Nils-Göran Areskoug, 5 April 2013

THE STATE OF THE PRESENT STATE

A COUNTERPOINT on “Scandinavia: Model management. Swedish business is being cast as a model for long-term stability and growth”, Financial Times (FT), 20 March 2013, and, on March 15, “Swedish prime minister Fredrik Reinfeldt. The Swedish prime minister on budgets, basketball and the Eurovision song contest.”

PRELUDE

Our conversation on the Swedish and Nordic model continues by crossing outside and inside perspectives. The unusually bright spotlight on Sweden in recent global media calls for a comment. As in music, where two melodies form a harmony, the flow of chords and discord need sensitive modulation, and attentive listening to the facts of the world, especially among the leaders governing the dynamic unfolding of the interface between value creation in corporate business and systems regulation by policing the state.

STATE OF THE ECONOMIC LEADERSHIP

Richard Milne of Financial Times reveals many secrets of "the Swedish model of active ownership" but fails to explain with critical acumen the crucial structure in the social and legal construct responsible for the success. Shareholders exercise strategic power by their majority votes in the large foundations whose assets consist of shares in the holding companies. Therefore, ownership control is protected and foundations also provide a convenient tax shelter for profits that need to be reinvested with a much longer-term vista than otherwise possible. A major part of the shares of Sweden's industrial gems are in this way protected from the daily vagaries of stock markets.

Despite these conditions at hand Swedish industry lost its two largest pharmaceutical industries, Astra AB and Pharmacia, as stars on its corporate firmament. The construct of foundation-owned holdings does little to protect against incompetence. But Sweden can learn from a different competence culture in Denmark and Switzerland. Both countries of comparable size and status are capable of both providing fertile arenas for life sciences industry and to offer favorable infrastructure in support of developing both “big pharma” and novel biotech start-ups.

Seemingly, the retention of owner control across generations does not itself warrant steady value growth in a fast-changing environment during cycles of crises. The creation of an efficient strategy for solid corporate and societal growth depends on the level of competence in the hands of skilled stakeholders of at least five categories. Their specific qualifications are key factors in the chain of decision-making and successful leadership:

(1) Regulators must understand how foundation laws provide a framework for an alliance between private and public interest.

(2) Owners must provide strategic competence critical for developing a guiding vision beyond horizon.

(3) Management focused on exploiting strategic business advantage - and ensuring viability of its growth model in a volatile business climate - must know how to navigate between the frames set by the owners at the boards and many self-evident responsibilities towards society.

(4) Activist funds of various colors provide risk capital and offer important vitalization of operative opportunities to capture value through upcoming advantages on a trajectory towards sustainable growth. Finally,

(5) Beneficiaries of the foundation grants reinvested from the profits (among whom we find leaders of frontier science organizations in a developing knowledge infrastructure), are expected to deliver sufficient momentum at the precise interface between research and innovation to enable future industrial progress. Even in view of present relative success the chosen strategic path looks severely suboptimal in the context of global foresight.

GOVERNANCE OF THE STATE

When it comes to the political leadership a few notes in our counterpoint may be relevant to the future state of our state:

Past success in the management of the debt crisis that Sweden overcame in the 90s does not save the country from facing a range of present problem. The current challenge is to translate a futurist analysis recently delivered by a governmental commission (www.framtidskommissionen.se) into actionable strategy. It becomes more urgent to bridge the gap between analytical fact, values, prospects, and scenarios on one hand and policies that cater to the real need of people on the other, especially in view of the increasing need to capture obvious future opportunities.

Although Sweden is often counted as a top performer in country rankings of "innovativeness" the need for the nation to create incitement for growth and implement results from its research investment is among urgent challenges. As for any real challenge it requires considerable competence in strategic cognition. It appears to be a problem to rely more on PR consultants and political advisors than on those who are really capable of urgent state of the art in depth analysis.

There is currently an unfortunate disappointment voiced among public opinion around the anorectic ideas and a stalemate of creative processes in an effort to finding effective remedy to key problems. Political programs need to address, handle and target the precise problems that worry the minds of the Swedes, such as the quality and efficiency of public health care, youth unemployment and psychosocial health, and the increasing signs of irresponsible allocation of public funds to extravagant projects ("Nya Karolinska") without due diligence and sufficient critical review of options in advance of final decision. Political dangers may erupt from a calm surface and the political burden of a content bureaucracy may well be perceived as a threat to the political peace, the core stabilizing constituent of the iconic mid way between capitalism and socialism. Not even a brilliant power player can afford playing with fire and risk disrupting the ingrained paradise vision of the iconic People´s Home (“Folkhemmet”) without unpleasant repercussions. Misinterpretation always results in loss of previous excellence in performance. This is a sobering insight in arts and business, in science as well as society.

These and other similar clusters of problems are by no means unmanageable. And strategic options are at hand. But the analytical acumen required to evaluate long-term outcome of preferred options is not at the moment entirely convincing.

Therefore, the government has lost some of its credibility and trust - and voices are polarizing on the scale towards both extremes. The political urgency is intensely felt despite the comparative wealth and stability of the nation, for the moment.

Competent citizens expect to see competence and energetic solutions to real problems and confidence in government will quickly regain once results get tangible and concrete.

To conclude: People look forward to see leaders overcome anemic paralyze by concerted and well-grounded strategic action. That is the real song contest.

@ Nils-Göran Areskoug, 5 April 2013.