Swedish technology company, Ericsson has announced a series of organizational and structural changes to strengthen strategy execution to drive growth and profitability.
The company over the past number of years has made some key strategic decisions which include exiting the handset and modems businesses, an enhanced partnership strategy on IP and investments to build targeted growth areas with strong focus on software and professional services designed to build new revenue areas and to drive efficiency in the core business.
Hans Vestberg, President and CEO, Ericsson, says that, “we are not satisfied with our overall growth and profitability development over past years. We are today announcing further actions to accelerate strategy execution and to drive efficiency and growth across the company even harder.’’
According to Ericsson, overall company strategy execution will be strengthened through an organizational structure aligned around type of customers and type of business.
“We will create a leaner, more fit for purpose organization, to cater for the needs of different customer segments and to faster capture market opportunities. As 5G, the Internet of Things, and Cloud drive the next phase of industry development, the time is just right to make these changes”, adds Vestberg.
The new structure will have five business units and one dedicated customer group for Industry & Society, in line with the company focus on core business, targeted growth areas and cost and efficiency.
The core business will incorporate the two network units, Business Unit Network Products and Business Unit Networks Services which will focus on incremental improvements in networks business performance, capturing opportunities in 4G and extending leadership into 5G.
The two business units will leverage the combined strength in products and services with BU Networks Services focusing on Managed Services, Network Roll-Out and Customer Support and BU Network Products combining Radio and Transport.
There will also be two new IT & cloud business units, Business Unit IT & Cloud Products and Business IT & Cloud Services in the target growth areas which will together with a new Business Unit Media, have a strong focus on profitable growth as a natural next step after a period of investment.
This will involve focus on software sales and recurring business to complement the already strong business in Consulting & Systems Integration and the Broadcast Services business. For the rapidly growing Industry & Society business a separate Customer Group will be introduced to improve scaling and time to market.
The cost and efficiency is designed to enhance efficiencies and cost structures through more end-to-end accountability and less duplication across portfolios and capabilities, as the company remains fully committed to drive cost reduction and efficiencies, including delivering on its SEK 9 b.
The new Group structure is optimized to bring both enhanced customer value with business units having full responsibility for business performance and end-to-end skills. Regions are being re-shaped to mirror the new business units with focus on sales and delivery quality.
Vestberg continues: “The changes we are making will make it easier for our customers to do business with us, whether they are an operator, a media company or from another industry. The changes will also take into account the different characteristics, needs, and pace of each of the businesses we are in. I am convinced this will make us even more competitive and enable us to grow both our company and our earnings”.
Ericsson says the new organization will be effective as of July 1, 2016. As of Q1, 2017, financial reporting will be made according to the new structure.