How Sweden Rose to the Forefront of Global Business

Courtesy IKEA

How did a semi-socialist nation of 10 million spawn global business giants like IKEA, H&M, and Volvo?

Like most people, I think I know myself pretty well. But this one came as a bit of a surprise: Embarking on an examination of my own buying habits, I realized that my greatest customer loyalty lies not with a particular brand but with an entire country. I shop Swedish.

My first car was a silver Volvo XC70 wagon, which I bought for safety reasons because a child was on the way. A Baby-Björn soon followed. I have purchased as much IKEA furniture as anyone I know, including so many of the uber-practical Billy bookcases that I’ve lost count. My home is equipped with an Electrolux tankless water heater, providing me with what I like to call “the never-ending shower.”

Last year I clocked more than 40,000 minutes on the music-streaming service Spotify, whose Discover Weekly playlist has, remarkably, made Monday my favorite day of the week. My nine-year-old daughter is addicted to Minecraft, a video game created by the Swedish outfit Mojang. (You can also thank the Swedes for another of the world’s most popular pointless diversions, Candy Crush.) Oh, and my ex-wife is a VIP-level shopper at H&M.

Try keeping a similar tally for other countries, and you’ll likely find, as I did, that even economic heavy hitters like Germany and Japan don’t come close. When it comes to producing bona fide global business juggernauts, Sweden—a country of just under 10 million people— punches well above its weight.

This isn’t exactly a secret. Sweden topped Forbes’ Best Countries for Business list in 2017 (though it slipped a few notches to No. 4 this year), based on criteria such as deregulation, slashed benefits, and corporate tax cuts. Thanks in part to its pro-business climate, the country is now home to a cauldron of new-venture activity, with a start-up scene that rivals Silicon Valley's.

But that doesn’t explain how Sweden, for the better part of the past century, has produced a smorgasbord of companies that play an outsize role in an array of global industries. Is there something particularly Swedish that has helped them differentiate themselves—a philosophical lingonberry on top of their economic meatball? As it turns out, there do seem to be a few special ingredients to their success.

Social Responsibility

The first step in understanding what distinguishes Sweden’s leading global brands is to realize that the country practices a kinder, gentler form of capitalism than is found in much of the developed world. In addition to boasting a generous welfare system and comprehensive, efficient government services, Sweden has an equitable social structure, not to mention a culture of self-effacement that extends to the economic elite.

The country is also a global leader in environmental policy, with over half of its energy production coming from renewable sources, particularly hydropower. So it’s not that surprising that many of Sweden’s most successful homegrown companies are, in some sense, socially minded—whether they’re making safe cars, smart baby carriers, or affordably stylish clothing and furniture.

At BabyBjörn, the commitment to sustainability, safety, and the environment runs deep. Textiles used in its products, for example, are tested not just for substances that are explicitly banned in the European Union or United States but also those that are merely suspected of causing harm. Currently among the world’s largest users of organic cotton, H&M aims to utilize only recycled or sustainably sourced materials by 2030. Volvo’s three-point seat belt, introduced in 1959, has saved countless lives, and the company has vowed to make its vehicles so safe that they will be fatality-free by 2020.

And IKEA, the world’s biggest furniture retailer, has pledged that within the next dozen years it will become carbon-neutral and use only renewable and recyclable materials in its products. These companies have shown that social responsibility and bottom-line performance are not mutually exclusive.

“For too many U.S. companies, corporate social responsibility and sustainability are just buzzwords,” says Natalia Brzezinski, whose husband, Mark F. Brzezinski, served as the American ambassador to Sweden under President Obama.

“In Sweden, they’ve been practicing it for real for decades.” Now back in Washington, D.C., Brzezinski stays deeply connected to the country as CEO of Brilliant Minds Foundation, an organization and platform co-founded by Spotify’s Daniel Ek.

Joakim Malmberg, a financial journalist at Business Insider Nordic, argues that Sweden’s “long tradition of invention and innovation” is supported by its socially-minded government policies. “A generous welfare state,” he says, “makes people more comfortable taking risks.”

In Sweden, companies with big compensation disparities are fined if they don’t make an effort to fix them. Swedes aren’t big on boastful billionaires, either. Across Scandinavia, there’s a social code known as Jante’s Law, which frowns upon ostentation and the trappings of success and instead emphasizes the collective good. In accordance with Jantelagen, Swedes typically don’t worship top business leaders as celebrities.

That’s why you won’t find too many business legends in the Welcome to My Hometown display that greets travelers at Stockholm’s Arlanda Airport. You will see photos of cultural heroes, like actor Joel Kinnaman, chemist Alfred Nobel, and tennis great Björn Borg. My suggestion: When they refresh the portfolio, they should consider adding a nice portrait of an IKEA Billy bookcase. With more than 40 million sold, it might just be the most famous Swede of all.

Practical, Efficient Design

The best Swedish products all share a bit of that famous Scandinavian design sense—simple, smart, functional. They are characterized by a lack of unnecessary details and features (see: IKEA, BabyBjörn, even Spotify’s interface)—generally just enough to do what is needed, and to do it well.

This philosophy connects to an efficiency-minded business culture in Sweden, where meetings begin and end punctually and workers clock fewer hours than in most advanced economies. Whereas the reigning orthodoxy in corporate America is selling—and that extends to office dynamics—Sweden’s dominant business philosophy is solving, with practical thinking as its foundation.

IKEA’s founder, Ingvar Kamprad, who started out at age 17 selling pens, built the company on principles of frugality and simplicity that still define it 75 years on. Assar Gabrielsson and Gustaf Larson, the founders of Volvo, began with the modest goal of building quality cars that could withstand Sweden’s rough roads and cold temperatures. In doing so, they established the philosophy of performance, comfort, and safety over flair that is Volvo’s hallmark.

A similar ethos informs the way Baby-Björn designs its carriers, cradles, and high chairs. “We’ve always been most focused on the benefits of the product as a selling point, and less on how it’s made with these materials or that quality,” says Björn Jakobson, who cofounded BabyBjörn with his sister-in-law, Elsa Jakobson, in 1961. “Don’t tell me what a shirt is made of. Tell me it’s comfortable, that it has a pocket for my glasses, and it looks nice—those are the benefits.”

Egalitarianism

Several years ago, the World Economic Forum named Sweden the most gender-equal country on the planet. It remains in the top five today, and its business culture reflects that. “If you’re looking for one through line among Sweden’s top companies,” says Brzezinski, “I think you’ll find it in the Swedes’ radical focus on egalitarianism, their total embrace of equality.”

In Sweden, both moms and dads are entitled to 240 days of paid leave each. While BabyBjörn’s carriers are not exclusively targeted to men, they have been credited with helping to cultivate modern notions of “nurturing masculinity” and reinforcing healthy family bonds. H&M, which has built an empire on the fundamental premise of quality fashion at the best price, has pledged “fair jobs for all” (though it has been criticized for failing to ensure living wages for all of its factory workers), and women make up more than half of its board of directors.

Consider, too, the “pay gaps,” whether between men and women or between executives and the rank and file. In the U.S., there is much hand-wringing—but little action—about closing said gaps. In Sweden, companies with big compensation disparities are fined if they don’t make an effort to fix them.

Swedes aren’t big on boastful billionaires, either. Across Scandinavia, there’s a social code known as Jante’s Law, which frowns upon ostentation and the trappings of success and instead emphasizes the collective good. In accordance with Jantelagen, Swedes typically don’t worship top business leaders as celebrities.

That’s why you won’t find too many business legends in the Welcome to My Hometown display that greets travelers at Stockholm’s Arlanda Airport. You will see photos of cultural heroes, like actor Joel Kinnaman, chemist Alfred Nobel, and tennis great Björn Borg. My suggestion: When they refresh the portfolio, they should consider adding a nice portrait of an IKEA Billy bookcase. With more than 40 million sold, it might just be the most famous Swede of all.