A mobile, global customer
Ericsson, the Swedish-based global telecom company, has identified a need to align and improve its organisation's management systems worldwide. To achieve the company's objectives for excellence, DNV's Global Customer Management service has been utilised to define and implement an Ericsson-wide certification programme based on a business-oriented assessment methodology, Risk Based Assessment.
Ericsson, the world's largest telecommunications supplier, is recovering from its losses caused by the formidable collapse in the telecom market four years ago. Since then, annual sales have been cut almost in half, from an all-time high of SEK 273 billion in 2000 to SEK 145 billion in 2002.
In a laborious process to regain its financial strength, Ericsson has halved its staff from 105,100 employees in 2000 to 51,600 in 2003. During the past two years, Ericsson has cut costs by SEK 500 million each week in order to balance its budget.
Halving the costs and keeping focus on the daily business and core activities at the same time has been a complicated and challenging process.
Ericsson's new business approach is to focus more on work processes instead of organisational issues. The key words are Simplicity, Clarity and Responsibility. The new approach has contributed to make Ericsson a more robust and streamlined company. More attention to efficient management and the standardisation of all work procedures at Ericsson has been given high priority.
Risk Based Assessment
When Carl-Henric Svanberg took over as the new president and chief executive officer (CEO) of Ericsson in 2003, one of his primary concerns was the company's running costs. Ericsson had a continued need of cutting operating expenses, and thereafter to generate sustainable revenues. Svanberg introduced "Operational Excellence" which is a move to increase profit. Risk Based Assessment is an approach, fitting well to Ericsson's objectives.
"Ericsson management has always focused on long-term objectives. Risk Based Assessment (RBA) is a very suitable approach to identify if our methods and systems are suitable to gain our defined objectives," says Harald Stubert, responsible for global assessment and certification in Ericsson.
Risk Based Assessment provides an added value in a certification process. In addition to a certificate, the customer also receives feedback on key aspects of the management system which have a bearing on the achievement of operational objectives for the business. Improvement areas identified in the assessment report will therefore have direct relevance and interest at all levels of the business, including top management.
"The certification process can be expensive. In Ericsson we want more out of the process than just a certificate," says Stubert.
According to Stubert, the RBA programme is strong due to the following reasons: RBA systems are easy to account for, easy to manage and has the full support of Ericsson's leadership, since the principles of the initiative have been implemented by senior management. Stubert adds that RBA also requires a certain level of organisational maturity.
Global focus replaces decentralised approach
During the cutback process, Ericsson recognised that there had been a lack of integration in the global Ericsson Corporation. Each country office had its own certificates from regional certification authorities. Allowing the organisation to develop separate procedures has lead to cost-redundancies, thus failing to take advantage of the company's economies of scale.
The company also saw that efficient work processes needed to be established and standardised. Without this process, inefficiencies will be impossible to trace or improve. These are principles that Ericsson is seeking to implement.
"Global customers demand the same level of service, wherever they use our services. It's not acceptable to our customers if the same service is delivered in one day by one unit and in three days by another unit," says Stubert.
Until recently, Ericsson operated with 300-400 local certificates worldwide. To create a more efficient system, Ericsson's leadership requested one corporate, common, global certificate in accordance with ISO standards. *
Global customer
Since 1995, DNV has been one of many certification bodies working with Ericsson. At the end of 2003, Ericsson and DNV signed a frame agreement based on DNV's Global Customer Management (GCM) approach. As a result, the assessment and certification program has been extended to a global scope, aimed at consolidating all management system certification within a cohesive framework for the Ericsson Group, compatible with the company's corporate objectives.
"Being a global company itself, DNV holds an understanding of how to work and how handle the obstacles in running a global business." He says: "Consequently, DNV realised Ericsson's need of a global customer manager which is also an important reason for us to sign a frame agreement with DNV."
The global customer manager shapes DNV's service delivery to fit Ericsson's special needs and expectations. Coordination of assessments across Ericsson's truly global operations is a major task, and the Global Customer Manager works systematically and in partnership with Ericsson to integrate all units into the same structure, culture and way of thinking.
Harvesting the fruits
Today, optimism characterises the Ericsson organisation. The company now possesses a strength which makes it more fit to handle future challenges. Knowing that the most stable factor in the telecom market is the continuous changes, require a robust organisation.
"But why hasn't Ericsson done this before?"
"A consequence of growth is often more decentralised management," says Stubert. "Each unit worldwide develops its own procedures and objectives. During slumps, the management tends to exercise a greater degree of central control in order to cut costs."
Technological developments have also made improved management solutions available to synchronise Ericsson's conduct.
A promising future
Today, the future looks bright, according to Ericsson's top management. In its 2003 fourth quarter report Ericsson present a sucessful turnaround, new contracts and technological achievements. It maintains a 40 percent share of the global telecom market and keep its position as the world's biggest telecom operator. With activities in 140 countries, Ericsson sees huge opportunities in its future market.
Keeping ahead of competitors in the technological development and gaining market share without organisational growth, are the two main challenges in Ericsson's crystal ball.
"This is where the DNV services come in,"says Stubert.