Sweden’s Defense Boom: Transforming Business Models in a New Era of Security
Sweden is entering a historic phase of transformation in national security and industrial strategy. Following its accession to NATO in March last year, the country is reshaping decades of neutrality and independence in defense policy. The government’s plan to raise defense spending from 1.5% to as high as 4-5% of GDP by 2026 marks a fundamental shift in priorities, and a wave of opportunity for private enterprise.
Recent developments underscore this momentum. Prime Minister Ulf Kristersson’s announcement of a letter of intent for large-scale air defense cooperation with Ukraine signals Sweden’s deepening engagement in European defense collaboration. These shifts are expected to drive major changes across the country’s defense ecosystem, influencing how both established and emerging companies operate and grow.
Bo Ekelund, a Partner at Amrop Sweden and an active member of Amrop's Defense, Digital and Industrial Practices, shares his perspectives.
“Major players like Ericsson, SAAB, Volvo, and Skanska are already positioned to capitalize on this new era of growth, driven by the ongoing conflict in Europe” explains Bo Ekelund. “SAAB, renowned for its aerospace and defense systems, is seeing heightened demand for fighter jets, systems, and surveillance equipment. Volvo is exploring opportunities in mobility, armored vehicles and logistical support solutions. Meanwhile, Skanska, one of the world's largest construction and infrastructure firms, is looking at public infrastructure, military facilities and base upgrades.”
“These are not simply new contracts - they represent a profound shift in business models, and a move from private sector contracts to long-term, government-funded projects,” Ekelund adds. “Such projects are characterized by long term investment, horizontal timelines, stable payment schedules, and complex compliance obligations, including strict adherence to public procurement procedures and tendering processes. While the larger part of the business for these companies typically faces private sector buying, where leaders are familiar with the processes and requirements involved. Larger companies have the foresight and resources to better navigate the potential barriers, but for small and mid-size players, the current transition presents both opportunities and new challenges. While sizable, predictable revenues are attractive, managing relationships with public authorities, navigating complex regulatory environments, and ensuring supply chain resilience require new skills and organizational capabilities.”
Strategic Pathways for Medium and Small Defense Tech Companies
In the context of increasing military expenditure and the accompanying opportunities and potential challenges, medium and small defense technology companies may want to consider strategic approaches to capitalize on this expansion and mitigate risks. Reflecting on past experiences and previous challenges indicates that it would be helpful to:
- Build Strategic Collaborations: Rather than going it alone, smaller firms can engage and collaborate across the value chain to strengthen their product roadmaps and offerings. Building a strong capital base and combining resources with others can improve competitiveness and capabilities, since with prolonged lead times in large public sector projects securing large pools of working capital will be crucial.
- Collaborate on Tenders: Companies can pool expertise for bidding processes, sharing and blending resources and capabilities for tenders and tender management. This doesn't require full mergers but allows short-term sharing of human resources, such as specialists who handle tenders and shared technical challenges, increasing efficiency and success rates.
- Engage Senior Public Sector Leaders: Recruiting advisors or executives with backgrounds in diplomacy, defense or government can bridge critical leadership gaps. Many of these "second career" professionals bring valuable insight, strategic guidance, and credibility within public sector, technology and defense projects.
The Leadership Imperative
“This transformation is creating a new demand for specialized leadership, particularly in navigating international buying networks, public tenders, compliance, and government contracting,” says Ekelund. “In this evolving environment, executive search firms play a vital role in identifying and attracting talent capable of managing these new responsibilities, ensuring companies are well-positioned to succeed in this expanded landscape.”
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Learn more about Amrop' Global Defense Practice.