, so that the consumer’s perception of a company will not be confused. An example is the Bert Hamster Youtube video that Sony Ericsson used for recruitment, which doesn’t fit with its product branding. I learnt brand continuity while working for SMUBE marketing department during year one. Maintaining the same SMUBE logo in emails and posters to the SMU population and outside corporations was important.
Employees in different countries are concerned about different issues to varying degrees such as environment or salary, and so diverse benefits are offered in India compared to another region like Sao Paulo. He used a matrix to analyze the wants of different employees, a common model used in both business and economics. It is always useful to know that such models are not always correct and one should be wary before arriving at conclusions using these models. The employee brand tracker in construction is an example of another economic indicator.
Next up was Tina and Ingrid Kroff who talked about company finances. Novo Nordisk’s vision is to be the best pharmaceutical company in battling diabetes (which it already is) and to eliminate diabetes, a much harder step. It is committed to the triple bottom line as mentioned previously, and Tina testified that the company really held them up to fulfilling it.
Yu Zhang is the only Asian working in that branch of Novo Nordisk and we were lucky to have her share her experience of the graduate program. She emphasized two things: the “way of management” charter Novo Nordisk adopted and the slogan “a job is never just a job”. Those are the two guiding principles for the employees. One could tell from her presentation that she obviously loved her work at Novo Nordisk.
Lastly, Ove Munch Ovesen gave us a presentation on how Novo Nordisk aimed to achieve “sustainability”. The same ideas we learnt in Business, Government and Society were raised about how business and responsibility go hand in hand (even the Economist.com article “Just Good Business” shown in the slides was the same). However, I was impressed with the plans and ideas Novo Nordisk came up with in performing its corporate social responsibility.
The bus with insulin jabs sounded like a great idea to me as the problem with pharmaceutical companies that try to sell drugs at a cheaper price in Africa and other poor nations is that they are often resold for cash on the black market. If insulin jabs were given directly on the bus, then that would solve the reselling problem. Since pharmaceutical companies can reproduce drugs at a very low cost price after initial research and development, they still make a profit if they sell the drugs in Africa. However, the financing of the bus and the continual jabs required daily affect the feasibility of the idea. Nonetheless, this idea should be brought up at TED, the platform I mentioned earlier.
Micro financing was mentioned as well but I am more skeptical of this plan as the original idea worked because the money borrowed was used to invest in business to generate revenue and make repayment possible, while borrowing to get insulin jabs would only increase the debt of the person in question. The challenge for pharmaceutical companies is that there is an increasing need for them to collaborate jointly to tackle pressing social issues and operate on a broader business model. Collaboration between competitors is definitely difficult but not impossible.
To conclude the round of companies we visited, I have an interesting observation. Both Lego and Grundfos gave me the impression of a companies without a rich global diversity of employees, as they hired mainly from the towns around them. This was evident by the lack of mention of a graduate program for working in these companies (used by Vestas and later on Novo Nordisk to attract foreign talent). So, one could probably tell whether a company has a rich diversity of employees by seeing if they have a graduate program (another pattern that I noticed).
For these few days, we had a lot more free time as there are no company visits during this period. We left Denmark and moved on to Gothenburg, Sweden. As expected, there were numerous photo taking sessions, especially at the small fishing village Gamle Viken and Tylosand. Highlight among these few days was the visit to the University of Gothenburg and the Museum of Design and Decorative Arts on 22 May.
The University of Gothenburg seemed like the twin sister of SMU. With a similar building design and seminar rooms; with the hectic studying to do and various assignments given out for the Master degree program; with the rationale of forcing people to form groups to experience real work life; with the discount on student card for certain shops and services, which other university could be more similar? The only difference is that SMU has a more active student life in terms of clubs and societies while they have more student-organized parties. All lessons are conducted in English and there is a break after every 45 minutes (better than SMU in this respect). The best take-away from the University of Gothenburg is that it is free to study at Gothenburg, even for international students! That would really encourage Singapore graduates to sign up for it.
Next up was the visit to the Museum of Design and Decorative Arts. The main exhibition, the quilt design, was a little smaller than expected, and I actually found the other exhibitions more interesting. There was a range of colorful juice squeezers that were really beautiful and a special Mickey Mouse as well. The second floor with these modern exhibits was my favorite, and the hand stitched cloth pictures were really special as well. This reminded me of the Singapore Arts Museum I visited while taking Creative Thinking and I actually felt the exhibition there was more interesting. On 23 May we bumped into George, the guide from Musikhuset Aarhus, who was in town to look at the exhibit in the Museum as well. What a small world this is, even outside of Singapore.
We left for Oslo on the 24 May and at the small shopping center we stopped at just before leaving Sweden, we saw various luxury cars and shops selling Espirit and Levi’s. This only goes to show that globalization is an unstoppable, growing force.
The first presenter for Renewable Energy Corporation was Jon Andre Lokke. He presented mainly on the technical aspects of REC. In the solar industry, a company needs to grow very fast not only for market share, but primarily to cut cost because the initial investment is massive. However, in the face of the current recession, REC expects 0% growth for the next few years. This leads one to wonder how badly hit is REC with the recession.
As mentioned above, solar energy is very capital intensive and the plant actually needs to run at full capacity for 20 years to cover the initial cost. This makes the price of solar energy uncompetitive compared to other sources of energy and so the urgent need to cut cost. A viable solution to cutting cost is integration. REC vertically integrates the stages in solar energy production through three main divisions: REC Silicon, REC Wafer and REC Solar. With integration they can cut the middleman out of each stage of production, ensuring that they are shielded from the uncertainties of the business market, such as the current recession. In fact, REC is building its first massive integrated plant in Singapore. Integration is what makes REC unique and dominant in the solar industry.
Interesting points about REC include the 60% market share they control of Silane gas market, which is used to create plasma and LCD screens. Hence, we probably have their products in our Singapore homes. Another point is that wafers are very fragile, as one of our BSM mates proved by breaking the wafer before the presenter could warn us. Thinner wafers are better apparently as they can produce the same amount of energy than thicker ones, so the wafers produced are thin and fragile. The wafer is coated blue to have an anti-reflective coating so as to absorb sunlight.
REC adopts automation instead of employing labor, as labor is expensive in Norway and automation makes the whole production process much more efficient. This is similar to Lego’s production process, which gives both companies a huge competitive advantage in the industry. Automation might be a best business practice to adopt for Singapore companies.
The holy grail of solar energy, as Jon put it, is grid-competitive. Solar energy has a comparative advantage in that the raw material (sunlight) is all around so variable cost is zero and low maintenance is required for a solar panel. The only problem is the current relatively expensive cost, though it is beginning to become competitive in countries like California with higher hours of sunlight. Geographical conditions play a huge role in natural renewable energy such as solar and wind energy, for which California and Norway are suitable respectively. For grid parity, Singapore is high on solar energy yield but there was discussion among our BSM mates about whether the cloud cover actually prevents efficient solar energy production.
It is important to note here that even if Singapore is not ideal for solar energy production, this does not prevent it from producing solar panels and being an ideal location for the integrated REC plant. It is rather easy to confuse the two different points, but just be reminded of Norway’s case. REC production plants are located in Norway yet it is not economically viable to set up solar panels in Norway’s climate. For solar panel production, what really attracted REC to set up its integrated plant in Singapore compared to other locations is its low cost and low risk environment with high government support. For solar energy production, its main markets are USA, Germany and France, in the areas with huge number of hours of sunlight.
Two more interesting points are that the solar panels for homes do not store energy to a battery, so each house actually sells the energy directly to the grid during daylight when there is excess production of energy; REC Solar has a website that uses Google maps to check if your house is suitable for solar energy production and generates a report of your projected budget and environmental benefit. The use of Google in REC’s business shows that REC is rather tech-savvy compared to other companies.
Svanaug Bergland, the vice president of corporate communication, was the next speaker. REC was actually founded in 1996, so its rapid growth to the present huge corporation is rather remarkable. Her view of the difference in culture between Singaporean and Norwegians gave a refreshing perspective of the Scandinavian culture. The table below illustrates her points.
|Excel when placed in the right framework, don’t adapt easily|
|Say “yes” when they mean “no”|
|Quiet during Question and Answer|
Her view of Singaporeans being quiet during QnA probably changed after her session with us.
Next, she went through the standard protocols of the company. The core values and corporate goals were formed after supposedly going through 100 plus words to define the 5 more important goals, but there were rather common slogans like enthusiasm and cost-reduction. However, the CEO and high management actually went to various branches around the world and talked to the employees about the values they wanted to inculcate. Meeting with every single employee is really commendable on the management’s part and displays the positive flat nature of Scandinavian business culture once again. This company culture was further reinforced by the CEO and top management who actually queue up in the same cafeteria as the employees for meals. Imagine being an entry level staff and having the CEO queue behind you during lunch; that is something you will not find in Singapore.
REC believes in both goal- and result-oriented leadership, the difference being goal-oriented is about the future while result-oriented is about the present. For result-oriented leadership, they focus not only on the economic value the employee produces (e.g. number of work hours, amount of products produced), but the intangible values as well using key performance indicators (e.g. responsibility, innovation).
For goal-oriented leadership, they have this remarkable tool known as job discussions. Job discussion systemizes the determination of the goals and activities of an employee at an individual level through involving them in the brainstorming process. Since the managers spend a large portion of their time determining the goals of the company, why not include the employees in this thinking process? The cost is a huge amount of hours spent discussing with employees individually their objectives but this is offset by the number of hours saved in the avoidance of possible conflicts if managers were to plan by themselves. Job discussions do add a very personal touch to the company culture and there might be possible conflicts resolved in job discussions instead of in actual future work, but do the benefits outweigh the costs? I have doubts about that because not every employee will take it seriously and job discussion does not necessarily translate to conflict avoidance with each session, but further studies have to be taken in order to reach a conclusion.
REC hires many workers from different countries and cultures and in order to integrate them, they actually translate the key goals and core values of the company to the local language that fits the context they were supposed to express. The strong connection they want to maintain with their employees through discussions about the company’s core values and job discussions probably does give them an advantage in their industry. This culture is encapsulated in the quote “leadership is about helping your employees succeed”.
Not forgetting sustainability, REC focuses on environmental issues and not charity issues, which is reasonable since REC’s business is about renewable energy. More can be done in terms of helping poor villages such as providing solar power to them, like the solar-powered water pumps that Grundfos provided for villages in Kenya.
Sustainability is supposedly the core and heart of REC’s business. Besides providing the cosmetic treatment of branding, it is a huge competitive factor due to political support and the growing number of “green-conscious” consumers. REC aims to lower its carbon footprint and cut energy payback time through its sustainability roadmap. The roadmap includes sustainability performance audits, workshops, and a clause in their contract allowing them to terminate any contractual agreement if there are breaches of REC’s sustainability principles.
Overall, REC does seem like a responsible and employee-friendly company, so its inclusion in the Singapore business environment with its integrated plant should be hugely beneficial to Singapore in terms of both business cultural learning and economically.
The first thing I noticed when I went into Orkla was the large plastic signboard with the words “Developing people, creating value”. This is the mission statement of Orkla and is similar throughout all the companies it holds. This is striking because most companies have mission statements revolving around growing to be number 1 or being responsible and sustainable, but Orkla chooses to focus on its people and their development. Though we tend to forget, a company is not only an entity but comprises a myriad of people as well. How well a company performs depends heavily on its people. This mission statement of Orkla resembles a school’s mission statement more and it just might be a corporate school that grooms future leaders if it lives up to its statement. The first speaker was Mr. Geir Aarseth, the human resource manager, and he brought us through the history, components and culture of Orkla. Orkla has a colourful history, starting off as a mining company, and under the foresight of its owners it bought shares of various Norwegian companies, enabling it to become the conglomerate it is today (the mines ran dry of resources by the 1980s).
Orkla is huge and very diversified, composing of branches like Orkla Foods, Elkem, Sapa and REC. Elkem and REC have the possibility of becoming competitors in the solar industry, but with Orkla having a controlling stake in Elkem and a large stake in REC, I do not see how Orkla could let that happen (though Mr. Geir did not comment further).
Another part of Orkla’s history is how it overcame past financial crises like the Great Depression and the Asian 1997 financial crisis, so Orkla is optimistic about overcoming the current recession as well. With robust gearing and large cash flow, accounting-wise Orkla looks set to bounce back, though this is just a preliminary analysis. Orkla was developed through many acquisitions and mergers, with strict selection criteria of only the first or second best performing company in the industry. However, the side effect of this form of expansion is the difficulty of running such a huge conglomerate and maintaining a strong sense of corporate identity. One way that Orkla tries to deal with this is through focusing on human capital and other management models like Orkla’s Golden Triangle of Culture. But what really interests me is the sponge, stone and coral analogy.
This analogy is not something new as I have heard of it before in secondary school. The sponge represents being open and receptive to change; the stone represents being closed to new things yet tough and strong; the coral represents a solid inner structure built over time, and a constantly growing and filtering organism. In secondary school, it was used to describe leadership and how we should be more receptive to change yet stick to our core values. In this context, it is used to describe companies, and how they should deal with change and still stick to their fundamental identity. Most companies start out with “sponge” culture and shut down with “stone” culture, though they are all trying for “sponge” culture. Orkla aims to achieve “sponge” culture, but how effective it will be remains to be seen.
This analogy gives people a much deeper impression rather than just a few key words as core values for employees to remember. Merely saying “I want to achieve coral culture” is a lot more fun and impactful than saying “I want to be responsible and enthusiastic” as well. A small change in packaging your company’s mission statement goes a long way in influencing human psychology. So Orkla has gotten off on the right foot. Singapore companies can consider using analogies or even pictures in their mission statement and core values as these visual tools are probably more impactful than using mere single words. Orkla has always set very high standards for itself, aiming for the high benchmark of Proctor and Gambler when it was still a small company. If the end result of the soccer match is 5-3 in their favor, they will not relax and celebrate. Instead they will concentrate on finding out why they conceded three goals and how to improve. This strong sense of constant improvement and high benchmark pushes the company and its employees to perform better.
The Orkla Way consists of five core values, such as persistence and passion. These are rather normal core values of any company or leadership manual. An intriguing quote from Mr. Geir is “A leader often gets hired on competence, but fired on personality.” This illustrates the point that a manager needs both good leadership and social skills. So what are some of the good leadership skills that Scandinavian companies generally have?
First would be the short distance between management and employees or the flat structure with little hierarchy in Scandinavian companies. Scandinavian companies generally actively involve employees in their decision making. Second would be the placement of employees first before customers and shareholders. Scandinavian companies like to focus on grooming their employees more as they believe strongly that human capital is vital. The flipside of this would be that there might not be enough attention on customers’ and shareholders’ interests. Last would be that Scandinavian companies seek to engage their employees through values, instead of rewards or performance bonuses. This would probably not work in Asian countries as it depends heavily on the employee culture.
But even within Scandinavian companies, there are clear general distinctions as well. For example, Swedish companies are generally tradition-bound and consensus-oriented while Norwegian companies are sporadic and more headstrong in their views.
When different cultures meet, misunderstandings will arise and should only be expected. It is important to expect the differences in culture and avoid possible cultural conflicts by trying to understand each other’s culture more. For example, when Carlsberg merged with Orkla, the lack of cultural understanding eventually led them to break up. Though Carlsberg was a financially good choice, it was strategically a bad choice due to the cultural differences and lack of understanding.
The second speaker was Ellen Behrens, who is in charge of corporate social responsibility (CSR). Her speech’s content mirrored closely our SMU BGS module. The most intriguing part is that Orkla is coming up with a sustainability report on CSR, which is rather comprehensive for a company report. According to her, the recession has not caused Orkla to abandon its CSR activities as CSR is a prerequisite for Orkla’s company activities. A nice public statement, but whether it is the actual fact remains to be seen as a company’s bottom line for profits is almost always more important than environmental concerns. This is the same for every company around the world, as a company supporting environmental issues but making a loss would have to shut down eventually.
Finally, Mr. Geir talked about the future of Orkla, and how grooming human capital, along with reinforcing the connection between culture and competence are the most important goals for Orkla. Why these factors are important to a company has been mentioned above, but the flair or X-factor that makes a company great cannot be readily defined. Trying to achieve that special flair is a good goal for Orkla, but how to achieve it is a whole other conundrum. The business book From Good to Great makes a good description of these issues.
The most rewarding part of the Orkla presentation was to learn how a Norwegian viewed Scandinavian culture and how Scandinavian countries differ from each other.
For the last company visit in Oslo, we had two speakers: Anne Kristine S. Stensli and Ee Fei Khoo. The second speaker is actually Malaysian, so that brings a different element to the presentation compared to other company visits, as she can connect better with us as Asians. What’s even more different with Statoil Hydro is that the speakers are actually engineers, and there was not even one representative from the corporate communication department. Their focus was more on the engineering details and less of the corporate culture or CSR, which every company seemed eager to ingrain in us at every company visit. This was refreshing as the engineers provided a different view of the company compared to what the corporate communication department tends to portray.
The distinctive feature about Statoil Hydro is that the Norwegian state owns 66.3% of its shares, making it the major stockholder. Though it is technically a state-owned company, it is run pretty much like a normal private company. The advantage in Statoil Hydro is government support, and this is evident in its European CO2 Technology Centre Mongstad (TCM) project. With a lot of companies facing credit problems due to the massive projects they undertook, Statoil Hydro is unfazed by the recession and continues full steam with the TCM project. This is possible only because of the huge funding from the government.
Why is the TCM project Statoil Hydro’s main focus at this moment in time? This question brings us back to the issue of climate change. Ee Fei presented animatedly about the climate issue, proving to be witty and using funny yet appropriate pictures to keep us engaged. Climate change is causing serious problems globally and measures must be taken to protect the environment. Norway strongly supports protecting the environment and even introduced a CO2 tax 20 odd years ago (more than 100 Kronor per ton of CO2 ). Bringing in a bit of economics at this point, the oil market follows the global oil price, so the tax implemented in Norway cannot be passed onto consumers as price is inelastic. Since producers have to sustain the tax entirely by themselves, they are likely to be anxious about reducing their CO2 emissions.
There are some enforcement problems with the tax however, as the measurement of CO2 is done by calculation and the projection of the Norwegian companies. This allows for the possibility of cheating and foul play.
But if we assume that cheating is not possible, then Norwegian companies have a lot to gain from being environmentally-friendly. That is why Statoil Hydro decided to invest in new technology known as carbon capture and storage at its TCM centre. The project is still in its planning stage and will become operational in 2011. The important thing to realize is that the amine and chilled ammonia technology implemented in the plants is not fully tested yet, so whether this TCM project will be successful is still unknown. The only reason this project can be carried out with so many uncertainties is the Norwegian government’s funding.
The focus throughout the presentation was on the technology with little discussion of the company culture. Only a few points were raised, such as the goal of Statoil Hydro to secure long term development of the Norwegian continental shelf and grow internationally; there is a value-based performance culture where employees are evaluated more on their values than results; and an emphasis on combining business with the environment. These common themes have been repeated in other Scandinavian companies we have visited, but Statoil Hydro mentioned it a lot less than the rest. Because Statoil Hydro is state-owned, perhaps it does not see the need for developing a strong company culture as it is more used to bureaucracy and people following orders readily. After the three company visits, we toured Heddal Stave Church, which reminded me of the religion presentation we had during our BSM lesson, How the church can be stacked like a Lego stack still befuddles me and I am still unsure of the distinction between the Lutheran and Catholic church, or even between Lutheran and Protestantism. History is always fascinating.
After a long bus ride, we finally got a chance to rest and enjoy the scenery at Geilo. To my utter surprise, I got to touch and play with real snow for the first time in my life, in summer time nonetheless. Now I understood why the universities we visited all mentioned the value of having four seasons.
A free day at last, we managed to enjoy the scenery of Norway on the Flam train and actually watched the Champion League Finals at a pub in Europe.
The last two visits of the BSM trip began this morning with a visit to NHH. We were hosted by John A. Andersen of the International Relations Office, who gave a presentation on the university’s graduate program.
The presentation started with a quirky video on Bergen, with people moving weirdly on the streets and appearing to dance. After that special introduction, as we discussed more about the details of the university, I discovered SMU and NHH are very similar, perhaps even more similar than SMU and the University of Gothenburg, NHH is a niche business school with a small student population of 3000, similar to SMU. Both SMU and NHH have executive education programs, which actually contribute additional cash to the university. The courses offered in the university are pretty similar to the ones we have in SMU and there is strong student involvement in co-curriculum activities as well. NHH has a wide range of student clubs, sports activities, and voluntary organizations such as “Walk the World” and plenty of freedom for student clubs. An annual music festival that the NHH students organize closely resembles the SMU Arts festival we hold every year.
The most striking similarity is that they have launched a double degree program as well, where you can get a joint degree between two institutions. The difference is that SMU’s double degree program is within SMU and not between partner universities, which might be a direction SMU can consider working towards. Exchange is especially valuable to students, allowing students to experience other cultures and seeing how big the world really is beyond textbooks and the Internet. Therefore, both SMU and NHH have more than 50% of their students going for exchange.
All these points show how similar SMU and NHH are. One of the differences between SMU and NHH is the grading system, with most exams in NHH comprising 100% of your grade while in SMU there are significant components of projects and class participation in your grade. Another is that education in NHH is free, provided by the government, even for international students.
John mentioned his impression of Singapore students, with hardworking and clever being key traits typical of Singaporeans. Singaporean students do get culture shock at first but learn to adapt, especially to the Norwegian way of enjoying life, such as hiking and enjoying nature. When Singaporeans get home, they find it hard to adjust back to their busy lifestyles. I believe the work-life balance lifestyle of Norwegians is extremely important, especially for Singaporeans who tend to overwork themselves in their jobs, so perhaps an exchange program to Norway or the Scandinavian countries would be rewarding beyond just the academics.
The culture in Norway to do volunteer work for free is known as “dugnad”, and it is interesting how Norwegians like to do things together and help each other out. This is different from Sweden’s “largon” which basically wants everyone to stay the same. “Dugnad” is a much more appealing concept in terms of meeting social needs, and it is inspiring to see students do voluntary work without the incentive of extra credit. In Singapore, voluntary work is often done to meet certain criteria or credit incentive, which is rather distressing.
There are two Norwegian exchange students coming to SMU this fall, Hakan and Martine, who apparently view Singapore as a great place to travel and study. I hope we will not disappoint them as hosts when they arrive in Singapore.
The last company of the trip was Hansa Borg, the largest Norwegian company in the brewery industry. Hansa Borg is not big internationally, but is a big player in Norway.
We were led on a tour of the production plant, where we saw a mix of both manual labour and automated machinery. Automation in Hansa Borg is not as high as the level of automation in Lego, and this we learnt was mainly due to the struggle between Norwegian breweries in the recent two decades, leaving no excess cash flow to invest in automating the plants.
The recycling bottle concept is interesting, in which used bottles are collected and transported to the plant, where they will wash the bottles and reuse them. This is all done through an automated process, and a bottle can actually be reused up to 20 times. The main reasons for this concept is to be environmentally friendly and to save on corporate tax, as the Norwegian government allows for a cut in corporate taxes if enough bottles are returned. Therefore, companies actually give out small cash rebates if you return the bottles to the stores, as their economic profit from the cut in corporate tax is much higher.
If you are worried about whether the bottles are clean, various tests and inspections are conducted constantly to ensure high hygiene conditions, as any health breach would be extremely detrimental to a beverage company like Hansa Borg. Hansa Borg has actually bottled for Pepsi and Coke at the same time before and Carlsberg and Tuborg at the same time as well, which is ironic because they are all competitors. This shows how unstable the Norwegian brewery industry is.
Initially, the Norwegian brewery industry was stable as the breweries were confined to their own regions by law, until the 1980s when restrictions were lifted. Since then, the two biggest competitors in the brewery industry are Hansa Borg and Ringnes (owned by Carlsberg). Ringnes has 54.2% of the Norwegian market, Hansa 29.6% and the other brands the remaining 16.2%.
Apparently, alcohol beverage companies are not allowed to advertise in Norway, so there are no Heineken or Ringes commercials on television at all. They cannot sponsor soccer teams as well, so Hansa Borg can only market itself through sponsoring events. For example, an upcoming music event known as Matt Jazz is sponsored by both Hansa Borg and Statoil Hydro.
Hansa Borg is a mix of tradition with youthfulness, much like Orkla, because though they have more than 150 years of history, the merger of Hansa with Borg and a change in their business compass happened only recently. In that sense, they can be considered a “young” company. Hansa Borg was a great company with which to wrap up our BSM trip, as it is owned by three major Scandinavian breweries: 60% Norwegian, 25% Danish, and 15% Swedish, exactly the countries we visited on our trip.
The core values of Hansa Borg are typical, with a focus on people and having fun, as they believe job satisfaction is closely linked to work performance. The workers are trained for years, taking accreditation tests to ensure they are highly educated in their job specializations. The vision of Hansa Borg is playful though, wanting to be Norway’s most famous producer of happiness, pleasure and taste. Such a vision might be appealing to workers. Hansa Borg consists of different arms besides alcohol, such as soft drinks like Coke and Schweppes and mineral water like Olden. Olden is owned 100% by Hansa Borg and has an appealing story of how several thousand years ago, the water fell down as snow and when it melted, pure Olden water flowed out of the mountain. This story plus the special design of the bottle supposedly gives Olden a competitive advantage in the market. Their expansion into more variant flavours like mineral water with a taste of raspberry was very successful in Norway (I tried it and it is actually not bad). However, their venture into the sportswater market has not been successful, proving that one can never visualize a business on paper without strong market studies and pilot testing. One idea of introducing more variant flavors in mineral water might work, but moving it to sportswater it might turn out to be failure, something that Mr. Fredik Haren mentioned before.
In terms of marketing, Olden is not restricted by the advertising limits of Hansa so it can advertise in the media freely. For example, in one of the presentation slides, we could actually see Sapa and Olden signboards in a soccer stadium. Hansa Borg is a very different company from Orkla, as it has neither intention nor present capacity to expand internationally (especially in the brewery industry), so its main focus stays on the Norwegian market.
After visiting so many Scandinavian companies and experiencing the local culture, could we begin to decipher the traits that allow Scandinavian companies to succeed and perform so well in their national or even global market?
There are four common threads that run through all Scandinavian companies:
- A focus on people. They strongly believe in grooming people to become leaders, and that is the best way to create value for the company in the long run.
- An emphasis on being creative and finding innovative ways to engage employees such as through job discussions or slogans like “a life-changing career” is another common point.
- Scandinavian companies also tend to have a flat structure, with little power distance between employees. This allows them to engage their employees.
- There is a strong belief in protecting the environment in every Scandinavian company, as this is closely related to the culture in Scandinavian countries.
All these points are values that Singapore companies can learn from Scandinavian companies, and other minor points that I have highlighted in the journal. But obviously Scandinavian companies have their differences as well, which have been listed in the Orkla journal entry. The most important thing to learn from Scandinavian companies is the ability to rapidly adapt best practices from other companies and embed them in your own company culture. That was how Lego turned around from its crisis and secured its place in the toy market. Similar stories are also found in other Scandinavian companies.
How the Scandinavian company representatives open up to us and answer our questions diligently, and how they prepared extensively for our visit with presentation slides, tours and even gifts goes to creating a great image for Scandinavian companies. The willingness to engage students, and be curious about our view of their companies is a real sign of a company at the forefront of adapting best practices and not afraid of change.
Besides learning about the Scandinavian companies in great detail, I have thoroughly enjoyed travelling the Scandinavian countries: their scenery, people and culture. Some really good friends were made on this trip as well, friendships that will last beyond the trip. I look forward to seeing the Norwegian exchange students in SMU, and perhaps I might even come to Scandinavian for exchange in the future. And so, I end here regrettably yet contented.
– Ken Chang