A changing world

Text by the Centre for Business History in Stockholm

In a planetary perspective, 150 years passes in the blink of an eye. For the people on that planet, though, the past 150 years have seen living conditions improve faster than ever before. A change propelled by the most remarkable developments in technology. In the process, humans themselves have also affected the world in unprecedented ways, for better or for worse. In 1873, the year that Atlas Copco Group was founded, the planet supported around 1.4 billion people. Today, it is home to more than 8 billion. Such growth could not happen without continuous technological development – but it also creates a whole new set of challenges.

Incidentally, 1873 was also the year in which French author Jules Verne published his novel Around the World in 80 Days. The book’s protagonist, Phileas Fogg, bets that he can use that time’s new technology to travel around the world in just 80 days. Today, anyone with a decent flight schedule could probably circle the globe in 48 hours. In the 1870s, though, railways and oceangoing steamships had just cut a journey that used to take well over a year into mere months. People were thrilled by the novelty. Jules Verne’s book portrayed both the globalization of the time and its technological optimism. 

The same faith in progress could be found across the world. Take Sweden, for instance. By the 1870s, the poverty-stricken agricultural country on the outskirts of Europe was in the full throes of industrialization. Steam engines, a mechanized textile industry, railways, and telegraph services were playing an increasingly central role in the country’s development. Industries brought in outside knowledge, technology, and capital from countries such as the United Kingdom and Germany.  

This was a time when liberal reforms and free trade agreements boosted international commerce and investments. Industrialization, growing trade, and urbanization created demand for new infrastructure. With this development, more had to be built, and the demand for products such as iron and steel increased. New methods made iron and steel production more efficient. Small, traditional production units were outcompeted by large-scale facilities with modern technology. It was the dawn of big industry. 

Among the many novelties of the time, the railway probably stood out as the era’s key symbol. It connected remote areas, shortened distances, and brought people and goods closer. Along its tracks, it nourished new ideas and technology-based activities, along with a new type of companies. (Atlas Copco, by the way, was founded as one such company.) 

The Industrial Revolution, which began in the early 1800s in the United Kingdom and drove all this new development, is often described as one continuous event. It can, however, also be thought of as three successive waves, each based on specific technology shifts. 

The first industrial wave used water and steam power to mechanize production. Its focal product was the steam engine. A second industrial wave came in the late 1800s. This one used electricity as its power source and led to mass production. It was characterized by turbines, internal combustion engines, science-based manufacturing methods, and large-scale production. The mechanical engineering industry in particular flourished. 

The industry needed minerals and metals for its new production. Fortunately, new technology made mineral extraction possible in locations that had previously been impossible to exploit – such as the iron ore fields in the north of Sweden, the Mesabi Range in the USA, or Kryvyi Rih in Ukraine. Compressors and pneumatic precision tools, hammers, and drills became important products across industries. 

As industries went from using steam to using electricity, they also took production methods to new levels, using, for instance, pneumatic and hydraulic solutions. Productivity and output at companies grew rapidly. By the 1920s, the technology landscape had changed both what could be done, and how work itself was organized. Scientific management and assembly lines were introduced to increase efficiency and reduce production time. Large industrial firms began to form in each country, often working closely with smaller and specialized technology suppliers.  

For international trade, though, these were difficult times. The interwar period was a time of protectionism, isolationism, and trade restrictions. Although World War II did bring business to some industries, as wars tend to do, the war primarily reduced trade and international exchange even further.

It wasn’t until the decades after World War II that global growth began again in earnest. New international treaties, such as the international Bretton Woods agreement in 1944 and the GATT treaty in 1947, increased the flow of international trade. Peacetime meant that global trade could restart, which led to expanding companies and increasing living standards. The world’s large industrial companies often set up operations and sales offices on continent after continent, no matter what their country of origin really was. 

The world became smaller, the connections closer – including on an individual level. If railways and ocean liners had connected people and places in the 1800s, cars and airplanes now opened the world to more people. Globalization helped build material progress and mobility worldwide. Still, it didn’t bridge the difference between the industrialized world and developing countries. 

Then came a third industrial revolution. Its propelling technology was semiconductor components, such as diodes and transistors in integrated circuits. This brought computerization, information technology and eventually the rise of the internet. Production facilities used electronics to automate their processes even further, making many manual tasks redundant. As a consequence, the people working in the facilities needed new training. The need for a workforce with more theoretical skills and higher education increased. 

Globalization intensified, but now with new aspects to it. The established economic dominance of Western Europe and North America was challenged by more recently industrialized countries – first Japan, and later South Korea, China, and India, to mention but a few. Supply chains that spanned many different countries became the norm when new areas of production emerged, as well as new consumer markets.

This development meant that any company that wanted to stay at the forefront of its business had to reevaluate its ways. Operational processes were now digitized, and whenever possible, mechanical components were replaced with digital ones. The pace of doing things just kept increasing, as digitization, the internet and various mobile devices simplified communication and information access. For many people, everyday life and professional life also became increasingly interlaced. 

Many industrial companies found themselves having to become even more customer-oriented than before, now that their clients were digital, connected and much quicker to evaluate alternatives. Companies in close sync with their clients had a step up on their competitors in this phase. A business effect of this was the emergence of more service offerings to complement industrial products, including today's variety of "as-a-service" solutions. 

This is also the time when environmental issues, and industry’s responsibility for the global ecosystem, began to take center stage in strategic discussions. From one perspective, running a business has always meant managing scarce resources in order to succeed. However, the types of external effects that cause environmental harm had not been brought into the calculation earlier. Sustainability now became the key word, simply because any company that wants to remain long term has to make sure there is a world to do business in.

This brings us to current times – and a possible fourth industrial revolution. Because it seems there is a new wave of development upon us again. It builds on the third industrial revolution’s digital core but is characterized by a fusion of technologies that blur the lines between the physical, digital, and biological spheres. It gives the world artificial intelligence, robotics, and connected products that create new conditions for…well, almost everything, from manufacturing and production to management and governance. It all seems to be happening at a speed that the world has never seen before. The wheels seem to indeed be turning faster – much like they must have seemed to the people in 1873, who marveled at the fact that you could travel around the world in just 80 days.

As the wheels keep spinning faster, history is clear that only the companies that dare to question their old ways and reinvent themselves will survive. The challenge – as well as the opportunity – lies as always in adapting to new surroundings while maintaining a positive impact. This is a challenge that a company such as the Atlas Copco Group has risen to time and time again, as we will show in the next chapter of this book.