NOVO NORDISK HAS the sheen of a global champion. Its corporate headquarters near Copenhagen is decorated with freshly cut flowers and thought-provoking sculptures, with little bowls of fruit and nuts dotted here and there. The CEO and his fellow executives work from a large open-plan office.

That is all as it should be. Novo produces half the world’s medical insulin and frequently generates shareholder returns approaching 30%. The world market for insulin is growing fast: about 346m people already suffer from diabetes and the number will grow as the emerging world gets richer. Novo is well placed to remain the world’s leading insulin producer for years to come.

The Vikings’ modern descendants believe they can turn globalisation to their advantage. They excel at producing born-global companies. Ericsson, founded in 1876, started selling phones in China in the 1890s. They also outperform more muscular competitors. Torben Pedersen, of the Copenhagen Business School, points out that Nordic countries are past masters at adjusting to rules dictated by big countries such as Germany or America. Surely they can cope with China and India?

Alas, the logic that destroyed brawnwork such as shipbuilding and textile manufacturing is now moving on to brainwork. The best Nordic companies are transforming themselves from export machines into global networks. Ericsson, for example, has reduced the number of workers it employs in Sweden from 31,000 in 2001 to 18,000 today. Medium-sized companies are taking advantage of low production costs in the Baltic states as well as in China and India. In turn, foreigners are invading the Vikings’ strongholds. Volvo, Sweden’s fabled car company, has been swallowed by a Chinese upstart, Geely. Danisco, a Danish food-ingredients company, has been taken over by America’s DuPont. Ericsson has sold its handset division to Sony. Nokia is a shadow of its former self.

The Nordic countries have an impressive number of globally competitive companies. Denmark is a world leader in hearing aids (Oticon), shipping (Maersk), toys (Lego), drink (Carlsberg) and windpower (with more than 200 companies that account for a third of the world’s wind-turbine market). Novo Nordisk is at the centre of a biotech cluster, dubbed Medicon Valley, that stretches from Copenhagen to Malmö in neighbouring Sweden and has an annual turnover of €13.4 billion.

Sweden boasts some world-class manufacturing companies, particularly in mining equipment and machine tools (Sandvik and Atlas Copco), as well as retail stars such as IKEA and H&M. Finland’s Kone is one of the world’s leading lift and escalator companies. Nokia’s problems are being offset by the rise of electronic-games makers such as Rovio, the creator of Angry Birds. Norway is a world leader in oil services and fish farming.

Nordic companies have thrived in well-defined global niches. Lego dominates the market for interlocking bricks. Sandvik is a machine-tool superpower. Volvo Trucks produces the world’s best high-quality lorries. Nichification protects high-cost companies from emerging-market competitors. Nobody wants the cheapest machine-tool when a defective one can cause millions of pounds-worth of damage.

They owe their success to four qualities. The first is their commitment to relentless innovation which they apply to even the most basic industries. Tiny Denmark remains the world’s eighth-biggest food exporter thanks to its obsession with productivity. Danish farmers use implanted chips to monitor their cows to maximise their milk yield. KJ Industries has developed a way of mechanising the carving up of carcasses by programming the cutting machines with the help of X-rays.

Nordic companies balance their passion for the new with an ability to take the long view. Sweden is still dominated by a handful of long-established families such as the Wallenbergs and the Bonniers. Denmark has a number of organisations such as the Carlsberg Foundation and the Lego Foundation, set up partly to look after the long-term interests of their parent companies.

The third quality is their consensus-based approach to management. They pride themselves on their flat structures and democratic ways which they feel promote trust and co-operation. BCG thinks the region has the world’s most skilled “low-skilled” workers. But they balance co-operation with a fourth quality—a passion for replacing labour with machines. The Copenhagen underground has dispensed with drivers and ticket-sellers. Shops get by on automated checkouts.

To see these forces in action, consider two companies in different industries. Sandvik started making steel in the late 19th century in the small town of Sandviken, two hours north of Stockholm. It is now a global giant that produces everything from machine tools to steel rods for nuclear reactors. Sandvik’s small-town roots have not prevented it from becoming a global leader in its core businesses. “Expanding abroad is how we save jobs at home” is a common refrain.

Sandvik is obsessed by promoting productivity—both its own and its customers’. A giant factory that produces steel rods looks as if it is run by ghosts: four people monitor computer screens in a command centre and a few others patrol the floor. A productivity centre is devoted to pushing forward the frontiers of technology—making the world’s fastest drills, for example—and training employees to help customers. The company’s mantra is “we sell productivity not products.”

Haldor Topsoe founded the company that bears his name back in 1940. Now aged 99, and bright as a button with it, he remains chairman. His company, meanwhile, has grown into a global giant. Mr Topsoe ascribes its success to two things. He found a perfect niche in catalysis. Catalysts accelerate lots of chemical processes that are vital to a modern economy. They are also extremely hard to copy. So demand is growing and barriers to entry are high. He believes that his company benefits from being a family affair, which allows it both to invest for the long term and to take advantage of the global market.

Vulnerable giants

For all their fortifications, the best Nordic companies are nevertheless under assault from two powerful enemies: rich-world rivals and emerging-world upstarts. In 2000 Nokia dominated the mobile-phone business. Scandinavian companies had pioneered the GSM standard for mobile communications and Nokia was the world’s biggest producer of handsets. Today it is fighting for its life: since Stephen Elop took over as CEO in 2010, the company has cut a fifth of its workforce. The world’s mobile-phone leader was beaten to the discovery of smartphone gold by Apple, a Californian company whose core competence was making computers. Ericsson decided to abandon the handset business in order to focus on making telecoms equipment, but it is now engaged in a mighty battle with Huawei, a Chinese company that did not exist in the early 1980s.

These twin assaults have revealed one of the region’s biggest weaknesses: its failure to bring together design and engineering, two of its core strengths. They have also shown up the downside of two of the region’s great virtues, consensus and patience. Consensus-based management can prove a disadvantage when industries are being disrupted by new technologies, and patience can lead to the scrapyard. Nokia put up with a lacklustre CEO for four years. The CEO of Vestas, which specialises in wind power, is still in place even though its stocks have fallen by 90%.

These problems are not insoluble. Ericsson has done better than Nokia in pulling itself out of its tailspin. It is focusing on a defensible global niche, telecommunications networks, and trying to turn itself into a creative hothouse. The company’s innovation centre has come up with lots of clever ways to show that “everything that can be connected will be connected.” The company is also shifting its emphasis from making equipment to providing services. Its obsession with creativity can be a little trying: does eating your lunch off a table-tennis table really make you more innovative? But Ericsson is a powerful force in the industry—40% of all mobile-phone traffic passes through its networks—and it argues strongly that the market is set to take off.

Even so, the region’s best companies are relentlessly moving their activities abroad not just in pursuit of cheaper workers (though that can help) but also in order to be close to the world’s most populous markets. Such offshoring exposes the region’s biggest weakness: that most of its best companies were founded in the late 19th and early 20th centuries, and that its ability to replenish its corporate stock has declined as the state has got bigger. In California 39 of the state’s 100 biggest companies were founded since 1970. In Denmark the number is just three—and one of those three, Bonus Energy, has been taken over by Germany’s Siemens. In Sweden the number is just two. A country that prides itself on equality and upward mobility is dominated by a handful of capitalist dynasties.

If the Nordic countries are to generate the high-quality jobs that their citizens regard as their birthright, they need to produce a new generation of successful capitalists. As Karsten Dybvad, the head of the Confederation of Danish Industry, puts it, “you can’t keep milking the same cow for ever.”