From lighthouses to mobile phones
The industrial gases community may be surprised to know that AGA celebrated 100 years in 2004. Today, however, the company is very different to the one that began life in Sweden in the early 20th century.
AGA AB was originally formed in 1904, near Stockholm, when the acetylene company Svenska Carbid was taken over by newly formed AB Gasaccumulator (AGA). With Nobel Prize winner Gustaf Dalen\\$quot;s direction the company demonstrated acetylene welding for the first time in the country, which led to welding becoming a revolutionary technology in engineering workshops and shipyards and hence to the development of lighthouse technology.
Initially production mainly comprised lighthouse, railway and automobile lighting using acetylene gas but it was Gustaf DalÃ©n\\$quot;s innovations within the lighthouse technology that were to dictate the company\\$quot;s future.
Demand for dissolved acetylene gas equipment such as movie theater lamps and film projectors increased and acetylene welding technology achieved a significant breakthrough. AGA established businesses in neighbouring countries in Scandinavia and the Baltic as well as in South America and in the US.
Sadly the depression in the 1930s affected AGA and the crisis had considerable negative impact on lighthouse products. But in spite of these bad times the development of new equipment continued and the company\\$quot;s gas technology was used in new medical technical products for oxygen and nitrous oxide.
The significance of air gases increased dramatically in the 1950s in a number of markets. Swedish steelworks started using oxygen in metallurgical processes and the demand was so high that new, larger air separation plants and new transport methods were required. In 1951 AGA built its first liquid oxygen factory at LidingÃ¶.
However, the early 20th century\\$quot;s phase of dabbling in several different businesses including mobile phones, prisms, televisions and cars lead to severe financial problems and major re-structuring took place in the 1970s to avoid bankruptcy.
\\$quot;The period from the 1970s until 1995 involved heavy streamlining and divestment of businesses in order to concentrate solely on industrial gases,\\$quot; says Svante Frid, senior vice president of AGA Region Europe North. \\$quot;Fortunately the restructuring strategy worked and AGA returned to profitability again.\\$quot;
It was in 1994 that AGA sold off its refrigeration business and the company became a pure industrial gas company.AGA today
The acquisition of AGA by the Linde group in 1999, is well documented but what remains of the company and the brand?
Linde made a wise decision to keep the AGA brand in Scandinavia, the Baltic and South America where AGA dominated. Where there was country overlap, the businesses were mainly consolidated and managed under the Linde brand.
Linde maintained LidingÃ¶ as the regional head office for the Scandinavian region, albeit a much slimmer operation, but recently reorganised the management of the region to include the Baltic states as well. Today Nordic Region AGA covers eight countries: Sweden, Finland, Norway, Denmark, Iceland, Estonia, Latvia and Lithuania. The core business involves the usual production and distribution of gas, on-site activity and non-cryogenic on-site equipment sales. \\$quot;This is a mix of countries with differing market opportunities,\\$quot; says Frid. \\$quot;Some of these markets are mature and others are still in the growth cycle.\\$quot;
So how has Nordic AGA addressed the maturity of some of the markets? According to Frid AGA didn\\$quot;t just want to become a commodity supplier of gases but realised that to continue to grow the company had to become a problem solver to its customers. \\$quot;From our sales today, commodity supply forms about 50 per cent of the revenue streams. The remainder has been created through application and product development with customers. We still deliver the gas and take care of the process but more often we develop solutions together with our customers. That is really what we find interesting.
\\$quot;This is one thing that really makes us different from our competitors: our way of working together with our customers,\\$quot; adds Pauli Toiviainen, vice president of AGA Finland.
Svante Frid - Senior Vice President AGA Sweden///Hand in hand with customers
Both Frid and Toiviainen agree that working together with customers is one of the keys to develop the business further. This was boosted through the AGA-Linde merger in 1999, when Linde brought its engineering and technical experience available to AGA and its customers, which allowed AGA to get closer to its customers\\$quot; business processes. However, working hand in hand with customers is what AGA does well. It was ingrained in the company before the acquisition by Linde and goes back over the past 25 years.
Examples of this can be seen in many industries. For example, oxygen used in the steel industry is core to the global industrial gases business and has benefited enormously from different applications specifically developed by AGA in Scandinavia. Toiviainen says: \\$quot;All gas companies have contributed towards the development but we have gone deeper into it and have developed, for example, the knowledge of how to utilize gas in the reheating furnaces.\\$quot;
The pulp and paper industry is one of the largest and most important industries in Finland and Sweden. Working with customers, AGA developed applications that addressed the industry\\$quot;s challenge to react to environmental needs and obligations.
\\$quot;If we look at the pulp bleaching in Finland and Sweden today, we developed an environmentally friendly application that uses oxygen instead of chlorine to bleach paper,\\$quot; Frid says. \\$quot;This application is common today throughout the world. If nobody [governments and environmental bodies] demanded that the pulp and paper plants substitute chlorine they would not have done it because chlorine is a very good bleaching agent. But since chlorine is unfriendly to the environment, oxygen became a very good alternative solution.
Pauli Toivianen - Vice President AGA Finland///
\\$quot;Governments are very concerned about pollution and the effects of emissions on the environment. If industries want to increase output or capacity, governments are more rigorous about increased emissions but by our industry working with end-user industries, they can help customers through introducing new applications to ensure environmental standards are maintained.\\$quot;
Toiviainen explains: \\$quot;If we look at the steel industry, you substitute oil and air in the process with oxygen and natural gas, which lowers NOX and CO2 emissions as well as decreases energy consumption. The result of this may be an increase in capacity without the associated output of exhaust gases and emissions \\$quot;“ therefore becoming more efficient and more environmentally friendly.\\$quot;
Clearly some new applications developed through customer co-operations are environmentally driven through tighter EU legislation. In fact AGA claims to be in the front line of it. Frid continues: \\$quot;If we look at our applications, we see that 60 per cent of our new applications are geared towards the environment and efficiency.\\$quot;No limits to application development
Developing new applications is probably the most important avenue for AGA. The growth of gases in the Nordic region has slowed due to its maturity, and in order to gain more growth gas companies have to create it together with their customers.
\\$quot;To say that our business in Scandinavia is mature is misleading,\\$quot; says Frid, \\$quot;as we continue to develop new applications constantly. As soon as we come to visit our customers to discuss what we can do with gas, we generally end up finding better ways to support their processes.\\$quot;
Frid also believes that AGA has to add more value to its customer process by expanding the business. \\$quot;We need to be more proactive in developing solutions together. We have segmented specialist applications teams who work very closely with industries such as metallurgy and food to find new solutions.
Toiviainen continues: \\$quot;Somebody asked us \\$quot;˜where\\$quot;s the limit?\\$quot; - but I don\\$quot;t think there is one. We are surprised by the opportunities every year. If it demands more engineering hours then so be it, but the aim is to get customers to pay for the value new applications deliver to their processes and that is the big question faced by all the gas companies. When a product becomes a commodity, the value to the customer is not the molecule but the knowledge behind it.\\$quot;
We are suprised by the opportunities every year, but the aim is to get customers to pay for the value new applications deliver to their processes.
\\$quot;Because we still deliver and charge for the molecules, customers expect us to deliver the knowledge for free. But you cannot do that because then you can\\$quot;t invest in research and development. It\\$quot;s a challenge for all the gas companies to get customers to pay part of the value we create for them,\\$quot;\\$quot; Toiviainen says.
Both Frid and Toiviainen consider customer relationship management (CRM) the key to sharing the rewards of value generation in customers\\$quot; processes. They both agree that many customers are prepared to share some of the value generated by AGA\\$quot;s solutions.
Toiviainen adds: \\$quot;There\\$quot;s not much value in gas itself, so gas doesn\\$quot;t pay for the R&D efforts. For example some customers may pay a gas cost of â‚¬50,000 per year, but the saving to the customer may be millions. So it is important to develop the relationship with the customer to address the balance and achieve a win-win situation.\\$quot;
The pair also consider the challenges for the industry as a whole to be: how to charge for added value and how to make the product less commodity and more complex? They believe that the development of CRM has helped them address these questions and feel that AGA is the leader in this field in the industrial gases business. While AGA benefited from the link with Linde\\$quot;s technology, it reciprocated by sharing its CRM models to the benefit of Linde\\$quot;s merchant gases business.Future of Nordic AGA
The geographical differences between countries in AGA\\$quot;s Nordic Region are noteworthy. Whilst the Scandinavian countries of the region - Sweden, Finland, Norway, Denmark and Iceland - are mature, the remaining three - Estonia, Latvia and Lithuania - are still developing and experiencing faster growth, albeit from a smaller industrial base.
Despite being much smaller markets than the Scandinavian countries, these Baltic States are enjoying industrial growth through consumer growth. Frid says: \\$quot;There are many consumer applications within the food industry developed in Scandinavia that we are now able to roll into the Baltic countries. These applications are growing quickly there, which is really important, as they don\\$quot;t have the benefit of metallurgy and pulp and paper industries like we have in Finland and Sweden.\\$quot;
However, the pair say that while the food industry has many applications, it needs restructuring. The steel industry saw significant restructuring ten years ago, but when it all settled down AGA once again grew in this sector. Now the food industry is facing the same restructuring needs, especially with regard to EU legislation, which has had a significant impact in both Finland and Sweden.
Frid explains: \\$quot;You close down a lot of plants and build bigger ones, hence you lose some liquid volume delivered to the market \\$quot;“ but at the same time if you work actively with these applications you get new ones to the market. You may not gain so much growth but you compensate the loss in other ways.\\$quot;
Toiviainen continues: \\$quot;There is a lot of potential in the food industry; you have convenient food, smaller series of food and special products, so there\\$quot;s definitely potential for gas applications. We can also see huge potential in the steel industry where we are really strong.
\\$quot;In pulp we have done the big thing of exchanging chlorine for oxygen. I think there are still other applications in this industry but they are pretty small compared to other things. Chemistry also offers huge opportunities but is more specialised.\\$quot;
While Finland has received the most heavy investment out of all the Nordic countries through a new air separation plant, a large CO2 recovery plant, a couple of on-site units and, recently, through Messer Suomi acquisition, both Toiviainen and Frid get excited over the future opportunities with hydrogen.
They claim that Linde is the leader in hydrogen technology, but the main challenge is to address the \\$quot;˜make versus buy\\$quot; question that refineries continue to ask. Frid continued: \\$quot;Linde is good at hydrogen and we have the best of both worlds \\$quot;“ offering the technology and an on-site supply scheme.\\$quot;
We are going through challenging times but it\\$quot;s not a question of finding business - it\\$quot;s a question of choosing the right ones that we can develop further.
The question of the hydrogen society is being partly answered by using Linde technology to install trial hydrogen filling stations in the region. Toiviainen concludes: \\$quot;We have the knowledge, we will be able to solve the technology problems, sell tanks and distribution systems and set up production of hydrogen \\$quot;“ but I don\\$quot;t think we would start competing with oil companies, but work with them.
\\$quot;Why is hydrogen interesting for us? Scandinavia is leading the way in environmental policy and cutting greenhouse emissions. We need to develop a solution to produce hydrogen in an environmentally friendly way, which is not the case today.
\\$quot;If hydrogen were happening in our region we would rise to the challenge but we don\\$quot;t have any of our own technology development here. We know how to conduct the business, but Linde has the technology.\\$quot;
Hydrogen is just an example of the synergy between the two companies. The development takes place in Germany but having Linde as a parent company has opened many new doors to AGA.Proud to be no.1
With the acquisition of BOC by Linde now completed, both Toiviainen and Frid are confident that the merger is nothing but positive. Frid explains: \\$quot;When AGA merged with Linde, we gained the engineering side of the gases business. With BOC we hope to gain more than geographical expansion, such as some key account management or more commercial business practices.\\$quot;
\\$quot;The latest merger is seen as a sexy thing for us because we are now truly the number one gas company in the world and this creates positive feelings among our staff,\\$quot; adds Toiviainen.
As AGA is going through exciting times, the two men are clearly proud to be part of the number one in the world. At the same time the future goes back to basics and the matter of deciding on where to focus. They conclude: \\$quot;We are going through challenging times, but it\\$quot;s not a question of finding business. It\\$quot;s a question of choosing the right business that we can develop further through strong customer relationships.\\$quot;
The Nobel Prize for Physics in 1912///Gustaf DalÃ©n
Nils Gustaf DalÃ©n was born at Stenstorp in Skaraborg, Sweden in 1869. After his preliminary education, the farmer\\$quot;s son entered a School of Agriculture to study dairy farming but he was later advised by Gustaf de Laval, who recognized his natural gift for mechanics, to seek a technical education.
He prepared himself for the Chalmers Institute at Gothenburg from where he graduated as an engineer in 1896.
In 1901 DalÃ©n became the technical chief of the Swedish Carbide and Acetylene and later joined the Gas Accumulator Company where he became chief engineer in 1906. When in 1909 the company was reorganized as AGA, DalÃ©n became its managing director.
DalÃ©n\\$quot;s inventiveness started showing from early age when he first built a threshing machine powered by an old spinning wheel at his father\\$quot;s farm. He also invented a pasteurization apparatus and a milking machine.
But when in 1901, DalÃ©n\\$quot;s company purchased the patent rights of the French invention of dissolved acetylene and he began his work on automatic flashing beacons for lighthouses. His subsequent invention of the sun-valve enabled lighthouses to function perfectly and unattended for long periods.
DalÃ©n\\$quot;s dedication however had tragic consequences. In September 1912 a gas accumulator exploded while being heated up and DalÃ©n was seriously injured. The doctors succeeded in saving his life but he never regained his sight.
Still bedridden he was awarded the 1912 Nobel Prize in Physics. The citation reads: \\$quot;For his inventions of self-operating regulators which in combination with gas accumulators can be used to light lighthouses and light buoys.\\$quot;
Since lighthouses could save many human lives and expensive property these were inventions which, entirely in the spirit of Alfred Nobel, were to the benefit of humanity.