Nordic Agenda - Nordic Trial Alliance (NTA) · Nordic Agenda_Triton_150115-presentation...

Nordic AgendaTransforming for the Next Wave of Success

Nordic Trial AllianceHelsinki, January 29, 2015

Stuart Gander, Partner & Managing DirectorBCG Stockholm

Nordic Agenda_Triton_150115-presentation version.pptx 1


Volatility is increasing

Information Tech.

Consumer Disc.

Industrials

Materials

Financials

Health Care

Consumer

Staples

Telecom

Energy

Utilities

Rolling five-year standard deviation of firm market cap growth by sectorSector

Time

0.50+0.04Standard deviation:

1960 20101970 1980 1990 2000


Competitive dynamics are changing

Companies leaving

top 3 ranking position (%)

Probability that share leader

is the profitability leader

Increased positional volatility Less returns to scale

0

5

10

15

1950 1960 1970 1980 1990 2000 2010

0

10

20

30

40

50

1950 1960 1970 1980 1990 2000 2010


Competitive advantage outweighsindustry attractiveness

74

43

88

61

40

53

70

91

83

34

50

38

57

67

19 12 9 9 9 8 6 5 5 5

0 (2)(6) (6)

(3) (1)

(20)

(35)

(26) (28)

(38)

(26)(19) (18)

(12)

(31)(41)

(25)

(50)

0

50

100

Shareholder return

Tech. Media &

Entert.

Mining

& Mat.

Trans.

& Log.

Chem. Utility Travel &

Tourism

Retail Cons.

Goods

Pulp &

Paper

PharmaMach.

&

Constr.

Auto Multi-

Bus.

Low

High

Weighted Average TotalSample

Source:Thomson Financial Datastream; BCG analysis


Nordic industry overall has transformed

Electronics Machinery Constr. mat & eq. Pulp & paper Chem &. health Medicine

Agro chemicals

Ships & boats

Fruit & veg. Other agriculture Precious stones GarmentsCrude petroleumMetal products

1960's 1980's 2000's

http://upload.wikimedia.org/wikipedia/commons/b/bc/Flag_of_Finland.svg


http://upload.wikimedia.org/wikipedia/commons/4/4c/Flag_of_Sweden.svg


http://upload.wikimedia.org/wikipedia/commons/d/d9/Flag_of_Norway.svg



Nordic MNC's are very healthy

0

10

20

30

10

years

20

years

Median average annual TSR (%)

2

years

5

years

The NordicsFinland

Norway

SwedenDenmark

Global median

0

10

20

30

Fis

h F

arm

ing

+5+4

-4

+4

+13

+3

Basic

mte

rials

+2+2

Consum

er

&

Serv

ices

Median average annual TSR (2004 –YTD 2014)

Healthcare

Energ

y

Technolo

gy

Industr

ial

Fin

ancia

l

Global medianNordic median

Nordics outperform global

across all time periods... ...and in most industries


"Nordic model" admired internationally


The illusion of competitiveness

0 1 2 3 4 5 6

WEF competitiveness index

FinlandSwedenNorway

Denmark


Average: 1.4

Gold Silver Bronze Bottom

Three

2 3 3 10

2 2 6 6

2 1 0 9

0 1 0 13

2 1 3 10

0 2 1 8

2 2 0 14

2 1 2 4

12 5 1 9

2 4 2 5

0 2 4 6

4 3 5 1

1 1 3 5

1 6 5 5

5 3 2 6

However, Nordics are average to weak compared with the key competitors

-30

-20

-10

0

10

20

30

0 1 2 3 4

BCG net competitiveness score

Average GDP growth (2005-2013)

Switzerland

UKUS

South Korea

Netherlands

France

Canada

Belgium

Austria

Sweden

Norway

Japan Germany

Finland

Denmark


Low productivity growth coupled with flat hours make growth outlook bleak

x =

0

1

2

3

4

GDP (% real change per annum)

Finland

OECD

2010

-2013

2000

-2010

1990

-2000

1980

-1990

Norway

Sweden

Denmark

202020001980

1 000

900

800

700

600

500

Peer avg.

Sweden

Hours worked per capita

Norway

Finland

Denmark

0%

1%

2%

3%

4%

5%

6%

Norway

Finland

avg.

60-

70

avg.

90-

00

avg.

10-

13

avg.

80-

90

avg.

70-

80

avg.

00-

10

Avg. annual productivity growth (%)

Denmark

Peer avg.

Sweden

Productivity growth

slowing ...

... and no growth in

hours ...

... lead to declining

GDP growth


Overall relative competitiveness of Nordic exports is declining

1995 2000 2005 2010 2015

1.6

1.8

1.4

1.2

1.0

Economic complexity index value








Large companies provide important base-load, but no longer drive growth in home countries

1.5

1.0

0.5

0.0

Number of employees (m)

Employed

abroad+4% CAGR

Employed

in Sweden-1% CAGR

20

10

19

90




Root cause 1:Conditions for businesses are weakening

Global Competitiveness

ranking

(WEF , 2014/15)

dk fi no se

Institutions 9 1 2 7

Infrastructure 13 12 15 14

Macroeconomic

environment4 9 1 5

Health & education 13 1 8 12

Goods market efficiency 12 9 13 8

Labor market efficiency 5 10 6 7

Financial market dev. 11 1 4 6

Market size 14 15 13 10

Deterioration in

ranking by more than 2 places

Improvement in ranking

by more than 2 places

Rank 6-10 (of 15)Top 5 (of 15)Bottom 5 (of 15)

Change in rank

by 2 places or less


0.5

1.0

0.0

1.5

0.130.200.230.23

0.28 Peer avg: 0.30

Euro spent on fixed investments for each Euro spent on social protection

De

nm

ark

Fin

lan

d

0.29

Ge

rmany

Be

lgiu

m

No

rwa

y

Sw

itze

rland

Jap

an

Unite

d K

ing

do

m

The

Ne

the

rland

s

Unite

d S

tate

s

So

uth

Ko

rea

0.100.18 0.17 0.17 0.15

1.38

0.44

Fra

nce

Sw

ed

en

Root case 2: Focus on current spending not future investment








Root cause 3:Factor costs are too high

130

100

120

110

0

140

Ne

the

rland

s

111

Canad

a

115

Sw

ed

en

116G

erm

any

121

Be

lgiu

m

123

Manufacturing-cost index, 2014 (US = 100)

So

uth

Ko

rea

111

125

Austr

ia

111

Sw

itze

rland

100

UK

124

102

US

Fra

nce

109

Jap

an


Root cause 4:Room to improve key productivity drivers

0

2

4

6

8

10

2009 2010 2011 2012

BCG e-Intensity ranking

All Nordics with recent decline in

digitization

Low R&D intensity in Norway; low

start-up rate in Finland

Start-

ups

R&D

spend

Patents

1st quartile

2nd quartile

3rd quartile

4th quartile


























Additionally, no competitive advantage in talent

Primary/ secondary

education (Math)

Tertiary education

graduates

Science and

engineering

graduates

0 20 40 60 80

UKCanada

JapanS. Korea

OECD: 38

AustriaGermany

DenmarkFinland

NetherlandsSwitzerland

BelgiumSweden

FranceUS

Norway

0 10 20 30 40

% of graduates with degrees

in science and engineering

OECD: 23

Netherlands

US

Norway

Denmark

Canada

Belgium

UK

Japan

Switzerland

Finland

Sweden

Germany

S. Korea

% of 25-34 year olds with

tertiary education

480 500 540520 5600

PISA 2012 mathematics score

Peer average: 511

S. Korea

Sweden

US

Norway

France

Denmark

Austria

Germany

Belgium

Canada

Finland

Netherlands

Switzerland

Japan


And yet the pressure on each worker is growing

0.6

0.0

0.8

1.0

1.2

20

30

f

Denmark

Finland

Norway

Sweden

20

20

f

20

15

f

Peer group avg.

Dependency ratio

(Number of dependents per worker)1

99

0

19

95

20

00

20

05

20

10

20

25

f


2M more Nordic workers are needed to close gap

Workforce gap of 2M by 2030

Key peers also with

large gap

2.0

1.5

1.0

0.5

0.0

To

tal

0.60

0.44

0.51

1.98

0.43

Workforce gap (million workers)

40

60

0

20

Austr

ia

UK

Fra

nce

Canad

a

Jap

an

52

S. K

ore

a

To

tal

Be

lgiu

m

Ne

the

rland

s

Sw

itze

rland

Ge

rmany








But Nordics are attracting less skilled talentGlobal survey of 160,000 respondents

58

72 69 65 63 62 61 58 58 57 57 56 55 53 49 47

42

28 31 35 37 38 39 42 42 43 43 44 45 47 51 53

60

40

20

0

100

80U

nite

d K

ingdom

Japan

South

Kore

aTotal

Austr

ia

Fin

lan

d

No

rwa

y

Sw

ed

en

Belg

ium

De

nm

ark

Sw

itzerland

Germ

any

Neth

erlands

Fra

nce

Canada

Unite

d S

tate

s

Share of those choosing 1-5 countries wanting to move to country

Other

Tertiery








If they will come at all

0 10 20 30 40 50

South Korea

% of respondents willing to move there

Finland

Belgium

Japan

Norway

Denmark

The Netherlands

Austria

Sweden

France

Switzerland

Germany

Canada

United Kingdom

United States


In sum, Nordics need to strengthen competitiveness and solve looming talent crisis

Export less unique and not exposed to

high growth markets

MNCs moving out

Framework conditions for businesses

are too weak

Not enough on forward-looking

investment (relative to social costs)

Factor costs are too high

Room for improvement on key

productivity drivers (innovation,

digitalization)

Nordics are working less than many

peers

Increasing dependency ratios, leading

to workforce shortage

Nordics are less attractive to

international talent than peers

1

2

3

4

Pressure on productivity Pressure on hours worked

7

8

9

5

6


"Nordic Agenda" with 10 key priorities

Reduce public expendi-

ture as share of GDP

Take immediate action to help businesses overcome competitive

disadvantages

Get more people into the

workforce

Open the labor market

"Funding the

journey"

"Winning in the

medium term"

"Right team, talent

and culture"I II III

1

2

3

4

5

6

9

7

10

8Invest more into, and get

the most out of, talent, innovation and digitalization

Revitalize public sector

Improve framework conditions for businesses

Become a magnet for

international talent

Leverage the current

workforce/population to higher degree

Increase the workforce through immigration

Pro

du

cti

vit

y d

riv

ers

Ho

urs

wo

rke

d

dri

ve

rs


We estimate that transformation could give growth uplift of 1-2%pts across Nordics

?

1.1%

2.1%1.9% 1.7%

1.5%

1.9%

1.1% 1.1%

0

1

2

3

4

5

6

Baseline forecast

growth

Uplift from catching

up to top-performing

key competitors

SwedenNorwayFinlandDenmark

Real GDP growth per annum (2015-2030)

Further potential possible from

outperforming key competitors in

productivity growth and hours







Thank you

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