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CASE STUDIES:

Malmö/Lund – One region – two worlds

Background and facts

   The Nordic countries have a strong history of being leaders in the mobile sector, most known are the three capital cities; Stockholm, Copenhagen and Helsinki; in Sweden, Denmark and Finland respectively. What most people outside the Nordic region tend to forget is the Malmó/Lund area in southern Sweden. The region holds Northern Europe's largest university, Lund Uni­versity, the largest Science Park and a strong history of being an innovative region, some even claim that the mobile phone was actually born here.

   Since Ericsson established a R&D site in the region in 1970's, Lund has played an important role in the mobile sector, today hosting R&D offices for companies such as Sony Mobile, Huawei, Nokia (Microsoft) and Intel amongst others. Malmó was formerly a shipwright city, but that industry moved from the city in the early 1990's. Since then Malmó has managed to reform as a centre for mobile and digital industries and was in 2011 named the "appi-centre" of Europe, due to top education for app developers as well as the app companies such as TAT (the Astonishing Tribe, acquired by RIM [Blackberry] in 2010), Crunchfish and King (created Candy Crush Saga). Together these two cities create a unique combination of skills to create an almost complete ecosystem for the mobile sector, from hardware to applications and services.

Innovation climate

One region two worlds

   Being a region consisting of two cities, there are different drivers for inno-vations within. While Lund, a city over 1,000 years old, and with a univer­sity dating back to the 1600's, there is a profound history of research. Few people know that for example, the inkjet printer and Bluetooth technology were invented there. The innovation climate got a boost in the 1970's when the research park IDEON was born and Ericsson established a R&D facility in the city. Ericsson's new office became their centre for developing the Ericsson mobile phone. Having such a big player in the city has led to a number of start-ups popping up in the mobile sector.

   Malmó on the other hand went through a big transformation in the 1990's repositioning themselves from being a grey working class city with many societal problems to being one of the trendiest places in Sweden booming not only within mobile services but also other creative industries such as media, fashion and gaming.

   The walls between the two cities are slowly breaking down, but still it can be seen as two different worlds. This is both the advantage and the challenge of the region. The regional and local authorities are all very much aware of the situation and are building bridges through different collaborations such as joint meetings and including each other in processes. However on the entrepreneurial level there is still a schism between the two cities, where Lund is considered old, slow and too heavy by the Malmó people and on the other hand Malmó is perceived as too young and hip by Lund.

Cultural diversity

   Both Malmó and Lund have big international communities. Malmó has over 170 nationalities represented in the city making it the most multicultural city in Sweden. Lund on the other hand attracts people from all over the world much thanks to the university, (e.g. the Masters in Entrepreneurship holds about 10 spots for international students for each class and usually gets hundreds of applications). What can be noticed in the start-up community is a significant representation of international entrepreneurs or mixed cultural background, especially amongst the most successful start-ups. This is reflecting one of the most mentioned issues that the authorities needs to deal with from the interviews, that we need to create a visa for entrepreneurs so that they can come, stay and get to start up new business.

Communication and infrastructure

   Thanks to the closeness to Copenhagen, approximately 20 minutes by train from the airport, Malmó and Lund can easily be accessed from the rest of Europe and the world. Trains run frequently every 20 minutes during the day, every 10 minutes during rush hours, and every hour during night between Sweden and Denmark. The first highway (E22) in Sweden was built between Malmó and Lund in 1953 and trains and buses run between the two cities several times every hour all day and night, as well as local alternatives.

   Thanks to a national initiative in the 1990's broadband was made accessible for the whole population and the possibility for anyone to get a tax reduction when buying a home PC for the home, making Sweden the country with highest penetration of PC's in homes. A side effect of this have been that Sweden constantly have been on the top in e- and network readiness in the world which has helped the country being early adopters and first movers among the public as well as the companies. This creates a good test market for new products in the mobile services industry.

Access to capital

   One of the main challenges for start-ups from the Malmó/Lund region is access to finance. Not being a known brand on a global scale makes it difficult to attract international VC's to come to the region; they tend to go to

  Stockholm, Copenhagen or Helsinki instead. Thanks to collaborations with the start-up community in Copenhagen and Stockholm companies can benefit from going there instead, and it has led to some major investments and acquisitions in the region. E.g. Apple recently acquired its second company founded in Malmó (Algotrim). The first one (Polar Rose) is still considered to be their most successful acquisition to date. On top of this there have been acquisitions made by Blackberry (then RIM), Intel and ARM in recent years, which has created a success wave many wants to be a part of. The region has also been lucky with the money being to a large majority reinvested in companies in the region and the entrepreneurs becoming serial entrepreneurs. Otherwise the general feeling from the interviews is that there is a lack of VC money in the region as well as in Sweden generally, and that investors are too risk averse.

Innovation support mechanisms

   The most successful incubator in Sweden is located in Malmó, MINC, contributing to the success of the region. The university together with Ingvar Kamprad, the founder of IKEA, founded IDEON Science Park in the 70's, today the biggest Science Park in northern Europe. Success stories from the park are e.g. Scalado, the company behind Internet in the cell phone, acquired in 2012 by Nokia, and the Bluetooth technology in 1994.

   Both the municipalities of Malmó and Lund as well as the region of Scania (southern Sweden) invest money in creating different support mechanisms to elevate the industry in the region. There is both direct support such as the cities have their incubators (IDEON Innovation and MINC respectively), the region supports cluster initiatives etc. But there is also indirect support of e.g. vocational training programs and creation of networks, both within the region between different sectors, but mainly internationally. After three years of discussions there has now been an initiative started from the Research and Innovation Council where there will be a focus on three different areas; personal health, smart cities and smart materials, where mobile is an important part of all three areas. The project is just started so it is difficult to draw any conclusions from it today.

Key elements for growth

   The Malmó Lund region have maintained a strong position through the latest financial crisis and shown a growth within mobile services, in the growth of companies growth and in investments made. Success breeds success is one factor.

R & D

   The combination of a top 100 university in the region with several R&D facilities for global companies is the backbone of this highly innovative region. The region also holds a unique set competences. The ability to go from radio to user experience and the different layers in between, combining mechanics and technology with gaming and music can probably only be compared with South Korea. The region is good at inventions, but falls back when it comes to bring it to the market. This is shown in recent reports, with the Malmó/ Lund region in the top three as one of the most inventive cities in the world. The ranking was made on patents coming out of different regions. However when it comes to creating new incomes, the region is lagging behind.

Large multinationals

   The presence of large multinational companies in the region is a key for the success the region has seen. The large multinationals in themselves does not create new successful companies, but being able to get your first global customer in your home region have advantages. It is easier to access the big players if they are located close to home as well it is more likely to get an introduction to them. Being able to invite investment from a global player to the business has also been said to be valuable when going international and exploiting new markets.

   On the other hand, having strong global companies in the region created an oligopoly in the market and the changes that are happening now can be seen as very positive with new companies being able to gain market shares.

Openness

   Even though the interviewees have pointed out that there is no place like Si­licon Valley when it comes to openness, there is a proven openness that can be found in the Malmó/Lund region as well. Several open spaces and networking places boost the mindset for opening up and sharing. But also some initiatives such as Mobile Heights Business Center where entrepreneurs get to meet with representatives from some of the large multinationals in the region and get feedback on their ideas/technology. This encourages entrepreneurs to not only share with potential customers but also other entrepreneurs to generate success.

Strengths and weaknesses

   Talking to the persons interviewed they all mention more or less the same strengths and weaknesses:

Strengths

• Strong history in the region
• Success stories in recent years
• Excellent infrastructure and communications
• Leading University in the region
• Multinational Companies
• Good collaboration between companies and support organisations

Weaknesses

• Lack of capital
• Region not a good brand in itself
• Not enough commercial thinking
• Failing is not considered to be the road to success
• Home market too small

Challenges

    The main challenge concluded from the interviews is changing the mind set in the region. It has to be more forgiving; failing should not be seen as a mistake rather a process to succeeding. The trend is changing and there are initiatives for this, where entrepreneurs actually share how they failed; what went wrong and what they learnt in the process. If Silicon Valley is the star, the mind set has to be more like theirs as well. Waiting too long and missing on market opportunities have been said to be one of the main reasons for not succeeding.

   With the recent changes in the mobile industry in the region, such as Sony Ericsson splitting up to Sony Mobile: the latest with Nokia being acquired by Microsoft and the question is how much longer these giants will remain in the region. However with the current output of companies it is not likely that it will change in the short run. One of the biggest challenges the region is facing at the moment is to be able to maintain the competences and the position the region has. It can change quickly and start to lag behind other regions.

   To be able to keep multinationals as well as SME's there has to be a base to recruit from. Not being a strong brand in itself can lead to problem in attracting workforce to move to the region, and thus maintaining companies to keep their offices and headquarters there.

Sustainability and future

   The future for the region is difficult to predict. Recent changes in the industry may make it look unstable. But companies as well as policy makers seems to be on top of what is going on to be able to adapt to the new world. The region can ride on the advantages that both Sweden and Denmark bring, Sweden in particular is proven to be an excellent brand around the world.

If the region manages to do what it has done in the past, with reinventing itself to keep up with new trends and demands in the world it has a good chance to continue growing and creating new start-ups. The environment is well suited for entrepreneurs and start-ups. However, with a big support system and different activities for them weekly, entrepreneurs also support each other. The fact that the multinationals are participating in the start up community creates a positive vibe. With a fairly advanced community of users and companies surrounding the companies there is a good test market, but also first market to release a product or technology on. This increases the probability of the region maintaining its position. It will be interesting to follow the new initiatives during the coming years, to better bridge the two cities together, and see the outcomes. It is already moving in the right direction and if successful the Malmó/Lund region can gain unique advantages.

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