How pocket calculators disrupted mechanical calculators and Facit, a company that Sweden was proud of.

1. Calculator Disruption

2. In 1981, the German
group Kraftwerk
released a single
called Pocket
Calculator.
The lyrics were
simple, straight
forward and very
thoughtful…

3. I’m the operator
with my pocket calculator
I’m adding…
… And subtracting
I’m controlling…
… And composing
By pressing down a special key
It plays a little melody
( http://www.youtube.com/watch?v=zZt64_XOflk )

4. About ten years before ”Pocket Calculator”,
calculators were far from pocket size…

6. Calculators used to be big, heavy and
expensive mechanical devices…

7. … And well, these calculators were disrupted
and the Digital Pocket Calculator emerged as
the dominant design…

8. In 1972, the Swedish firm Facit faced
bankruptcy. The shift from mechanical to
digital calculators created great difficulties.

10. Facit was the main employer in the small
town Åtvidaberg and thus…

11. … the entire society suffered from this disruption.

12. All of a sudden, the value of Facit’s products
had diminished, the amount of unsold
products and inventories increased rapidly…

13. … The disruption seemed
to come from nowhere…

14. … In Sweden a term was coined in
order to describe how large successful
firms could collapse so rapidly…

15. The ’Facit Disease’

16. Facit used to be a
large, well reputed
and profitable
company – how
could this happen?

17. Did Facit recognize the threat?

18. Let’s take a closer look at what actually happened
to Facit in this technological shift…

19. Facit came from
the kingdom of Sweden

20. Its
headquarters
were located
in a small town
called
Åtvidaberg

26. The firm started in the 1920’s as a company
called ’Åtvidaberg Industries’, which was
mainly producing office furniture.

27. Under the leadership of Elof Ericsson,
the firm focused increasingly on
calculators and grew rapidly.

28. In 1932, the first calculator with ten
keys was manufactured in Åtvidaberg.

29. It was called FACIT.

31. Facit became a great success and was
exported to the entire world. Åtvidaberg
Industries was a source of pride for
Sweden in the era after World War 2.

32. Along with the expansion of Åtvidaberg
Industries, the town Åtvidaberg grew rapidly…

34. Elof Ericsson and his family
used to live in this house. Elof
was widely acclaimed for his
leadership, both in Åtvidaberg
and in Sweden.

35. At the age of
38, Elof’s
son, Gunnar
Ericsson
became
CEO of the
company.

36. While Åtvidaberg
was a large player
in the calculator
market, it was still
very small
compared to other
actors. For
instance, IBM was
25 times bigger in
the 1950’s.

37. The industry was
technologically mature,
yet there was still a
great demand globally
for calculators…

38. … Therefore, Ericsson
focused the company
more towards selling
calculators globally…

39. … The name of the company was changed to
FACIT and all products were now sold under the
same brand with similar design…

40. … The focus on calculators,
marketing, the FACIT brand
and global expansion was
referred to as ”The New Deal”.

41. Under the leadership of Gunnar Ericsson sales
and profits grew rapidly as the FACIT brand
became recognized internationally…

42. The little ”FACIT Guy” with his long hat
symbolized a wizard, who could rapidly make
accurate calculations for the customer.

43. In the 1960’s the
FACIT wizard was
seen in most
parts of the
world…

45. The global
expansion
was very
successful…

48. In the skyscrapers of New York
In the mines of Rhodesia
The whole world uses FACIT
At the marketplaces
In downtown London
in Mongolia

49. The FACIT brand was everywhere…

55. The remarkable growth in the 1960’s
implied that FACIT, Gunnar
Ericsson and Åtvidaberg became a
role model for Swedish industry.
The company was admired by both
industrialists and politicians.

56. Gunnar Ericsson was
fantastic at marketing…

57. In 1966 he invited the Brazilian national
soccer team to practice in Åtvidaberg…

58. In the small town Åtvidaberg, in the small
country of Sweden, legends like Pelé
entered this grass in order to practice prior
to the World Championships in 1966.

60. Photos like this featuring Gunnar
Ericsson and Pelé were spread
throughout the entire world.
Fantastic Marketing!

61. Mr. Ericsson was
almost a celebrity
in these years. He
was the CEO of
Facit, the board
member of various
international
soccer
associations as
well as a member
of the Swedish
parliament.

62. Ericsson used his
extensive network
frequently in order
to sell the Facit
calculators.

64. Here, down by the lake in
Åtvidaberg were Gunnar Ericsson
lived, cocktail parties were held.
Politicians, Industrial leaders and
international guests gathered and
made new acquaintances.

67. While the Facit
Wizard was
conquering the
world, some
important
breakthroughs
were made in the
field of digital
technology…

68. In order to explore this new area, the
company founded a subsidiary called
Facit Electronics.

69. Facit succeeded in
developing some
big computers,
at one point the
strongest
computer in the
world was made
by Facit.

72. However, these projects
generated huge losses.
Deadlines and budgets were
not met and Facit Electronics
never had the resources to
match global players like IBM.

73. As a consequence, Facit
Electronics was
terminated in 1962-63.

74. Instead, Facit focused
increasingly on the magic of
its core business –
mechanical calculators.

77. Sales and profits kept rising
through the 1960’s…

79. As the company grew, the
town Åtvidaberg grew…

82. As the company grew, the soccer
team in Åtvidaberg rised to the
Swedish elite division…

83. Many of the Swedish soccer
stars in those days moved to
Åtvidaberg, to join the team
and to work for Facit.

84. Thus, not only the company, but also the town
and its soccer team were largely built upon the
continuing success of mechanical technology.

85. In the years 1957-1972, the amount of
employees increased from about 6000
to almost 14 000.
Revenues increased with 500 percent
and the products were sold in 140
countries all over the world.

86. However, digital calculators also
started to prosper in the 1960’s.

87. Initially, digital calculators were
expensive, big, and demanded a
lot of electricity.
However, digital technology has a
high pace of development and
the calculators became smaller,
cheaper and better over time…

88. Given that Facit was a relatively small
company, with competence in
mechanical technology, the firm
tried to benefit from the new
technology through collaborations.

89. In 1965, the digital calculators
started to enter the market slowly.
The same year, Gunnar Ericsson
signed a contract with Hayakawa
(owned by Sharp), which gave Facit
exclusivity in selling their calculators
throughout the world for 2 years..

90. Hayakawa had the technology and
Facit had a global market
organization and a strong brand.
A perfect match – in the short term…

91. In the 1960’s Facit acquired several
manufacturers of mechanical
calculators but failed to consolidate
the R&D organizations.

92. As digital calculators were
improved the competition
increased, thus forcing Facit to
cut prices and to loose profits…

93. Initially, the collaboration with Hayakawa
helped Facit to keep sales up.

94. These calculators held the Facit brand,
but they were Made in Japan.

95. In 1965 4000 digital calculators
were sold in the world. The same
figure reached 25 000 in 1966!
In 1967 15 percent of the global
calculator market was digital.

96. The collaboration implied that Facit
was depending upon Hayakawa in
order to survive…
Over time, Hayakawa started to build
its own sales organization.

97. Facit’s development lagged behind, the
R&D organization was too small and
fragmented throughout the world…

98. As Hayakawa started to enter Facit’s
markets in many countries, the
relationship between the two companies
became increasingly strained…

99. However, Facit was
still a growing and
profitable firm in
the late 1960’s.

100. Some of the engineers
argued that the
mechanical calculators
could at best be sold
until 1971-72, whereas
parts of the board were
less worried about the
future…

101. As Hayakawa
and other
manufacturers of
digital calculators
improved their
technology, Facit
encountered great
problems in 1970-
71 and did not
know what to
do…

102. Facit’s mechanical calculators
had reached a dead end.

103. The amount of unsold
calculators increased rapidly.

105. “We sit here in the forests and
have no idea what’s going on
in the world.”
// Quote from a board meeting

106. In 1972, the situation
became
desperate. Sales
decreased sharply
and thousands of
people were laid
off in Åtvidaberg
and throughout the
world.
Even the soccer
stars had to leave
the company later
on.

107. Only a few years after
having shown record
profits, Facit now
faced bankruptcy.

108. I’m the operator
with my pocket calculator
I’m adding
And subtracting
I’m controlling
And composing
By pressing down a special key
It plays a little melody

110. It’s amazing how much value can be destroyed in
such a short period of time…

112. Imagine the amount of manufacturing
sites that became irrelevant…

113. Imagine how the entire value chain of
suppliers of mechanical components
became irrelevant…

114. Imagine the amount of
knowledge that became
irrelevant in only a few years…

115. ”The coggwheels in the mechanical calculators
were the soul of the company”
// Gert Persson, used to work at Facit Electronics

116. The economic value of this soul
was destroyed in the early 1970’s.

118. The Swedish firm Electrolux offered to buy
Facit in 1972.
The owners had to accept and Electrolux
paid 80 MSEK for a company which had
been an industrial giant only a few
years ago.
Given that Facit had a profitable turnover of
about 1 Billion SEK in 1970, this gives an
idea of how much value was destroyed.
Later on, Electrolux sold the different parts
of Facit for 200 MSEK in total.

123. Gunnar Ericsson
was no longer an
admired
industrial leader.
Much of the blame
was put on him
personally.

124. It’s always tempting to play the blame game.
But it’s not very constructive. Many, many
other firms suffered greatly in this and other
technological shifts.
Could something have been done differently?

125. I don’t know. No one really knows.
Maybe Facit should have acquired Hayakawa or
another digital manufacturer earlier?
Maybe they should have invested more aggressively
in R&D instead of marketing in the early 1960’s?
However, somewhere, for someone, a lot of economic
value (mechanical knowledge, manufacturing, sales
and networks) would have to become obsolete.
This fact can’t be changed by any strategy, or
anything.
Therefore we should think twice before we accuse
managers or firms for being incompetent when they
fail in technological shifts.

127. So what’s the main
lesson from this story?
Well, I think it illustrates how technological
shifts destroy the vale of previous
competence and therefore create difficulties,
simply because the capabilities of industrial
giants all of a sudden become irrelevant.
Moreover, it illustrates how the furious pace of
digital technology and the fact that it attacks
from below often threatens established firms.

128. ”The coggwheels in the mechanical calculators
were the soul of the company”
// Gert Persson, used to work at Facit Electronics
This quote actually explains the
’Facit Disease’ very eloquently.

130. Thanks to the following sources:
Pettersson, T. (2003) I teknikrevolutionens
centrum: företagsledning och utveckling i Facit
1957-1972, Uppsala Papers in Financial and
Business History, Report 16
“Facit av en era”, Computer Sweden nr 22 2004
Facitindustrierna efter 1972, Åtvidabergs
Teknikhistoriska Sällskap
Åtvidabergs Bruks och Facit Museum, Sweden
Åssa Industri och Bil Museum, Sweden

131. Image Attributions
http://www.flickr.com/photos/71432201@N00/889045042/
http://www.flickr.com/photos/71432201@N00/889000088/
http://www.flickr.com/photos/71432201@N00/888129447/
http://www.flickr.com/photos/ocad123/1065955129/
http://www.flickr.com/photos/gak/16999155/
http://www.flickr.com/photos/clango/439862166/

132. Photos taken at:
Åtvidabergs Bruks och Facit Museum, Sweden
http://brukskultur.atvidaberg.se/index2.html
Åssa Industri och Bil Museum, Sweden
http://www.assamuseet.se/
Thank You!

133. Links of interest:
http://archive.corren.se/archive/2007/12/20/jidow0
01baatzzc.xml
http://www.oldcalculatormuseum.com/
http://en.wikipedia.org/wiki/Electronic_calculator

135. Christian Sandström is a
PhD student at Chalmers
University of Technology in
Gothenburg, Sweden. He
writes and speaks about
disruptive innovation and
technological change.
www.christiansandstrom.org
christian.sandstrom@chalmers.se