Despite Support for 'Jangbogo' Submarine, Korea Falls Short... The Secret Behind the 88-Year Legacy of Swedish Defense Firm [Corporate Research Institute]

(18) Swedish Defense Company Saab, Founded in 1937
Invests About 17% of Sales in R&D
Transforms Selected Innovative Ideas into Real Businesses

Editor's NoteSouth Korea ranks second in the world for corporate research and development (R&D) expenditure (2022) and fourth for patent applications in the United States (2020). However, the annual average growth rate of corporate productivity dropped significantly from 6.1% between 2001 and 2010 to just 0.5% from 2011 to 2020. This slowdown is largely due to a decrease in productivity growth among so-called "innovative companies" that are actively engaged in innovation activities. Without change, companies risk being neglected by the market. To help the industry revive its innovation DNA, we are looking at innovation cases pioneered by leading global companies. Innovative companies will be the driving force to revitalize Korea's stagnant economic growth rate.

"Innovation is an idea that offers a solution or new possibilities. It can be developed further through research and development (R&D)."

Henrik Lonn, CEO of Saab Korea, described Saab's approach to innovation in a recent interview with The Asia Business Daily at the company's headquarters in Jongno-gu, Seoul. Saab, a leading Swedish defense company, defines innovation as "something that can be learned, managed, and measured." The company emphasizes that innovation is not the exclusive domain of a few geniuses; rather, it begins when someone identifies a problem that needs a solution.

Lonn stated, "To quote Amazon founder Jeff Bezos, there is a mix of good and bad ideas, but what makes a difference is selecting and developing those ideas that can be commercialized." He continued, "At Saab, when innovative talent generates ideas, management and various technical support departments work together to validate them, and we also provide legal support such as patents and licensing. This creates a system that connects innovation to tangible products and businesses."

To ensure that innovation leads to real change, Saab has invested heavily in R&D. As of 2024, Saab's sales reached approximately 63.8 billion kronor (about 9.4171 trillion won), with about 17% (approximately 1.5631 trillion won) invested in R&D. This is more than ten times the investment ratio of domestic competitors. For comparison, Hanwha Ocean, HD Hyundai Heavy Industries, and LIG Nex1 invest only about 1-2% of their sales in R&D. Saab also operates five innovation research centers.

Recently, the Polish government selected Saab as the contractor for its new submarine project, a decision that came as a shock to Korean companies. Saab is strengthening its position in four major fields: aviation technology, dynamics, surveillance and reconnaissance, and submarine technology. We asked Lonn, who has served as CEO in Korea for four years, about innovation. The following is a Q&A.

Henrik Ron, CEO of Saab Korea, is holding and explaining a model of the lightweight single-engine supersonic multirole fighter jet Gripen developed by Saab. The Gripen is characterized by its lightweight design, advanced electronic equipment, and network-centric tactics. Photo by Yoon Dongju

-The reason Saab was chosen in the competition for Poland's new submarine project.

▲The contract negotiations have not been finalized yet. Sweden won the competition, but that is all for now. The final contract negotiations will take place in the first quarter of next year. The competition was fierce, and Hanwha Ocean was the strongest competitor. However, this victory was due to submarine technology and operational advantages. From a technical perspective, the A26 Blekinge-class submarine incorporates the latest technology and innovations and is specifically designed for the shallow waters of the Baltic Sea. According to submarine experts, the Baltic Sea environment is extremely challenging due to temperature fluctuations, but the A26 is well adapted to these conditions. From an operational standpoint, there was strong cooperation among European countries, and the Polish government highly valued Sweden's collaboration with its government, military, and the NATO community.

-Why does Saab invest so much in research and development?

▲The defense industry must always stay at the cutting edge of technology. It is like a "chicken game" between attackers and defenders. Without the latest technology, you cannot respond to threats from the other side, and since technology evolves rapidly, continuous investment is necessary. Saab provides a wide range of solutions in the air, land, sea, and submarine domains. Maintaining a leading technological position is the company's greatest driving force. Recently, we have increased investment in areas such as drone usage, the introduction of artificial intelligence (AI) into defense systems, new technologies, and new military operational methods.

-The reason for strengthening your portfolio and diversifying your business.

▲Looking at the Korean defense industry, LIG Nex1 has strengths in missiles and sensors, Hanwha Ocean specializes in shipbuilding, and Korea Aerospace Industries (KAI) is responsible for fighter jets. Korean companies tend to focus on their respective areas of expertise. In contrast, Saab covers a very wide range. As a "solution provider," Saab develops and integrates various subsystems such as fighter jets, radars, electronic warfare sensors, missiles, and communication systems. For example, in the radar business, Saab has developed radars for naval vessels, ground and air defense systems, and fighter jets, applying the latest technologies and tailoring them to each field. We pursue a kind of "economy of technology," similar to the "economies of scale," where the average cost of producing a product decreases as production volume increases. This allows us to broaden our revenue base and continue investing in research and development.

Saab is showcasing the Gotland-class submarine 'HMS Halland,' which was relaunched at the Karlskrona shipyard last February. Through modernization work, the operational life of HMS Halland has been extended by 15 to 20 years. It is the third and final Gotland-class submarine of the Swedish Navy. Saab website

-Saab's innovation research centers operate under the motto "fail fast."

▲Innovation is extremely important. Marcus Wandt was recently appointed as a new member of the Saab Group management team; he was previously Saab's Chief Innovation Officer (CIO). Failure should not be postponed, and ideas should be reviewed quickly at the idea stage so that good ones can be advanced to research and development. Unnecessary ideas should be eliminated early. To do this, we need a group of experts who can technically evaluate ideas and a management support system. Innovation is not limited to specific research centers; it can be realized in all parts of the organization, including marketing, sales, and customer requirements.

-What achievements have you made through cooperation with Korea?

▲The defense industry is highly competitive, but there is also cooperation within the sector. The Korean branch was established in 2002. In September this year, Saab signed a memorandum of understanding with Hanwha Aerospace to explore integrating the Ground-Launched Small Diameter Bomb (GLSDB) with the Chunmoo Multiple Launch Rocket System (MLRS) launcher developed by Hanwha Aerospace. The GLSDB is a product co-developed by Saab and Boeing. This collaboration is a good example of the "win-win" approach that Saab pursues. Cooperation creates new business opportunities.