Sweden’s attitude towards innovation is perhaps best exemplified by the Swedish innovation agency, Vinnova, a government agency founded in 2001 based on a series of predecessors going back to at least 1968.
The innovation agency functions much like its counterparts in other countries, similarly to the Finnish Funding Agency for Technology and Innovation (Tekes) in neighbouring Finland, and to the part of the US National Science Foundation (NSF) that does seed funding on the other side of the Atlantic.
The Swedish government gives Vinnova more than €300m each year to invest through grants to different kinds of actors, which might be small companies, research institutes, large competence centres, or consortia of companies working together on projects.
Vinnova invests this money along 10 different themes, including sustainable industry and digital transformation. To report on the social and economic effects of its funding, the agency produces two impact studies annually. It has also published a document that describes its approach to tracking the impact of investments.
Success stories in innovation
“It’s never the case that we’re alone in the responsibility for success or failure,” says Göran Marklund, head of strategic intelligence and deputy director-general at Vinnova. “We usually fund collaborative projects in which we require the actors to contribute 50%, or more for large companies. This ensures they have a stake in the project – and that they will do what they need to be successful. There are often other outside investors.”
Vinnova runs several projects in collaboration with the Swedish Energy Agency. This includes supporting a battery revolution currently underway in the north of Sweden – a project that revolves around Northvolt, a company whose founder, Peter Carlsson, was formerly an executive at Tesla. Now Carlsson is pushing Northvolt in directions that are revolutionising battery technology for many industries. For example, its batteries play an important role in transforming vehicles to electric – and automotive is a key industry in Sweden.
Vinnova is also involved in artificial intelligence (AI), having written a report on the topic, and having helped start AI Sweden, an umbrella initiative that promotes the adoption of AI in the country. Vinnova looks for opportunities to promote the use of AI within businesses and public service agencies and to increase AI skills in Sweden.
Another area where Vinnova has invested is quantum computing. Among other things, the agency ran a kick-start programme in 2021 to support projects that lead to commercialisation of quantum technology. “The global race is between China and the US, and with the EU [European Union] as a whole, particularly France and Germany,” says Marklund. “Though there is good applied research in quantum computing in Sweden, it is a challenge for such a small country to keep up with the rest of the world.”
One area where Sweden has excelled for decades is in telecommunications – a key industry for Sweden, with Ericsson standing out as one of the world’s leaders. In an impact study published in 2008 called Effects of research on Swedish mobile telephone developments: The GSM story, Vinnova analysed the connection between research funded by Vinnova’s predecessors (Stu and Nutek) and the transformation of the Swedish telecommunications industry.
The Ericsson group was the big winner from the transformation, and the company took an early lead in the global GSM market. According to some estimates, Ericsson had a five-year advantage compared with competitors. While it is hard to measure how important any single contributor was to this success, strategic funding was certainly crucial, especially for innovation in digital radio technologies.
Sweden is taking part in the digital transformation of mining
Another big industry in Sweden is mining – and a major effort is underway to make mining fully sustainable. With help from Ericsson, ABB and Volvo, Swedish mine operator Boliden set up a test mine in Kankberg (pictured above) that will be completely automated as part of a pilot project overseen by Vinnova. The test mine began operations two-and-a-half years ago and will eventually operate autonomously, with no personnel in the mine itself.
The project was kicked off in Sweden when Ericsson approached Vinnova with the aim of conducting digitisation projects. Vinnova suggested two pilots. The first was automation of manufacturing in Gothenburg; the second was the Kankberg mine in the county of Västerbotten that was part of a European effort to make mining more sustainable.
Ericsson installed a 5G network throughout the Kankberg mine in early 2016, covering a path down to the mine area. Even with blind alleys and caves without line of sight to the antenna, Ericsson managed to provide high bandwidth (100mbps) and low latency throughout the mine. The network also met stringent requirements for reliability – very important requirements, since a loss of signal, even for a few seconds, could cause big problems.
This ongoing demonstration project fits into the EU Commission programme Next Generation Carbon Neutral Pilots for Smart Innovation Mining Systems (or NexGen SIMS). One of the interesting aspects of the project is that it requires innovation in different industries – mining, telecommunications and machinery – which is beneficial to Sweden overall.
Societal challenges drive investment
“Sweden does not have clearly defined national strategies for digital technologies that we can follow,” says Marklund. “But everybody knows what the hot topics are. Rather than try to find an entirely new topic that most of the people in the world haven’t yet thought of, what’s important is execution – how you make it happen on the ground.”
“Having says that, Vinnova is definitely aligned with where many of the investments are going, internationally and nationally. We’re all over the board. We’re in IT and digital technologies, as in health, biotech and all kinds of technologies.”
Vinnova is also the Swedish hub for the EU framework programme Horizon Europe. In this capacity, it facilitates the participation of Swedish actors in that EU framework programme, the biggest research and development programme in the world, with clearly specified areas for investment. Digital mining is an example of how Vinnova helps fund Swedish projects that fit into EU strategies.
Göran Marklund, Vinnova
“Our approach at Vinnova is more than just technological,” Marklund tells Computer Weekly. “We start by spotting societal challenges. This is what will drive competitiveness in the future. If you’re good at driving solutions to societal challenges, then you’re probably going to be very competitive, because those markets will grow.”
Once a societal challenge is identified, the next step is to think about what it would take to overcome the challenge. The solution may have a technological component, but that has to be designed to work in specific contexts, like sustainable cities, which is one of the 10 themes where Vinnova invests. Sustainable industry is another – industry needs to transform into more sustainable solutions, to protect the environment of course, but also because the market demands sustainability.
“If you’re not transforming your whole business, then you will probably be out of the market somewhere down the line,” explains Marklund. “We try to put technology in a wider, systemic context. For example, we look at technology as something that enables a transformation that brings about competitive sustainability.”
As much as possible, the philosophy is to invest in technology that meets the needs of society. Vinnova looks at how AI can be employed in the context of social change, and how 5G signalling can be propagated deep underneath the surface of the earth to help automate mining, which will result in sustainable mining.
In the case of battery technology, putting the technology into a wider context means answering a series of questions. How do you get the batteries working with the efficiency you need? Then you have questions about how much energy is required, and whether that energy is green. If it’s not green, the solution can’t be sustainable, so the market value of the innovation in question would be very low.
The line of questions also leads to the materials needed for the batteries and where they can be obtained. It turns out that the materials currently used for batteries are scarce, and China dominates the market. This leads to questions about what alternative Sweden has for getting those materials. The minerals do exist in Sweden (and elsewhere in Europe) but have been in abundance and cheap in China for so long that these businesses never developed in Sweden.
“Sweden has to develop these resources now because it cannot be dependent on China for such critical things,” says Marklund. “Then that becomes a very critical focus and identifies a set of technologies that are needed.”
“This is how we go about finding places to invest. Technologies alone do not lead. We also consider the market around the innovation.”
Swedish national advantages
The areas of investment also tend to cluster around a country’s national advantages – what a country is already good at, or where industry is already developed.
One of Sweden’s national advantages is the existing automotive industry, which is denser in Sweden than in Germany – that is, the amount of revenue generated per person is higher. This includes cars and trucks.
While the Chinese holding company Geely now owns both Volvo and Polestar, most of the work still takes place in Sweden, using Swedish workers. Automotive also has a big impact on many other sectors that generate solutions for the automotive industry.
Another national advantage is the telecommunications industry, with Ericsson standing out internationally and very much linked to digital transformation. Mining and steel are also important industries and are dominant across Europe in certain parts of these industries.
Another big industry is forestry. All those industries have given rise to a strong machinery industry.
Sweden also has a very advanced research community, with pure and applied research in a several areas including artificial intelligence, quantum computing and the internet of things (IoT).
Sweden’s education system is also very good, with a new focus on lifelong learning. Digitisation makes things change more rapidly, so skills have to be developed in the labour force more rapidly than before. Furthermore, an increasing number of jobs require digital skills.
Challenging times for Swedish startups
As for the future, Marklund expects some challenges ahead, especially for startups. Over the years, Sweden has produced a very vibrant startup community, particularly in Stockholm, producing several success cases, including Spotify and Skype.
The startup community still has big potential, but with the economic crisis new challenges have arisen, especially in attracting capital investment. With prices and interest rates rising significantly, the business models of many of the startups don’t look as good as they used to.
“Many startups are not profitable in a direct sense,” says Marklund. “Venture ca bpital is put in based on market share and expectations, rather than profitability.
“This has already been seen here with Klarna bank, which took a big hit. Klarna bank is one of those startups which ran up very quickly. It’s a bank owned by a credit market and has risen very rapidly in terms compared with large Swedish banks. But now, with turbulence in the financial sector, venture capitalists get scared. We are in very uncertain times right now. This is true not only in Sweden, but in many places in the world.”
Vinnova tries to fill in the gaps by investing in innovations that provide long-term solutions to societal problems. By applying technology to overcome the challenges within the country, Sweden sometimes gets so good at it that it becomes a net exporter of certain solutions. While Sweden is too small to become an overall leader in digital transformation, its approach to innovation allows the country to keep up – and even lead in certain niches.
Read more about Nordic startup hubs
- Danish capital Copenhagen offers all the advantages startups need to get off the ground – and many are staying there for the long haul.
- Swedish capital Stockholm has created a world-leading tech startup environment, but it still lacks the diversity of people needed to move it to the next level.
- Estonia has created a country-as-a-service offering that is attracting entrepreneurs and businesses from across the world.